Multinational hospitality group, InterContinental Hotels Group (LON:IHG) saw its shares slide on Friday, as its third quarter results laid out the ongoing damage being done by the COVID pandemic.
Though occupancy improved from 25% in Q2 to 44% in Q3, this level was still 30% beneath activity for the same period the year before. Largely led by COVID restrictions, reduced occupancy was also caused by hotels remaining shut, with 3% of the InterContinental Hotels portfolio – or 199 hotels – remaining closed.
These trends were reflected in the company’s financial performance, with third quarter revenue per available room down by 53.4%, which meant year-to-date revenue was down by 52.3% year-on-year.
However, there was some room for optimism. During Q3, the company opened 82 new hotels and signed a further 14,000 rooms. This brings its total rooms opened in 2020 up to 23,000, and its total estate up to 890,000 rooms across 5,977 hotels, up 2.9% year-on-year.
Further, the company booked positive cash flow in Q3, with total liquidity at the end of September rising to £2.1 billion. It also added that it was on track to reduce its business costs by £150 million, targeting at least half of that number ‘to be sustainable into 2021’.
InterContinental Hotels dust themselves off
Coming through a tough year, company CEO, Keith Barr, discusses both the challenges and opportunities that lie ahead:
Despite the challenges we’ve faced, we have continued to open new hotels and sign more into our pipeline. This is recognition of consumer preference for our brands and strong owner relationships, and also the long-term attractiveness of the markets we operate in and the relative resilience of our business model. We signed 82 hotels in the quarter, taking us to 263 year-to-date, more than a quarter of which are conversions. As we continue to invest in growth initiatives, we do so with a strict focus on cost reduction and an unwavering commitment to act responsibly for our people, guests, owners and local communities.”
“A full industry recovery will take time and uncertainty remains regarding the potential for further improvement in the short term, but we take confidence from the steps taken to protect and support our owners and drive demand back to our hotels as guests feel safe to travel. Our actions have resulted in ongoing industry outperformance in our key markets, and we remain focused on leveraging the strength of our brands, scale and market positioning to recover strongly and drive future growth.”
Following the news, InterContinental Hotels Group shares dipped by 2.39% or 102.00p, down to 4,161.00p a share 23/10/20 12:38 BST. This level is around 5% above analysts’ target price of 3,951.54p a share, but beneath its six-month high of 4,484.00p seen in September.
Analysts currently have a ‘Hold’ stance on the company’s stock, it has a p/e ratio of 18.38, and it currently has a 66.92% ‘Underperform’ rating from the MarketBeat community