(Reuters) - InterContinental Hotels Group Plc, the world's largest hotelier, said it would focus on increasing room numbers and raising its valuation and had received no bids, despite speculation U.S. peers were circling.
The British-based group, which operates InterContinental, Crowne Plaza and Holiday Inn hotels, is moving toward being a managed and franchised hotel operator, but analysts have warned that unless it closes the valuation gap with its U.S. hotel rivals it may become a bid target.
"We have received no offer of any description," said group Chief Executive Andrew Cosslett in an interview with Reuters on Wednesday.
Cosslett said the valuation gap of around 20-25 percent was beginning to close, and as the group was very focused on growth it hoped it would get recognition from the stock market.
Analysts said unless InterContinental closes this gap then U.S. players such as Starwood Hotels & Resorts Worldwide Inc or Marriott International Inc may approach it and take advantage of its relatively low share price.
They say Marriott trades on over 15 times its forecast 2006 enterprise value/earnings before interest, depreciation and amortisation (EBITDA), against InterContinental at 11.2 times.
Bid talk in the hotels sector was fuelled in mid-October when Hilton Hotels Corp of the U.S. made an offer of 3.6 billion pounds ($6.4 billion) for the hotels of its British namesake Hilton Group Plc, and the two sides are still trying to thrash out a deal.
InterContinental shares slipped over 0.5 percent as some bid speculation was dampened, but then recovered to trade up 0.4 percent at 815p by 1540 GMT as the market focused on its encouraging future growth prospects, dealers said.
Cosslett said he was focused on growth and in September set a target to gain a net 50,000 to 60,000 rooms by end-2008 -- three times the growth it has seen over the last five years -- with particular emphasis on China, the world's fastest growing major hotel market.
"China is our primary focus. It is the biggest opportunity in the industry," he said. The group currently has 47 hotels in China and intends to have 125 operating in three years' time.
Cosslett said the group was the first major hotel player in China in 1984 and it has benefited from China's big road building programme and the 2008 Olympic preparations in Beijing.
"Holiday Inn has been in China for 21 years and 70 percent of its occupancy is from Chinese," he said, predicting China would be the world's second biggest hotel market following the United States within his lifetime.
Cosslett, who took over in February, is leading the shift to being a less capital intensive business with less volatile earnings growth, making it unique among European-listed hotel groups by becoming a managed and franchised hotel operator.
InterContinental runs almost 3,600 hotels with 540,000 rooms worldwide and has sold off 2.2 billion pounds of hotel assets largely in return for management contracts over the last two years, with a further 600 million pounds of assets on the block which will leave it owning just a handful of hotels.
Most of the sale proceeds have been returned to shareholders and it has promised more following the sale of the 600 million pound tranche of hotels and the 371 million it received from the sale of its stake in soft drinks group Britvic .