In its first trading update since its demerger from Six Continents, InterContinental Hotels (IHG) has reported profits for the period January to March as having fallen substantially compared with the previous year.

Demand for hotel accommodation worldwide has been hit by the prospect and subsequent outbreak of hostilities in Iraq, by the continued weakness of the global economy and, latterly, by fears over the spread of the SARS virus, all of which have affected IHG.

In the Americas, operations have outperformed or performed in line with their relative markets, but in Europe InterContinental owned and leased hotels have seen a fall in RevPAR against last year of 9.6 per cent and Holidays Inns in London a drop of 9.2 per cent.

The company said a cost cutting programme aimed at reducing costs by $100m per year is making good progress and it is anticipating making savings of at least $75m by the end of 2003.

Over 50 per cent of these savings will be coming from staff cuts, with up to 800 redundancies across all levels from a global corporate staff of 2,600.

IHG's results for the 6 months to 31 March will be announced on 22 May. www.ichotelsgroup.com