SIX CONTINENTS HOTELS ANNOUNCES STRONG RESULTS

Group strongly represented in the Middle East increases global room numbers to 515,000 and has over 12 million Priority Club members

Six Continents Hotels, the world’s most global hotel company today announced strong financial results and a resilient position for the future, despite difficult market conditions.

Six Continents Hotels owns, manages, leases or franchises leading hotel brands including Inter-Continental Hotels and Resorts, Crowne Plaza, Holiday Inn, Express by Holiday Inn and Staybridge Suites in six continents around the world. In the Middle East and Africa, Six Continents Hotels has 118 operating hotels with 20 being developed under its Inter-Continental, Crowne Plaza and Holiday Inn brands, as well as seven Palaces in Saudi Arabia.

In the financial year to the end of September 2001 Six Continents Hotels’ global portfolio grew by 24,000 rooms to 515,000 rooms. The company was particularly strengthened by two valuable acquisitions, according to Sir Ian Prosser, chairman Six Continents PLC. These included the acquisition of the former Regent in Hong Kong which is now the Hotel Inter-Continental Hong Kong, giving the five-star brand a high-profile flagship hotel in this key city and which will enhance the company’s leading position in China. The second key purchase of the year was the acquisition of the 79–strong UK Posthouse chain from Compass Group PLC in April 2001. Sixty one of these hotels have already been converted to Holiday Inn hotels, ensuring Holiday Inn is now a leading hotel brand in the UK.

Jim Clarke, Chief Executive, Six Continents PLC said: “In the hotel business our position improved despite obvious trading difficulties. The increase in our system size raised our global system fund to $350 million a year. This is used for marketing, reservations and loyalty programmes. Our excellent reservation system continued to support growth in the business, generating over 30 per cent of total US mid-scale room nights. Priority club, our loyalty programme, grew by almost 20 per cent, or 2 million members to 12.4 million.

“Overall, hotel profit rose by 13.6 per cent in the year, including the acquisition of Posthouse; excluding that acquisition, profits were up by 3.7 per cent. EMEA had a strong year, with profits up by 22.4 per cent.”

He concluded: "We are extracting the benefits from recent investments, and in particular the Allied Domecq and Posthouse properties we purchased. While the strong site pipeline in Hotels of 69,000 rooms, and Retail of 700 sites, will underpin organic opportunities for growth in both businesses.

“And finally, we have consciously prepared for the downturn, conserving the bulk of our resources should potential opportunities arise that meet our rigorous criteria."

NOTES

Current trading - hotels

Within hotels it is clear that in the United States, following the dire trading conditions in the two weeks following the terrorist attacks, there has been some improvement, although trading remains at depressed levels.

Within Europe the position is not as clear. It would appear that there has not as yet been any recovery in long haul travel and so trading in upscale hotels has not shown any meaningful improvements since 11 September.

Anticipating tough market conditions, Six Continents took decisive action early in the year to reduce costs across the division. Overall profit in the hotel division for the month of October was $30 million less than the previous year.

The upscale business across the United Kingdom, United States and France is all now trading at 30-40 per cent RevPAR decline, which remains lower than the July figures. This decline is relatively evenly split between rate and occupancy in both the United Kingdom and United States.

The US mid-scale business is faring better, with November RevPAR some 16 per cent down for Holiday Inn and 5 per cent down for Express. November is the first month where all segments have shown a rate decline.

In EMEA the mid-scale business has recently showed occupancy decline not rate decline across most European countries, but overall RevPAR declines are now reaching double digit levels.

While there are signs of optimism, particularly with regard to occupancy in the major cities and the United States, we remain cautious over rate trends.

Outlook - hotels

In the hotel business occupancy has declined both as a result of attitudes to flying and heavy corporate cutbacks on travel.

In the short term the evidence from the Gulf War and the early nineties recession is that it will take at least six months for confidence in international travel, particularly outbound from the United States, to recover and, therefore, we are taking a cautious view on market conditions in our upscale business. By contrast, we anticipate a faster recovery for domestic US travel.

Overall, Six Continents is in a strong position. We have two leading businesses, with excellent brands, revenue premiums and real scale economies in our industries.