InterContinental looks east to emerging markets

World No 1 hotelier InterContinental Hotels is looking to emerging markets and especially China to drive growth after a recovery in the United States and a string of new Chinese hotel openings helped push 2011 profits up 26%.

The hotelier, home to Crowne Plaza and Holiday Inn as well as the InterContinental brand, said business was improving in the US, led by a healthier economy and job creation in a region which makes well over half the group’s profit.

Greater China, which was reporting numbers as a separate region for the first time, saw the group’s highest growth rate as it opened over 8,000 new rooms in the year, while over a quarter of the group’s new global hotel pipeline is in China.

Chief executive Richard Solomons said that despite the eurozone crisis he was upbeat about the future as people still wanted to travel for business and leisure, while emerging markets were growing strongly.

“We go where the travellers are. We see good momentum in the US economy with economic data there quite positive while China is our fastest growing region and our business there has doubled in the last two years,” he told a results briefing yesterday.

The group earns nearly 10% of profits from its 167 Chinese hotels with a further 147 in the pipeline to open soon, and the hotelier plans to introduce another upmarket brand alongside InterContinental to meet the growing demand.

Growth in global revenue per available room, a key hotel industry measure, grew at 6.2% in 2011 with the US and China ahead 7.9% and 10.7%. While there was a fourth-quarter slowdown worldwide to 4.6%, the January growth rate recovered to 6.0%.

“We expect a continuing strong performance in the US and Asia will likely lead to 5% plus upgrades to consensus 2012 forecasts”, said analyst Ian Rennardson at brokers Jefferies, after he described the 2011 results as solid with a decent outlook statement.

The hotelier said it had a preferred bidder for its flagship InterContinental New York Barclay hotel which has been for sale for a year with a price tag estimated at $300-350 million, and analysts said a sale may prompt a share buyback or special dividend as it moves to be a management and franchise operator.

“We believe that the New York asset market has improved, and that any sale would be accompanied by a return of capital in some form,” said analyst Simon Champion at Deutsche Bank.

The British group, which operates more than 660,000 rooms in over 4,500 hotels worldwide posted a 26% rise in 2011 operating profits to $559m (€425m) beating a $543m ThomsonReuters consensus estimate, while annual revenue rose 9% to $1.77 billion.

The group 2011 dividend rose 15% to 55 US cents.

InterContinental, like other hoteliers in 2011 suffered from unrest in the Middle East and North Africa, the tsunami in Japan and the eurozone crisis, but recovery and growth elsewhere has helped to offset these negative factors, analysts said.

Europe, which accounts for 15% of group profit, showed a small fall of 0.2% in revenue per available room in the fourth quartet due to a poor economic conditions, but Solomons said revenue per available room had recovered to grow 3% in January.

Earlier this month, Sheraton-owner Starwood posted higher-than-expected fourth quarter earnings but a flat Europe worried investors and its shares dipped, while Marriott reports its fourth-quarter on February 15.


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