(List compiled by Andrew Dominguez. Data sourced from Finviz.)
The economic climate might just be right for a spate of foreign investments into the American hotel industry, reports Nadja Brandt of Bloomberg.
“High-end hotels in large U.S. cities are attracting buyers from Hong Kong, China and Singapore seeking to cater to a growing number of affluent Asians traveling abroad,” writes Brandt.
Asian hoteliers, particularly those in Mainland China, Hong Kong, and Korea, have realized significant gains from the strong growth of the Asian economies. The depressed value of the US dollar could make American hotels quite attractive for those “seeking trophy properties in the U.S. to hedge against inflation and capitalize on a growing and increasingly mobile Asian middle class.” (quote via Bloomberg).
Asian investors already comprised around eight percent of the US hotel acquisition market in 2010, and could account for over ten percent this year, according to John Strauss of Jones Lang LaSalle Hotels (via Bloomberg).
The American market has seen large investments from Hong Kong billionaire Cheng Yu-Tung and New World Development Co., which the Cheng family controls. The completed deals include the $570M purchase of the Carlyle Hotel in Manhattan, which offers “the exclusive ambience of an Upper East Side pied-à-terre.” (quote via TheCarlyle.com)
Another Chinese investor, Shenzhen New World Group Co., has spent a combined $153M on two hotels in Los Angeles since the beginning of 2010.
“This is possibly one of the biggest explosions of demand from that part of the world I’ve seen in my career,” James Butler of Jeffer Mangels Butler & Mitchell LLP told Bloomberg.
Brandt reports that Asian investors could face steep competition from American Real Estate Investment Trusts or REITs, which have been snapping up hotels in hopes of profiting from positive trends in hotel occupancy rates and revenue per available rooms, two key metrics for gauging hotel revenues that have recovered healthily since the recession.
Average hotel purchase prices have surged over $192,000 per room, more than 25 percent above the pre-recession peak of $153,000 per room in 2006, adds Brandt.
“For Asian investors to get invested in the U.S. hotel space, it may not be just an outright buy but they may partner up with an existing U.S. group… And often neither of the parties involved are public. Then these investments fly under the radar,” said Stephen O’Connor of Cushman & Wakefield Sonnenblick Goldman (via Bloomberg).
Interested in sniffing out possibly lucrative M&A deals? To help you with your own research, here is a list of hotel companies that have seen their share prices improve over the past year. Do you think these stocks could strengthen on increased M&A activity in the industry?
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List sorted by share price performance over the past year.
1. Wyndham Worldwide Corporation (WYN): Market cap of $5.5B. Share prices have increased by 27.98% over the past year. It offers individual consumers and business customers a range of hospitality services and products across various accommodation alternatives and price ranges through its brand portfolio. Its operations are grouped into three segments: lodging, vacation exchange and rentals and vacation ownership. It has more than 20 brands, which include Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Howard Johnson, Wyndham Rewards, Wingate by Wyndham, Microtel, RCI, The Registry Collection, ResortQuest, Landal GreenParks, Novasol, Hoseasons, cottages4you, James Villa Holidays, Wyndham Vacation Resorts and WorldMark by Wyndham.
2. Intercontinental Hotels Group plc (IHG): Market cap of $5.37B. Share prices have increased by 23.81% over the past year. It owns a portfolio of established and diverse hotel brands, including InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts, Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo. On December 31, 2010, the Company had 4,437 franchised, managed, owned and leased hotels and 647,161 guest rooms in 100 countries and territories around the world. It also manages the hotel loyalty program, Priority Club Rewards.
3. Starwood Hotels & Resorts Worldwide Inc. (HOT): Market cap of $9.73B. Share prices have increased by 0.24% over the past year. Its brand names include St. Regis (luxury full-service hotels, resorts and residences), The Luxury Collection (luxury full-service hotels and resorts), W (luxury and upscale full service hotels, retreats and residences), Westin (luxury and upscale full-service hotels, resorts and residences), Le Meridien (luxury and upscale full-service hotels, resorts and residences), Sheraton (luxury and upscale full-service hotels, resorts and residences), Four Points (select-service hotels), Aloft (select-service hotels), and Element (extended stay hotels).