Fast, Furious, Fun Pace

IN MY 13 YEARS AS EDITOR of HOTELS, I have not witnessed as feverish a merger and acquisition pace as today’s. Blackstone’s recently announced acquisition of Hilton Hotels Corp. for US$26 billion is certainly the glamour deal of the year, but there are so many others to consider.

By Jeff Weinstein, Editor in Chief -- HOTELS Magazine, 8/1/2007

IN MY 13 YEARS AS EDITOR of HOTELS, I have not witnessed as feverish a merger and

acquisition pace as today’s. Blackstone’s recently announced acquisition of Hilton

Hotels Corp. for US$26 billion is certainly the glamour deal of the year, but there

are so many others to consider. Among the biggest single asset transactions of the

first half of the year was the sale of the Maui Prince Makena for US$575 million.

At press time, the sale of the Malmaison and Hotel du Vin brands by Marylebone

Warwick Balfour was pending after the company failed to float its Vector

Hospitality REIT. Dublin’s Quinlan Private is the rumored suitor and with this deal

would develop quite a UK-focused lineup, which includes the recently acquired

Jurys Doyle chain.

More than US$11.5 billion in upscale and luxury

lodging in the United States alone changed hands in

the first half of 2007, according to consulting firm

Hospitium. Through the second quarter, 177 assets

traded, exceeding the 158 deals that occurred in the first

half of 2006. Even in Asia Pacific, where real estate is

traditionally very slow to change hands, Jones Lang

LaSalle Hotels projects investments to exceed US$7

billion in 2007.

There are several factors that make this market so

ripe for transactions: The public-to-private trend, which

increases the availability of assets; healthy industry

fundamentals, which show no real signs of abating as

the supply-demand quotient remains very favorable;

shorter hold periods of 18 to 24 months versus the

traditional three to seven years; aggressive investors in

the market, including high-net-worth individuals like

Saudi Prince Alwaleed and private equity players like

Blackstone and Quinlan; and the fact that public hotel companies remain

undervalued by the markets and, therefore, trade at very attractive multiples, which

some say led to Blackstone’s acquisition of Hilton. The expected sale price of

US$47.50 per share represents a 40% premium for very happy shareholders and

makes outgoing Chairman Stephen Bollenbach look like a true hero. At the same

time, Blackstone is thrilled to acquire a legendary operating machine that now has

an even greater platform for expansion.

Many more big deals have been rumored, including targets such as Starwood,

InterContinental, Orient-Express Hotels and Accor. But based on scuttlebutt from

the street it appears the InterContinental deal is the only likely one to proceed and,

even so, there is no sign of that being imminent. But I am not sure anyone saw the

Hilton deal coming—at least it was never rumored in the press—so who knows

what could happen next.

And then there is the other shocking story of the moment—the hook-up between

Bill Marriott and Ian Schrager, which Karyn Strauss writes about on p.10. It is

suprising, shrewd and utterly amazing if you stop to consider the roots of these

counter-opposite leaders. That may well be the case, but they do have one thing in

common—great business sense and a never-ending desire to succeed. In Laurence

Geller’s blog on our Web site, he stepped out right away and called it a great move

for both. “Original and bold thinkers can be so easily pilloried,” Geller says. “To the

first movers will come the spoils while the naysayers and self-styled cognoscenti

are left to follow in their wake with variations on the theme. Bravo Schrager. Bravo

Marriott. I can’t wait to see the first product come off the assembly line.”

Neither can we, Laurence. My only questions are these: Can these two really

work together, and will they set the industry bar even higher? Either way, it is

going to be a lot of fun watching and waiting to find the answers.

Jeff Weinstein, Editor In Chief