UPDATE 2-InterContinental Hotels gets a boost from strong U.S. demand

Tue Aug 6, 2013 6:44am EDT

* $350m special dividend to be paid out in October

* Ordinary interim dividended raised 10 pct

* H1 operating profit up 20 pct at $338m

* Shares up 3 pct

By Neil Maidment

LONDON, Aug 6 (Reuters) - InterContinental Hotels Group , the world's biggest hotelier, posted a big rise in first-half profits on the back of strong demand in the United States and said it would return $350 million to shareholders via a special dividend.

IHG, which operates 4,600 hotels globally and is home to the Crowne Plaza, Holiday Inn and InterContinental brands, added to recent upbeat comments from rivals Starwood and Marriott International on high U.S. demand, which is helping offset tougher trading conditions in Europe and Greater China.

"Our high quality pipeline, broad geographic spread and fee-based model give us confidence in the outlook, despite the ongoing challenging economic conditions in some of our markets," Chief Executive Richard Solomons said on Tuesday.

Operating profit for the six months to June 30 rose 20 percent to $338 million, ahead of an average forecast of $323 million given in a company-compiled survey of analysts' estimates, while the firm also raised its ordinary interim dividend by 10 percent to 23 cents a share.

Shares in IHG were up 3 percent at 1965 pence at 1030 GMT.

The company's strategy of selling hotels in return for management contracts has resulted in strong free cash flow levels, allowing it to return over $7.5 billion to shareholders since 2004.

The firm sold its London Park Lane hotel for 301.5 million pounds ($462 million) in March and is now in the process of selling its New York Barclay Hotel, which it began marketing in May.

First-half revenue rose 7 percent to $936 million, while global revenue per available room (RevPAR), a key industry measure, was up 3.7 percent, driven by higher rates and demand in the Americas, which account for nearly half of IHG's sales.

Second-quarter RevPAR grew by 4 percent, up from a 3.1 percent rise in the first.

In the United States, where hoteliers are benefiting from a rebound in business travel, which has in turn boosted the rates hotels can charge for rooms, first-half RevPAR grew 4.7 percent, and was up 6.2 percent in Asia, the Middle East and Africa.

CHINA

RevPAR in Europe rose 0.4 percent thanks to resilient trading in key markets like the UK, Germany and France, but in Greater China it declined by 0.1 percent for the six months.

That compared to 9.7 percent growth in the same period a year ago as business suffered from a slight economic slowdown, cuts in government spending and a number of natural disasters including the Sichuan earthquake.

"It's true that the rate of economic growth has slightly slowed there but we are still looking at GDP growth of around 7.5 percent, which is pretty good compared to the rest of the world," Chief Financial Officer Tom Singer told reporters.

The firm said that its RevPAR performance in Greater China was still 5.9 percentage points ahead of the wider market but would not say if it expected to reach positive RevPAR growth in the second half of the year.

Singer reiterated that the region's fundamental drivers "remain highly compelling", with the firm pointing to almost a third of its expansion pipeline, which represents hotels and rooms where a contract has been signed and fees paid, being in Greater China.

IHG said that current trading trends were broadly in line with the first half of the year.

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