<B>FelCor Folds In MeriStar</B>
By Bruce Serlen
FelCor Lodging Trust this month announced that it had agreed to acquire MeriStar Hospitality Corp., creating the largest U.S. lodging real estate investment trust in terms of number of hotels and room count. The deal was valued at $2.7 billion and is expected to close in August. After the deal closes, FelCor, which is based in Irving, Texas, will own 299 hotels, 113 of which constituted the Washington, D.C.-based MeriStar portfolio. In terms of rooms, post-merger FelCor will control 79,000 rooms, 29,000 of which belonged to MeriStar.
According to Thomas Corcoran, president and CEO of Felcor, who will head the combined enterprise, the appeal of MeriStar was the diversity it brings to FelCor. Specifically, "it enhances our concentration in the full-service, upper upscale and resort segments," he said.
FelCor will be the largest independent owner of hotels flying flags of various Bass Hotels & Resorts, Carlson Hospitality, Hilton Hotels Corp. and Starwood Hotels & Resorts Worldwide brands, including Crowne Plaza, Doubletree, Embassy Suites, Hilton, Holiday Inn, Radisson, Sheraton and Westin. The properties in the MeriStar portfolio will continue to be managed by MeriStar Hotels and Resorts. Among MeriStar's other assets is BridgeStreet Accommodations, a network of 37,000 extended stay apartments that MeriStar acquired in March 2000.
For travel buyers, the deal underscores the growing importance in the lodging industry of the independent owner/operator. While a hotel may fly the flag of a national brand and carry that brand's core standards, when it comes to negotiating corporate rates, the final sign-off likely rests in the hands of the owner/operator. In other words, while the hotel company's national corporate sales team may handle requests for proposals on behalf of all that brand's properties, the owner is the one who has to approve final negotiated rates. Other large U.S. owners/operators include Tharaldson Enterprises, based in Fargo, N.D., and Lodgian Inc., based in Atlanta.
As with any lodging industry acquisition, the FelCor/MeriStar transaction also signals increased consolidation. For travel managers, this translates into one less industry player and, therefore, potentially less competition when it comes to rate negotiations.
From the Wall Street perspective, the price of the deal surprised Goldman Sachs lodging industry analyst Steven Kent, who termed it "awfully low." Earlier in the year, MeriStar had entered into a merger agreement with the American Skiing Co., but that deal collapsed in March, ostensibly because of the softening economy.