IHG rejigs deal with Hospitality Properties

26th Jul 2011 14:20

Holiday Inn hotels owner InterContinental Hotels Group (IHG) has revised and consolidated its four existing management agreements with the Hospitality Properties Trust (HPT).The four agreements, covering 130 hotels, have been incorporated into a single new agreement, which came into effect on 1 July, 2011.IHG said its guarantee on the previous contracts has not been renewed and that it will fund a security deposit of $37m to cover any future shortfalls to HPT's owner priority returns. The balance of the security deposit will be repaid to IHG at the end of the contract;Up to 42 hotels (6,751 rooms) will be rebranded or sold by HPT, leaving 88 hotels (13,131 rooms) under IHG's brands in the revised single management contract. These hotels will be removed from IHG's system size in 2011 in addition to one hotel which has already been sold by HPT.HPT has committed to investing $300m to renovate the remaining 88 hotels. These include 3 InterContinental hotels, 6 Crowne Plaza hotels, 2 Holiday Inn hotels, 19 Staybridge Suites hotels and 58 Candlewood Suites hotels. Chief executive of IHG, Richard Solomons, said: "The exit of up to 43 hotels and the $300m investment by HPT in the remaining 88 hotels will leave us with a high quality brand defining portfolio which will be well placed to deliver superior returns to IHG over the long term."The net profit and loss impact to IHG in 2011 and 2012 was decribed by IHG as "immaterial". IHG expects to begin earning base management fees in 2013. --jh