The hotel industry may be mired in its worst trading decline in living memory amid a slump in corporate spending, but InterContinental Hotels Group (IHG), the world’s biggest hotel company, will provide compelling evidence this week that the pipeline of new development, even at the top end, has yet to dry up.

The group, which owns the Holiday Inn, Indigo and Crowne Plaza chains, is set to announce that it has signed a contract for its second luxury InterContinental-branded hotel in London, to be developed in Westminster by the Splendid Hotel Group, an existing IHG franchisee, at an estimated cost of about £100 million.

The Splendid group, controlled by the Boghani family, will develop the 254-room InterContinental London Westminster on a 120,000 sq ft site near New Scotland Yard known as Queen Anne’s Chambers.

The 19th-century building, currently office and retail space, is scheduled to open as a six-storey hotel in time for the 2012 Olympic Games.

The opening of a second InterContinental in the capital will allow IHG to study ways of releasing some or all of the equity tied up in its flagship property on Park Lane.

Over the past six years the group has sold the underlying assets of all but a handful of its hotels, principally the “big four” InterContinentals in London, Paris, New York and Hong Kong. It has always said that it would also consider selling the equity in the four properties, but only after securing a contract on a second hotel under its five-star brand in each city.

The company reiterated yesterday that its “medium-term” strategy remained to sell the “big four” assets, but added: “The InterContinental Westminster is not due to open for another couple of years. We will, therefore, consider our options with regards to the Park Lane property nearer that time.”

IHG has a total of 4,300 hotels globally, of which 250 are in the UK, all but 25 under its Holiday Inn and Holiday Inn Express brands. It continues to sign almost one new hotel a day globally and has signed ten new hotels this year in Britain, including five under Indigo, its fledgeling boutique concept, taking its total pipeline of new properties in the country to 37. The UK hotels will open over the next two to three years, creating about 3,000 jobs.

The proposed InterContinental in Westminster is one of 67 hotels in the pipeline under the five-star brand around the world, which would lift the total number of InterContinentals from 158 to 225. Among new properties under development is a 192-room hotel in Edinburgh, due to open in 2013 as part of a £250 million development to transform the city’s Haymarket district.

Andy Cosslett, chief executive of IHG, said that he was particularly pleased to win the 20-year management contract on the Westminster project, as the credit crunch meant it was difficult for developers to secure funding on such high-end projects. He said that the Splendid group had had to “work quite hard to get a package that is acceptable ... If you can get the funding together, it’s a great time to buy. We have got a lot of developers waiting for the upturn to invest — they have got the equity, but are waiting for the debt market to improve.”

Mr Cosslett said that part of the attraction of the London market was its resilience relative not only to the rest of Britain but also to other cities around the world.

“Revenue per available room [revpar] in London is typically down by low double digits compared with a couple of years ago but that’s about 50 per cent better than most cities around the world. London has weathered the storms better than almost any other city I can think of.”

The main factor in the revpar fall is the sharp decline in corporate spending as big companies rein in expenses budgets during the recession. Mr Cosslett said: “Leisure business is supporting occupancy, but there is a lack of business travellers, which is a market that remains depressed. Our Park Lane hotel is over three quarters full most weeks. Occupancy is not the issue, it’s the rate.”

Five-star check-in

Renaissance St Pancras Chambers, 245 rooms, opens 2010

Marconi House Strand, 173 rooms Corinthia/Metropole Northumberland Avenue, 283 rooms, opens next year

Shangri-La London Bridge Tower, 195 rooms, opens 2012

Ham Yard/Firmdale Soho, 100 rooms, opens 2011

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