Sleepless nights have become the norm for hotel investors and holders

Sleepless nights have become the norm for hotel investors and holders of InterContinental stock are unlikely to fare any differently. Lacking the cushion of its defensive pubs arm, the hotels group will be exposed to every weakness thrown up by the market – and with the genie of Islamic terrorism out of the bottle, the travel industry will remain edgy.Richard North, the chief executive designate, has a three-point plan for InterContinental Hotels – which also includes the Holiday Inn, Crowne Plaza and Staybridge Suites brands. First up is slashing its inflated cost base by more than £60m annually by axing middle management and streamlining the organisation. After an intensive capital expenditure programme that has seen the bulk of the InterContinental estate refurbished, the focus will be on driving historically low returns.Next comes a vigorous review of the group’s estate, with the aim of reducing its £3.8bn asset base, selling off non-strategic InterContinental sites and separating property ownership from hotel management wherever possible. Lastly it plans to extend its network of hotels through franchise and management contracts, at minimal cost to the group.The main snag is that this all requires investors to put a heap of faith in Mr North, a man who is a canny finance director but a chief executive virgin.

Mr North may have beefed up his management team by hiring a string of industry bigwigs, but they have yet to prove their worth at InterContinental. While the group argues it is heavily geared to a sector recovery, owning or leasing one-third of its estate, this is no good if bookings remain weak.The grey market range for IHG shares has already priced in hefty takeover speculation and with better plays around, such as Hilton, these shares should be avoided.. The Chancellor again bamboozled us with a bewildering array of percentages and statistics in his Budget speech yesterday, all of it designed to give the impression that everything is fine on the ranch. The reality is that it is not and, although the Chancellor is right to make favourable comparisons with the sickly eurozone, the outlook for the economy and the public finances is a lot worse than he pretended.

As for being a Budget for business, that too is so much poppycock.
True enough, he didn’t appear to turn the screw on business any further than he already has, but the damage being wreaked by previously announced measures such as the increase in national insurance is quite bad enough. Anything more and the pips would start to squeak.Affordable public spending? Well perhaps, but not nearly as affordable as the Chancellor tried to make out. For the second time in a year, Mr Brown cut his forecast of growth for 2003, but only to a still too optimistic 2 to 2.5 per cent. The fall of Baghdad will be a confidence booster but, having grown only marginally in the first quarter, the economy will need to get a move on during the remainder of the year even to reach the bottom end of that target range.So much for this year.