Regions

Spate of hotel IPOs underscores revival of hospitality industry- report

December 25
9:11 PM 2013

The third initial public offering of a hotel chain in just two months planned by private equity giant Blackstone Group is a reflection of the revival of the hospitality industry and a soaring stock market, USA Today reported. The report said limited service hotel chain La Quinta Holdings has filed a draft registration statement confidentially to the US Securities and Exchange Commission for an IPO of its common stock. Blackstone purchased La Quinta for $3.4 billion in 2005.

Two other hotels owned by the private equity group re-entered Wall Street in a promising fashion, with Hilton Worldwide raising $2.3 billion in its IPO earlier this month. Last month, Extended Stay was able to raise $565 million in its IPO. The two companies are now trading above their IPO prices.

The report said that the deals are an indication that investors are now showing interest in one of the most beat-up sectors during the financial crisis, the hospitality industry. During the financial crisis, hotel projects were put to a standstill. Now, hotel operators have began to add more rooms. However, there is substantial demand from travelers which is increasing room rates, the report said.

Sun Trust Robinson Humphrey Managing Director for gaming, Lodging and Leisure Equity Research Patrick Scholes was quoted in the report as saying, "They are riding on the success of the Extended Stay and Hilton IPOs. The appetite for lodging stocks is strong right now after several decent years of revenue growth and good prospects for 2014."

Research firm STR has said that improvements were posted by the US hotel industry in terms of occupancy, average daily rate and revenue per available room, the report said. Occupancy had increased 1.4% year over year to a rate of 67.9% while the average daily rate also increased 4% to $111.88. The third key area on the revenue per available room had also increased 5.5% to $75.97, the report said.

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