Comment: Tough times ahead for Intercontinental Hotels

11th Aug 2009 17:17

Just how subdued any economic recovery might be is well demonstrated by Intercontinental Hotels Group's latest update. The owner of the Holiday Inn chain today posted a sharp fall in revenues over the six months to June 30, to $726m from $974m over the same period the previous year.RevPAR (revenue per available room) a key metric for the industry, fell by 16.2% over the second quarter, with a second quarter drop of 18.2%, but the decline eased back to 14.4% in July, suggesting the firm may be through the worst of the current troubles.However, this improved figure was helped by strong leisure demand. Chief executive Andrew Cosslett pointed out that business demand is a different story. 'Business travel remains subdued and this is affecting our ability to yield room inventory and our banqueting revenues, particularly in upscale hotels,' he said.He said that while leisure travellers were being tempted back into hotels by the chance to stay in luxury rooms at knock-down prices, the firm was yet to see any sign of business travellers who pay premium prices coming back into the market.Occupancy rates are stabilising, but pricing remains weak, he said. With unemployment continuing to rise even as we see other economic indicators showing signs of improvement, firms are unlikely to start splashing out on extravagant corporate bashes any time soon and a more austere approach to business trips may turn out to be permanent post-credit crunch feature.In the hotel sector, as in the broader economy, the recovery may be a long-drawn-out process that by no means brings about a return to business as usual.