InterContinental Hotels, the world's biggest hotelier, said a recovery for the industry might be two years away after reporting first-half profit that fell but beat forecasts.

The British group, which operates the InterContinental, Crowne Plaza and Holiday Inn brands, declined to call the bottom of the hotel market as the economic downturn continued to crimp the travel budgets of its key customers from the business community.

We can't see any sign of recovery and it could be two years before we get back to levels of travel we were at before, Chief Executive Andrew Cosslett told a results briefing on Tuesday.

The firm's shares were down 1 percent at 750.5 pence by 0852 GMT in a slightly firmer overall market.

This is one of the toughest years on record with little respite and it will continue to be challenging this year and into next, Cosslett said.

ROOM RATES UNDER PRESSURE

He said forward booking data showed no further deterioration in demand, with July benefiting from stronger leisure demand from holidaymakers, but while occupancy levels were stabilizing, hotel room rates were still very much under pressure.

Analysts expect revenue per available room (RevPAR) to fall in the second half after the British hotelier said the key industry measure fell 16.2 percent in the first half and 18.6 percent in the second quarter.

Although deeper cost cuts helped offset tough trading in the first half, analysts said further cuts are unlikely to offset fully further declines in business as the group raised its cost savings target for 2009 to $80 million from $70 million.

InterContinental says that occupancy has shown signs of stabilization but room rates continue to decline in a very competitive market, said analyst Ian Rennardson at house broker Bank of America/Merrill Lynch.

The hotelier, which typically manages or franchises hotels instead of owning them and earns 70 percent of its profit in the United States, has been hit by the fall in global travel from leisure and business guests, especially since September.

RIVALS CUT FORECASTS

Last month, U.S. group Marriott International reported a plunge in second-quarter profit while it and rival Starwood, which owns the Sheraton brand, cut their 2009 earnings forecasts and reported few signs of recovery.

InterContinental, which runs almost 630,000 rooms in over 4,300 worldwide hotels, reported adjusted operating profit down 38 percent at $179 million for the first half of 2009, while its half-year dividend was unchanged at 12.2 cents.

Continuing operating profit dipped to $174 million, above a consensus of $162 million and a range of $152-$173 million in a survey of eight analysts by Reuters. The firm gave no comparative figure for continuing profit.

The group, which also runs Staybridge Suites and Hotel Indigo, said it was still on track to add 400 hotels this year and on target with a $1 billion relaunch of its Holiday Inn brand with 1,040 hotels operating under its new standards.

Its shares have outperformed London's FTSE 100 by over 20 percent this year, meaning the shares trade on nearly 17 times 2009 forecast earnings, at a discount to Marriott on 32.

(Reporting by David Jones; Editing by Dan Lalor, Rupert Winchester, John Stonestreet)