The hospitality industry has been doing shockingly well during the pandemic, and investors have taken notice. Here’s why.
By Garrett Boyce
Recently, investment firms Blackstone Group and Starwood Capital Group bought Extended Stay America, a hotel operator, for $6 billion (Reuters Staff). This might come as a surprise to most investors, as common sense would tell us that sweeping lockdowns due to COVID-19 would cause bookings to plummet. Why, then, would such a large purchase take place now?
With the success of the US’s vaccine rollout, the country is becoming more comfortable with a slow return to normalcy beginning this fall. This timing led to a push for higher education institutions to return to in-person learning, as universities like Harvard (Koller, A. M., & Peterman, T. C.), Rutgers (Devlin, D.), NYU (Wanebo, G.), and many others announced ambitious plans to reconvene on campus in the fall semester (Burke, L.). Such responses from universities should make us optimistic considering universities are transmission hotbeds with students living and working in close proximity to one another.
Now, viewing this newfound optimism in conjunction with the unique success of Extended Stay America sheds light on the reasoning behind the purchase (Yahoo Finance). Extended Stay has done incredibly well during the pandemic due to its business model: Offering affordable, short-term and long-term housing targeted at healthcare workers. Although COVID-19 has much of the US locked down, many healthcare workers still need to travel for work. Thus, Extended Stay America still receives business while large hospitality companies like Hilton and Marriott suffer due to reduced travel. This led to Extended Stay outperforming both companies and more than doubling its stock price in 12 months (Reuters Staff).
As the country begins to reopen, the number of people traveling is likely to increase rapidly, as Americans are desperate for leisure. This became evident in the market, as Marriott’s stock price increased last month despite a “50% year-over-year revenue decline” in 2020 (Matthew Frankel, C.). Therefore, with the success of vaccine distribution along with investment firms making such large, bullish bets on hospitality, it seems the industry is, despite setbacks, recovering quickly. □
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- Burke, L. (2021, February 19). Colleges promise return to in-person classes for fall. Retrieved March 31, 2021, from https://www.insidehighered.com/news/2021/02/19/colleges-promise-return-person-classes-fall
- Devlin, D. (2021, February 3). A quick guide to a gradual return. Retrieved March 31, 2021, from https://www.rutgers.edu/news/quick-guide-gradual-return
- Koller, A. M., & Peterman, T. C. (2021, March 23). Harvard college students will live on Campus, learn in person in Fall 2021, Fas Announces: News: The Harvard Crimson. Retrieved March 31, 2021, from https://www.thecrimson.com/article/2021/3/23/Students-to-return-to-campus/
- Reuters Staff. (2021, March 15). Blackstone, Starwood capital to buy extended stay for $6 billion. Retrieved March 31, 2021, from https://www.reuters.com/article/extended-stay-ma/update-2-blackstone-starwood-capital-to-buy-extended-stay-for-6-bln-idUSL4N2LD33V
- Matthew Frankel, C. (2021, February 22). Here’s why Marriott International was rising on Monday. Retrieved March 31, 2021, from https://www.fool.com/investing/2021/02/22/heres-why-marriott-international-was-rising-on-mon/
- Mauguin, M. (n.d.). 6 key learnings from an Unprecedented year in hospitality. Retrieved March 31, 2021, from https://hospitalityinsights.ehl.edu/unprecedented-year-hospitality
- Wanebo, G. (2021, February 24). NYU announces plans for all faculty to Resume in-person classes for FALL 2021. Retrieved March 31, 2021, from https://nyulocal.com/nyu-plans-to-resume-in-person-classes-for-fall-2021-7becaae0f266
- Yahoo Finance. (2021, March 31). Extended stay America, Inc. – P (STAY) stock Price, NEWS, quote & history. Retrieved March 31, 2021, from https://finance.yahoo.com/quote/stay/