InterContinental to return $1B from hotel sales

Aug 07, 2012, 10:04 AM EDT

* Special dividend of $500 mln, plus $500 mln buyback

* Half-year operating profit $286 mln, consensus $285 mln

* Continues to trade well and confident for future growth

* H1 RevPar up 6.5 percent, July RevPar up 3.8 percent

* Shares up 6.5 pct, top riser in the FTSE 100 index

By David Jones

LONDON, Aug 7 (Reuters) - InterContinental Hotels,the world's biggest hotelier, cheered investors by promising toreturn $1 billion to them funded from the planned sale of a NewYork hotel and added its flagship London Park Lane hotel is setto be next on the block.

The British-based group, home to the Crowne Plaza, HolidayInn as well as InterContinental brands, said it will pay aspecial dividend in the fourth quarter costing $500 million, andalso kick off a $500 million share buyback in the same threemonths.

Chief Executive Richard Solomons said the return of capitalreflected the planned sale of its New York Barclay hotel, whichanalysts expect to fetch around $300 million, as the groupreported a 6 percent rise in half-year profits boosted by goodtrading in its two biggest markets, the United States and China.

The hotelier's strategy to sell hotel assets in return formanagement contracts is similar to U.S. peers like Marriott, and has helped return $8.9 billion, including $1.2 ofordinary dividends, since the group's formation in 2003.

The capital return helped boost its shares up 6.5 percent to1,727 pence by 0933 GMT to be the biggest riser in the FTSE 100index in a largely flat London stock market.

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

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

Solomons said that once the group opens its secondInterContinental in London in the first quarter of 2013 then itis likely to sell its Park Lane hotel in return for a managementcontract. 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 stillmaintaining the group's BBB investment grade credit rating.

"Interest will come from high net worth and sovereign wealthmoney from the Middle East, Russia and possibly south-eastAsia," said Robert Seabrook, head of hotel transactions atproperty consultant Savills.

"It's one down from the likes of the Dorchester but is atthe bottom of arguably the best hotel street in London," hesaid.



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 groupwas trading well and continued to see growth for the future.

"There might be a little bit of a slowdown in July but thatis for one-off factors and for the medium time, the outlook isgood," said Solomons. He added one-off factors included the U.S.July 4 independence day falling in mid-week, and by the end ofJuly growth rates were back running similar to the half year.

Growth in half year global revenue per available room(RevPAR), a key industry measure, grew 6.5 percent with theUnited States and China ahead 7.2 percent and 9.7 percent,respectively. In July, global growth slowed by 3.8 percent.

The Olympic Games had seen the group's 51 London hotelsfull, but the effect was "financially neutral" as games guestsreplaced regular London visitors, Solomons said.

The hotelier, which operates more than 660,000 rooms in over4,500 hotels worldwide, posted a 6 percent rise in half-yearoperating profit to $286 million, in line with an averageforecast of $285 million in a company-compiled consensus.

Revenue increased 3 percent to $878 million.

The half-year dividend rose 31 percent to 21 U.S. centsfollowing a decision to rebalance its interim towards one thirdof the total for the year.

Results from rival hoteliers such as Marriott and Starwood have shown signs of a steady industry recovery despitesome weakness in euro zone crisis hit southern European nationsand some slower growth in China.

Solomons added he was confident the group had complied withall competition laws after Britain's consumer watchdog, theOffice of Fair Trading, accused the hotelier of price fixingwith two major online travel agents to restrict discounts thatcould be offered for hotel rooms. (Additional reporting by Tom Bill; Reporting by David Jones;Editing by Mike Nesbit)