Millennium & Copthorne optimistic about recovery

Millennium & Copthorne, the hotel group ravaged during the Sars epidemic, struck an optimistic note about the industry's prospects for recovery yesterday as it unveiled heavy interim losses.

The company, which relies on customers in Asia for about one-third of its sales, said it was making steady progress in all of its regions, although it cautioned the market was still "challenging".

But analysts quibbled about the lack of evidence, given the continuing pressure on room rates. "It is still a case of hope over experience, despite the recent rally in hotel stocks," one leisure analyst said. M&C shares lost 3p to 253.5p.

The group said revenue per available room (revpar) - a key industry measure - sank 14 per cent in the six months to end-June, adding revpar had recovered from a 26 per cent fall in April to an 8 per cent drop in July.

John Wilson, the chief executive, predicted that room rates would be on the up by this time next year. "An increase in volume will always precede an increase in rates," he added.

Revealing the extent of the impact from Sars, Mr Wilson said hotel occupancies in Singapore were barely 25 per cent at the height of the epidemic, while the group's Hong Kong sites struggled to get into double-digit volumes. Occupancy levels at hotels in both countries were up 60 per cent, year on year, he said.

David Thomas, the finance director, said that although it was "difficult to imagine a worse trading quarter", the region had still reported an operating profit thanks to stringent cost controls. In addition to axing 600 jobs across the group, staff in Asia were asked to work four-day weeks and accept a pay cut of 15 to 20 per cent, Mr Thomas said, adding that salaries should go up again in the third quarter.

The group, which warned in May that its results would be lower due to the Iraq war and Sars, said the slump in international travel after airlines cancelled flights during the Sars outbreak had particularly affected its London hotels, where revpar fell 16 per cent. One Kensington property lost 16,000 aircrew room nights.

The group reported a pre-tax loss of £6.3m against a profit of £25.6m the previous year, saying it expected to return to profit in the second half. It is still battling with insurers to recover the cost of business lost after the 11 September terror attacks devastated its Manhattan flagship hotel. Out of a $200m claim, it has recouped only $50m and a court hearing is scheduled for October, Mr Wilson said.