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InterContinental eyes business travel upturn

London, September 24, 2009

InterContinental Hotels, the world's biggest hotelier, is seeing early signs of recovery in forward bookings for business travel but warns it will be a long haul to bounce back to the levels seen in 2007.

Chief executive Andrew Cosslett said its London flagship Park Lane InterContinental hotel was full this month while its August performance in China was ahead of last year despite the Olympic Games boost in the Chinese capital in August 2008.

'It's pretty early days, but we are definitely seeing some return of forward bookings from corporate clients. There are some signs of life in the business world but it will be a long haul,' Cosslett said in an interview with Reuters.

The British group, which operates Holiday Inn and Crowne Plaza brands as well as InterContinental said it was seeing leisure travellers replacing some business clients, but this business was being attracted using lower room rates.

'The general trend is that we are seeing some stability, occupancy levels are holding or rising but rates will be depressed as long as the corporate traveller is missing,' Cosslett added.

The hotelier along with the industry saw a sharp fall off in occupancy levels last November following the collapse of Lehman Brothers in September, with room rates coming under severe pressure in the following months of January and February.

InterContinental shares were flat at 825.5 pence by 1132 GMT having risen 47 per cent so far in 2009 on hopes for a recovery in the hotel sector.

What Cosslett is seeing now is some optimistic signs from a stronger leisure business and signs of some relaxation of corporate budgets, but he is not expecting a 'fantastic autumn' as the hotel industry faces the winter conference season.

'There are the first few encouraging signs but it is early in the spring of a long recovery process. If we see a good results season in January and February there will be more confidence, if financing is less of a problem,' he said.

In the downturn, the hotelier has seen leisure travellers boost business at its 158 InterContinentals while some business traffic has downtraded to its 3,000-plus Holiday Inn outlets, as it has kept customers within the group which runs around 630,000 rooms in over 4,300 worldwide hotels.

Its 500-room London InterContinental has seen 100 per cent occupancy in September, but Cosslett admits this was helped by more leisure customers while the lucrative banqueting business was still somewhat 'soft'.

The hotelier, which typically manages or franchises hotels instead of owning them and earns 70 percent of its profit in the United States, has been hit by the fall in global travel from late last year as well as rivals such as US group Marriott International and Sheraton owner Starwood.

The group has reported a fall in revenue per available room (RevPAR), a key industry measure taking into account occupancy and room rates, down 16.2 per cent in the first-half with analysts estimating a 15 per cent fall for the full year.

Cosslett expects further sustainable cost cuts of $25-30 million in 2010 after targeting $40 million of sustainable cuts out of a total of $80 million this year as it streamlines management and gains from more centralised procurement.

He expects the growth in number of rooms to slow in 2010 from a net addition of 15,000 rooms this year as its on-going $1 billion Holiday Inn revamp sees some hotels dropping out of its system and hotel owners delaying coming into the group's system.

The hotelier expects to add 50,000 rooms this year, but lose 35,000 and then the same amount next year so growth in 2010 will depend on new additions. 'There will be slower growth in 2010, but still growth overall,' Cosslett said.

Some 1,200 Holiday Inns have been revamped, and the group has seen an outperformance in RevPAR of 5-6<


Tags: InterContinental | hotels | London | Holiday Inn | Business travel |

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