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IHG plans a global Chinese hotel chain

By Rob Davies for the Daily Mail
Updated: 03:08 EDT, 16 February 2011

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InterContinental Hotels is drawing up plans for a global Chinese hotel chain to cash in on an expected surge in holidaymakers from the People's Republic.

Windfall: IHG hiked its annual dividend 16% to 30p a share

The world's largest hotelier enjoyed a 6% rise in annual revenue to £1bn, as the global economic recovery saw more business travellers check into its rooms.

Operating profit surged 22% to £275m and management displayed their confidence in IHG's immediate prospects by hiking the final dividend, resulting in an annual shareholder windfall of 30p per share, up 16%.

Profits before tax reached £246m, compared to a £40m loss in 2009 when the firm was hit by writedowns and a fee to exit a large management contract in the US.

Revenue per available room - a key measure of strength in the hotels business - was up 6.2%, driven by a near 26% rise from IHG's burgeoning Chinese business.

And chief executive Andy Cosslett said the company was now exploring ways to build on that success via a global chain of hotels aimed at the 100m or so Chinese people who will soon be travelling overseas each year.

'It's not beyond the realms of possibility that we create a brand for use by Chinese travellers, as Westerners have done for years,' said Cosslett.

He said IHG (down 28p to 1360.5p) would also look at acquisitions to complement its stable of seven hotel brands, including Crowne Plaza and Holiday Inn.

The past year has seen the Holiday Inn chain undergo a huge revamp, as 1,200 franchises failed to meet the firm's criteria for a new minimum standard and subsequently left the group.

Cosslett confirmed that Crown Plaza was in for its own overhaul, albeit on a smaller scale.

Some 40 owners will be told to invest to meet the standards of newer hotels in the chain, or lose access to the nameplate of the world's fourth-largest upscale hotel brand.

IHG has been left with greater flexibility to freshen up its global collection of 4,437 hotels, after reducing its debt burden from £677m to £460m.

And the firm could reduce its debt position even further via the sale of its New York Barclay hotel.

Cosslett said IHG had already received approaches from 'several parties' to buy Barclay, which analysts say would cost around £185m.

But Cosslett - whose claims to fame include bringing Vienetta to the British market as a youngster with Unilever - said any buyer would be contractually bound to spend about £60m bringing the hotel up to scratch.

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