Massive Hilton Hotel Sale Making Headlines
Chris · July 13, 2007
We love to mix business with pleasure here at Vacant Ready. For guests and employees the hotel industry is a lifestyle, and we enjoy capturing the essence of working in hotels on this blog.
For ownership groups the hotel industry is much more than a lifestyle...it’s a HUGE business. Hotel properties hold massive value--in the tens and hundreds of millions of dollars (or euros, pounds, yen etc.) Add up hundreds of properties in a group’s portfolio, and you can see why the hotel industry is one of the most capital-intensive industries there is.
When hotel brands sell hotel assets en masse, the numbers can look pretty big.
Earlier this month the entire Hilton Hotel Corporation was purchased by the Blackstone Group for an incredible $26 billion dollars. This marks the biggest acquisition of a hotel company in history. Paris Hilton won’t have to worry about her legal bills too much....her grandfather’s take from the deal was $990 million!
Jim Butler, editor of the excellent Hotel Law Blog, wrote a fascinating story for eHotelier on the significance of this massive deal. You can read the article here.
Jim highlights three significant ramifications that result from big-time deals like this one:
1. The concentration issue is a big one. Will there be only one or two hotel companies to negotiate your management or franchise agreement with? Is there any competition to keep hotel rates fair for consumers? Will hotels be able to maintain quality standards for their brands or will MBAs be using their HP calculators to determine how much quality they can afford to deliver for the investment?
2. Have you noticed how hotel prices and rates seem to go up after every billionaire or equity fund buys it--presumably to justify the latest outrageous price paid for the property? Have you worried about how the big buyers don’t seem to invest any money to update or maintain the property where they just doubled the rates?
3. Dismantling the industry? But more than that, a lot of players have claimed they were buying a company for “long term investment"--as has Blackstone on the purchase of Hilton. To some this sounds like a classic car buyer purchasing a fine, vintage automobile to own “forever”, which he then dismantles to sell by the part--wheels, carburetor, hood ornament, doors, and the like--piece by piece.
Interesting perspective from Jim...I look forward to more intelligence when the deal plays out for while.
Linkage
Paul McManus, CEO of LHW Talks Challenges [BrightCove]
Check out Jim Butler’s [Hotel Law Blog]
I just can’t get enough of Paris Hilton going to jail [YouTube]
