The hotel business is booming, and one of the world's richest investors is looking to cash in on his ownership of two landmark Canadian chains.
Prince al-Waleed bin Talal, who was in Toronto last week to meet with hotel executives, is pressing Four Seasons Hotels Inc. and the parent company of Fairmont Hotels & Resorts Inc. to look at options such as merging or going public.
The Saudi Arabian prince, who holds large stakes in both companies, is being vocal about his views during an upswing for the hotel industry.
"Our objective right now is to grow both companies and have a monetization process," he said at a conference hosted by Bloomberg News.
"The hotel industry is facing major upside right now. This may go on another three or four years. So there is a zone of opportunity for us right now."
He added that while he has made his views clear, he will defer to management when it comes to final decisions. A spokesperson for the prince declined to elaborate.
It's not the first time the prince suggested going public. The numbers show why: Hotel occupancy rates in Canada have risen to 65 per cent this year, up from 59 per cent in 2009.
In the U.S., they have risen to 64 per cent from 55 per cent, according to data from Smith Travel Research and HVS that was provided by CBRE, a commercial real estate services firm. Revenue per room is also on the rise.
The market is responding accordingly, with a Standard & Poor's index that tracks the hotel industry up 22 per cent in the past year. Hilton Worldwide Inc., which is owned by New York-based private equity giant Blackstone Group, is in the midst of planning an initial public offering and will raise $2.25-billion (U.S.), according to a report in the Financial Times.
Prince al-Waleed led a consortium that took over Fairmont in 2006, after which the chain became part of FRHI Hotels & Resorts. The company has more than 100 hotels in dozens of countries operating under three brands: Fairmont, Raffles and Swissotel. The following year, he teamed up with Bill Gates to buy Toronto-based Four Seasons, with the chain's founder, Isadore Sharp, retaining a 5-per-cent stake.
In 2010 Prince al-Waleed sold a 40-per-cent stake in FRHI to Voyager Partners Ltd., saying at the time that he wanted to see the hotel company go public within three years.
FRHI spokesman Mike Taylor said the company is now majority owned by Qatar Investment Authority, Qatar's sovereign wealth fund, though Prince al-Waleed's Kingdom Holding Co. and Toronto-based Oxford Properties Group remain shareholders. Mr. Taylor confirmed that the prince was at the firm's Toronto headquarters last week, where he met with FRHI chief executive William Fatt and other company leaders.
"We agree that the hotel industry is in a very healthy cycle right now," Mr. Taylor said.
FRHI is monitoring market conditions and analyzing opportunities to grow or to maximize shareholder value, he said. But he added that "in the short term, nothing is imminent" and that if a transaction were to occur it would likely be two to three years from now.
"Any private company is always exploring the idea of going public when it makes sense or depending on the circumstances," Four Seasons spokeswoman Sorya Ingrid Gaulin said. "Our shareholders and management team are always exploring these types of questions." She too said that no deal is imminent.
Bill Stone, an executive vice-president at CBRE Ltd. who specializes in hotels, said that there is "a lot of capital out there looking to be placed in the sector." Business travel is up as executives have regained confidence, he said.
"If we do happen to move into an inflationary environment, hotels have the ability to change room rates every night, unlike office buildings that have five- or 10-year leases in place," he added. "If that happens, it tends to be a pretty big win in the short term."
But the ability of consumers to make and cancel hotel reservations with short notice, and the discretionary nature of much travel, also makes hotels a highly cyclical business.
"IPOs are struck at critical times. We're in one of those opportune times," Mr. Stone said.