InterContinental expansion continues

opening 50 hotels in China a year

LONDON: The world's largest hotelier, InterContinental, met forecasts with a 19 percent rise in 2007 profit and said it would carry on opening a hotel a day despite fears of a U.S.-led global recession.

The group, which operates InterContinental, Crowne Plaza and Holiday Inn hotels, said on Tuesday revenue from continuing operations rose 12.3 percent to 883 million pounds and continuing operating profit increased by 18.5 percent to 237 million pounds.

The firm, which operates almost 4,000 hotels around the world, put the growth down to strong underlying revenue per available room (RevPAR) gains across all regions, expansion in key markets and higher profits from its owned and leased assets.

RevPAR grew 7 percent over the year as a whole but slowed to 5.4 percent in January.

With InterContinental's U.S. hotels bringing in around 70 percent of it profits and the U.S. economy struggling, shares in the firm have almost halved in value over the last seven months on fears that U.S bookings may not hold up.

"America is in pretty good shape we think... Whatever people are commenting in the background, our current day-to-day business is holding up," said Chief Executive Andrew Cosslett.

"The (general) outlook is slightly less predictable and a bit more uncertain, but in terms of our internal indicators they remain very positive," he added.

Analysts were impressed by the firm's solid performance and its growth, but worries around the U.S. market continued to nag.

"Overall, the business continues to trade strongly (particularly with regard to system growth), but it will remain difficult for investors to disregard U.S. economic uncertainties with regard to the stock," said analysts at Deutsche Bank.

ROOM TO GROW

On average InterContinental opens a hotel somewhere in the world every day, adding 28,848 rooms in 2007 to take its global total to 585,000.

It has plans for 1,500 new hotels and signed up 41,908 rooms in its fourth quarter, taking its development pipeline to 225,872 rooms.

Cosslett reiterated it would top its 3-1/2 year target to open 50,000 to 60,000 net new rooms by the end of 2008. Analysts think it could open around 70,000.

"If we've got 225,000 rooms in our pipeline and they take on average nine quarters to open, and if exits remain around the current level, then you can probably do the sums," Cosslett said.

With China set to host the Olympics in August and the country's economy booming, InterContinental is opening 50 hotels there this year, while Russia and the Middle East are also growing fast.

"It's taken us 24 years to get to 80 hotels in China, and now we are going to open 50 in year," said Cosslett.

"It's going to be a few years before it really moves the needle, but, for the industry, over a million rooms will be added there within the next 10 years," he said, adding that InterContinental was currently snapping up almost half of all the internationally branded hotels being built in China.

Cosslett said the firm would also spend 50 million pounds on getting its new Indigo 'boutique' hotels up-and-running in Europe and Asia, and he expected to have around 20 of its Staybridge apartment-hotels in Britain in the next few years.

(Editing by Quentin Bryar/Will Waterman)

Source:
International Herald Tribune/Reuters