War and Sars take toll on Hilton

Hilton reported a 25% drop in profits in the first four months of 2003, as bookings at its hotels in Europe and Asia plummeted because of the Sars virus and the war in Iraq.

But the firm, which runs about 400 Hilton hotels outside the US, said it would meet profit forecasts of about £250m thanks to the strong performance of its Ladbrokes betting shops.

"It's a pattern we're getting used to - Ladbrokes propping up the hotels," Mark Reed, an analyst at Teather & Greenwood, told Reuters.

Hilton shares, which have lagged behind the UK leisure sector in the past year, were unchanged at 170p in midmorning trading.

Hilton, which caters to international travellers, was badly affected by the September 11 attacks and is now suffering from the downturn in travel because of Sars, the flu-like virus that has killed more than 600 people in 30 countries.

Revenues per available room - a key industry measure - fell 9.7% in March and April, after rising 3.3% in January and 3.2% in February.

"Clearly, March and April were terribly hit by the war and Sars," Brian Wallace, finance director, said, although bookings had picked up since the end of the war in Iraq.

In contrast to the struggling hotels business, operating profit at Ladbrokes, Britain's biggest betting shop chain, had risen in the first four months and was expected to accelerate. But Hilton did not provide precise profit numbers.

The company dismissed speculation the group might bid for InterContinental Hotels group as "yesterday's story", but said it was watching developments at privately owned luxury hotel group Le Meridien, the subject of bid speculation.

Hilton is not the only company to feel the negative impact of Sars. Japan Airlines System, Asia's largest carrier, forecast a group net loss this year after being forced to cut flights in the past two months.

The company, formed in October by the merger of Japan Airlines and Japan Air System, said it would probably post a 43bn yen (£227.678) loss this year, compared with net income of 11.6bn yen, in the year ended March 31. Airlines worldwide will lose an estimated $10bn (£6.1bn) this year, industry officials say.