The Investment Column: No need to check out of InterContinental

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The Independent Online

InterContinental Hotels conducted one of the more brutal boardroom executions last year, telling Richard North, the finance director turned chief executive, that his bean-counting expertise did not qualify him to run the global leisure group's expanding operations from now.

InterContinental Hotels conducted one of the more brutal boardroom executions last year, telling Richard North, the finance director turned chief executive, that his bean-counting expertise did not qualify him to run the global leisure group's expanding operations from now.

So yesterday it was Andrew Cosslett, hired from Cadbury Schweppes, who was boasting of 50 per cent uplift in operating profits at the group, driven by strong business traveller demand and bookings at its London, New York and Miami operations, in particular. It has proved a decent time to be in hotels, as the industry recovers from the downturn caused by the terrorist attacks of 11 September.

InterContinental has proved an especially good investment since its demerger from the Bass empire in 2003. It has not just been carried along by the industry recovery, but had outpaced it (and it showed market-share gains again yesterday in its results for the first quarter of 2005). And it has been at the forefront of the trend towards selling hotel buildings, concentrating the business instead only on running the operations, or on franchising its brands - which include Holiday Inn. It has sold 123 hotels and put a further 22 on the block, leaving just 52.

Some £2bn of the proceeds are being returned to shareholders, and analysts believe there will be more to follow, suggesting that it will be worth hanging on to some of your holding, despite what is likely to be rockier times ahead.

The stock looks less toppy than it did at its peak at the start of February, when we advised readers to lock in their profits on shares across the sector.

There were few signs of a consumer slowdown in yesterday's figures, which showed revenue per available room (the standard industry measure of profitability) rising in all three of InterContinental's geographic regions. It has a pipeline of new hotel operations that will add 8,500 rooms over the next few years. Currently it has 535,200. The business should be able to progress under this steam. Hold.

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