Intercontinental Hotels Group reports 17% profits rise

Intercontinental Hotels Group (IHG), the world's largest hotel business in terms of rooms, has offered an unexpectedly rosy view of its current trading environment, pushing shares up 8%.

With only a brief nod to recent turmoil in the financial markets, IHG told investors: "We look forward with confidence in the currently favourable hotel trading environment of record demand and low supply growth in many markets."

Newly-promoted IHG chief executive Richard Solomons told an audience of City analysts on Tuesday: "Obviously, there has been a lot of news overnight, but hopefully we've got some good news at least in this room." For the first six months of 2011, the group reported "strong performance" worldwide, with higher numbers of both business and leisure guests.

Exceptional circumstances in Egypt, Bahrain and Japan had hit operating profits by $7m (£4m), but wider trends around the world were positive. Underlying operating profit was up 17% to $269m on revenues 6% up at $850m – ahead of City expectations.

In particular, Solomons, who was previously IHG's finance director, singled out strong performance in the US, the group's most important market, where hotel trading appeared to belie recent disappointing economic data.

The FTSE 100 group expects soon-to-be-published industry figures to show that last month was the busiest July on record for US hotels, with guests staying the equivalent of well over 100m nights.

Pressure on room availability allowed IHG and others to hold prices firmer than last year, leaving revenue per available room – or RevPAR, the industry's benchmark measure – up 8.2% for the first six months of 2011.

The strong performance was driven by IHG's mid-market brands Holiday Inn and Holiday Inn Express, which between them have more than 300,000 rooms. These brands underwent a thorough makeover in recent years, after they were perceived to have let standards slip.

On Tuesday IHG said the group was continuing to see the fruits of the revamp, in which 120,000 shabbier rooms were removed from the brands over three years, and newer rooms were added.

Sam Hart, an analyst at Charles Stanley, was more cautious than many about the IHG figures. "Uncertainty surrounding the outlook for the global hotels industry has increased materially in recent days," he said.

"Concerns are growing that escalating sovereign debt crises in the eurozone and the US could start to impact the real economy more seriously than anticipated, by reducing the confidence of corporations and individuals to invest and spend."