Research Update: InterContinental Hotels Group Affirmed At 'BBB-' As Demand Is Expected To Recover; Outlook Negative

Changing travel restrictions and the slower-than-expected rollout of the vaccine in Europe has made demand for hotel rooms more fragile in 2021. We now expect revenue and EBITDA to decline more steeply than we did in mid-2020, falling to about 40%-50% below 2019 in 2021 and 30% lower than 2019 in 2022. This could depress credit metrics for the next 12 months. Although we now view 2021 as a transition year for the sector, we anticipate that cost-cutting and cash-conservation initiatives by Intercontinental Hotels Group PLC (IHG), combined with prudent financial policy decisions, will partly offset its weaker revenue in 2021. We affirmed our 'BBB-' issuer credit ratings on IHG because we expect credit metrics should recover in 2022 as

...- Changing travel restrictions and the slower-than-expected rollout of the vaccine in Europe has made demand for hotel rooms more fragile in 2021. We now expect revenue and EBITDA to decline more steeply than we did in mid-2020, falling to about 40%-50% below 2019 in 2021 and 30% lower than 2019 in 2022. This could depress credit metrics for the next 12 months. - Although we now view 2021 as a transition year for the sector, we anticipate that cost-cutting and cash-conservation initiatives by Intercontinental Hotels Group PLC (IHG), combined with prudent financial policy decisions, will partly offset its weaker revenue in 2021. - We affirmed our '###-' issuer credit ratings on IHG because we expect credit metrics should recover in 2022 as vaccination roll-outs continue and travel restrictions continue to ease in different jurisdictions globally. - The negative outlook indicates that we see a one-in-three chance of a downgrade if the delays in the vaccination campaign cause restrictions...

Research Update