InterContinental Hotels Group Plc, whose Holiday Inn chain benefited from the construction of the US Interstate Highway system in the 1950s, is counting on Chinese roads to fuel demand for overnight stays.

InterContinental, the biggest hotelier in Asia's fastest-growing economy, plans to more than double the number of outlets in China to 125 from 50 by 2008, Chief Executive Officer Andrew Cosslett said recently. A Chinese Government program to build as much as 85,000 kilometers (53,000 miles) of roads over 20 years will underpin the growth, he said.

"Suddenly the curve becomes exponential, so we're very focused on getting hotels open in China," Cosslett, 50, said this month. "We expect to be growing extremely quickly," he said.

Kemmons Wilson, Holiday Inn's founder, became a millionaire after his air-conditioned, franchised hotels began to sprout up across the US when President Dwight Eisenhower's road-building program created a national transit network.

Today, InterContinental makes most of its money from hotel management and franchising after divesting properties and other assets. The company, which also operates the Crowne Plaza chain, will own fewer than 12 hotels by the end of the reorganization, Cosslett said. Holiday Inn and Holiday Inn Express account for about 91 percent of InterContinental's 3,000 franchised rooms.

The British company's net income probably fell about 19 percent last year to 187 million pounds (US$330 million), following the property sales, UBS AG analyst Vicki Lee said in a note to clients. Sales probably declined 10 percent to 1.98 billion pounds, she wrote.

InterContinental's shares have gained 16 percent in the past six months. Shares of US competitors Marriott International Inc and Starwood Hotels & Resorts Worldwide Inc have gained 3.3 percent and 1.3 percent. Accor SA, a French hotel group, has climbed 24 percent.

Accor, Marriott and Starwood may provide InterContinental's biggest challenge in China, according to Matthias Desmarais, an analyst at SG Securities who on Tuesday raised his rating on the company's stock to "buy" from "hold."

Paris-based Accor, which has fewer than 30 outlets in China, plans to sell and lease back 80 hotels next year to help fuel growth in China. Its Ibis chain competes with Holiday Inn.

InterContinental could profit from the "power of its brand and its marketing tools," Desmarais said. "But Accor has proven in the past its ability to better develop its hotels."

InterContinental, which opened its first hotel in China in 1984, in the last three years has invested more in information-technology and reservation systems, Cosslett said. Its Shanghai office now employs 88 people and a website allows customers to make a reservation anywhere in the world in Chinese.

"We are in the right place to take advantage" of Chinese growth, Cosslett said. "We have all the experience from America, which was only 50 years ago, so there's a lot of knowledge still in the business about how that took place."

Cosslett joined InterContinental last February from Cadbury Schweppes Plc, the world's third-largest soft-drink maker, to focus on the hotel company's brand development. He had been in charge of Cadbury's business in Europe, the Middle East and Africa for the previous two years.

China overtook Italy to become the world's sixth-largest economy in 2004 after the government last month revised output up 16.8 percent to almost US$2 trillion. The National Bureau of Statistics last week raised its preliminary estimate for China's 2004 GDP growth to 10.1 percent from a previous 9.5 percent.

"China is the promised land for all the hotels groups," SG Securities' Desmarais said. He estimates it will take three to four years before they begin benefiting from Chinese growth.

(China Daily January 26, 2006)