Holiday Inn and Crowne Plaza owner InterContinental Hotels (IHG) is the top faller on the FTSE 100 as investment bank Morgan Stanley moves to 'underweight' on the stock with a reduced price target of £31 and a bear case valuation of just £20. The shares trade down 4.3% to £31.46.

The move to a negative stance reflects concerns the stock is overvalued after a strong run and a number of what the analysts describe as 'red flags' in the US hotel market.

'US RevPAR (revenue per available room) growth has been slowing for some time (2014: 8.3%, 2015: 6.4%, year to date: 2.7%), and we think it will weaken further given declining occupancy, anaemic rate growth, accelerating supply growth, one-fifth of submarkets in RevPAR decline, ‘compression nights’ analysis suggesting Airbnb now having an impact, and independent hotels outperforming brands,' writes Morgan Stanley.

Its anlaysts add that the recent share price strength has taken InterContinental from a 12% discount to its peers to a 5% premium.

The company is set to announce its third quarter results on 25 October.

Issue Date: 26 Sep 2016