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China's Huazhu To Buy German Luxury Hotel Group Steigenberger

Published on Nov 7 2019 2:06 PM in Hotel tagged: Huazhu Group / Steigenberger Hotels / Deutsche Hospitality

China's Huazhu To Buy German Luxury Hotel Group Steigenberger

China's Huazhu Group is buying Steigenberger Hotels as it seeks to extend its global reach with the addition of one of Germany's most well-known upmarket chains.

Huazhu, already the world's fifth-largest hotel group by market capitalisation, is paying €700 million in cash for Steigenberger parent Deutsche Hospitality.

That values Deutsche Hospitality, the brands of which include MAXX by Steigenberger, Jaz in the City, IntercityHotels and Zleep, at 17-18 times its 2019 expected earnings before interest, tax, depreciation and amortisation, or at less than 10 times expected 2022 core earnings.

Peers such as Marriott, Hilton, Accor , InterContinental and Hyatt trade at 11-14 times their expected core earnings over the next twelve months, while China International Travel and smaller peer Huazhu both trade at more than 20 times.

Huazhu, based in China and listed in New York, operates hotels using a franchise model and on leased properties, opens 1,000 hotels each year. The acquisition will add to its more than 5,000 hotels.

Deutsche Hospitality Plans

Deutsche Hospitality operates 118 hotels and has 36 hotels under development, with a focus on Europe. It has plans to increase that number to 250 by 2024.

"With the help of Huazhu that will go faster than 2024," Huazhu chief executive Jenny Zhang told Reuters, adding that four of five Deutsche Hospitality brands will be rolled out in China.

No job cuts are planned as part of the deal, she said, adding that Huazhu does not expect to encounter any issues with antitrust regulators or German authorities overseeing foreign investments in the country.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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