Intercon to return $1b from hotel sales

World’s top hotelier posts half-year operating profit of $286 million

InterContinental Hotels, the world’s biggest hotelier, cheered investors by promising to return $1 billion to them funded from the planned sale of a New York hotel and added its flagship London Park Lane hotel is set to be next on the block.

The British-based group, home to the Crowne Plaza, Holiday Inn as well as InterContinental brands, said it will pay a special dividend in the fourth quarter costing $500 million, and also kick off a $500 million share buyback in the same three months.

Chief Executive Richard Solomons said the return of capital reflected the planned sale of its New York Barclay hotel, which analysts expect to fetch around $300 million, as the group reported a 6 per cent rise in half-year profits boosted by good trading in its two biggest markets, the United States and China.

The hotelier’s strategy to sell hotel assets in return for management contracts is similar to US peers like Marriott, and has helped return $8.9 billion, including $1.2 of ordinary dividends, since the group’s formation in 2003.

The capital return helped boost its shares up 6.5 per cent to 1,727 pence by 0933 GMT to be the biggest riser in the FTSE 100 index in a largely flat London stock market.

The group only owns 10 of its 4,500-plus hotels worldwide with a book value of $1.6 bil- lion, with most of that value being in its flagship hotels in New York, London, Paris and Hong Kong which are all expected to be eventually sold.

The year-long sale process of the New York Barclay should be closed in the next few months, Solomons said, and talks are under way with one exclusive buyer, which analysts say is likely to be the Qatari hotel owner Ghanim Bin Saad Al Saad.

Solomons said that once the group opens its second InterContinental in London in the first quarter of 2013 then it is likely to sell its Park Lane hotel in return for a management contract.

Analysts estimate its value at over $330 million.

He added this was consistent with the group’s “asset light” strategy and returning funds to shareholders while still maintaining the group’s BBB investment grade credit rating.

“Interest will come from high net worth and sovereign wealth money from the Middle East, Russia and possibly south-east Asia,” said Robert Seabrook, head of hotel transactions at property consultant Savills.

“It’s one down from the likes of the Dorchester but is at the bottom of arguably the best hotel street in London,” he said.

Continued growth

Solomons said the group reported growth in the half year across all regions, and both hotel occupancy and room rates increased and, despite a tough economic environment, the group was trading well and continued to see growth for the future.