It warned that profits during the January to March quarter would be "substantially lower than last year".

The group - which includes the Holiday Inn, Intercontinental and Crowne Plaza chains - said it was cutting 800 jobs worldwide from its 2,600-strong back office workforce.

In a trading update, chief executive Richard North said the company had faced "some of the worst conditions the industry has ever encountered".

The conflict in Iraq and continued weakness in the global economy have hit both tourist and business travel.

Takeover targets

IHG had said earlier this month that it would shed jobs as part of a plan to reduce costs by $100m (�64m) a year, but at the time it did not say how many jobs would go.

In its trading update, IHG said the total cost of its separation from Six Continents and the defence of the Hugh Osmond takeover bid would be about �129m.

Six Continents split into two earlier this month, with IHG taking the hotel chains while the pubs and restaurants business was renamed Mitchells & Butlers.

Before the split took place it blocked a takeover bid from entrepreneur Hugh Osmond.

However, speculation has continued that IHG could be a takeover target for one of the other major hotel groups.