InterContinental Hotels, the world’s biggest hotel group, cheered the troubled industry yesterday, saying that occupancy rates were showing signs of improvement.

However, the parent company of Holiday Inns admitted that the stabilisation in occupancy rates in the three months to March 31 was achieved at the expense of room rates. Last year, prices held up, while occupancy rates plummeted.

Margins were hit by savage price competition. Revenue per available room fell 13.6 per cent at constant currencies and was down 19.8 per cent in April, exacerbated by Easter falling late this year. InterContinental has won market share, as it is outperforming revenue declines seen in the rest of the industry.

Pre-tax profit for the first quarter from its 4,200 hotels was $55 million (£36 million), before exceptional items, down 41 per cent on last year, but the figure was in line with expectations.

InterContinental, which operates 248 hotels in Britain, including the Crowne Plaza and Indigo brands, and has another 40 hotels in the pipeline, opened nearly 100 hotels in the first quarter, adding 1,845 rooms, but it said that its expansion had been slowed by the lack of financing available.

The company, based in Windsor, said that UK earnings had been hit by the slump in sterling. Revenue fell by 24 per cent to $87 million. Yet it increased its share of the market, with revenue per room, in constant currencies, falling by 9 per cent.

Richard Solomons, InterContinental’s finance director, said that the London market had held up.

Andrew Cosslett, the chief executive, said: “Occupancy showed signs of stabilisation, but room rates, which held up well during 2008, declined under the pressure of a very competitive market. The outlook remains tough but we are taking decisive action on costs without compromising our ability to continue to grow market share.”

InterContinental said that it was benefiting from travellers trading down to its mid-market Holiday Inn chain. It recently launched a $1 billion refurbishment programme for the hotels, under which 21 locations have been revamped in Britain.

The company is accelerating its rate of closure of poorly performing hotels so that it can renew the Holiday Inns brand more quickly.

Worldwide, 729 hotels have been revamped. The refurbished hotels have increased revenue by about 5 per cent, the company estimated. In Mexico, revenues fell between 30 per cent and 40 per cent after the outbreak of swine flu last month, although the group said that the impact on its whole business was minimal.

The shares rose 16½p, or 2.5 per cent, to 675p yesterday.

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