New World Development

New World Development plans separate stock listing for hotels

Spin-off comes amid high valuations and points to end of high growth in industry, analysts say

PUBLISHED : Saturday, 09 March, 2013, 12:00am
UPDATED : Saturday, 09 March, 2013, 4:37am

New World Development is mulling a spin-off and listing of its hospitality assets, a move that some analysts see as an indication that the fast growth experienced by the hotel industry is coming to an end.

The spin-off proposal comes little more than a month after Great Eagle announced a spin-off plan for its hotel properties in an attempt to cash in their value amid an influx of mainland travellers.

Mainland visitors drove the city's tourist arrivals to a record of more than 46 million last year.

"No decision has yet been made as to which assets would be included in the spun-off entity, the transaction structure, as well as whether or when to proceed with the proposed spin-off," the company said in a statement to the stock exchange yesterday.

In June last year, New World had invested in 16 hotels with 7,235 rooms in Hong Kong, mainland China and Southeast Asia. The hotels included the 64 per cent-owned Grand Hyatt in Wan Chai and the 78.8 per cent-owned Hyatt Regency in Tsim Sha Tsui.

Sonia Cheng Chi-man, the daughter of chairman Henry Cheng Kar-shun, oversees the hotel division.

Analysts said New World wanted to cash in while hotel valuations remained high, but they expected the rapid revenue growth in the sector would end soon.

You cannot find buyers for such a big chunk of assets if the market has already peaked. No one knows when the peak will come

"You cannot find buyers for such a big chunk of assets if the market has already peaked. No one knows when the peak will come. Therefore, the best time to sell is when the sector is near the end of the high-growth period," said Alex Wong Kwok-ying, a director of asset management at Ample Capital.

According to a global survey by British business travel agency Hogg Robinson, daily room rates in Hong Kong averaged £211.35 (HK$2,460) last year, up 2 per cent from 2011. Hong Kong was ranked the fourth most expensive corporate travel destination.

But given the uncertainty in the global economy and the slowdown in business, the hotel market in the Asia-Pacific was slated for a period of slow growth as organisations became more aware of costs, the survey said.

Adrian Ngan Wai-hung, an executive director of Citic Securities' real estate equity research department, said New World had decided to sell as hotels were enjoying good valuations because of booming tourism.

Ngan said he believed the company also wanted to strengthen its war chest for future project developments.