Blackstone and Starwood Bought Extended Stay America for $6 Billion

Blackstone Group and Starwood Capital acquired Extended Stay America for $6 billion. The firms paid $19.50 per share to acquire the hotel operator. Both Blackstone and Starwood invested in Extended Stay America in the past. In 2004, Blackstone had a 4.9% share in the company. Blackstone was also part of the group that saved Extended Stay America from bankruptcy and go public in 2013.

Betting on Recovery

With millions vaccinated, both Starwood and Blackstone anticipate a surge in travel demand in the coming months. The acquisition is a big move considering losses that the travel industry incurred last year. Blackstone’s head of US Acquisition Tyler Henritze called the travel and leisure industry “one of Blackstone’s highest conviction investment themes”. He added that they are confident in the extended-stay model.

Extended Stay America may have experienced a decline in its profits during the pandemic but not as much as other companies. It was down 16 percent from 2019 but this is small compared to other hotels. Marriot International, for instance, reported a 46% decline in revenue in 2020 compared to its 2019 performance.

Another important metric that Extended Stay America performed well is its revenue per available room. Extended Stay America was also up in the third quarter. One of the things that contributed to its stability is the company’s focus on long-term stays. This made their occupancy higher than other hotels.

In the second week of March, hotel bookings in the US exceeded 2020 numbers. However, could this be just a slight surge due to spring break? With COVID19 vaccinations now underway, could we be seeing more travelers become comfortable to travel again?

As lockdowns were in place along with travel bans and health advisories, the occupancy rate among hotels dropped to around 22% in April last year. Though there is a slight recovery, things are trickier this time around with COVID19 variants. For the director of lodging analytics at Tourism Economics Aran Ryan, “things could get worse”.