The Lightstone Group, a privately held
company that is one of the largest owners of retail outlet space in
the U.S., has acquired controlling interest in the Extended Stay
Hotels chain from the Blackstone Group for $8 billion in cash and
The sale, which includes 638 properties, comes
three years after Blackstone purchased the chain for $3.1
in Lakewood, N.J., owns more than 18,000 residential units and 30
million square feet of office, industrial and retail space in 27
states, the District of Columbia and Puerto Rico.
Lightstone's first foray into the lodging industry, is the largest
hotel chain geared specifically to guests who require lodging
accommodations for several weeks at a time or longer.
properties under five brands: Extended Stay Deluxe, Extended Stay
America Efficiency Studios, Homestead Studio Suites, StudioPLUS
Deluxe Studios and Crossland Economy Studios.
which include a total of 76,000 rooms, are located in 44 states and
chains that operate on a franchise model, Extended Stay corporately
owns and operates its properties.
"This was a
perfect opportunity for the Lightstone Group to expand its growing
portfolio into the hotel industry, and acquiring Extended Stay
Hotels immediately puts us in a leadership position within the
extended stay market," David Lichtenstein, chairman and CEO of the
Lightstone Group, said in a statement.
The deal will be
financed with $1 billion in cash and $7 billion in debt, and
Blackstone will retain a 10% stake, according to a report in the
New York Times.
Woodworth, president of Atlanta-based PKF-HR, a consulting firm,
said that in purchasing Extended Stay, Lightstone had gained a
"There is no
question given the size, their geographic distribution and the
market awareness of the brand itself, [Extended Stay] absolutely
dwarfs everybody else in that economy component of the
extended-stay segment," Woodworth said.
In an interview,
Gary De Lapp, Extended Stay's president and CEO, said, "We had a
really great relationship with Blackstone, and I think going
forward with Lightstone we are going to have another really good
opportunity to take the company to a different level."
Over the years,
Spartanburg, S.C.-based Extended Stay has grown largely through the
acquisition of smaller hotel chains and individual
In recent years,
it is has focused on developing Extended Stay Deluxe, a higher-end
version of the moderate-priced Extended Stay brand. Currently,
there are more than 100 Extended Stay Deluxe hotels.
As part of the
development strategy for the brand, Extended Stay has been
converting, refurbishing and rebranding its StudioPlus Deluxe
hotels into Extended Stay Deluxe properties.
Only about 45
StudioPlus properties remain open. Once they are converted to
Extended Stay Deluxe hotels later this year, De Lapp said, Extended
Stay intends to retire the StudioPlus brand.
Crossland, Homestead and other brands also will be retired as
Extended Stay consolidates into three brands: Extended Stay Deluxe,
Extended Stay America and Extended Stay Economy.
intends to continue with the rebranding strategy, De Lapp
To that end, De
Lapp said, "You will see enhanced and stepped-up marketing efforts
to really create awareness in people so that they know who we
Despite the fact
that Extended Stay is the largest chain in its market segment, De
Lapp said, "I'm not sure many people know about us. This gives us
the brands and streamlining the brands will help us create the
awareness that we would like to create."
the extended-stay category include InterContinental's Staybridge
Suites, Accor's Studio 6, U.S. Franchise Systems' Hawthorn Suites,
Choice International's Suburban Extended Stay Hotels and Marriott's
New brands, such
as Starwood's Element, a spin-off from its Westin Hotels chain, are
also entering the market.
hotels essentially operate like apartments. Guests stay longer than
they would at traditional hotels. Lower turnover reduces marketing
and service costs.
the extended-stay category was attractive to developers and
investors because they "weather the storms better than the average
hotel when times are bad and yet do very well when times are
the sale is the latest in a long string of travel-related
transactions.In addition to its acquisition last year of
Travelport, the former Cendant unit that includes Orbitz, Galileo
and other travel distribution brands, Blackstone has been buying
and selling hotel brands for several years.
Just a month ago,
Blackstone sold the Budgetel hotel brand for an undisclosed sum to
a group of private investors.
Budgetel was once
part of La Quinta, which Blackstone acquired in November 2005 for
In June 2005,
Blackstone bought Wyndham International's name, franchise system
and hotel portfolio for $3.24 billion, later selling most of it to
Cendant, which eventually combined it with other lodging units that
were spun off as Wyndham Worldwide.
bought and sold the AmeriSuites hotel chain, which Global Hyatt is
now converting into Hyatt Place hotels. It also owns the MeriStar
In March, the
private equity group disclosed plans for a partial public stock
offering that could raise another $4 billion.
To contact reporter Michael Milligan, send e-mail to [email protected].