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The Investment Column: Jarvis hit by hotel sector woes

Last year the hotel sector flourished. Helped by a buoyant economy, occupancy and room rates were rising rapidly. Jarvis Hotels was one of a crop of companies that checked into the stock market on the wave of optimism.

However investors have had an uncomfortable stay. Growth is slowing as the wider economy comes off the boil. The strong pound is putting off foreign tourists and competition among hoteliers is fierce.

But the sector is not heading for another crash. Demand is still buoyant. Occupancy rates are nearing their peak, but there is still room for price inflation. And the sector now looks ripe for consolidation, with the larger groups able to pick up struggling rivals. With a war chest of pounds 90m, Jarvis is well placed to benefit.

Jarvis shares have been hit by the sector's woes since floating at 175p. It recovered some lost ground yesterday, rising 8.5p to 157.5p, after announcing a robust 28 per rise in operating profits to pounds 21m for the six months to October. Its mainly provincial hotels should continue to do well, helped by a growing demand for conference facilities. Analysts forecast current year profits of pounds 29.9m. putting the shares on under 10 times forward earnings. Good value.