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IHG warns of tough outlooks as profits slide

IHG warns of tough outlooks as profits slide

InterContinental Hotels has reported a 19% slump in full-year net profit and said trading would “stay tough” until its business travel market picked up.

The world’s largest hotel operator by number of rooms said full-year net profit fell to $213 million from $262 million in 2008, and revenue was down 19% to $1.54 billion from $1.9 billion.

But IHG, which owns Holiday Inn and Crown Plaza, said trading had improved performed towards the end of the year. Revenue Per Available Room, or RevPAR was down 10.9% in the fourth quarter, compared with a 15.2% decline in the previous quarter. This figure improved further in January to a fall of just 3.8% as a strong performance in the Asia Pacific region (up 11.1%) offset declines elsewhere (the Americas fell 7.2%, while in Europe, the Middle East and Africa, it was down 3.1%).

Chief Executive Andrew Cosslett said there had been some improvement in the fourth quarter with occupancy levels stabilizing. He said: “The fourth quarter did show some improvement in trends and occupancy has now stabilised. Rates however remain under pressure and we expect trading to stay tough until business travellers return in greater numbers.”

Hotel revenues were hit globally in 2009, as the credit crunch and swine flu led to both consumer and business travel cutbacks. Hotels reacted to dwindling occupancy rates by slashing their room rates.

Nevertheless the company’s shares have gained by more than 80% in the past year, as the market prices in a swift recovery from the downturn.


The group also announced that it has made annual cost savings of $95 million compared with its $80 million target.

It also said that more than half of the Holiday Inn chain has now been refurbished and rebranded as part of the brand’s $1 billion updating.

Rather than owning hotels directly, IHG operates a franchise model in partnership with hotel owners. It owns, manages, leases or franchises nearly 4,400 hotels and over 640,000 guest rooms in 100 countries. The group generates 70 percent of its profit in the United States.