Holiday Inn facelift starts to attract business

* Holiday Inn attracting more business travelers

* Hotel make-over about one-fifth completed

* So far progress has been encouraging- executive

* 'Several hundred' hotels expected to leave the system

By Deepa Seetharaman NEW YORK, May 14 (Reuters) - Business travel, once the domain of fat expense accounts, has been caught up in the same economic downdraft as the rest of the global economy.

But Intercontinental Hotel Group (IHG.N: Quote, Profile, Research)(IHG.L: Quote, Profile, Research) is hoping a $1 billion overhaul of its Holiday Inn and Holiday Inn Express chains will seize market share by attracting suddenly more parsimonious business travelers.

"Nobody ever got busted internally from turning in an expense report from Holiday Inn," said Jim Anhut, chief development officer for the hotel group, the world's largest by rooms.

In recent weeks, hotel companies have reported a sharp drop in business travel, particularly at high-end hotels. Industry experts says businesses are flocking to less expensive hotels to cut costs and avoid criticism for excessive spending.

The trend will undoubtedly benefit InterContinental, which is knee-deep in a three-year global make-over of its chains.

So far, the signs of progress are encouraging, Anhut said. The renovated properties reported revenue per available room -- an industry metric known as RevPAR -- that was 5 percent better than its group in the first quarter. [nLC759423]

Overall RevPAR was down 13.6 percent in the first quarter, less than the hotel group's peers Marriott International (MAR.N: Quote, Profile, Research) and Starwood Hotels & Resorts (HOT.N: Quote, Profile, Research).

"That would suggest we're gaining market share," Anhut said.

InterContinental hopes its make-over, which is about one-fifth done, will also reverse a popular perception of the chain as inconsistent and dingy, a turn of events that could translate into more stability for the company.

In a bid to undo its negative image, the company expects to remove "several hundred" hotels as part of the renovation, said Kevin Kowalski, head of global brand management for Holiday Inn.

"It's integral to our continued leadership," Kowalski added.

BRAND BUILDING

Nearly 70 percent of the company's rooms fall under the Holiday Inn or Holiday Inn Express banner, and of the 400 hotels the company plans to open in 2009, the bulk belong to these two chains.

The hotels' make-over, announced in October 2007, is centered on revamping the hotels' look and streamlining check-in. About 730 of roughly 3,200 hotels have been upgraded so far and the renovation is picking up speed, Kowalski said.

Now the company is seeking ways to get the two chains into other lucrative markets, including cities. The sector that includes the Holiday Inns that compete with Marriott Courtyard and Starwood's Four Points saw a roughly 19 percent drop in RevPAR last week, according to FBR Capital Markets analyst Patrick Scholes wrote in a research note this week, citing Smith Travel Research.

Those lower-end chains fared better than their luxury and upscale counterparts, Scholes noted, which dropped 32 percent and 24 percent respectively.

In a recent securities filing, InterContinental said its average daily room rate was about $100 a night for both Holiday Inn and Holiday Inn Express. Marriott Hotels & Resorts averages $167 a night while at Starwood, the average cost of a room runs slightly more than $200 a night.

It is common for lower-end brands to do better than their luxury or upscale counterparts during recessions as consumer seek bargains, Scholes said. But the company now has an opportunity to impress guests and convince them to return even when the economy bounces back.

"Sometimes people, in the back of their mind, they think of the Holiday Inn as a roadside hotel that could use a little refreshing around the edges," Scholes said.

"The newer ones are a little bit closer to the Marriott's Courtyard brand. It's better than your father's Holiday Inn."

(Reporting by Deepa Seetharaman; editing by Patrick Fitzgibbons and Leslie Gevirtz)

((deepa.seetharaman@thomsonreuters.com; +1 646 223-6125; Reuters Messaging: deepa.seetharaman.reuters.com@reuters.net)) Keywords: INTERCONTINENTAL/HOLIDAYINN

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