Hilton signals huge windfall for investors

HOTELS and betting giant Hilton Group is expected to announce that it is planning to return millions of pounds to shareholders when it reports annual results on Thursday.

The £5 billion company, which owns Ladbrokes as well as the Scandic and Hilton hotel chains, has raised more than £700 million by selling hotel assets over the past five years.

Chief executive David Michels is expected to reveal that the group will return a substantial part of the cash raised to shareholdersin coming months. Analystsare predicting more than £500 million following the example of rival hotel group InterContinental, which has already pledged to return at least £1bn to its shareholders.

However, Hilton will probably offer shareholders a special dividend rather than break with company tradition with a share buy-back. Michels is also likely to announce that Hilton is selling more hotels, in keeping with the the industry trend. Hilton already has 11 hotels on the market, but is expected to put more of its £2.3bn portfolio up for sale.

Hilton still owns 70 of the 400 hotels it manages. It sold 11 to Royal Bank of Scotland for £312 million in 2001 and ten to a Bank of Scotland-backed consortium for £336m a year later.

Hilton is not alone in turning its properties into cash. The strategy is to sell to banks or private equity companies and hold on to the hotel brand by leasing back the buildings or keeping the contract to manage them.

InterContinental has put £2bn of properties on the market over the past two years, 45 of which have been sold, raising £580m, while Whitbread's Marriott is going ahead with a 'sale-and-manageback' of 12 hotels with more to follow.

Last week, De Vere staged a £186m sale-and-manage-back of its Belfry hotel in Birmingham, while Jarvis Hotels has disposed of almost half its 55 hotels through sale and manage or leasebacks in the past five years.

Hilton's overall pre-tax profits, with hotels performing strongly, are likely to be about £380m, up from £272m last year.