InterContinental Hotels Group has what one analyst called a "less negative" outlook on the current and future state of its business in 2008. With heaps of negativity surrounding the lodging industry since May, IHG's second quarter earnings calls left some analysts wondering: Why so positive?
IHG this morning reported a 21 percent net income dip to $101 million in the June quarter from last year's $128 million, but CEO Andrew Cosslett remained hopeful when referring to corporate accounts, which make up about 25 percent to 27 percent of revenue, and this year's upcoming negotiations.
"There have been no significant rate re-negotiations with our corporate accounts," said Cosslett in his opening statement to U.S. investors. "Even there we expect to be in a reasonably good position."
"What happens when times get tougher is that [corporations] actually consolidate their supplier base, but if you are particularly well placed to be able to respond to inquiries, such that you should imagine having more of those revenues. They are looking for the right price point and global reach, so we are particularly well placed," he said.
Cosslett said IHG is the "world’s biggest mid-scale player" and will be able to hold on to corporate accounts mainly because corporations are looking to downscale their preferred properties, not necessarily cut back on travel.
"People are continuing to travel and go to these places, but how they get there and where they stay when they get there might be changing. Looking back on previous situations we have seen a disproportionate lift in midscale," Cosslett told investors.
Overall, Cossette said there has been a "steady softening in occupancy rates" and they are beginning to "see the first signs of rate growth come under some pressure."