Key Blackstone hospitality transactions, 2004-present
July 2007: Agrees to acquire Hilton Hotels, valued at $26B
April 2007: Sells Extended Stay Hotels to Lightstone Group, valued at $8B
March 2007: Sells Budgetel to investment group, terms not disclosed
August 2006: Acquires Travelport, valued at $4.5B
March 2006: Sells Baymont Inn & Suites to Cendant, terms not disclosed
February 2006: Agrees to acquire Meristar Hospitality Corp., valued at $2.3B
January 2006: Sells a portfolio of Summerfield Suites to Global Hyatt, terms not disclosed
November 2005: Agrees to acquire La Quinta Inn & Suites, valued at $3.4B
October 2005: Sells the management and franchise business of Wyndham chain to Cendant, valued at $101M
August 2005: Launches LXR Luxury Resorts brand, a collection of hotels from different brands
June 2005: Agrees to acquire Wyndham International, valued at $3.3B
December 2004: Acquires Boca Resorts, valued at $1.3B
December 2004: Sells AmeriSuites (now Hyatt Place) to Global Hyatt, terms not disclosed
August 2004: Agrees to acquire Prime Hospitality, valued at $869 M
March 2004: Agrees to buy Extended Stay Hotels, valued at $3.9 B
"When it comes to hospitality, this is as
exciting as they come."
So declared Bjorn
Hanson, a principal with PricewaterhouseCoopers and one of the most
looked-to analysts in the lodging industry, in describing last
week's announcement that the Blackstone Group would be acquiring
Hilton Hotels Corp. for $26 billion --
$20 billion in cash and the assumption of $6 billion in
The price was a
record for the hotel industry.
Hanson indulged in
some hyperbole, he said, because, "this deal combines a brand that
has grown to be one of the biggest names in global hospitality with
a company that has more investment in lodging than anyone
The deal, scheduled
to close the fourth quarter of 2007, is subject to approval by
Hilton's shareholders. Assuming it is approved, it will make
Blackstone the world's largest hotel operator, with 600,000 beds,
according to Paris-based MKG Consulting.
invested many billions in hotels in the last five years, including
the purchase of MeriStar (a real estate investment trust, or REIT),
La Quinta, Wyndham and Boca Resorts.
equity firms have also made big plays. For example, Morgan Stanley
acquired CNL, another REIT, for $6.6 billion a few months
owns the Galileo GDS; consumer Web sites Orbitz and CheapTickets;
and wholesaler Gullivers Travel Associates. It is seeking to buy
Worldspan, as well.
While it is a brand
long-associated with a family, Hilton has been publicly traded for
more than 60 years. It will now become part of a private equity
company. While Blackstone did recently make a public offering of
its own stock, it was a limited offering.
The upshot, Hanson
said, is that "Hilton will no longer have to worry about quarterly
Stephen Bollenbach, said the deal would be good for the company's
owners and operators. Hilton hotels are overwhelmingly owned by
third parties, while Hilton manages and/or franchises branded
Hotels in general
have become prime targets of investors in recent years because of
record profits and quiescent supply pipelines. Hilton became even
more attractive after it repurchased Hilton International in 2006,
reuniting the company 42 years after Hilton had sold off its
announcement, Blackstone said it intended to invest in Hilton
properties. The company said that in the last three years it had
invested about $1 billion in redevelopment capital for LXR alone
and had grown the La Quinta brand by 45% since its acquisition in
Hanson said that
Blackstone had a record of being a "long-term player" that invested
in its hotels. He said that for customers the result would be
hotels that were "as good or better" than they are
to integrate Hilton brands, including Embassy Suites and Hampton
Inns, into its other hotel holdings. Bollenbach said it was too
early to say if that might include HHonors, Hilton's loyalty
observer said that was doubtful because brands like La Quinta were
not priced for such an expensive (for hotel owners)
Asked if current
management would remain in place, Bollenbach replied that Hilton's
management was one of the big attractions for Blackstone. He joked,
"Also, they know I'm retiring so that's another plus." Hilton COO
Matthew Hart is slated to take Bollenbach's place.
"We are working our
way through a privatization cycle," said Hanson, who added that he
foresaw at least one more big privatization deal and two or three
After that, he
said, "the increased value of these companies will make it
difficult for further privatization."
It's difficult to
predict which company might be the next to be acquired, he said.
Rumors have been floated periodically about other hotel giants,
including Starwood and InterContinental Hotels Group.
IHG and Starwood
declined to comment on the deal, saying they never commented on the
activities of competitors. A spokesman at IHG did say it would be
"business as usual" there.
Jim Butler, a
well-known hotel industry lawyer who comments widely on lodging
issues, said the deal "portends an unprecedented consolidation of
the hospitality industry with potentially staggering consequences
to hotel owners, guests and other stakeholders in the hospitality
"The industry is in
play," Butler said. "We have heard rumors about Marriott, Starwood,
InterContinental, Orient-Express and a lot more. The industry still
looks cheap to abundant capital."
In a conference
call, Bollenbach called the buying price of $47.50 per share "an
excellent price," a premium of 40% over the trading price as of
He said that,
including this deal -- assuming it concludes as planned in the last
quarter -- Hilton will have delivered a 29% return on investment
over the last five years, outperforming competitors.
Blackstone "a great buyer" because it is a "sophisticated real
estate player with a long track record, specifically in terms of
lodging. They are large owners of brands with over 100,000 rooms
ranging from midscale to luxury."
He said Blackstone
bought Hilton because "they like our position in the industry, with
our nine great brands, a global platform and experienced
Rob Haiman, senior
vice president of development for Remington Hotels, which manages
at least one of every Hilton brand, said the relationship began
when Remington began to manage Embassy Suites, then still a part of
acquired Promus in 1999, Haiman said, "we were on good terms with
Hilton, and when it came time to reflag a hotel, we would go with
the company with which we had a good relationship. Also, they have
contact reporter Harvey Chipkin, send e-mail to [email protected].