Thistle Hotels Sell-Off: An Omen Of Things To Come?

LONDON, UK— Does Thistle Hotels Plc here know something the competition doesn’t? And, more pointedly, is the 56-property lodging chain gearing up to make a major move in an apparently improving marketplace? As Thistle CEO Ian Burke revealed to HOTEL BUSINESS®, the US$875-million sale of 37 properties (the vast majority outside London proper) last month to a subsidiary of the privately held Orb Group set in motion a number of developments— and possibilities— for his organization. For starters, Burke offered, “The transaction allowed us a prime opportunity to further focus on our brand and management skills while lessening our asset intensity.” In essence, this translates into Thistle’s retention of management contracts on all the newly shed hotels (which, incidentally, will continue to fly the Thistle flag). On the other hand, the undertaking also avowedly reduces the company’s exposure to the vagaries of a somewhat uncertain real-estate market (in the U.K.). That’s not to say Thistle is completely averse to owning its properties…as evidenced by the fact the remainder of its asset portfolio at this time still amounts to something in the neighborhood of US$1.5 billion. Moreover, Burke noted the company’s shareholders have already been advised “there are no plans for such further dispositions…at this time.” Another goal accomplished by the recent property sell-off shapes up as it being “a clear demonstration [to the investment community]there is real worth in Thistle’s business and holdings,” according to Burke. He maintained that worth is not adequately reflected in the company’s share prices, currently trading at levels “significantly discounted to net asset value [NAV].” But likely, the most important outgrowth of the U.K. firm’s early-April property-divestment was obviously the immediate influx of capital resulting from that move. As Burke explained, the first order of business vis-à-vis this inflow of funds has been to repay Thistle’s outstanding loans. However, in light of a significant amount of capital left over (after paying the aforementioned loans), the Thistle CEO contended the recent deal has similarly afforded the company a chance to “strengthen its balance sheet with [this infusion of]net cash.” Accordingly, with some ready cash now on hand, Burke maintained Thistle is now strategically positioned “to pursue potential acquisition opportunities.” As to whether his somewhat cryptic remark referred to possible new development, one-off purchases, portfolio acquisitions…or even the assumption of entire operating businesses, Burke wouldn’t say. Maybe the only “hint” forthcoming as to which road Thistle might travel was when Burke noted “there has been no significant ground-up development in the full-service market here [the arena in which Thistle specializes]of late.” In the wake of this observation, one might conjecture the company recognizes definite buying opportunities in the offing…and perhaps market-watchers would do well to keep an eye on Thistle which— while not as financially endowed as its Six Continents’ neighbor— nonetheless seems to be primed to join the ranks of the pursuers rather than the pursued.