IHG tells investors its coronavirus exposure is small

InterContinental Hotels Group (IHG) expects impact from the
Covid-19 coronavirus outbreak to be “manageable,” despite having closed or
partially closed approximately 160 of its 470 hotels across China.

“There’ll be some impact, but we haven’t seen anything
significant,” IHG CEO Keith Barr told investors during the company’s full-year
2019 earnings call Tuesday. “Greater China is an important part of our future
and we see a compelling growth story for the longer term. However, today, it is
a smaller part of our business overall, representing 15% of our open rooms and
less than 10% of our operating profit.”

Barr predicted initial negative impact in China for February
will total around $5 million in fee revenue. 

“We are seeing significant reductions in occupancy in the
month of February across the entirety of the [China] business,” he said. “Looking
beyond China, we’re seeing some impact across Asia Pacific, [with] some
conference and events shifting dates from Q1 into later in the year.”

For 2019, IHG saw RevPAR across Greater China drop 4.5%,
with the company attributing much of the decline to unrest in Hong Kong. 

Meanwhile, Barr emphasized that IHG’s U.S. and Europe
businesses have been relatively insulated from the coronavirus crisis thus far,
despite industry concerns over a drop-off in outbound China travel. 

“There is clearly going to be some level of international
inbound impact to the U.S., but it would be on the margin for IHG,” said Barr. “So,
we’re not seeing any impact [in the U.S.]. Similarly, in Europe, we’re
principally domestic there. There’ll be some impact, but we haven’t seen
anything significant at all that we can even quantify.”

IHG reported that revenue per available room (RevPAR) in the
Europe-Middle East-Africa region was up 0.3% for 2019, while RevPAR in the
Americas fell 0.1% over the same period.

In the U.S., IHG posted a RevPAR decline of 0.2%, due in
part to a softening in small-group business and a surplus of upper-midscale hotel
rooms. For the fourth quarter of the year, IHG’s U.S. RevPAR was down 1.7%.

“Increasing preference from owners, lenders and guests for
upper-midscale hotels means that Holiday Inn and Holiday Inn Express are
competing in a segment where supply growth is now over 3%,” said Paul
Edgecliffe-Johnson, IHG’s CFO and group head of strategy. “This highlights the
attractiveness of our market-leading position in this segment but led to an
occupancy-driven RevPAR decline as supply growth slightly outweighed demand

For full-year 2019, IHG reported companywide revenue growth
of 8% to $2.1 billion.

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