InterContinental Hotels Group (IHG) has warned that 2009 is set to be a difficult time for the hospitality sector after experiencing a sharp deterioration in fourth quarter trading, despite reporting a 12 per cent increase in profits for the year ending 31 December.

Although IHG recorded global RevPAR growth of 0.9 per cent, it includes a 6.5 per cent fall during the last three months of 2008, and the company has admitted that its forward bookings data shows no sign of improvement heading into 2009. In the year ending 31 December, IHG increased its estate by 6 per cent with the addition of 34,757 rooms. The company currently has a further 85,000 rooms under construction, 50,000 of which are scheduled to open in 2009.

IHG has also identified the US$1bn (£702m) relaunch of the Holiday Inn brand in 2009 as one of the company's main priorities, with 350 sites already operating under the new standard. Around 220 more sites are expected to be converted during the first quarter of 2009 after the relaunched sites reported a RevPAR increase of 5 per cent. The company is also looking to reduce regional and central costs by US$30m (£21m) this year, although it plans to continue investing in order to support growth.

Andrew Cosslett, IHG chief executive, said: "The trading environment is very tough. The sharp deterioration that we reported on last November has continued into 2009 and we see no signs of improvement at this stage. It has been clear for some time that 2009 will be a challenging year and we have taken action to prepare the business. "The actions we have taken to move the business to an asset light model with strong brands, scale advantage and leading technology and reservation systems position us well to grow market share in the testing times ahead."