Doubletree To Buy Renaissance Chain
<I>Phoenix</I> - With an impending $780 million deal to acquire the Renaissance Hotel group, Doubletree Corp. is on the verge of major-league status. The purchase, expected to close this summer, would make the Doubletree name global-a home run in the upscale arena.
Adding the 146-property group would grant Doubletree approximately 20 Renaissance and 45 Ramada hotels in Europe. In the Asia-Pacific region, the chain would gain 13 Renaissance, 15 New World and 10 Ramada hotels. Three Renaissance hotels in Canada, five in the Caribbean and two in Brazil round out the global roster.
With a total of 382 properties, the deal would render Doubletree the nation's third-largest upscale management company, following Marriott and Hilton.
"Critical mass for a hotel chain is everything," said Arthur Adler, partner in hospitality consulting for Coopers & Lybrand, New York. "This will give travel managers another big-league brand to negotiate corporate deals with."
Renaissance, which only last year took down its last Stouffer sign, will switch to the Doubletree flag should the deal go through. The Hong Kong-based New World group, which owns about 54.4 percent of Renaissance shares, also would convert to the Doubletree name, retaining its real estate interests. Doubletree would have first refusal on any future hotels acquired by New World.
The agreement carries a $50 million breakup fee, to be paid by the party that fails to proceed with the transaction.
"This is a great opportunity for Doubletree to get their name out there internationally," said Ted Mandigo, director of Landauer Associates Inc., Chicago.
Because most habitués of higher-priced hotels cover an array of international cities, their hotel chains need global presence, Mandigo said. Many rely on frequent travel programs for upgrades and VIP treatment. And the scores of international business travelers scouting for U.S. hotels look for a brand name that they recognize.
"Just as an airline needs to fly where the people are traveling, hotel brands need to have properties where their customer base is going," Adler said. "And this deal would be a good fit, without tremendous overlap. Doubletree won't run into a lot of conflicting properties in the same market."
Larger chains also fare better in the hotel arena, said Scott Brush, president of Brush & Co., Miami. "We're getting to the point where chains have to be pretty big to be able to afford all the new technology, such as the global computer network," he said. "It will take a significant investment, and smaller hotel companies will be at a disadvantage."
A greater number of hotels also translates into more marketing and advertising power, Adler pointed out. And bigger chains can drive a higher percentage of bookings through the global reservations system. "The bigger companies run 30 percent of their reservations through the system, while the midsize chains might be more in the 15-to-20 percent range," Adler said.
The Renaissance purchase would boost Doubletree's stateside presence as well, adding additional hotels in Atlanta, Austin, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Houston, Los Angeles, Nashville, New York, Orlando, San Francisco, St. Louis, Seattle and Washington, D.C.
The chain also recently bolstered its West Coast portfolio in November when it acquired 56 Red Lion hotels for $1.2 billion in cash and stock.