LONDON, June 29 (Reuters) - InterContinental Hotels, the world's biggest hotelier, plans to more than double in size in China in the next five years, a move which will give a major boost to its performance.
The British group, which operates Holiday Inn and Crowne Plaza brands as well as InterContinental, currently runs 131 hotels in China with a further 146 in its pipeline, and will open 30 this year in the world’s most populous nation.
"We are very optimistic about China for the rest of the year, and we are certain China will have a material impact on the group in the coming years," InterContinental Chief Executive Andrew Cosslett told Reuters in an interview on Tuesday.
The hotel market in China has improved since late 2009, reflecting a pick up in economic growth helping to boost the hotelier’s $1 billion Chinese business and leading the global hotel industry out of recession into slow growth.
"We are doing better in 2010 than 2009 in most parts of the world but still not 2008. However, in China we are doing better than both years," Cosslett said at its London flagship Park Lane InterContinental Hotel.
The British group is the largest international hotelier in China after it first opened a Holiday Inn in Beijing in 1984. China is now the group’s second largest market in terms of hotel rooms and revenue after the United States.
The Asia-Pacific region made around 10 percent of group profit in 2009, with the majority coming from China but this is expected to rise with its big expansion plans and the strong economic growth seen across China since late last year.
Chinese revenue per available room (RevPAR), a key industry measure, rose 27.1 percent in April compared with the group’s overall 5.2 percent rise. Independent Smith Travel Research said Asia-Pacific industry RevPARs rose 25.2 percent in dollar terms during May, and analysts said the British hotelier usually outperforms the broader market.
Cosslett, 55, has been chief executive since February 2005 and has used the brand marketing expertise gained in his earlier career at Unilever and Cadbury to grow his global business to over 4,400 hotels and more than 650,00O rooms. He speeded up the move towards running franchised and managed hotels like its American rivals by selling off a number of owned properties in return for management contracts and returning the cash to shareholders.
Cosslett says the group is not wedded to keeping hold of its 16 remaining wholly-owned hotels and it would expect to sell thesm over time. The cash raised would be used to invest in the business, cut debt or returned to shareholders.
"When conditions improve we expect to move on these assets over time," said Cosslett, adding that they would only be sold when they could fetch a good market value, renovations had taken place and there was another InterContinental in the city.
The 16 hotels are valued at $1.8 billion with the majority of that coming from five InterContinental-branded hotels in London, New York, Paris, Hong Kong and Atlanta.
The Atlanta Buckhead hotel is set to be the first on the block for sale, industry sources with knowledge of the situation said, while a second InterContinental is set to open in New York next month and a second in London next year.
InterContinental shares have risen nearly 30 percent from end-2009 and posted a strong recovery from the low of 434 pence in March 2009.
They have gained along with U.S. rivals Sheraton-owner Starwood Hotels & Resorts and Marriott International on hopes the hotel market recovery will continue.
Its shares were off their lows and down 1.8 percent at 11.39 pounds by 1330 GMT in a London market off 2.2 percent.
The hotelier still earns some two-thirds of its profits from the United States so conditions there are critical to its prospects. "There are still some question marks about the economy there but I am optimistic the business traveller is returning although the booking window is still short," Cosslett said.
