Hilton’s $2.4B IPO Symbol of Growing Hotel Industry

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Dec. 3 (Bloomberg) -- Joel Simkins, analyst at Credit Suisse, examines the growing strength of the hotel industry as Blackstone brings Hilton to market in an IPO that could potentially bring in $2.4 billion. He speaks on Bloomberg Television’s “In The Loop.”

This is a pretty good time to bring a hotel business public.

We have seen some other ones doing pretty well.

I cannot talk too much about me hilton deal.

The lodging industry is very healthy.

We have had a strong recovery since 2008. industry wide, revpar should surpass the peak this year.

I am going to bring in cristina alesci.

I just noted the timing.

Blackstone bought this before the crisis.

Hilton could have been left for dead, blackstone put in more money and now it looks like it is going to do pretty well.

Blackstone and other investors had to restructure the company.

It is a turnaround story.

What is more remarkable, not only has the ipo market been on fire, other investors, existing shareholders are selling into this ipo.

That is a testament to the fact that they think the ipo market is so hot.

Not only can issue primary shares, they can do secondary ones.

If you did not know that jonathan who runs blackstone's real estate is a superstar, this is the proof.

We have seen hotel stocks run out.

If you look at a pe multiple basis, they are more expensive than the broader market.

How much room is there to run?

The stocks are relatively reasonably valued versus historical levels.

Keep in mind that up until the last few weeks, these stocks have lagged.

Other names that they trade against, gaming stocks, macau casino stocks.

You have seen a catch-up trade in some of the names we like, like starwood and marriott.

That explains the rotation we are seeing.

I was going to ask you.

How do you think hilton is going to stack up against starwood and marriott and hyatt?

I cannot discuss the hilton ipo.

I think people understand the lodging industry fundamentals at this point.

We are in a low supply growth environment.

Most countries are directing their focus over to asia and international markets.

We are seeing more growth and asset light business model.

That is the industry backdrop at this point.

There is not that much supply so they can bump up prices.

On the other hand, they don't want to charge corporate clients too much.

Carpets are under pressure to reduce cost.

How are hotels taking advantage of this?

W.a.r. how are they prevented from taking advantage -- or how are they prevented from taking advantage?

You are seeing strong rate given growth, hotels are full.

There is corporate demand, groups and conventions, which can be very high margin, gives you an advance booking and that is picking up.

Corporate america is traveling again and hosting events.

The lodging industry is participating in that upside.

Who else is going to make money?

The other investors that came in.

They helped restructure the company.

Blackstone will have to sell at some point.

Private equity has to return capital to investors.

Right now, they are marking their equity at two point three times cost.

They went to see the price of this offering go up after the offering, they want to see the multiple increase.

They have an incentive.

The big question is is the story they're telling investors specifically about its ability to expand overseas?

Can they on that and kenny emerging markets, specifically -- and can the emerging markets specifically stay strong enough to support growth.

Especially in this economy where you have things like airbnb.

Cristina alesci and joel birth credit suisse, thank you.

Companies like amazon and twitter are spending millions of dollars to expand.

Others are going on a diet.

Dow chemical is one of them.

We will tell you what that could mean for the future of the company.

Super mario cannot even save this company.

Sony and microsoft releasing new consoles.

The world's largest console maker facing tough times.

When we come back.

This text has been automatically generated. It may not be 100% accurate.


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