Shares in Holiday Inn owner InterContinental Hotels Group (IHG) fell 5% after news the company is facing a CMA (Competition & Markets Authority) investigation. The announcement adds to pressure on the stock as international tourism is expected to take a dive on conflict in the Middle East.
| Share price: $131 (-5%) | PE: 23.9x |
| Market cap: $20.8bn | Yield: 1.5% |
Information sharing
IHG, along with Hilton Hotels (HLT) and Marriott International (MAR), is suspected of sharing sensitive information. Specifically, all three are thought to have shared hotel data from analytics tool STR, owned by CoStar (CSGP).
The CMA has no issue with companies using data analytics tools and algorithms in general to help their decision-making. What it does have a problem with is companies colluding, as it reduces competition, which can hurt consumers.
When rival businesses share ‘competitively sensitive’ information it ‘reduces the uncertainty competing businesses normally have about how each other will act’, says the CMA. This matters because if companies decide to compete less, they can coordinate their behaviour.
The regulator says at this stage no assumptions should be made about whether any law has been broken. It is gathering information and will issue a ‘statement of objections’ if it thinks the law has been infringed.
This investigation doesn’t do anything for IHG’s reputation, or that of the other hotels groups mentioned. At times the uncanny similarity between hotel prices even on comparison websites can suggest it’s more than just coincidence.
With inbound tourism into the US suffering already due to Trump’s immigration policy, today’s news isn’t helpful. Then throw in a full-blown conflict in the Middle East, where it has 30 hotels just in Dubai and dozens more around the region.
We would give IHG and other global hospitality stocks a wide berth for the time being. There are plenty more attractive options out there.
Read the CMA press release here: https://www.gov.uk/government/news/cma-launches-investigation-into-hotel-chains
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