• Private equity drives consolidation

Private equity is increasingly the driver of consolidation in the hotel industry just as it is in the wider business environment.

In the past week, for example, Alchemy Partners, the backer of QHotels, has been tipped to acquire privately-owned Marston Hotels in a £180m move.

According to data from Dealogic, global M&A volume across all industries is set to eclipse the record $3.3bn achieved in 2000. Private equity has been involved in 21% of the deals so far this year, up from 8% in 2001.

The hotel and leisure sector is similarly reflecting this trend, with private equity increasingly dominating. This week, for example, KSL Capital Partners has struck a deal with ClubCorp, the world’s biggest operator of golf courses and resorts, for $1.8bn. Involved are 170 courses and three resorts.

The Alchemy transaction involves smaller numbers but reflects the consolidating trend. Alchemy would put the 12 Marston properties into its QHotels operation to create a 21-strong upscale chain. The other party widely tipped to be chasing Marston is Permira, the private equity firm that lost out in the race for De Vere and who already own Principal Hotels.

The UK upscale and upper mid market segments has also attracted Nikko Principal Investments who own Menzies. Nikko is understood to be looking at a sale and leaseback of its 16-strong portfolio.

The appetite for such leaseback transactions among investors appears to be strong. Hilton’s Caledonian Hotel is currently being tipped for a £45m sale to WG Mitchell, although a sale and manage back deal is more probable than the lease back speculated in the Scottish press given the aversion to leases of US-based Hilton.

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