SYMBOL COMPANY NAME
$7.1B IN ASSETS, $7.6B IN LIABILITIES, BANKRUPTCY FILING SAYS
Extended Stay seeks Chapter 11 status
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By Jeri Clausing
Extended Stay Hotels has filed for bankruptcy
protection, the victim of the same combination of factors behind the recent foreclosures
and bankruptcies involving some high-profile luxury hotels.
“The bankruptcies to date share two attributes: acquisition at or near the peak of the
market and high leverage,” said Bjorn Hanson, a professor at New York University.
Indeed, Extended Stay said in its bankruptcy filing that it was overleveraged after Light-stone bought the group of nearly 700 hotels
near the peak of the market in 2007 from the
Blackstone Group for $8 billion.
The midprice hotel operator said in its
Chapter 11 filing in federal bankruptcy court
in New York that it has about $7.1 billion in
assets and $7.6 billion in liabilities. The Extended Stay America in Alameda, Calif., one of 684 Extended Stay hotels in the U.S. and Canada.
“Extended Stay is significantly overleveraged, and the projected cash flows cannot continue to service over $7 billion in debt,” Joseph Teichman, Extended
Stay’s secretary and general counsel, said in a declaration
filed in the case.
Teichman said Extended Stay’s revenue has dropped because of decreased business spending on travel.
While luxury hotels have been hit the
hardest by the downturn in travel, Hanson
said the only real trend in distressed assets
to date is debt and time of development or
Markets such as Phoenix and Las Vegas,
for example, have been especially hard hit
because of the amount of development
during the peak.
And Extended Stay, unlike some chains
that just manage or franchise the bulk of
their properties, owns all its hotels.
“The hotel companies facing the greatest
distress are the real estate owners, because
they are paying all the taxes and operating costs in the face
of lower revenues,” Hanson said.
Earlier this month, the lavish Fontainebleau resort being
built in Las Vegas filed for bankruptcy. Two W hotels, in San
Diego and Scottsdale, Ariz., are in foreclosure. The owners
of the leveraged Aviara resort near San Diego are trying to
oust Four Seasons as managers of the property because of
Analysts say the number of distressed properties will only
grow as the year goes on. Still, Hanson said he expects there
will be fewer bankruptcies and foreclosures than in the recession of the early ’90s.
“Bankruptcy is a last resort because lenders generally do
not want to take over hotels,” he said. “Hotels require extra
amounts of attention and capital, so the
lenders are being extra flexible and cooperative in working with hotels facing financial distress.”
that just manage or franchise
the bulk of their
all its hotels.
Operator pledges ‘same great service’
HVM LLC, which manages Extended
Stay’s 684 hotels in the U.S. and Canada,
said the company’s bankruptcy filing
should have no impact on operations of
“Extended Stay Inc. has turned an important page in restructuring its debt and
recapitalizing its business,” said Gary De-
Lapp, president and CEO of HVM, “but for hotel guests,
the story is the same: the same great service, the same convenient locations, same comfortable, value-priced hotel
HVM is a separate company that manages Extended Stay’s
brands, which include Extended Stay America, Extended Stay
Deluxe,SM Homestead Studio Suites Hotels, StudioPLUS
Deluxe Studios and Crossland Economy Studios.
Starwood Capital Group to acquire Golden Tulip
By Jeri Clausing
$723.48 $1,209.05 - 40. 2
CUMULATIVE (NOT INCLUDING AIRLINES) $484.54 $829.70 - 41. 6
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Starwood Capital Group, whose chief, Barry Sternlicht, is
best known for developing luxury brands, is expanding its
The private equity firm said it would acquire the Swiss-based Golden Tulip brand, which Starwood plans to merge with its European
budget and midscale chain, Louvre Hotels.
The merger will give Starwood Capital
a full range in accommodation and service levels around the word.
The Golden Tulip Hospitality Group
franchises and manages more than 260
hotels with 26,000 rooms across hotels
in Europe, the Middle East and Africa, Asia-Pacific and the
Americas. Its brands range from budget to five-star.
Louvre Hotels is Europe’s second-largest hotel group. Its
brands include Premiere Classe, Campanile, Kyriad and
“The clear appeal of Golden Tulip Hotels is its strong
brand and far-reaching franchise network,” said Rich
Gomel, managing director at Starwood Capital Group. “The
group is highly complementary to Louvre Hotels, both geographically and on a segment level.”
Gomel added that the deal would enable Starwood to offer “a full range in accommodation and
service levels across over 40 countries,
with over 1,000 hotels, comprising some
Sternlicht is the former head of Starwood Hotels & Resorts and led the development of its popular W brand.
Since forming the independent Starwood Capital, he has launched three new
luxury brands: Crillon, Baccarat and 1 Hotels & Resorts, all
of which have been stalled by the credit crunch. His Louvre
brands, however, have performed well in the downturn, Neil
Jacobs, president of Starwood Capital’s global hotel operations, said recently during an Argyle Forum panel.