Q&A: InterContinental CEO sees tough year ahead

— -- InterContinental Hotels Group CEO Andrew Cosslett spoke with USA TODAY's Roger Yu to discuss the economy and progress on Holiday Inn's $1 billion makeover launched in late 2007.

Q: How is the global economic downturn affecting Intercontinental?

A reasonable assumption is that 2009 is going to be very tough. Owners of the hotels need to know they can get access to lending, but the market remains stubbornly closed. Revenue per available room (the industry standard for measuring performance) has fallen, but we're better than most industries. We've had 4 to 5 years of steady increase in occupancy and rates. Even with a sharp drop in revenue (per room), we're only going back to the levels in 2005 and 2006, which weren't bad years. We're still running 60% and 70% occupancy in big cities.

Q: Will room rates continue come down?

Rates were strong through 2008. (They're) coming down somewhat now, but more slowly than previous downturns. (Hoteliers) are looking at the last downturn and realizing that simply dropping rates doesn't give them any more occupancy.

But (low) Occupancy has been the problem. We've got some markets with 10 or 15 points off in occupancy and that's significant. In the luxury market, it's higher than that.

Q: How are your hotels cutting costs?

We can remove cost without fundamentally changing the experience of hotels. You close floors (and) You can get rid of some of the cost in banqueting, regulate air conditioning, and stop newspaper drops in every room and have them available (by) the elevator. One person at the front door instead of two.

Q: How is Holiday Inn's revamp going?

This is the biggest midscale brand in the world and it's getting a lot of revived attention from people who haven't been to Holiday Inn for some time. By the end of March, 600 hotels will have been converted to the new look and service standards. We've got 1,100 new (hotels) ready to (open) come out in the next couple of years. We've seen a good increase in customer satisfaction and revenue (per room) against competitors.