The appetite for lodging properties is very strong. Publicly traded companies, hotel management companies tied to investment capital, institutional/opportunistic funds and Asian investors are among the hottest buyers in today's market.
New development in the limited-service and extended-stay sectors is also aggressively under way, and a number of new brands are being introduced to the market.
Here is a quick overview of some of the players and deals taking place, beginning with selected public companies.
A number of public companies are rapidly growing their hotel holdings by portfolio purchases. Granada Group Plc of London acquired Forte Plc (which includes the Meridien chain) in January for $5.8 billion. Starwood Lodging Trust (NYSE:HOT) announced in May that it had struck a deal with Teachers Insurance and Annuity Association for the acquisition of eight upscale and luxury full-service hotels (3,141 rooms) for an acquisition cost of approximately $309 million. In April, Hospitality Properties Trust (NYSE:HRP) purchased 34 hotels (16 Courtyards/18 Residence Inns) from an affiliate of Host Marriott Corp. for approximately $350 million.
It also recently purchased 11 Wyndham Garden Hotels for $136 million from an affiliate of Wyndham Hotel Co. HFS Inc. (NYSE:HFS), National Lodging Corp. (NASDAQ:NALC) and Motels of America acquired the North American Travelodge operations of Forte PLC (450 hotels/33,000 rooms) in January. FelCor Suite Hotels Inc. (NYSE:FCH) has acquired thus far 16 hotels during 1996 and 30 since the company's inception in July 1994. In Nov. 1995, it acquired a package of 18 Crown Sterling Suites (4,609 rooms), including the assets of Crown Sterling's management and franchise companies for approximately $450 million. In February, Doubletree Hotel Corp. (NASDAQ:TREE) acquired RFS, Inc., a company which acts as lessee of RFS Hotel Investors, Inc., (NASDAQ:RFSI) a hotel REIT with a portfolio of 49 hotels (6,870 rooms) and growing. Prime Hospitality Corp. (NYSE:PDQ) consolidated its ownership of its proprietary Wellesley Inn brand by acquiring a package of 16 Wellesley Inns in March from three different partnerships. Bristol Hotel Co. (NYSE:BH) was formed as a result of Harvey Hotel Co.'s acquisition of United Inns Inc. (26 hotels) in 1995.
Harvey grew from 10 to 36 properties in one acquisition. Sunstone Hotel Investors Inc. (Nasdaq:SSHI) purchased a portfolio of six Cypress Inns located in the Pacific Northwest in February, and Winston Hotels Inc. (NASDAQ:WINN) just acquired a package of four hotels.
Private companies are also active buyers. TRT Holdings of Texas purchased Omni Hotels (35 hotels/13,600 rooms) from Wharf Holdings (Hong Kong) in February. US Franchise Systems acquired the worldwide franchise rights to Hawthorn Suites in April and the franchise system rights to Microtel Inn in Oct. 1995. And Wyndham Hotel Corp. made its public offering in May.
Forming strategic alliances is also an excellent way for growth. In April, Patriot American Hospitality Inc. (NYSE:PAH) signed a letter of intent to begin a strategic alliance with Wyndham Hotel Corp. As a first step in the arrangement, it is reported that Patriot American will purchase five hotels (1,141 rooms) for $96 million. Since its Oct. 1995 IPO, Patriot American has acquired 12 hotels. Patriot American formed a strategic alliance with Westcoast Hotels in February and acquired a portfolio of six hotels located in Washington and California for approximately $83 million. Equity Inns Inc. (NASDAQ:ENNS) formed a strategic alliance with Promus Hotel Corp. (NYSE:PRH) in May, whereby Promus will invest up to $15 million in Equity Inns' stock, and Equity Inns will acquire from Promus a total of seven hotels, two of which are open and five of which are under development. Innkeepers USA Trust (NASDAQ:NKPR) announced it has entered into an alliance with IMPAC Hotel Group, whereby the Trust will have the opportunity to acquire various properties developed by IMPAC.
Other active buyers include: Host Marriott Corp. (NYSE:HMT), which acquired nine hotels (3,900 rooms) for approximately $390 million in 1995; ITT Corp. (NYSE:ITT), which bought the Sheraton Skyline Hotel at Heathrow Airport in London and the Sheraton Cancun Resort & Towers in Mexico; Servico Inc. (AMEX:SER), which purchased ownership interests in 12 hotels in 1995 and three additional hotels during the first quarter of 1996; Manor Care Inc. (NYSE:MNR), which purchased 16 hotels over the past year for approximately $50 million. In March, Manor Care Inc. announced plans to spin off its hotel division, which includes Choice Hotels International, the world's second largest franchise system; Red Lion Hotels Inc. (NYSE:RL), which went public in July 1995, bought the 369-room Sheraton Spokane City Center and the 290-room Sheraton Fiesta Hotel in San Antonio; and Crescent Real Estate Equities Ltd. (NYSE:CEI) acquired the 395-room Hyatt Regency Hotel in Albuquerque.
