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InterContinental Hotels Group

InterContinental Hotels may increase number of its brands in China

Chris Spillane and Armorel Kenna  Aug 10, 2010

InterContinental Hotels Group Plc, owner of the Holiday Inn brand, posted a first-half profit after a loss a year earlier on higher sales in China and as business travel improved.

Net income for the six months ended June 30 was $141 million, compared with a loss of $29 million a year earlier, the Denham, U.K.-based company said in a statement today.

InterContinental, the world’s largest hotel group by number of rooms, said revenue per available room, or revpar, rose 3.9 percent. The hotel industry is recovering after the global recession deterred holidaymakers and forced companies to cut travel budgets. Greater China was InterContinental’s “strongest performing region” with revpar growing 29 percent.

Chief Executive Officer Andrew Cosslett said the company may increase the number of brands it operates in China to allow it to offer greater choice to partners.

“There’s a limit to how many InterContinentals you can have in any city,” Cosslett said on a conference call with analysts, saying the three in Tokyo was the record. “We could be potentially turning down great deals with partners who want to work with us.”

Intercontinental, which also owns the boutique Hotel Indigo brand and the Crown Plaza name, has fewer than 20 of its own properties and mostly franchises and manages hotels under its brands. The group had a total of 4,503 hotels and 656,661 rooms at the end of the second quarter, and said it had a pipeline of 197,431 rooms.

Shares Decline

The hotelier declined 46 pence, or 4.1 percent, to close at 1,078 pence at 4:30 p.m. in London, giving the company a market value of 3.1 billion pounds ($4.9 billion).

TUI Travel Plc, Europe’s largest travel operator, said today reduced holiday spending by Britons and Germans will affect profitability, dragging down shares at other leisure companies.

China is expanding at a rate that the industry hasn’t seen since the U.S. in the 1950s and 1960s, Cosslett said. The company expects it to overtake the U.S. as the world’s largest market within 20 years, he said.

The company has 132 hotels open in Greater China with 148 in its “development pipeline,” it said in the statement.

“The medium to long earnings power of IHG remains compelling,” said London-based Nomura analyst Simon Larkin in an Aug. 4 note. Larkin has a “buy” recommendation on the company and estimated a 4 percent revpar increase for the quarter.

InterContinental Hotels may increase number of its brands in China
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Source: Bloomberg

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