(Photo: La Quinta Inn & Suites)
USA TODAY - Blackstone Group is planning its third IPO of a hotel chain in two months, reflecting a powerful comeback of the hospitality industry as well as a soaring stock market.
La Quinta Holdings, a limited service hotel chain, has confidentially submitted a draft registration statement to the U.S. Securities and Exchange Commission for an initial public offering of its common stock.
"The number of shares of common stock to be sold and the price range for the proposed offering has not yet been determined," the company said in a statement this week.
Private equity firm Blackstone bought La Quinta in 2005 for $3.4 billion, including assumption of debt.
Two other Blackstone-backed hotel companies recently had promising re-entries into Wall Street. Hilton Worldwide had a record $2.3 billion IPO earlier this month and Extended Stay raised $565 million in its IPO in November. Both are trading above their IPO prices.
The deals indicate that investors are interested in getting back into the hospitality industry, one of the most battered sectors during the recession. Hotel projects had stalled during the downturn. Hotel operators are now starting to add new rooms, but demand from travelers is up significantly. That's driving up room rates.
"They are riding on the success of the Extended Stay and Hilton IPOs," says C. Patrick Scholes, managing director for gaming, lodging and leisure equity research at SunTrust Robinson Humphrey. "The appetite for lodging stocks is strong right now after several decent years of revenue growth and good prospects for 2014."
The U.S. hotel industry showed improvements in three key areas at the end of the third quarter of this year, according to research firm STR.
Occupancy was up 1.4% year over year to 67.9%. The average daily rate rose 4% to $111.88. And revenue per available room was up 5.5% to $75.97.
Meanwhile, more hotels are under development.
In November, the total number of projects in planning stages or construction in the U.S. was 2,807, for a total of 339,602 rooms, according to STR. That was a 13.5% increase in the number of rooms in the pipeline over the same time last year.
La Quinta filed its IPO confidentially under the Jumpstart Our Business Startups, or JOBS, Act. The 2012 law lets start-ups or small businesses keep IPO applications confidential in the initial stages.
Because of that, no details about financials have been made public.
Blackstone bought La Quinta in 2006 for more than $3 billion. Scholes says it is typical of private equity funds to hold on to such assets for five to 10 years at most.
La Quinta has more than 800 hotels across the United States, Mexico and Canada, according to the company's website.
Earlier this year, La Quinta said it was planning nearly 150 new locations and that it would soon grow to 1,000 hotels. The company said that in the past five years, it has pursued an aggressive strategy to sign international franchises, beginning with Latin America. It is eyeing Canada for further expansion in North America, the company said on its website.
(Copyright © 2013 USA TODAY)