What a difference a couple of years make. In July 2007, Blackstone, the private equity company, was so convinced about the potential of the hotel market that it launched a knockout $26 billion bid for Hilton Hotels Corporation and outlined global expansion plans. Last week, at a gloomy International Hotel Investment Forum in Berlin, Chris Nassetta, the chief executive of Hilton, described trading as “uniformly bad around the world”.

Blackstone has almost certainly kissed goodbye – for now – to the $5.5 billion of equity it pumped into the deal, but it is not alone in suffering. There is unlikely to be equity left in any of the leveraged buyouts of recent years, ranging from Jarvis Hotels and Macdonald Hotels to Menzies Hotels, Principal Hotels, Jurys Inns, Alternative Hotel Group, QHotels, Travelodge and Marriott UK. That does not mean that any will go bust (although there may be some painful restructuring), but it could be years before any is in a position to execute a profitable exit.

Such sharply reduced values might have been expected to boost deal activity, but the lack of credit means that transactions have dried up. There is evidence that wealthy individuals are starting to consider acquisitions, but until owners find themselves in financial distress, prices are unlikely to come down to realistic levels. Deals will also be thin on the ground so long as occupancy, room rate and revenue per available room (revpar) continue to fall.

Although many regions are suffering double-digit revpar declines, most operators in Berlin last week were predicting that trading would get worse before it got better. Such falls would further drive down values and could tip one or two chains over the edge. The lack of confidence exhibited by both corporate and leisure guests has not been helped by the climate of distaste at the conspicuous consumption of the past exhibited by wealthy bankers and other top executives. As a result, hoteliers have started lobbying politicians to tone down their rhetoric.

The credit crunch is also harming the ability of developers to fund new projects, which in turn has hit the pipeline of management contracts and franchises on which the big chains rely. But the more nimble operators have responded by switching their focus to converting existing independent hotels, many of which can benefit from the marketing muscle of a big brand.

The notoriously cyclical hotel industry will undoubtedly bounce back, but for now green shoots are in short supply.

IN&M

Independent News & Media finally has a little hope, after last week’s deal between Sir Anthony O’Reilly and Denis O’Brien. Critically, Mr O’Brien will help with a desperately needed refinancing, as the newspaper publisher groans under the weight of €1.3 billion in debt, including a €200 million bond that falls due in May. Dealing with the bond is crucial: IN&M may only have €100 million on hand but it is looking to sell various online assets to make up the shortfall. Plus, with Mr O’Brien on board, a new option emerges: an equity issue could help to top up the difference, on the presumption that both Sir Anthony and Mr O’Brien would invest.

For now, little else matters, financially speaking. There is plenty of talk about the possibility of selling the Independent titles in London but while this would boost the profit and loss account by about €15 million, the papers will only realistically raise £1 in a sale – the weekday cover price of The Independent. That would lift profits by about 12 per cent, before exceptionals – this year brokers are expecting IN&M to produce €125 million of pretax income. But it would do nothing to help with the bond repayment. While advertising is weak in all the company’s key markets, the low sale value means that, for the moment, IN&M can risk holding on to the papers.

Investors should remain cautious. The stock jumped last Friday, when Sir Anthony said he would retire to win Mr O’Brien’s support, but even at the 20 cents level the shares are simply an option on whether the debt can be dealt with. At some point, economic recovery will lift the business but it is too early to test that theory and the stock is best avoided.

CryptoLogic

CryptoLogic, the internet gaming software group, will use today’s fourth-quarter results to reiterate that its revitalised growth strategy remains on track despite the economic backdrop. This will be a relief to investors, as it has had a chequered history since the American ban on internet gambling wiped out more than a quarter of its revenues in October 2006.

CryptoLogic, which is listed on the Toronto, London and Nasdaq exchanges, quickly rebuilt profits after the American ban but then marked time and fell behind the pace. New management, led by Brian Hadfield, the chief executive, has sought to restore its growth and has addressed its cost base, saving $13 million (£9.2 million) a year.

One problem area – poker – has been resolved through an outsourcing deal with Gtech that will improve liquidity for its players and eliminate the cost of running its own network. This, in turn, has allowed the group to focus on its core casino strength. Mr Hadfield has adopted the “build once, licence often” mantra, signing licensing deals with the likes of 888 and PartyGaming. Expect further deal news today.

CryptoLogic, which will reiterate a 2009 net profit target of $9 million to $10 million, has suffered unwelcome publicity after a spat with a former chief executive. That should not distract from the underlying story. The shares have halved in the past 12 months, yet the market value of $67 million is offset by cash on the balance sheet of $42 million. Hold.

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