InterContinental Hotels Group plc (IHG), a leading worldwide hotel company engaged in the ownership, franchising and management of hotels, recently announced that Pebblebrook Hotel Trust (“Pebblebrook”) will buy its Buckhead Atlanta hotel for $105 million. Additionally, Pebblebrook will spend approximately $7 million in capital improvements of the hotel. However, InterContinental Hotels will continue to manage the hotel on behalf of the owner under a management contract.
 
InterContinental Buckhead Atlanta, built in November 2004, was the first hotel of the company in the Buckhead market. The company is selling the hotel to develop its management and franchise businesses, as operationally the hotel is profitable. InterContinental Hotel has globally disposed 185 hotels since 2003.
 
InterContinental Hotels is one of the largest hotel management and hotel franchise companies in the world and enjoys higher return on capital as it reduces its capital requirements. Additionally, free cash flow will continue to grow, leaving room for reinvestment in increasing brand recognition and enhancing shareholder return.
 
The development pipeline of InterContinental Hotels is the largest among its peers such as, Marriott International Inc. (MAR) and Wyndham Worldwide Corp. (WYN). The company has over 1,300 hotels in its development pipeline and is set to double the number of hotels it runs in China in about five years.
 
Intercontinental Hotels is the world’s largest hotel group with more than 4,400 hotels in 100 countries. The company is headquartered in Denham, the United Kingdom. It operates its hotels under seven brands including InterContinental, Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites. It is listed on the London and New York stock exchanges.
 
We maintain a Zacks #2 Rank on Intercontinental Hotels, which translates into a short-term Buy recommendation.
 
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