Hotel IPOs highlight hospitality’s resurgence
La Quinta Holdings, a limited service hotel chain, has confidentially submitted a draft registration statement to the U.S. Securities and Exchange Commission for an initial public offering of its common stock.
“The number of shares of common stock to be sold and the price range for the proposed offering has not yet been determined,” the company said in a statement this week.
Private equity firm Blackstone bought La Quinta in 2005 for $3.4 billion, including assumption of debt.
Two other Blackstone-backed hotel companies recently had promising re-entries into Wall Street. Hilton Worldwide had a record $2.3 billion IPO earlier this month and Extended Stay raised $565 million in its IPO in November. Both are trading above their IPO prices.
The deals indicate that investors are interested in getting back into the hospitality industry, one of the most battered sectors during the recession. Hotel projects had stalled during the downturn. Hotel operators are now starting to add new rooms, but demand from travelers is up significantly. That’s driving up room rates.
“They are riding on the success of the Extended Stay and Hilton IPOs,” says C. Patrick Scholes, managing director for gaming, lodging and leisure equity research at SunTrust Robinson Humphrey. “The appetite for lodging stocks is strong right now after several decent years of revenue growth and good prospects for 2014.”
The U.S. hotel industry showed improvements in three key areas at the end of the third quarter of this year, according to research firm STR.
Occupancy was up 1.4% year over year to 67.9%. The average daily rate rose 4% to $111.88. And revenue per available room was up 5.5% to $75.97.
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