The biggest story in hotel deals and development this week was that KSL Capital Partners said on Monday it wants to take Hersha Hospitality Trust private. But it was just one of many that the Daily Lodging Report newsletter covered.
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The biggest story in hotel deals and development this week was that KSL Capital Partners said on Monday it wanted to merge with Hersha Hospitality Trust. Other topics include Hilton’s luxury push in Asia, a big hotel asset sale in New York, uncertainty about Caribbean resort demand, some hope for San Francisco’s beleaguered market, and Thailand’s struggling budget hotels.
KSL/Hersha Deal Makes Waves
Private equity firm KSL said it would be taking Hersha Hospitality Trust private in an all-cash transaction valued at approximately $1.4 billion.
From Daily Lodging Report: “The initial commentary from the sell-side analysts was positive. The deal’s value was 60% above Friday’s closing price for Hersha Hospitality when you include the one additional dividend that will be granted. That sent a signal to Wall Street, judging by the rally in the hotel REIT group this week. Investment bank analysts of lodging REITs have been more bearish on the sector recently. Will they turn bullish?”
KSL’s purchase price was 14 times Hersha’s estimated year-to-date EBITDA of $99 million for 2023, according to S&P Capital IQ.
As for other real estate investment trusts (REITs), the big debate now is whether the Hersha Hospitality/KSL deal means more are in the pipeline.
“The amazing thing about this is that it won’t take much for Wall Street to narrow the gap between net asset value and current stock prices for hotel REITs, making transactions less attractive to private equity firms,” wrote Alan Woinski, founder and editor of Daily Lodging Report.
Hilton Invests in Luxury in Asia Pacific
Nikkei Asia published an article on Hilton planning to expand its luxury offerings in Asia. Hilton will bring its Waldorf Astoria brand to Malaysia, Vietnam, India, and other countries for the first time as part of its plans to open 25 new luxury hotels in the Asia Pacific region over the next few years. (Hilton today runs 33 luxury hotels in the Asia Pacific region.)
For example, In 2027, Hilton will open India’s first Waldorf in Jaipur, the capital of the state of Rajasthan. Hilton has a management agreement with the Dangayach Group, which will own the hotel.
Hilton is also bringing Waldorfs to Kuala Lumpur, Malaysia; Hanoi, Vietnam; and Sydney, Australia, Nikkei reported.
In China, Hilton will add its top-of-the-range hotels in Xi’an and Shanghai, while Japan’s first Waldorf will open in Osaka in 2025, followed by Tokyo in 2026.
JLL estimates that the Asia Pacific region has 560,000 luxury hotel rooms, a number that is expected to increase by 90,000 in 10 years. See Skift’s story on Hilton for context.
New York Hotel Asset Sales
Qatar’s sovereign wealth fund, the Qatar Investment Authority, has paid nearly $623 million for the 46-story Park Lane Hotel on Central Park South, reported Bloomberg News. Jho Low had been part of the group that owned property. He was convicted last year on U.S. corruption charges.
“The U.S. Justice Department wanted to seize the hotel as part of its investigation of Low,” Bloomberg noted, but came to an agreement with the owners, led by Steven Witkoff, to sell the hotel and hold Low’s share of the proceeds in escrow.
Also in New York City news: MCR Hotels is taking over Manhattan’s famed Gramercy Park Hotels, with plans to reopen the shuttered property and restore it as a boutique luxury hotel. MCR acquired the lease to the property, which was foreclosed on last year by Solil Management.
MCR signed a 99-year, $50 million lease and expects to reopen the property in about two years after a renovation.
Eyeing Caribbean Resort Demand
Analysts at investment bank Truist reported on investor meetings they held with the executive team of Playa Hotels & Resorts.
“Conversations mainly centered around management’s confidence that Caribbean leisure demand is not a bubble about to pop and, secondly, the company opportunistically buying shares given the inexpensive valuation and $100 million of annual free cash flow,” wrote Woinski. “Truist said management was adamant they do not believe the party is over. But they do expect a normalization of travel patterns and growth rates following a year-long rebound in the Caribbean.”
Hope for San Francisco
San Francisco’s post-pandemic recovery has been challenged by a slow return to the office by local businesses. A perception that the city has high crime and homelessness has also hurt the hotel business, as we’ve noted. But it’s not all bad news.
Oxford Hotels & Resorts is preparing to rebrand, renovate, and eventually reopen four downtown San Francisco hotels it acquired through OxfordCapital Group in 2019. Its 143-room Best Western hotel, the Americania Hotel, will be rebranded as SoMa House and will have 152 rooms as they will add on 9 more hotel rooms. The Hotel Garret, formerly the 117-room Good Hotel, will have 121 rooms after Oxford adds 4 rooms. The 110-room Hotel Vertigo will reopen as the Hotel Julian but will only have 107 refreshed guestrooms.
Thailand’s Economy Hotel Segment At Risk
A survey by the Thai Hotels Association and Bank of Thailand found that 29% of Thai hotels rated three stars or less suffered a severe impact from interest rate hikes and might need debt restructuring. The Tourism Council of Thailand said something similar, as 34% remain uncertain about the tourism outlook, and 19% believe they will earn less this quarter than the previous one, according to The Bangkok Post. Lower-than-expected Chinese arrivals are blamed the most, but small operators in second-tier destinations did not benefit as much from the pandemic-era subsidy programs.
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