Hilton casts gloom over recovery in hotel market

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The Independent Online

Recovery for the hotels industry battered by the Iraqi war, the outbreak of Sars and the general economic downturn is further away than many had hoped, according to Hilton, one of the world's biggest hoteliers.

The company said it did not want to raise hopes with predictions of a "false dawn" because there was still a lot of uncertainty about the strength of the hotel market for the next few months.

Hilton had predicted in May that the first signs of an upturn would be seen by the end of the summer, but yesterday it was painting a far more cautious picture. David Michels, chief executive of Hilton, said: "We said the Americans would return but we got it wrong".

In the hotels division, which Mr Michels said had "experienced significant disruption", profits fell 42.6 per cent to £56.1m, as Sars, threats of terrorist attacks and economic uncertainty kept tourists away from Hilton's high-class hotels around the world.

Mr Michels said the hotels market was now going in the right direction, but said the timing and pace of the recovery was too difficult to predict.

Americans are continuing to stay at home and the continental European economy remains moribund, although there was some patchy improvement in London and the Caribbean, he said.

"We understand the market's desire to gauge future trends and developments but, in this environment, it is not possible to forecast with any certainty the economic future," Mr Michels said.

For the group as a whole, profit before tax, goodwill and exceptional items fell 15 per cent to £110.5m in the six months to 30 June. Turnover was up to £3.97bn from £2.57bn last time. Hilton's shares fell 4p to 198p.

The effects of the still sickly hotels business was cushioned by robust revenues at Ladbrokes, the gaming business Hilton also owns.

Analysts at Merrill Lynch also noted that profit growth at Ladbrokes, Britain's biggest bookmakers, were driven largely by fixed odds betting terminals, which are subject to a court challenge by casino operators. The terminals offer games such as roulette which casino operators claim fall outside the remit of bookmakers.

Mr Michels said he expected to maintain "steady growth" in Ladbrokes' underlying business, though he added that results would be influenced by "any controls" placed on fixed odds betting terminals.

Globally, revenue per available room, the standard measure of hotel profitability, fell by 4.9 per cent to £41.44 with occupancy down 2.9 percentage points to 59.37 per cent. The average room rate slipped 0.3 per cent to £69.79.

Separately, TUI, owner of the Thomson Holidays brand, also laid the blame for grim half-year figures on the global problems which have hit the travel industry.

Europe's largest travel firm and said sales slumped to e51m (£25.3m) against e152m the previous year.