Author of www.HotelLawBlog.com
27 December 2006
Hotel Lawyer on international hotel investment. Over the past two days, the shares of InterContinental Hotels Group Plc — which describes itself as “the world’s biggest lodging company” — rose substantially, fueling speculation that it has become a takeover target. The shares are up approximately 8% since December 22, 2006 (and 49% for 2006). Citing the Guardian, Bloomberg says there are rumors of a buyout firm making an offer at a “significant premium” to current stock prices. Some think a ₤5.7 billion (U.S.$11.2 billion) offer may be made.
Who are the likely buyers? Aside from the financial aspects of the takeover, what does the interest in InterContinental mean? How does this play into the big push into international hotel investments I have been talking about on www.HotelLawBlog.com in some of the most recent postings? Or into the power of brands, or the rush to hotel-enhanced mixed-use development?
Who is InterContinental Hotels Group Plc (or IHG as it is often called)?
InterContinental Hotels Group describes itself as “the world’s most global hotel company and the largest by number of rooms.” With more than 3,650 hotels and 543,775 rooms in 100 countries, more than 120 million people stay at the company’s hotels every year.
The “distribution system” of rooms, marketing and operations positions IHG nicely to take advantage of inbound and outbound traffic from many countries as international traffic takes off.
IHG owns some of the most recognized hotel brands in the world, including Holiday Inns (and other Holiday product), Hotel indigo, Crowne Plaza, InterContinental, Staybridge and Candlewood Suites. These brands nicely cover the spectrum of economy to luxury, including extended stay and hip, branded boutique.
IHG’s strategy has been to build the industry’s strongest operating system focused on the biggest markets and segments where scale really counts. In fact, 12 countries account for 77% of the global hotel market by rooms, and IHG has significant scale in most of them.
Although relatively quiet for many years, the InterContinenal luxury brand has really been on a tear recently — emphasizing new development and particularly hotel-enhanced mixed-use with condo hotel and hotel condo components.
Who’s got the inside track on a buyout?
According to a Bloomberg report today by Meera Bhatia in Oslo, the three big contenders are Barry Sternlicht’s Starwood Capital Group, Blackstone and Permira Advisers LLP. The Independent is calling Starwood Capital the “favorite” to make a successful bid.
At this point, no one will admit today is Wednesday, much less that they are or are not pursuing anything (or being pursued). But stay tuned, because this could happen fast.
Why the interest in InterContinental now?
Obviously InterContinental has an interesting financial play based on balance sheet, market share, and future revenue streams.
There is a ton of private equity still on the loose and looking for a place to invest.
The lodging industry continues on a very strong pace and is recording all time record RevPAR growth and profits.
But underneath all this is InterContinental’s even greater potential — the inherent value and growth that comes from internationally recognized brands, international market presence, lots of development under way, big profit potential from property ownership, hotel mixed-use development, capitalizing on increased international travel and exploding foreign markets, and leveraging capital with management and branding — as well as brand extension into residential and mixed-use.
Oh yes, and there is quite an infrastructure and operations base in place too, as well as all the human capital.
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Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.
Jim Butler is one of the top hotel lawyers in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.
Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $87 billion of hotel transactional experience, involving more than 3,900 properties located around the globe.
Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right “fit” for all parts of the capital stack. Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.
Jim is frequently quoted as an expert on hotel issues by national and industry publications such as The New York Times, The Wall Street Journal, Los Angeles Times, Forbes, BusinessWeek, and Hotel Business. A frequent author and speaker, Jim’s books, articles and many expert panel presentations cover topics reflecting his practice, including hotel and hotel-mixed use investment and development, negotiating, re-negotiating or terminating hotel management agreements, acquisition and sale of hospitality properties, hotel finance, complex joint venture and entity structure matters, workouts, as well as many operating and strategic issues.
Jim Butler is a Founding Partner of Jeffer, Mangels, Butler & Marmaro LLP and he is Chairman of the firm’s Global Hospitality Group®. If you would like to discuss any hospitality or condo hotel matters, Jim would like to hear from you. Contact him at jbutler@jmbm.com or 310.201.3526. For his views on current industry issues, visit www.HotelLawBlog.com.