By David Jones
LONDON (Reuters) - InterContinental Hotels (Intercon Hotel ORD 13 29/47P), the world's biggest hotelier, warned trading will stay tough until business travellers return in greater numbers, putting pressure on its shares after 2009 profit fell 34 percent.
Annual profit from the, which operates the InterContinental, Crowne Plaza and Holiday Inn brands, beat forecasts and showed improving trends, but the cautious outlook saw the shares dip 3.1 percent to 891-1/2 pence by 2:45 p.m.
Chief Executive Andrew Cosslett warned that hotel room rates remain under pressure and expects trading will stay difficult until he sees a big return in global business travellers.
"We see a challenging six months, then hopefully we will see some improvement," Cosslett told a results news conference.
He added the group had seen occupancy levels stabilise, move higher in January and expects a turning point in the second half from the worst downturn the hotel industry has ever seen.
Analysts highlighted the cautious outlook compared to U.S. rivals, the recent sharp rally in the shares and a $91 million (£58 million) one-off charge over an onerous hotel management contract in the U.S. behind the sharp fall in the shares.
"We think that InterContinental's share price has travelled too far, too fast. We forecast no U.S. recovery until 2011 and prefer cheaper alternatives elsewhere," said analyst Nigel Parson at brokers Evolution Securities.
Shares in InterContinental have more than doubled from a low of 434p in March 2009 on recovery hopes with its shares trading on 20.1 times 2010 forecast earnings, but still at a discount to U.S. rival Marriott International (Marriott International Inc) on 29.3 times.
Analyst Simon Champion at Deutsche Bank said the outlook was slightly worse than expected and Wyn Ellis at Numis Securities detected a more cautious tone compared to Marriott last week.
The hotelier, which typically manages or franchises hotels instead of owning them, and earns 70 percent of its profit in the United States, posted 2009 operating profits of $363 million, ahead of a Thomson Reuters I/B/E/S consensus of $354 million and a company-conducted consensus of $358 million.
It paid an unchanged full year dividend of 41.4 cents.
InterContinental, which runs over 646,000 rooms in 4,438 hotels worldwide, said revenue per available room (RevPAR), a key industry measure, fell by 14.7 percent in 2009, with a fourth quarter fall of 10.9 percent.
Its January 2010 RevPAR decline narrowed to just 3.8 percent, with Asia Pacific ahead 11.1 percent, and Chief Financial Officer Richard Solomons said he saw this regional performance leading the recovery at the group.
Although InterContinental does not give RevPAR forecasts, U.S. rivals expect bookings to improve, with Sheraton owner Starwood Hotels & Resorts (Starwood Hotels & Resorts Worl) looking for flat to a 5 percent RevPAR growth in 2010 and Marriott seeing RevPAR up 2 percent to down 2 percent.
Evolution's Parson added he preferred cheaper stocks than InterContinental, like Whitbread (Whitbread ORD 76 122/153P) and Carnival (Carnival PLC), and although Millennium & Copthorne (Millennium & Copthorne Hotels) is more expensive it offers better Asian exposure and higher recovery potential.
InterContinental opened a net 26,828 new rooms in 2009 showing a slowdown from the prior year due to the scarcity of financing for new hotel development, and said net room growth will be flat in 2010 due to room removals to improve quality.
The group, which also runs Staybridge Suites and Hotel Indigo, said it was on track with its $1 billion relaunch of Holiday Inn, with over half its hotels or nearly 1,900 operating under its new standards and seeing a 5 percent rise in RevPAR.
The hotelier cut costs deeper in 2009 than it previously planned, trimming $95 million off its 2008 cost base compared to the $80 million from its original plan.
(Reporting by David Jones; Editing by Jon Loades-Carter and Louise Heavens)