Hotel to return $1 billion from sales

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 return of capital reflected the planned sale of its NY Barclay hotel

The British-based group, home to the Crowne Plaza, Holiday Inn and 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 six 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 group only owns 10 of its 4,500-plus hotels worldwide with a book value of $1.6 billion, 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, Mr 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.

Mr 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.