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First-Quarter Freefall

By Dennis Nessler | May 12, 2020

By Dennis Nessler

The impact of the current COVID-19 pandemic has been widely acknowledged throughout the lodging industry, but several of the major brands got a look at just how severe it has been last week posting declines in excess of 20 percent for the first quarter of 2020 with second quarter losses excepted to be even greater.

For example, Hilton saw system-wide comparable RevPAR decrease 22.6% primarily as a result of drops in occupancy, and management and franchise fee revenues decreased 18% for the three months ended March 31, 2020. The company attributed the decreases to the COVID-19 pandemic and the related reduction in global travel and tourism, which required the complete and partial suspensions of hotel operations at many of Hilton’s properties.

In addition, net income and adjusted EBITDA were $18 million and $363 million, respectively compared to $159 million and $499 million, respectively, for the three months ended March 31, 2019. Christopher Nassetta, president/CEO, Hilton, noted in a statement that it is likely to get worse before it gets better.

“Overall, we do not think our first quarter results provide clear insight into the current environment and, given the timing of the pandemic, we expect a much more dramatic impact on our second quarter results,” he said. “With travel at a virtual standstill, we expect systemwide RevPAR declines roughly 90% in April.”

Meanwhile, IHG posted similar quarterly results despite a solid performance in the first two months. The company saw global RevPAR in the first quarter decline by 25 percent, including a 55 percent decline in March alone. In addition, the company anticipates April to be down about 80 percent.

According to Keith Barr, CEO, InterContinental Hotels Group PLC, “COVID-19 represents the most significant challenge both IHG and our industry have ever faced. We are responding on every front and taking decisive action to the benefit of all our stakeholders. Our top priority remains to support our guests, colleagues and hotel owners through this crisis, whilst protecting for the long term and positioning the business for recovery,” he said in a statement.

Wyndham Worldwide also experienced declines but they were not quite as severe due to some cost-cutting measues. For the first quarter of 2020, ended March 31, Wyndham Hotels & Resorts’ revenues decreased 12% to $410 million, compared with $468 million in the first quarter of 2019. Excluding cost-reimbursement revenues, revenues declined $29 million or 9%, reflecting a 23% decline in constant-currency RevPAR, as well as lower license fees, which were adversely impacted by declining travel demand, according to the company.

“Our franchise, leisure-transient, fee-for-service business model is highly resilient during economic turmoil,” stated Geoffrey Ballotti, CEO. “We have made difficult and measured decisions to adjust our cost base to this new reality, to preserve liquidity and to support our franchisees. Altogether, our actions since the start of this crisis have resulted in the identification of approximately $255 million in cash savings that will help mitigate revenue declines and provide us with the funds to continue to offer support to our franchisees.”

Ballotti further detailed some reason for optimism going forward for Wyndham. “Nearly 5,900 of our 6,300 hotels in the U.S. remain open, and with nearly 90% of those properties located outside of major cities in drive-to destinations that cater to a leisure customer base, we believe that our asset-light business is well positioned for a quick recovery when travel demand returns,” said Ballotti.

Similarly, Nassetta pointed to progress overseas as an encouraging sign for the company. “In China, nearly all 150 hotels that have been closed due to the pandemic have since reopened with occupancies reaching more than 50% during the May Day holiday this past weekend, up significantly from 9% in early February,” he stated. “Additionally, the majority of our previously halted construction projects in China have restarted. In the U.S. and Europe, we’re starting to see sensible and staged reopenings of economies. Temporary hotel suspensions have plateaued and we are now seeing reopening requests.”

Credit
Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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