Cornell Hospitality Analysis Finds Takeovers Aimed at Large Hotel Operators and Small REITs

Jul 15, 2010

Contact:  Glenn Withiam, 607.255.3025,

Cornell Hospitality Analysis Finds Takeovers Aimed at Large Hotel Operators and Small REITs

Study analyzes the explosion of hotel mergers and acquisitions between 2004 and 2007
Ithaca, NY, July 15, 2010 – A new Cornell hospitality analysis finds that the rush of lodging mergers and acquisitions of 2004 through 2007 was the largest ever recorded in the hospitality industry. Although the credit freeze of 2008 brought that activity to a halt, a new report from the Cornell Center for Hospitality Research focuses on the characteristics of companies most likely to be taken over. The report, "Who's Next? An Analysis of Lodging Industry Acquisitions," by Qingzhong Ma and Peng Liu, allows investors and owners to anticipate where acquisitions might occur once such activity resumes. The report is available for free download from the CHR at

The hotel merger and acquisition targets were most likely to be either a large hotel company or a relatively small real estate investment trust (REIT), Ma and Liu found. Both are assistant professors at the Cornell School of Hotel Administration. Other takeover targets tended to have a high percentage of fixed assets and a low level of debt, and displayed a mismatch between growth prospects and available resources.
"One thing we did not find was support for the idea that a company's performance made it a target, and we also saw no effect of book-to-market ratios," said Ma. "Both of those are often considered to be factors in acquisitions."

Liu suggested that further research is needed to determine exactly why deal makers preferred large operators and small REITs. "One clue from other research is that REITs are more transparent in financial management, as tax regulations require that REITs must pay out 90 percent of their taxable income as dividends and maintain 75 percent of their income and assets in real estate related activities," he said. "It may be that these special tax regulations make the REITs particularly attractive, so that they behave differently from hotel operating companies."

Ma and Liu add that the availability of credit will eventually return, and they believe that their hospitality analysis will be useful both for lodging company owners and investors who wish to attract an acquisition, and for those who want to make their firm unattractive to potential takeovers.

Thanks to the support of the CHR partners listed below, all publications posted on the center's website are available free of charge, at

About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 81 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit

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