What’s Going On Here?Two major investment firms agreed to buy hotel operator Extended Stay America on Monday, in hopes that getting into bed together will lead to a good time. What Does This Mean?The hotel industry hasn’t exactly been doing well recently, but investment firms Blackstone and Starwood seem to think it’s only a matter of time before travel – and by extension hospitality – picks back up. So much so, in fact, that they offered to pay $6 billion for Extended Stay – 15% more than the company was worth on Friday, and the biggest sale the hotel sector’s seen since the pandemic began. And there are signs they’re right to be so optimistic: Friday was the busiest day for American airlines since March last year. Why Should I Care?For markets: Affordability and long stays are the key.
Extended Stay has something else working in its favor: the hotel chain offers, well, extended stays at reasonable prices, meaning it tends to attract guests no matter how the economy’s doing. In fact, it managed to fill 75% of its rooms on average last year, even as the rest of America’s hotels only filled 44% of theirs. That might be one of the reasons why its shares have gained 30% since February last year, compared to just 2% and 12% for giant rivals Marriott and Hilton respectively.
The bigger picture: You might’ve missed your chance with the travel sector.
Get the sanitizer, because the travel bug seems to have spread across the Atlantic: one major index of European travel and leisure stocks erased all its pandemic losses and reached an all-time high on Monday. That’s not to say there are no cheap stocks in the travel sector any more, but they might be cheap for good reason: airline stocks, for example, are still some way off pre-pandemic highs, but they’re burning through cash and have a lot of government debt to repay. | 