The scent of recovery in their nostrils, investors are chasing cyclical recovery plays wherever they can find them. So hotels, though still clobbered by the slump in business travel, have had their share prices race ahead of the market. Marriott is up 22 per cent in the year to date, InterContinental Hotels 32 per cent, and Starwood 55 per cent. Price/earnings ratios are eye-popping – Starwood now trades on 45 times 2010 earnings.

IHG on Tuesday provided a reality check. True, the world’s biggest hotelier by number of rooms is outperforming its peers. Though its second-quarter revenues per available room, the key industry indicator, fell 18.6 per cent year on year, that beat Starwood’s 28 per cent decline and Marriott’s 26 per cent drop. IHG is benefiting from its greater exposure to the mid-range market – to which business travellers are trading down – and the $1bn refurbishment of its Holiday Inn chain.

The industry’s nose-diving revpars are also less ghastly than they might seem. They follow spiralling hotel revenues from 2005 to mid-2008; revpars remain well above 2005 levels. And the big hoteliers are cutting costs impressively. IHG, which increased its 2009 cost savings target by $10m to $80m, is achieving hefty savings by centralising functions such as procurement.

But even IHG warns that while forward booking data show no further demand deterioration, there is no sign of recovery. Swine flu remains a threat and hotels cannot begin rebuilding pricing power until demand starts to pick up. That makes the sector’s share price strength look premature.

IHG, whose UK listing tends to lead to a discount to US peers, offers the best value at 18 times 2010 earnings. But an old rule of thumb says the time to invest in hotels is when occupancy starts to recover. Investors should be wary of checking in early.

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