Private-Equity Firm Rents Out Hilton Brands to Franchisees
In six years, Blackstone Group LP transformed Hilton Worldwide Holdings Inc. into the largest hotel company by rooms, more than doubling its $6 billion investment.
That growth came not by expanding Hilton’s empire of company-owned hotels. Instead, the New York private-equity firm has taken a more economical route—renting out Hilton’s brand names such as Hampton Inn, Hilton Garden Inn and Doubletree to franchisees.
Of the 164,000 rooms added by the company since 2006, more than nine out of 10 were franchised, according to Hilton’s securities filings.
The strategy is a revved-up version of an increasingly popular tactic in the hotel industry: rent out brand names, booking systems and even loyalty-points programs, collecting a five percent fee on room revenue and avoiding costly overhead tied to building and owning properties.
Blackstone is now shopping Hilton to other investors. It plans to take the hotel chain public next month in a $2.25 billion initial public offering, the largest-ever in the hotel industry. Blackstone and Hilton are planning to meet with potential investors next week to persuade them to buy stock in the company. The offering would value Hilton at about $30 billion to $32 billion, say people familiar with the company.
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