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InterContinental targets luxury hotel brand acquisitions

U.K.-based InterContinental Hotels Group Plc plans to purchase up to two luxury hotel chains in a push to grow its presence in the top end of the hospitality market, CEO and Director Keith Barr said during an earnings call.

The hospitality giant also intends to launch an upscale conversion brand later in 2018, said Barr, who also revealed a series of strategic initiatives aimed at delivering the largest net rooms growth in the industry.

"We are currently looking to acquire one or two small luxury, asset-light brands that will incubate and grow in order to access these significant opportunities [in the higher end of the market]," Barr said. "There are a number of those located throughout the world right now that we've had conversations with that are interesting," he added.

The global luxury hotel segment is worth $60 billion per year and is set to grow 50% over the next 10 years, according to figures quoted by Barr. The upscale segment in which InterContinental plans to launch a conversion brand is worth $40 billion per year and is also expected to grow by 50% over the next decade, he said.

In addition to the planned brand acquisitions, the strategic initiatives discussed involve the company focusing and redeploying resources to better leverage its scale; strengthening its loyalty program; enhancing revenue delivery through digital and technological innovation; evolving its franchise proposition and strengthening its existing brands.

The initiatives will be funded by a company-wide efficiency program that aims to release $125 million in annual savings by the end of 2020, Barr said. "The competition is not standing still. That's why we're implementing new strategic initiatives to accelerate our growth, find efficiencies to fund that growth and ensure that we secure our position as one of the industry leaders for years to come," he added.

InterContinental reported pretax profit for 2017 of $678.0 million, a 14.7% year-over-year rise from $591.0 million. It noted a 20.3% incline in EPS of $2.45, compared to $2.03 in 2016.