InterContinental shrugs off impact of China pressures

Hotel group sticks with its plan to open 186 properties in next five years

PUBLISHED : Tuesday, 28 October, 2014, 9:47am
UPDATED : Wednesday, 29 October, 2014, 5:21am

InterContinental Hotels Group, the world's largest hotel group by room numbers, said its business remained unscathed in China despite the twin pressures of a Beijing crackdown on corruption and political tension in Hong Kong.

The group's plan to open 186 hotels over the next five years in the key China market remains unchanged. The market is the group's second-largest after the United States.

The China expansion will take the group's room numbers to 126,073, a jump of 77 per cent. All will be added under hotel management contracts, with no equity interest.

Kenneth Macpherson, InterContinental's chief executive for Greater China, believes the mainland's austerity measures and Hong Kong's Occupy Central movement will have only a short-term impact on the industry.

The protracted pro-democracy protests, now in their fifth week, have disrupted businesses in Admiralty, Causeway Bay and Mong Kok.

Nevertheless, it is understood that InterContinental will put on sale its only wholly owned asset in the China market, the InterContinental Hotel in Tsim Sha Tsui. The asking price could be about US$1 billion, sources have said.

The group declined to comment on the potential sale, which has surprised the market.

Britain-based InterContinental runs five brands in the region catering from the high-end to the mid-range market. Among its 216 hotels in China, it manages 200 on the mainland and will open a 10th Hong Kong hotel in Mong Kok in the first quarter of next year.

President Xi Jinping's anti-graft campaign has hurt top-end retailers and luxury hotels.

However, Macpherson said high-end hotels were not its only source of revenue.

"We've seen strong corporate activities in our hotels in Shanghai and Beijing, while lots of people spend their weekends at our resorts," he said.

Despite the austerity measures, the group said overall revenue per available room in the China market registered a year-on-year 3 per cent increase in the first nine months of the year.

As for the pro-democracy protests in Hong Kong, which some have blamed for a slide in hotel bookings, Macpherson said: "Yes, there is some short-term impact on inbound travellers to Hong Kong from the mainland and the international [market]. We are fortunate that the hotels we have are not in the directly hit areas."

Macpherson expressed confidence that the Hong Kong administration would find a resolution to the political standoff.

In C-Suite, Kenneth Macpherson shares his views on the hospitality industry in China