Queens Moat return to profit fails to convince City

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The Independent Online
The struggling Queens Moat Houses hotels group has crept back into profit, but analysts in the City remain sceptical about its chances of accelerating its pace of recovery fast enough to compete effectively.

Queens is positioned in the heart of the UK's vast three-star market, which is being squeezed hard by the industry's increasing emphasis on chasing custom through cheap budget lodges in the provinces and high-quality five-star hotels in cities.

The company is also having to grapple with recession- induced low occupancies and price discounting on the Continent. Germany is proving particularly hard, with the problems exacerbated by constructors cashing in on tax breaks and swamping an over-supplied market with new hotels.

Andrew Coppel, chief executive of Queens, acknowledged the difficulties, but remained optimistic that the group's interim pounds 700,000 profit, announced yesterday, was a big step in the right direction, given the pounds 31.6m loss incurred in the same period last year. "We made some useful progress in the first half-year in 1995, particularly as a result of our creditable UK rooms performance," he said.

Analysts' doubts rest mainly on the scope for increasing operating profits, as room occupancy levels were only a shade below the industry average.

Even business travellers, who form around 70 per cent of the company's customers, are posing a problem; on average they are spending less on food and drink in the hotel bars and restaurants, and some restaurants have had to be closed.

The disposal of lower-quality, and mainly smaller, hotels remains a key element of Mr Coppel's strategy to put Queens back on its feet, but repositioning the hotels that remain will be a tough task.

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