Bloomberg News

InterContinental Hotels Profit and Dividend Beat Estimates

February 14, 2012

(Updates with CEO comments starting in ninth paragraph.)

Feb. 14 (Bloomberg) -- InterContinental Hotels Group Plc, the world’s largest provider of hotel rooms, reported profit that beat estimates and declared a bigger-than-expected dividend as business travel recovered, led by the U.S. and greater China.

Operating profit in 2011 rose 26 percent to $559 million, the Denham, England-based company said today, more than the $541 million average estimate of 12 analysts compiled by Bloomberg. The dividend was increased 15 percent to 55 cents a share, exceeding the average analyst estimate of 52 cents.

Chief Executive Officer Richard Solomons said the hotelier is well-placed to benefit from demand in emerging markets such as the greater China region, which accounts for about 12 percent of group revenue. Growth in revenue per available room, or revpar, accelerated in January, the company said.

“The only big surprise was the dividend increase,” said Karl Burns, an analyst at Shore Capital in Liverpool. “The U.S. has been consistently strong and looks to remain that way,” he said of the hotelier’s biggest revenue source.

InterContinental Hotels rose 0.9 percent to 1,415 pence at 9:48 a.m. in London trading. The shares have risen 22 percent this year, compared with a 23 percent gain for U.S. competitor Marriott International Inc. and a 16 percent increase for Starwood Hotels & Resorts Worldwide.

Strong January

Global revpar last month rose 6 percent from January 2011, compared with growth of 4.6 percent in the fourth quarter, InterContinental Hotels said. The Americas region led the monthly gain with a 7.7 percent advance.

Business and leisure travel is recovering after companies and consumers cut spending during the global recession of 2008. Revenue per room in the industry rose 9.8 percent last year in the Asia-Pacific region, and 8.2 percent in the Americas, according to London-based researcher STR Global.

At InterContinental, renovation of the Holiday Inn brand helped boost the chain’s average revpar in the U.S. by 7.9 percent in 2011. The company is now repositioning its Crowne Plaza brand, a project that should be complete by 2015, it said.

“The Holiday Inn relaunch is delivering strong revpar, and we’re now using a similar approach with Crowne Plaza, which is our highest priority,” Solomons said. “There is good momentum in the U.S.”

In Greater China, revpar increased 10.7 percent last year and more than a quarter of the 180,484 rooms in the company’s development pipeline are in that region. InterContinental has doubled revenue from China over the past two years, and will unveil a new hotel brand there later this year, Solomons said.

New York Barclay

“We have developed this new brand primarily for Chinese guests,” the CEO said. “Oversupply is always a risk, but we are not concerned, as demand is growing hugely.”

The company’s Chinese hotels “will likely come under some demand pressure” in 2012, Simon French, an analyst at Panmure Gordon in London, said in a note today. Industry-wide occupancy rates across the Asia-Pacific region were little changed in 2011, according to STR Global.

InterContinental increased the total number of rooms by 2 percent last year to almost 660,000. It gets most of its income from franchising. Solomons said he’s seeing “good interest” from potential buyers of the InterContinental New York Barclay hotel and has whittled the list down to one preferred bidder.

Panmure’s French estimates a $250 million after-tax gain from the sale of the Barclay, which he expects to be returned to shareholders in the form of a share buyback. In 2006, InterContinental sold seven European hotels for 634 million euros ($835 million) to focus on managing properties.

Solomons said acquisitions “are not a priority now” as the company focuses on growing its existing brands and introducing new brands in China and the U.S.

Starwood said last week that worldwide revenue per available room for 2011 grew 7.4 percent, at the low end of the hotelier’s October forecast of 7 percent to 9 percent before currency adjustments, as demand in Europe weakened. Marriott plans to report fourth-quarter results on Feb. 16.

--Editors: Paul Jarvis, Thomas Mulier

To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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