InterContinental Hotels Profit Gains, Aided by Travel Recovery

InterContinental Hotels Group Plc, the owner of the Holiday Inn brand, said profit rose 38 percent in 2010 as business travel recovered.

Net income climbed to $293 million from $213 million in 2009, the Denham, England-based company said in a statement today. That compares with the $291.4 million average estimate of nine analysts surveyed by Bloomberg. Sales gained 5.9 percent to $1.63 billion.

Business and leisure travel is recovering after companies and consumers cut spending during the global recession. Revenue per available room in the hotel industry rose 21.3 percent in the year through December in the Asia Pacific region, and 6.2 percent in the Americas, where InterContinental has most of its business, according to London-based researcher STR Global.

“We have a high regard for IHG as the leading global hotel group, with open-ended medium-term expansion potential in terms of net room growth and with limited capital requirement, as well as strong brands and a sensible asset-light ownership structure,” Nigel Hicks, an analyst at Liberum Capital, said in a note yesterday. He recommends selling InterContinental shares after they gained more than 50 percent over the past year.

InterContinental increased the total number of rooms by 0.1 percent last year to almost 650,000. It owns fewer than 20 hotels and gets most of its income from franchising. The company said it started marketing the sale of its InterContinental New York Barclay hotel today.

Shareholder Returns

The disposal of InterContinental’s owned hotels and a high level of cash generation should allow “considerable scope” for share buybacks and capital returns, Hicks said.

The company plans to pay a full-year dividend of 48 cents a share, up from 41.4 cents in 2009.

“The industry staged the sharpest recovery in its history, exceeding all expectations,” Chief Executive Officer Andrew Cosslett said in the statement. “Our priority is to increase market share and improve margins in an industry set for strong growth.”

The Holiday Inn brand renovation helped boost average revenue per room for the chain in the U.S., InterContinental said. Refurbishments are almost complete and 91 percent of the properties are operating under the new standards, InterContinental said. The company also plans to renovate its Crowne Plaza brand.

InterContinental shares have risen 12 percent this year, giving the company a market value of 4 billion pounds ($6.4 billion.) That compares with a 1.3 percent decline for Marriott International Inc. and a 6.9 percent gain for Starwood Hotels & Resorts Worldwide in the U.S.

Photographer: Graham Barclay/Bloomberg

InterContinental Hotels Group Plc Chief Executive Officer Andrew Cosslett said, “The industry staged the sharpest recovery in its history, exceeding all expectations.” Close

InterContinental Hotels Group Plc Chief Executive Officer Andrew Cosslett said, “The... Read More

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Photographer: Graham Barclay/Bloomberg

InterContinental Hotels Group Plc Chief Executive Officer Andrew Cosslett said, “The industry staged the sharpest recovery in its history, exceeding all expectations.”

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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