Blackstone’s Aquisition of Strategic Good News for Luxury Segment

When Strategic Hotels & Resorts announced in August that it was exploring “strategic alternatives,” so to speak, including an outright sale, it left many wondering who had the financial wherewithal to scoop up the luxury hotel company. Many speculated it might be a large private equity company or, perhaps, foreign investors but, in the end, it was, who else, but Blackstone Group LLC that agreed to acquire the Chicago-based REIT.
Convinced there is still plenty of runway left in this upcycle, the real estate giant continued its methodical accumulation of hotel companies, and even had some industry folks talking about potential antitrust issues. Blackstone—which, over the course of the last decade, has acquired large brands such as Hilton, La Quinta, Extended Stay America and Motel 6—was once thought to be a short-term player looking for a quick flip. Clearly, the company has been anything but that and has identified long-term value in the lodging sector, which had traditionally been seen as a riskier investment because of what are effectively one-night leases.  
The latest area of focus for Blackstone has been the luxury segment, which is good news for the industry. The company has invested in virtually every other sector, including economy and extended-stay, with its previous acquisitions. Its luxury shopping spree started in May, when the company purchased the JW Marriott and the Ritz-Carlton in Orlando, FL, as well as the JW Marriott Phoenix Desert Ridge in Arizona. It continued with its agreement to acquire Strategic and its 17 assets, including the Hotel Coronado in San Diego, the JW Marriott Essex House New York and the Four Seasons in Washington, DC.
As for Strategic, its future became murky following the resignation a few years back of Sir Laurence Geller, president and CEO, who had been with the company since it was founded in 1997. It did not come cheaply for Blackstone, which agreed to pay some $6 billion, including debt, or $14.25 per share, in an all-cash transaction.
The price may seem steep but, given Blackstone’s recent track record, it’s hard to bet against it making it pencil out. Investors apparently agree, as shares of the company’s stock rose as much as 4.5% immediately following the announcement of the deal.
And, for those who are concerned that Blackstone has gained too much clout and influence within the hospitality industry: Don’t worry, it’s not like the company acquired Starwood Hotels & Resorts…at least not yet