International hotel chain Millennium & Copthorne (M&C) warned today that profits for the first six months of 2003 would be "significantly lower" than last year because of the effects of the war in Iraq and the Sars virus.
In the three months to 31 March, M&C reported a fall in turnover of nearly 8% to £125.1m (2002: £135.6m).
Pre-tax profit fell by nearly 40% to £4.7m (2002: £7.6m).
The group said this was despite a promising start to the year. Up until 21 February, revenue per available room had been down by just 2% on the previous year.
But the situation worsened with the build-up to and the subsequent war in Iraq, then the outbreak of Sars in the second half of March.
Sars had continued to seriously affect business in Asia during April and May, M&C said.
One bright spot was the re-opening on 5 May of the Millenium Hilton in New York, which had been closed since 11 September 2001. M&C now has nearly half of the 561 bedrooms open and expects to have them all available by mid-summer.
M&C said: "In response to very challenging market conditions we have successfully continued to drive sales at a local level to maintain and improve market share. We continue to monitor our cost base carefully and we have put in place further cost reductions, both in terms of staffing levels and by restricting other expenses."
The group is also looking to sell off "non-core assets". It has already made £4m by selling off one of its staff hostels in London.
In London, M&C said its hotels had suffered "significant pressure on room rate, combined with generally reduced levels of business" during the three months to 31 March.
Although occupancy remained above 75%, average room rate fell by almost 5% and revenue per available room (revpar) declined by 11%.
M&C added that the war in Iraq had further reduced the number of US guests at its London hotels. But it claimed: "We are continuing with our policy of making tactical price reductions rather than wholesale cuts."
Revpar in Asia was down by 8% during the period and the company has cut the working week for staff, mothballed some bedrooms and closed unprofitable outlets.
Since the beginning of April, the situation has got even worse. Revpar in April was down:
- by 52% in Asia
- by 23% in New York
- by 20% in the rest of the USA
- by 25% in London
- by 15% in the rest of Europe
Only Australasia showed an increase, with revpar up by 6%.
But M&C said things had begun to improve during the first two weeks of May, with a significant improvement in trading in both the USA and Europe.