InterContinental Hotels Group PLC (IHG) is seeing some signs of a recovery in the key business travel market but it will be next year before the "trickle" of bookings becomes a flow, the company's chief executive said Wednesday.
InterContinental Hotels Group PLC (IHG) is seeing some signs of a recovery in the key business travel market but it will be next year before the "trickle" of bookings becomes a flow, the company´s chief executive said Wednesday. In an interview with Dow Jones Newswires in London, Andrew Cosslett said there was some evidence that corporations were beginning to increase their travel budgets. "It´s a start," he said.
"Group bookings are starting to emerge, conferences are starting to get booked." Still, Cosslett described the uptick as a trickle. "Some time next year we could start to see the trickle become a bit more of a flow." IHG is the world´s largest hotel operator by number of rooms, counting Holiday Inn, Intercontinental and Crowne Plaza among its brands. Rather than owning hotels directly, it operates a franchise model in partnership with hotel owners.
The sector has seen revenues plummet in 2009, with room rates slashed in the face of dwindling occupancy rates. IHG´s Revenue Per Available Room, or RevPAR - a key industry measure - dropped 18.6% in its latest quarter to June 30, though that figure was much better than the industry as a whole. Cosslett said he was confident in the group´s short-term prospects, despite the tough trading environment.
"It´s still tough but I´m confident we can see the end," he said., adding: "whereas six to eight months ago it was so tough, there was no end." He said the "transient corporate customer" is still a scarce source of demand and would remain so until corporations decided on their travel budgets for next year after slashing them for 2009. "We know that´s going to run the full course of 2009; we would hope for some relaxation in 2010." He pointed out that most corporations would generally have "pretty good earnings" in the months ahead and this bodes well for the travel industry "We need to see them coming back and we think we will," Cosslett said. "You can´t do deals and manage people down a phone line." Analysts have expressed concerns about the company´s pipeline of new hotel rooms.
While still the strongest in the industry, fewer new hotels are signing up to IHG´s brands, due to the difficulty in securing finance of construction projects. Financing new hotels is still difficult for owners, said Cosslett, though he is hopeful signings will accelerate as liquidity returns to the financial markets. He said it would be a while before the pace of signings fully returns, but there was "a backlog of deals waiting to get funding." Cosslett said that the priority at the moment however was not the signings pipeline but rather how many of those signings become hotels in its system.