Cornell Hospitality Study Says, In Hotel Acquisitions, Private Firms Yield the Most Value

Dec 06, 2010

Contact:  Glenn Withiam, 607.255.3025,

Cornell Hospitality Study Says, In Hotel Acquisitions, Private Firms Yield the Most Value
Industry research shows companies that acquired a publicly traded firm either broke even or lost value, while those that acquired a private firm reaped considerable equity

Ithaca, NY, December 6, 2010 – An analysis of over 450 lodging company acquisitions found that companies taking over privately held companies yielded the most value, as measured by the equity changes for the acquiring firms. The hospitality study appears in a new report from the Cornell Center for Hospitality Research, "Public or Private? The Hospitality Investment Decision," by Qingzhong Ma and Athena Wei Zhang. The report is available at no charge from the CHR at

Looking at lodging company acquisitions from 1981 to 2006, Ma and Zhang analyzed the change in equity value for acquiring companies in the five-day period beginning two days before an acquisition announcement and ending two days after. Companies at best broke even when they acquired a publicly traded firm—and often lost market value. But companies reaped considerable equity rewards when their acquisition target was privately held, the hospitality industry research showed.
"The superior value creation of unlisted assets occurred in both hot acquisition markets and not-so-hot markets, such as where we are now," said Ma, who is an assistant professor at the Cornell School of Hotel Administration. "We found that the type of payment doesn't really matter, but more value was created when acquiring companies used their stock as payment. On the other hand, competitive bidding diminished the value of the transaction."

Zhang, an assistant professor at Ithaca College, added: "We analyzed only public acquirers simply because this allowed us to gauge the change in market capitalization during the five-day announcement period. However, we see no reason that privately held companies would not enjoy the same value creation outcome from acquiring an unlisted firm."

Anticipating an eventual increase in lodging merger and acquisition activity, Ma and Zhang suggest that their findings may guide would-be acquirers in determining their eventual takeover targets.

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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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