Blackstone Group (NYSE:BX) and Starwood Capital Group have agreed to buy Extended Stay America, an operator of hotels and motels, for $6 billion U.S.
Blackstone and Starwood are paying $19.50 U.S. per share for the hotel company, a 15% premium over Extended Stay’s closing price last Friday, according to a news release. Blackstone and Starwood are betting that the hotel industry will recover as the COVID-19 pandemic retreats.
Extended Stay’s shares jumped as much as 36% in New York before being halted due to volatility. After early trading resumed, the stock rose 15% to $19.45 U.S. a share.
Ongoing vaccination campaigns are seeding a travel recovery that industry analysts argue could begin in earnest this summer. While leisure travel is widely expected to bounce back fastest, the wager on Extended Stay demonstrates confidence that a broader economic revival will encourage business travellers to get back on the road as well.
Extended Stay, which operates 650 hotels in the U.S., focuses on providing longer-term stays, often catering to construction crews, emergency responders and cost-conscious corporate executives. The company’s system-wide occupancy rate was 74% last year versus 44% for the entire U.S. hotel industry.
The company’s steady performance during a travel freeze that ravaged the globally hospitality industry attracted investor interest. In addition to the hotel-operating company, an Extended Stay affiliate owns 564 hotel properties with 62,000 rooms, making it largest hotel real estate investment trust in North America.
Blackstone was part of a group that bought Extended Stay out of bankruptcy in 2010 and took it public three years later. The firm has been a prolific investor in hotel real estate and operating companies in the past, including Hilton Worldwide Holdings and La Quinta.
