Host Hotels & Resorts Inc. (HST), the largest lodging real estate investment trust (REIT) in the U.S., has recently completed the acquisition of the 1,625-room Manchester Grand Hyatt San Diego and the 775-room New York Helmsley Hotel.
The company had earlier acquired the premium hotels as part of its long-term strategy to make the most of the improving market fundamentals by purchasing assets at discounted prices. Host Hotels anticipates the acquisitions to be accretive to its future earnings, with the gradual revival of the overall economy further augmenting its operating results in 2011.
The Manchester Grand Hyatt San Diego hotel is strategically located in close proximity to the San Diego International Airport and features approximately 125,000 net square feet of meeting space, a 10,000 square foot spa and 6 food and beverage outlets. The hotel was acquired for $570 million in February 2011.
The New York Helmsley Hotel was acquired for $313.5 million. The upscale hotel is located in the heart of midtown Manhattan in close proximity to the various tourist spots such as the Grand Central Station, the United Nations Headquarters, the Midtown Tunnel and the Chrysler Building. The hotel will be initially managed by Starwood Hotels & Resorts Worldwide Inc. (HOT), one of the leading hotel and leisure companies in the world, as an unbranded hotel. Later in 2012, the hotel would be rechristened as a Westin brand after undergoing significant renovations.
Earlier in December 2010, Host Hotels had acquired 7 hotels in New Zealand for $143 million. Host Hotels purchased 6 hotels from the affiliates of Tourism Asset Holdings Ltd – the largest owner of hotels in Australia and New Zealand, while the remaining hotel was acquired from an affiliate of Accor – the world’s leading hotel manager and market leader in Europe. The properties with over 1,200 rooms are spread across Auckland, Christchurch, Queenstown and Wellington.
The acquisition spree is primarily due to a healthy rebound in the U.S. business and leisure travel that has attracted a wide array of investors to the hotel industry, including investors from the Middle East. According to Smith Travel Research Inc., an independent research company in the lodging industry, hotel revenue per available room (RevPAR) in the top 25 U.S. markets rose to $76.61 during the first 11 months of 2010 from $71.55 in the year-ago period.
Host Hotels is one of the largest owners of luxury and upper-upscale hotels, primarily operated under premium brands, such as Marriott, Westin, Sheraton, Ritz-Carlton, Hyatt, W, Four Seasons and St. Regi. Based in Bethesda, Maryland, Host Hotels owns properties and conducts operations through Host Hotels & Resorts. L.P., which is a limited partnership, where Host Hotels & Resorts Inc. is the sole general partner, and enjoys approximately 98.0% of partnership interest.
Host Hotels currently owns 106 properties in the U.S. and 16 international properties totaling approximately 65,000 rooms, and also holds a non-controlling interest in a joint venture that owns 11 hotels in Europe with approximately 3,500 rooms. Most of the properties of the company are located in areas with high barriers to entry, having the potential for significant capital appreciation.
The rating on Host Hotels is currently ‘Neutral’. The stock presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1−3 months.
STARWOOD HOTELS (HOT): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
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