At a time when the hospitality sector is on the path to recovery, Blackstone Group Inc. and Starwood Capital Group have decided to purchase hotel owner and operator Extended Stay America Inc. They will spend around USD 6 billion on the deal. The two private equity giants are hopeful that the industry will brighter as the United States emerges out of the COVID-19 pandemic. Vaccination drive has picked up in the US and more and more people are getting inoculated. They are paying roughly 15 percent more than Extended Stay’s closing price over the weekend. As per the deal, the companies have agreed to pay around USD 19.50 per share.
The deal, once finalized, would be the largest transaction in the hotel industry since the outbreak of COVID-19 that brought the travel industry to a standstill. The industry has now started recovering and experts believe that it would start bearing fruit later this year. They are hopeful of leisure travel bouncing back the fastest. The revival will help hotels and other associated sectors to bring back workers on the road. Tyler Henritze, head of US acquisitions for Blackstone Real Estate, said that travel and leisure is one of the best investment options for the company. “We have enough confidence about the Extended Stay model,” Henritze said in the statement.
Blackstone has a very old relation with Extended Stay. It purchased the operator of hotels and motels in 2004 only to sell it three years later. The firm was part of the group that bought Extended Stay in 2010. The group not only brought it out of bankruptcy but also took it public. Blackstone’s investment in hotels includes the likes of La Quinta, Hilton Worldwide Holdings Inc., and others. It is now buying back into the company as this is apparently the appropriate time for investing in this business. Over 650 midpriced hotels are operated by Extended Stay. The company focuses on longer-term stays and often targets those from construction crews, cost-conscious corporate workers, and emergency responders. Investors are attracted towards Extended Stay because of its consistent performance during the period when the pandemic was at its peaks.