Carlson Cos. move to sell hotel business reflects the era in the industry

The Carlson Cos. announcement Wednesday that it plans to sell its hotel business reflects a realization that industry trends are working against the family-owned business.

Companies are getting bigger through mergers, Carlson board Chairwoman Diana Nelson explained in a message to hotel employees, and the industry is getting more competitive. It's important to offer a wide range of brands and prices, keep costs efficient and invest in technology.

"Our hotels business has been performing very well, and we are very proud of it," Nelson said. "But in hospitality the larger economics of the industry are changing by the day."

Under the deal, HNA Tourism Group Co. will acquire Carlson Hotels, which owns several upper midscale to luxury hotel brands including Radisson, Country Inns and Suites and the Quorvus Collection. The monetary terms of the deal were not disclosed.

At this point, consolidation in the hotel industry is not surprising, said Sam Winterbottom, executive managing director in the hotel investment sales group at Newmark Grubb Knight Frank. Winterbottom is a former executive vice president for the Americas for Carlson Hotels.

"I think if one wants to try to exit like Starwood or Carlson, it's probably a good time to do it from the sales side and from the buyer's side, it's probably a good time to think about it as well," Winterbottom said.

Marriott International in a deal valued at more than $12.2 billion is buying Starwood Hotels and Resort, owner of the Westin and Sheraton brands, among others. Shareholders of both companies earlier this month approved the deal, which will create the world's largest hotel company.

The Carlson properties came into the news in January with reports that the company was exploring "strategic alternatives" for its hotel unit that could include a sale of its brands.

Carlson is one of the top 10 largest hospitality companies. But last year, its flagship brand Radisson ranked second from the bottom and below average in customer satisfaction out of the upscale hotels tracked by market research group J.D. Power and Associates. Country Inns and Suites ranked fifth in its segment behind Hampton and Holiday Inns.

"I would speculate the current and future generations are more interested in getting cashed out or getting money to change the direction of the company and what it does. They recognize that Carlson's hotel divisions haven't grown in the way they have hoped," said Kirby Payne, president of HVS Hotel Management, referring to the Carlson family.

Neither Payne nor Winterbottom was shocked that the buyer was HNA Tourism Group, which is based in Beijing.

"The Chinese have been very aggressive," Winterbottom said.

In February, Carlson announced that the company had 120 new hotel signings last year, totaling nearly 20,000 rooms, marking a third consecutive year of signing increases. Carlson also saw the highest number of hotel openings for the Americas since 2009, the company said.

In 2015, the hotel company reported revenue of $7.3 billion, a 4.6 percent year-over-year increase. In comparison, Carlson Cos' business travel management arm Carlson Wagonlit Travel reported $24.2 billion in revenue.

Nicole Norfleet • 612-673-4495

Twitter: @nicolenorfleet