MILLENNIUM and Copthorne Hotels saw bookings devastated in the first half of the year by war in Iraq and the Sars outbreak.

The company, which runs 91 hotels around the world, reported a pre-tax loss of £6.3m in the six months to June 30, compared with a £25.6m profit last year.

But M&C, which owns one of the finest hotels in Newcastle, indicated that the hotel industry was showing signs of revival, with an improvement in trading in the US and Europe since the end of major fighting in Iraq.

Chairman Kwek Leng Beng said: "I believe the hotel industry, barring circumstances beyond its control, is on the road to recovery, with growing occupancies to be followed by better rates."

Based in Horley, Surrey, M&C had been expected to suffer the effects of war and Sars with its high exposure to business and leisure travellers.

But Mr Leng Beng predicted the group would return to profit in the second half, despite challenging market conditions.

The problems meant turnover fell to £243m in the six months, from £283.8m last year.

Revenue per available room - a key hotel industry measure - fell to £36.83 from £43.07 on a like-for-like basis in the first half of last year.

The flagship Millennium Hotel, in New York, which had been closed since the September 11 terrorist attacks, was reopened in May, and had an average occupancy of 70 per cent.