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InterContinental Hotels Shares Gain On 1Q Results

The Associated Press

NEW YORK (AP) — Shares of InterContinental Hotels Group PLC gained on Tuesday after the hotel company reported that its profit dropped in the first quarter, but benefited from deep cost cuts.

InterContinental shares gained 46 cents, or 4.7 percent, to $10.33 in afternoon trading. The stock has traded between $5.98 and $16.90 during the past 52 weeks.

The U.K.-based company said its profit fell 56 percent to $27 million, or 9.5 cents per share, during the quarter that ended March 31. InterContinental noted that those results included one-time costs related to its U.K. pension fund and the relaunch of its Holiday Inn brand. Excluding those items, earnings per share totaled about 15 cents.

Revenue fell 24 percent to $342 million. Revenue per available room — a key gauge of a hotelier's performance — fell 13.6 percent during the quarter on a constant currency basis.

Friedman Billings Ramsey analyst C. Patrick Scholes said InterContinental — like its rivals in the hotel industry — beat his forecast by cutting costs deeper than expected. The results were also helped by lower-than-anticipated net interest expense.

"Occupancy showed signs of stabilization in the quarter, but room rates, which held up well during 2008, declined under the pressure of a very competitive market," said Chief Executive Andrew Cosslett in a statement.

InterContinental noted that it remains committed to completing its revamp of its Holiday Inn brand by the end of 2010. The company said conversions — which include redesigned lobbies and guest rooms — have been slower than planned due to tough market conditions, but that 700 hotels have already relaunched.

The company also noted that hotels that have completed the relaunch process are seeing better revenue per available room results than properties that have not gone through the renovations.

"It is taking longer. It is tougher," Cosslett said. "We expect to lose a few more on the way than we originally planned. But in the context of our overall pipeline ... we believe we can absorb that. And the key thing for us is to get the job finished."