Prime Hospitality yesterday announced it had agreed to be acquired by The Blackstone Group, a private equity real estate investment firm. Prime's brands include midprice AmeriSuites, extended stay Wellesley Inns & Suites and a new full-service brand, Prime Hotels & Resorts. Of Prime's 256 hotels, 112 are company-owned, representing 14,800 rooms. The rest are franchised.
The transaction, valued at $790 million, is the third lodging acquisition for Blackstone in the last 18 months. The private firm previously acquired Extended Stay America
(BTNonline, March 8) and Homestead Studio Suites. Though in those acquisitions Blackstone retained each brand as a separate entity, a number of company-owned Wellesley hotels will be converted to ESA properties. Chosen for conversion will be properties where rooms are equipped with kitchens, a prerequisite for extended stay business.
The deal, which is expected to close by year-end, follows the July acquisition of another midprice chain, Baymont Inns & Suites, by La Quinta Inns & Suites
(BTN, Aug. 2). The consolidation in the midprice segment comes after a period of strong revenue and occupancy growth during the economic downturn when many buyers, under pressure to achieve additional cost savings, traded down from full-service brands to midprice alternatives.
For buyers who bring significant volume to midprice chains, the consolidation signals less competition in certain markets and hence less negotiating leeway.