InterContinental's like-for-like swap fails to reassure investors

The hotel group's share price has been hit after CEO Andy Cosslett's surprise resignation. But do investors have anything to worry about?

by James Taylor
Last Updated: 19 Aug 2013
Replacing your CEO is never an easy task, particularly when you're a big public company. But on the face of it, today's news from Intercontinental Hotels that CEO Andy Cosslett is leaving - to be replaced by CFO Richard Solomons - seemed as good a way as any. After all, Cosslett is leaving the hotel group in a pretty strong position - and by promoting an internal candidate to replace him, the succession should be as smooth as humanly possible. Nonetheless, the news has wiped 4% off IHG's share price this morning. Admittedly the group has suffered in the fall-out from Japan in the last few days - but that's still a nice ego boost for Cosslett as he ponders his next move...

Cosslett is clearly very highly-rated by the markets for his work at IHG, which he joined in 2005 from Cadbury Schweppes. He's focused on becoming an asset-light operator - in other words, selling off the group's property portfolio and letting hotel owners use the brand under licence. He's also done a good job of reviving the Holiday Inn brand, which has been going great guns recently, particularly in China. And although it suffered along with the rest of the industry with the post-recession decline in business travel, revenues have bounced back lately - suggesting IHG is well-placed to cash in as the market picks up.

The question is: will the new man at the helm do anything massively different? It looks unlikely. Solomons has been with IHG for nearly 20 years, and in addition to his CFO role has also been operating as head of commercial development - so he's been working closely alongside Cosslett on all things strategic throughout his tenure. The two men even did the same degree at the same university - so they're clearly cut from pretty similar cloth.

Of course, Solomons will want to put his own stamp on proceedings at IHG (never an easy task for someone that's played second fiddle for so long). And that creates a level of uncertainty that may spook investors slightly. Perhaps, if anything, we’ll see more engagement with Government on ways to boost the leisure industry, an area in which IHG is taking an increasing  interest these days.

But it's hard to imagine a massive strategic departure. And given IHG's recent performance, shareholders are unlikely to complain too much about that. As for Cosslett, we doubt he’ll be short of job offers...

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