Empty rooms in US put brake on growth of InterContinental
Wednesday 13 August 2008
The breakneck pace of growth at the global hotel chain InterContinental is beginning to slow as more rooms stay empty in its key US market.
The chief executive, Andrew Cosslett, admitted yesterday that growth in revenue per available room – the key measure of hotel performance – had fallen to 1.6 per cent in the second quarter to the end of June, compared with 2.3 per cent in the first three months.
In July, it dropped to 1.5 per cent, and analysts fear it is on the brink of turning negative.
"We are acknowledging the more difficult trading conditions as we head into the second half," Mr Cosslett said.
The slowdown in revenue growth is due to lower occupancy levels rather than rate-cutting as higher fuel prices force more Americans to stay at home, particularly at weekends.
However, the group, whose best-known brands are Holiday Inn and Crowne Plaza, has no plans to slow down its expansion rate – it has added another 60,000 rooms over the past three years. There are now 4,000 hotels in 100 countries.
Even so, there are concerns that future growth could be affected by the credit crunch. InterContinental does not directly own the bulk of its hotels but manages or franchises them for a fee. If hoteliers are unable to raise funds for building work, it could put a sharp brake on InterContinental's own prospects.
Mr Cosslett insisted: "We still have a very strong pipeline of rooms. We signed more deals in the US in the first six months of 2008 than we did in the same period last year – and that was before the credit crunch."
There are plans to operate 1,700 new hotels over the next three years.
Overall, group pre-tax profits for the half-year to the end of June were nearly 10 per cent lower at £121m, reflecting a sharp rise in expenses. The shares ended up 22.5p at 773p.
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