Blackstone prepares for Hilton break-up

Hilton, the giant hotel group that was bought by Blackstone for $26bn (£15.5bn) at the top of the market in 2007, could be broken up under plans being devised by its owner.

It is believed that Blackstone is looking at a range of options for the hotel group, including public listings for parts of the chain along geographic lines, debt-for-equity swaps with lenders, as well as trade sales of portfolios of hotels to rival companies.

Although Blackstone is under no immediate pressure to break the group up, sources close to the firm say that it needs to devise plans to realise value from the group ahead of debt repayment deadlines three and four years down the line.

"These are very much early stage discussions, but clearly the $21bn worth of debt raised to buy Hilton back in 2007 isn't going to be easily refinanced," said a source. "The costs on servicing the debt aren't onerous, but the world has changed a lot since this deal was done and preparations need to be made."

It is thought that Blackstone last year wrote down the value of its investment in Hilton by a staggering 50 per cent, with consumers and business travellers cutting back on their collective travel spend.

Hilton operates a range of brands including Conrad and Waldorf-Astoria in America. The Hilton deal bought Blackstone nearly 3,000 properties and 480,000 rooms, adding to a portfolio of other hotel assets, to make it the world's biggest operator.

News of possible changes at Hilton come as the hotel and travel market suffers one of the toughest years in recent memory.

London-listed InterContinental Hotels reports this week, with analysts expecting the group to post weak numbers to the market.

Profits are expected to nearly halve to around $160m, while the key revenue per available room measure is expected to have slumped by as much as 14 per cent compared to the same six-month period last year.

InterContinental is currently in the process of relaunching its Holiday Inn brand around the world – the biggest in the history of the hospitality industry. So far, more than 1,000 of the firm's 3,200 Holiday Inns have been rebranded, although the group has met resistance to revamping in its Chinese operation, where hoteliers have called for a delay to the programme, given current trading conditions.

Meanwhile, the UK's biggest travel operators Tui and Thomas Cook will tell the market if they have had a strong summer of sales so far.

The pair are expected to say they have traded well over the period, as holidaymakers opt for package holidays over independent DIY bookings in the wake of the collapse of budget airlines like Zoom and XL last year.