After Hilton Sale, Who's Next?

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It was a shock but not a surprise to hear that The Blackstone Group made a deal late Tuesday to purchase Hilton Hotels Corp. for about $26 billion, a price that's one-third higher than Hilton's stock price at the close of the market on Tuesday. I (see Lodging Hospitality, Jan. 2006, pg. 4) and other analysts saw Hilton as a potental takeover target this year. It was the timing and the size of the deal that shocks me.

As this seems to be a done-deal, the next questions are how will Hilton change, if at all, under Blackstone ownership and which other hotel companies are in the crosshairs of Blackstone and/or other equity groups? Blackstone's current lodging portfolio includes the La Quinta system and LXR Resorts, a collection of loosely similar upscale resorts and city properties. Earlier this year, Blackstone sold the 683-property Extended Stay Hotels portfolio for $8 billion to lodging newbie David Lichtenstein.

In the few short years Blackstone has been in the lodging industry, the company has chosen not to combine its disparate brands and companies, probably because it knows it has a short- to -medium-term exit strategy for each of them. Similarly, I doubt if it will attempt to integrate La Quinta, which competes with the Hampton brand, into the Hilton family. Integration may occur, however, with LXR Resorts as several of those properties, e.g., The Boulders, Boca Raton Resort and The El Conquistador, could easily become Waldorf=Astorias or Conrads. But again, Blackstone doesn't buy to operate long-term; every deal it makes is a precursor to another deal down the road.

The more interesting question is whether other mega hotel companies are ripe for takeover. After all, what board of directors can say no to a sale price that's a 33-percent premium to stock value? In my estimation, the likeliest candidates, in order of potential, are InterContinental Hotels Group, Wyndham Worldwide and—as a long-shot—Starwood Hotels & Resorts.

You get the feeling that the buzzards are circling and more news is on the way—probably before the year is over.

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