The world's biggest international hotels group, Six Continents, has revealed struggling sales in both its hotel and pub divisions.

The group, whose brands include Holiday Inn hotels and the All Bar One pub chain, has reported a 24% fall in annual profits.

It also warned that hotel prospects were less certain now than when it last updated the market, two months ago.

"The macro-economic context remains uncertain, with business confidence at depressed levels," the group said.

"Thus we remain cautious as to the extent and timing of any hotel recovery."

Drinking woes

The group also joined a growing number of pub companies to warn that even drinkers were tightening their purses.

"[We] have seen some weakening of trading particularly in Greater London and on High Streets in the rest of the country."

Six Continents runs over 2,000 pubs and restaurants under a number of different brands, including O'Neill's, Browns, All Bar One and Harvester.

But those on high streets and in London, where it is experiencing the greatest falls, account for 40% of profits in the retail division.

And there are signs of that spending is getting even tighter, with sales in the first eight weeks of the new financial year in October down 4.5% compared to a 3.4% fall in the six months to September.

Last week, JD Wetherspoon, once seen as the stalwart of the UK pub industry, was forced to issue its first ever profit warning.

It followed warnings from its peers Fullers and SFI, owner of the Slug & Lettuce pub chain, that spending on eating and drinking was being hit by the weaker economy.

Pub spin

Six Continents announced in October that it would spin off its 2,000 pubs and restaurants and create two separately listed companies.

It also said it planned to return �700m to shareholders.

It said on Wednesday that it planned to stick to its original plan and ask for shareholder approval in March.

Chairman Sir Ian Prosser said: "The separation will create two excellent standalone businesses which will have greater flexibility to pursue their own strategies."

However, analysts questioned the plans.

Fraser Ramzan, an analyst at Lehman Brothers, said: "There is weakness in both businesses and there appears to be a threat to the cash return to shareholders."

In the City, Six Continents shares slid more than 6% to 510p in early trade on Thursday, before recovering to close down only 1p at 544p.