UPDATE 1-NH Hoteles cuts back plans in face of weak economy

(Adds results, detail, background)

MADRID, July 30 (Reuters) - Spanish hotel chain NH Hoteles (NHH.MC) will scale back its three-year expansion plan in the light of weak economic conditions, it said on Wednesday as it posted a 20 percent fall in first half net profit.

NH is reacting to worsening economic conditions in its home market -- reflected in a marked fall in its revenue per available room (RevPar) there -- and a weaker business travel market across Europe.

NH blamed economic uncertainties and "slightly weaker performance of some markets where the group is operating" for the change in its strategic plan which it began in January 2007.

"The company does not plan to continue acquiring properties, unless the market offers opportunities with large discounts to current transactions prices," it said,

NH said it would now focus on existing hotels and any expansion, which it said would have to have a higher return than in the past, would be acquired via rentals or management contracts.

Rival Sol Melia (SOL.MC) which focuses more on the holiday market, said last week it would miss 2008 targets due to the deepening economic crisis and as higher fuel and food prices put people off travelling and spending.

NH said first-half net profit at Spain's biggest business hotel group fell 20 percent to 32.4 million euros as financial costs more than doubled to 49.4 million euros after it was forced to make a 12.4 million euro provision for the falling value of its stock after undertaking an equity swap.

NH has until 2012 to reverse the position and said the provision was an accounting loss rather than an actual payment.

Like-for-like RevPar grew 2 percent year on year, aided by double-digit growth in Germany and Central Europe. However in Spain and Portugal, which account for 28 percent of group revenues, RevPar fell 3.83 percent for the half -- a shade better than a 3.88 percent fall after three months.

Results from NH's property arm Sotogrande reflected Spain's crumbling real estate sector.

Sales slumped to 8.4 million euros from 18.2 million a year earlier, which it blamed on the delivery of apartments and the general market deceleration.

Group revenues rose 7.5 percent to 771 million euros, while EBITDA (earnings before interest, tax, depreciation and amortisation) was up 2.7 percent to 2.7 percent. (Reporting by Ben Harding; Editing by David Cowell)