Institutional investors tied to management companies are also very active in the market. EquiStar Hotel Investors has acquired 11 hotels since it was formed in Jan. 1995 by Cap-Star Hotels Inc. (a hotel management company) and Acadia Partners.
In Dec. 1995, Interstone Partners L.P. acquired a 75% interest in six full service hotels from Cigna Investment Inc.; Cigna retained a 25% interest. Interstone is a joint venture between Blackstone Real Estate Partners and an affiliate of Interstate Hotels Corp., a hotel management company.
Prudential Real Estate Investors (PREI) has acquired 12 hotels with selected hotel management companies over the past 15 months. PREI and Davidson Hotel Co. have acquired four hotels, and PREI and HEI Hotels have purchased eight.
Institutional/opportunistic investors include Bedrock Partners, which has acquired interests in 53 hotels from Jan. 1994 through April 1996, 18 hotels were acquired individually, and it has a majority interest in Bristol Hotel Co. Colony Capital acquired the 539-room Ritz-Carlton Mauni Lani; Equitable's Value Enhancement Fund I bought The Aventine (which includes a 400-room Hyatt Regency Hotel) in La Jolla, Calif., and the Hyatt Regency Suites in the northwestern suburbs of Atlanta. Equitable's Buckhead Hospitality Fund, a private REIT, is seeking to acquire unique "difficult to reproduce" hotels and resorts. LaSalle Partners has completed eight hotel investments over the past 18 months, including the 580-room Radisson Hotel South & Plaza Tower in Bloomington, Minn. Lowe Enterprises Inc., on behalf of a pension fund client, acquired the Sheraton Palm Coast Golf & Tennis Resort in Palm Coast, Fla., and the Tenaya Lodge in Yosemite National Park.
Affiliates of Olympus Partners L.P. and Coastal Hotel Group recently acquired a package of five luxury hotels in California. In May, Tiger Real Estate Fund entered into a definitive agreement to acquire Kahler Realty Corp. (NASDAQ:KHLR) for approximately $222 million. Kahler owns and manages 23 hotels.
Asian buyers are also active. Polylinks International, a consortium of Hong Kong investors, purchased the Regent Beverly Wilshire; Forward Time Corp. of Taiwan acquired the Westin Bonaventure Hotel & Suites and Hong Kong-based Regal Hotels International bought the 300-room Knickerbocker Hotel in Chicago. Hong Kong-based CDL Hotels International is also an active player.
New development is under way by a number of companies. For example, Amerihost (NASDAQ/NM:HOST) started construction on 20 hotels in 1995; Extended Stay America Inc. (Nasdaq:STAY) has 20 properties currently under construction; Jameson Inns Inc. (NASDAQ:JAMS) -- a chain of 35 colonial styled, limited-service hotel properties -- has 13 properties under development. During 1995, John Q. Hammons Hotels Inc. (NYSE:JQH) opened six new hotels (1,261 rooms); Hammons currently has five hotels under construction. La Quinta Inns Inc. (NYSE:LQI) has 10 hotels under construction.
The Marcus Corp. (NYSE:MCS) continues to grow its Budgetel Inns and Woodfield Suites brands. Prime Hospitality is developing its AmeriSuites chain. In 1995, Promus Hotel Corp. (NYSE:PRH) opened 105 hotels and added more than 9,500 rooms to its hotel systems. Red Roof Inns Inc. (NYSE:RRI) opened 12 hotels (new builds and conversions) in 1995 and expects to open 15 to 20 in 1996. ShoLodge Inc. (NASDAQ:LODG) is building Sumner Suites hotels and Shoney's Inns, and Studio Plus Hotels Inc. (NASDAQ:SPHI) has 10 hotels currently under construction.
Also, watch for these new brands in the market targeting the limited service and extended stay sectors: Hilton Garden Inns by Hilton Hotels Corp. (NYSE:HLT); Sierra Suites, which is affiliated with Summerfield Suites; Candlewood Hotels, which is 50% owned by Doubletree; Club Hotels by Doubletree; MainStay Suites by Choice Hotels International; Wingate Inns by HFS Inc. (NYSE:HFS); Fairfield Suites; and Town-Place Suites by Marriott.
All eyes are on the hospitality industry. Investors are bullish and lodging properties are seen as an excellent vehicle for real estate investment.