International Hotel Investments has seen the turmoil caused last year by the international financial crisis spilling over to 2009, with the ensuing recession taking a toll on the hospitality industry.

In the first six months of 2009, the group registered a loss after tax of e2.81 million compared to a profit after tax for the comparative period last year of e2.31 million.

In an interim statement covering the first six months of the year, the Malta Stock Exchange-listed company said on Thursday, “The adverse effects of the financial crisis that started to be felt in the second semester of 2008 have spilled over into 2009 with the hospitality industry suffering the effects of recession in its main feeder markets resulting in falling occupancies and increasing pressures on room rates.”

As a result, the group registered a 20 per cent drop in turnover compared to the first half of 2008. Citing the benefits of the group’s considerable geographical spread, it pointed out that it still managed an operating profit of e4.18 million after depreciation. Although in positive territory, the figure was still down from the first half of 2008’s e6.82 million.

In terms of outlook, the group predicts, “Although there are some preliminary indications that the recessionary spiral may have bottomed out, it is still early to determine when the international economy will start showing tangible proof of recovery.

“This uncertain economic climate may have a negative impact on the value of some of the group’s properties at year-end. In order to counteract and mitigate these recessionary effects, the group is pursuing its strategy of seeking new markets, streamlining its operations and reducing costs without impinging on the quality of service provided by its properties.”

In the meantime, in the first six months of 2009 finance income – interest income earned on funds earmarked for future acquisitions – decreased when compared with the corresponding period last year following the utilisation of part of the funds for the acquisition of the group’s stake in the Metropole Building and 10 Whitehall Place in London coupled with the drop in interest rates.

The group incurred lower finance costs as a result of ongoing capital repayments and the reduction in the euro base rate. This same reduction in the euro base rate triggered a fair value loss on the two interest rate swap arrangements currently in place.

The group said it intends holding on to the instruments, with the result that the fair value loss would be reversed upon maturity.

Although reporting a consolidated loss, the group said a tax expense is still being recognised as a result of the profits being generated by Corinthia Hotel Tripoli.

On 25 May, the refurbished and extended Corinthia Hotel St Petersburg was officially inaugurated, and now features a total of 400 rooms, which include 107 luxury suites and bedrooms plus considerable meeting and conference facilities making it the largest five-star hotel in St Petersburg. The retail and commercial centre with extensive retail and office space, the group said, will be completed later on this year.

Having secured the required bank funding and appointed its main contractor in May, the redevelopment of the Metropole Building and 10 Whitehall Place in London is proceeding according to plan. As at 30 June, the strip-out was practically completed, the group reports.

The completion of the project is planned for October 2010. CHI will be entrusted with the management of the hotel operation under the Corinthia brand.

During the first six months of this year, IHI injected a further e16.7 million by way of equity into NLI Ltd, which is the joint venture company set up for this project. IHI has a 37 per cent stake in the company and has been entrusted by its joint venture partners, Istithmar Hotels of Dubai and LFICO of Libya, to lead the development.

The design work on the Benghazi project in Libya, a mixed-use development incorporating a 250 room five-star hotel, 30 luxury apartments, 700 square metres of retail space and 3,700 square metres of office space, are now at an advanced stage. Mobilisation work will start immediately after all the required permits and licences are in place. IHI has a 75 per cent stake in IHI Benghazi, the company set-up for this purpose, with the balance owned by LFICO of Libya.

In line with its expansion plans underpinned by the exclusive licence to operate under the Corinthia, Wyndham and Ramada brands in Europe, North Africa and the Middle East, the group’s hotel operating company, CHI Ltd., is assessing a number of opportunities for management agreements. CHI has recently started managing the first of a number of hotels opening in Egypt.

In July 2009, the group successfully issued a corporate bond for e35 million to be used for general corporate funding purposes principally to finance, together with funds remaining available from its equity capital, the Group’s expansion and property acquisitions. Tangible fixed assets acquired during the period, meanwhile, amounted to e26.36 million. The amount mainly relates to the expenditure incurred on the development of the Corinthia Hotel St Petersburg and the adjoining commercial centre.