A London-based company that owns and operates dozens of famous hotels, from the Cipriani in Venice to the Copacabana Palace in Rio de Janeiro, is up for sale after years of rebuffing its many suitors.
The move by Belmond Ltd. to explore the market now is the latest sign that luxury travel is booming after an extended downturn, when many leisure travelers and businesses shunned paying up for high-end accommodations.
Belmond said in a U.S. securities filing last week that it has initiated a “comprehensive review of strategic alternatives” including “a possible sale.” While the company could decide not to sell the entire firm, or could instead sell individual properties or even nothing at all, the market reacted as if a sale of the company were the probable outcome.
Shares of Belmond have surged about 40% on the New York Stock Exchange since the news was made public. They closed on Tuesday at $15.95, up about 1.6% on the day. Some analysts think the stock has further to go. Deutsche Bank in a note last week suggested it could go to $17 a share.
Belmond's board over the years has heard from potential buyers of all stripes — including sovereign-wealth funds, hotel operators and private-equity firms — but most of those talks never gained much traction, say people familiar with the firm. Because Belmond has a dual-class share system that concentrates voting rights in the hands of board members, the company has been able to reject any unsolicited bid.
A few years ago, the board rejected a bid of more than $12 a share from a unit of India's Tata Group. The board also turned away a $60-ashare offer made by a Dubai company in 2007. The stock hasn't been anywhere close to that level in several years.
Belmond has decided to pursue a potential sale at a time when the luxury hotel market has come roaring back. The average daily rate for luxury hotels in 2012 was $236.20, according to data firm STR. By the end of 2017, that figure was up to $284.61, and it has continued to rise this year without much change in occupancy levels.
“Resorts and luxury hotels are in vogue at the moment, and it's not surprising [Belmond] would want to capitalize on that,” said Lukas Hartwich, a senior analyst who covers the lodging sector for Green Street Advisors. Luxury travel's comeback reflects a stronger economy that has helped boost tourism and the return of business travel.
During the financial crisis, American International Group came under public attack when details emerged about a bash at the tony St. Regis hotel in Dana Point, Calif. AIG was denounced for spending money on a high-end hotel after receiving a government bailout package, even though it was a long-planned event for top-selling employees. The bad press put a chill on business events at luxury hotels for years to follow.
The decision to pursue a sale comes as the high-end market bounces back.
Analysts suggest Belmond could draw widespread interest because it owns iconic properties in places like St. Petersburg, Russia; Cape Town, South Africa; and Santa Barbara, Calif. The company's market capitalization of less than $2 billion is small enough to make it affordable for many potential buyers.
Belmond has full or partial stakes in virtually all its 36 hotels, making it one of the last hotel operators to own most of the properties it manages. Its sale would represent an end of an era.
Most lodging companies have gotten out of the business of owning real estate, often spinning off their property holdings into real-estate investment trusts for tax purposes. Large operators today focus on managing hotels or franchising their brands, teaming with investors who own the properties.
Belmond has chosen to hold on to its properties for a number of reasons, in part because it doesn't own a large enough number of hotels to function as a pure operator.
The company has struggled even after business started to pick for the rest of the industry. The company's share price was down 5.75% over the past three years through Aug. 8, when the company announced its strategic review. The hotels, restaurants and leisure subsector of the S&P 500 consumer discretionary index was up nearly 26% over the same period.
The new CEO, Roeland Vos, is a hospitality veteran and a former Starwood Hotels executive. The company also offers luxury train rides, including the Venice Simplon-Orient-Express, river cruises in Europe and Asia, and owns the venerable “21” Club restaurant in New York City.
BY CRAIG KARMIN