Hotels giant is struck by sudden pain of downturn

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InterContinental Hotels (IHG) warned today of a "major correction in the marketplace" as it braced investors for tough times.

Until October the world's largest hotel group was sailing along merrily.

In the 90 days to the end of September it opened 134 hotels with 19,000 rooms, saw sales up 8%% to $5.1 billion and profits up 8% at $153 million (£98 million) -- the top of City expectations. Then it hit the wall. Chief executive Andrew Cosslett said: "We are doing better than the competition, but the economic situation is impacting everyone."

The flagship hotel on Park Lane has benefited from rivals closing, but sales are still down. Cosslett says new hotel deals are on hold while banks hoard cash and decline loans. "We know a stack of hotel deals waiting to get done. We need the lending wheel to start turning again," he said.

Revenue per available room, RevPAR in the industry jargon, fell 4.5% globally in October. The result in the US was even worse, down 5.7%.

"It's pretty grim," said Cosslett. "But I'm optimistic that government actions will have a major impact as we turn into 2009."

IHG shares lost 27½p to 512½p.