InterContinental Hotels was London’s sharpest faller Monday on fears that Airbnb has been eating into the hoteliers’ most profitable markets.

Room supply growth is outpacing demand as the US hotel industry enters a cyclical downturn, said Morgan Stanley.

It blamed Airbnb for a slump in the number of “compression nights” — where more than 95 per cent of rooms are taken — which it said are down 23 per cent year-to-date in the top 25 US cities, having risen steadily since 2009.

US occupancy rates are slipping back from historical peaks while growth in US revenue per available room (revpar), the lodging industry’s key metric, has been slowing since 2014, Morgan Stanley said.

It forecast industry revpar to turn negative in 2018 and advised clients to sell InterContinental ahead of its third-quarter trading update, due on October 21.

InterContinental closed 5.6 per cent lower at £30.98. The FTSE 100 lost 1.3 per cent, down 91.39 points to 6,818.04, as concern about Deutsche Bank triggered a broad market retreat.

Lloyds Banking Group faded 3.1 per cent to 54.3p, with Goldman Sachs downgrading to “sell”. Competition “will have a significant impact on profitability” as HSBC diverts excess deposits into the UK mortgage market and challenger banks tap the Bank of England’s term funding scheme, said Goldman.

Pearson lost 4.2 per cent to 726p after the resignation of Linda Zecher, chief executive of US schoolbook publisher Houghton Mifflin Harcourt, deepened concerns about sales during the key Autumn enrolment period. Houghton also cut guidance to the low end of the range it set in an August profit warning.

“Pearson is extremely second-half weighted (with the half accounting for more than 100 per cent of 2016 earnings) and we believe it will both deliver another profit warning and that its problems are primarily structural in nature,” said Liberum, which repeated “sell” advice.

N Brown, the mail order retailer, faded 1.3 per cent to 184.8p after HSBC downgraded to “hold”.

With a 2014 transformation plan running behind schedule and delivering lower than expected benefits, investors may be facing a “significant and permanent step change in N Brown’s ongoing investment requirement”, said HSBC.

B&Q owner Kingfisher dropped 3.9 per cent to 358p after UBS flagged up increased competition in France.

UBS’s survey of French consumers showed the Leroy Merlin chain was “far more popular” than Castorama, Kingfisher’s brand.

“With Kingfisher France profits currently supported by gross margin gains — from lower promotional activity — we think there is an increasing risk that these gains will reverse or that the businesses will need to work harder to maintain share,” said UBS, which downgraded to “neutral”.

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