Macdonald Hotels warns on profits as bookings fall

Shares in Macdonald Hotels slumped sharply yesterday after the Scotland-based operator joined the chorus of hoteliers warning that trading conditions had deteriorated.

The group, Britain's eighth-biggest hotel operator, admitted that "a noticeable deterioration in the general economic and political outlook" had made trading "much more difficult".

In a trading update that contrasted with the upbeat tone struck as recently as December, the group said the downturn had created "a distinct nervousness" across the hotel sector. It warned it expected to "report lower profits" in the first half of its financial year, despite an "encouraging start". Its shares fell 9 per cent to 181.5p.

Companies and holiday makers are becoming more reluctant to book in advance, with visibility down to just a few days in some cases, a spokeswoman for Macdonald said. This compared with booking visibility of as much as two months, a year earlier, she added.

Frank O'Callaghan, the chairman, said he remained "confident" about the company's prospects for the second half. "This company has always traded well through difficult times and I am sure that it will do so again," he added.

Earlier this month, De Vere Group said that a fall-off in demand for mid-week conferences had marred an otherwise "pleasing" start to its financial year.

Peter Joseph, an analyst at KBC Peel Hunt, said he would slash his current full-year profit forecasts of £21.8m by "a couple of million" to just below £20m. Although Mr Joseph said he expected to see weak trading information from the hotel groups set to report over the next 10 days, Macdonald Hotels "still has a good long-term outlook".

Analysts said the group's high-quality estate, experienced management team and good track record in previous downturns meant it should weather the next few months better than some of its rivals.