The Investment Column: Macdonald Htls

MACDONALD HOTELS has led a yo-yo existence since coming to the market three years ago. Issued at 145p, the shares reached 241p a year ago, only to slump to a low of 130p at the end of the year. They have since enjoyed a recovery and closed up 7p yesterday at 229.5p on the back of encouraging full-year results.

The company has now almost completed its move from a largely three-star hotels group to a four-star operator. It is focusing on the Macdonald brand in its 27 managed hotels. Acquisitions such as the pounds 2.4m Bobsleigh Inn in Hemel Hempstead will be called the Macdonald Bobsleigh Inn, for example.

Annual profits rose by 15 per cent to pounds 12.8m as like-for-like average room rates rose by 9 per cent to pounds 57.61. However, room occupancy rose by only 4 per cent.

With 63 per cent of rooms filled last year, there's room for improvement this year. Macdonald is confident about current business and expects the hotel sector to benefit from a strengthening economy.

Analysts forecast pounds 13.5m pre-tax profits this year, giving the shares a rating of 13. The shift to four-star hotels has yet to prove its merit, and the shares are a hold.