InterContinental says outperforming

LONDON (Reuters) - InterContinental Hotels (IHG.L) on Tuesday met forecasts with a 44 percent drop in first-quarter profit, and said it was outperforming rivals and seeing some signs that demand was stabilising, boosting its shares.

The world's biggest hotelier said it was benefiting from travellers trading down to its mid-market Holiday Inn hotels and that it also expected to deliver an additional $40 million of cost savings this year, due largely to exchange rate moves.

Finance Director Richard Solomons said revenues had plunged 30 to 40 percent at the group's 113 Mexican hotels following the outbreak of swine flu last month, but the impact on the group as a whole was minimal.

"Overall, this statement seems to support the cautiously optimistic outlook from IHG's (InterContinental's) peers," Cazenove analysts said in a research note, lifting their 2009 earnings per share forecast by 13 percent to 77 U.S. cents.

At 11:55 a.m., InterContinental's shares were up 2.5 percent at 675 pence, after trading as high as 703.5 pence.

Travel groups across the world have been hit by a drop in business from both holidaymakers and companies.

However, there have been some signs of recovery recently.

Online travel agency Priceline.com (PCLN.O) posted a jump in quarterly bookings on Monday, while TUI (TUIGn.DE), the owner of Europe's No.1 holiday firm, forecast a better-than-expected annual profit.

InterContinental, which runs more than 600,000 rooms in over 4,200 hotels, said operating profit from continuing businesses was $69 million (45.1 million pounds) in the three months ended March 31, in line with the average forecast in a Reuters poll of eight analysts.

Revenue per available room (RevPAR) -- a key industry measure -- fell 13.6 percent at constant currencies, and was down 19.8 percent in April, hit by the timing of Easter.

The first-quarter decline outperformed rivals, with a 14.2 percent drop in U.S. RevPAR comparing with an industry average decline of 17.7 percent, the firm said.

"Occupancy showed signs of stabilisation in the quarter, but room rates, which held up well during 2008, declined under the pressure of a very competitive market," Chief Executive Andrew Cosslett said in a statement. "The outlook remains tough but we are taking decisive action on costs."

HOLIDAY INN

InterContinental, which also runs Crown Plaza and namesake hotels, raised its cost-savings target for this year to $70 million. But that included an estimated $30 million from currency moves not included in its previous goal of $30 million.

U.S. groups Marriott International (MAR.N) and Sheraton-owner Starwood (HOT.N) both reported big falls in first-quarter RevPAR last month, but beat earnings forecasts by slashing costs.

InterContinental is in the midst of revamping its Holiday Inn brand and said the 729 hotels upgraded so far were showing a RevPAR outperformance of over 5 percent against a control group.

The firm added a net 1,845 rooms in the first quarter and opened close to 100 hotels, more than the same time last year.

First-quarter RevPAR in Europe, the Middle East and Africa fell 11.6 percent and was down 17.2 percent in Asia.

InterContinental shares have beaten the DJ Stoxx European travel and leisure index .SXTP by 5 percent over the past year and have jumped by over 50 percent since early March on optimism about a global economic recovery.

Cazenove said the stock trades at 13 times forecast earnings, below U.S. rivals on 23, which it said was excessive.

Bank of America-Merrill Lynch analysts, however, said the recent recovery in InterContinental's shares was overdone given continued uncertainty over the trading outlook.

($1=0.6586 pound)

(Additional reporting by David Jones; editing by Rupert Winchester and Karen Foster)