Intercontinental sells 16 US hotels for $185m

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Intercontinental Hotels has sold 16 of its Staybridge Suites hotels in the US to the Massachussets-based real estate group Hospitality Properties Trust for $185m (£111m) cash.

The sale is the result of an asset review Intercontinental launched when it demerged from the leisure and brewing group Six Continents earlier this year. It will operate the hotels on Hospitality Properties Trust's behalf for the next 20 years as Staybridge Suites.

Richard North, the chief executive of the Intercontinental Hotels, said: "We have successfully developed and grown the Staybridge Suites brand over the last five years and now it has critical mass. As a consequence, we no longer need to own these assets."

He added: "The deal is consistent with our strategy to prove brand concepts and then reduce capital intensity while converting the income stream into management or franchise fees."

Intercontinental's shares rose 2.4 per cent to 440.25p yesterday. The group said the proceeds from the sale, which was $15m above the book value of the assets, would be used to pay down debt. The hotels are targeted at business travellers wanting self-catering accommodation for extended stays.

Richard Solomons, the finance director at Intercontinental, said: "The Staybridge Suites brand is making good progress with 55 hotels open and over 40 in the pipeline. This transaction is a direct consequence of the continuing review of our asset base and represents a step along the path to improving the group's return on capital."

The hotels that have been sold are located across 11 US states, from California to Texas and Florida. The average age of the hotels is three years.

Under the terms of the management deal, Intercontinental will run the hotels in exchange for $17m return to Hospitality Properties each year, plus a percentage of operating revenues over a certain level.

Intercontinental is looking to cut costs by £60m a year in an attempt to offset the falling demand in the travel industry. The hotel group has also said it is looking at other deals where it can sell assets and secure income in similar ways.