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COMMENT: Hotels on the rise | Indy concerns

In the UK, Whitbreads budget Premier Inn chain and rival Travelodge have made steady progress. Picture: TSPL

In the UK, Whitbreads budget Premier Inn chain and rival Travelodge have made steady progress. Picture: TSPL

  • by MARTIN FLANAGAN
 

THE solid trading results from InterContinental Hotels Group (IHG) are fresh testimony to the momentum in the industry.

They are also a fortuitously partial riposte to IHG’s irritant activist investor Marcato Capital, which would like the group to sell itself for opportunistic, short-term investor gains.

The hotels sector is often a lead indicator in a downturn and a lagging one in a recovery. Businesses cut back on travel when financial clouds gather, and, along with leisure spending at hotels, that only rebounds when a recovery looks established.

IHG’s interim results, with operating profits up 6 per cent to $300 million (£178m), show that generally more benign macro economic backdrop is here, from its key business in the United States, to the UK and Asia.

America accounts for two-thirds of group operating profit, and IHG will undoubtedly hope that the Federal Reserve will delay any interest rate rise well into 2015 so as not rain on the recovery parade.

All the crucial indicators at the company, whose brands include Holiday Inn and Crowne Plaza, are improving. Revenue per available room (RevPar) lifted 5.8 per cent in the period, with US growth gathering pace in Q2.

RevPar was also up in Europe, where the UK was again the standout performer, and China (the latter a big expansion target for IHG). Those better occupancy rates have also allowed many hotel chains, particularly at the higher end, to lift prices.

Thailand, Israel and Russia remain problematic markets for IHG and other major players due to political and military tensions, but geo-political pressures are not puncturing the broader sector recovery.

And it is not just three- and four-star hotel chains that have done notably better over the past few years after the hard yards of the financial crash and ensuing recession. In the UK, Whitbread’s budget Premier Inn chain and rival Travelodge have made steady progress, with Premier in particular on the front foot for expansion.

Hotel shares prices, including IHG up 25 per cent on a year ago, have reflected this positively changing backcloth for the industry. There’s likely to be more to come.

Corporate referendum nerves are jangling

STANDARD Life has joined Royal Bank of Scotland in the past week in strongly reaffirming their concerns about any Yes vote in the referendum.

Rudely discarded now are the vaguely mealy-mouthed “calls for clarity” from corporates about the potential consequences of Scottish independence that dominated the debate for so long.

Voices have got more shrill. The corporate world has got clarity and doesn’t fancy it. But, even so, it will be ordinary Scottish voters who decide, not business lobbying.

 

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