UAL to Sell Its Westin Hotels to Partnerships
UAL Inc., the parent company of United Airlines, said Friday that it plans to spin off the hotels owned by its Westin Hotels subsidiary into a series of partnership trusts. A spokesman for the Chicago-based company declined to say how much UAL expects to realize from the deals, which will take place over an unspecified period.
Under the plan, UAL, together with Merrill Lynch Capital Markets, will form several partnership trusts to which the hotels will be sold. UAL said it will transfer “two or more” hotels to the first of such trusts for between $300 million and $500 million in cash. The hotels were not identified.
There are 54 hotels in the Westin chain, about half of them abroad. Of the 54, UAL owns all or part of 24. For instance, the Bonaventure and Century Plaza hotels in Los Angeles and the Westin South Coast Plaza in Costa Mesa are operated by the chain, but the St. Francis in San Francisco is owned by Westin.
Equity in 24 Hotels
However, the UAL spokesman declined to specify which hotels UAL has an ownership stake in and which are simply operated by the chain.
The UAL statement said that subsequent partnerships will also contain two or more hotels each and will be in the same $300-million to $500-million range.
UAL said it will use the proceeds for “general corporate purposes in furtherance of its long-term strategic objectives.” It said the plan was not prompted by the 2-week-old strike of United Airlines pilots, which is costing the airline an estimated $5 million a day.
Robert Joedicke, airline analyst for Shearson Lehman Bros., said the plan made great sense for UAL.
“It is a realistic adjustment to convert a number of assets into cash,” he said. “The cash can then be used as working capital.”
Aid Pan Am Route Purchase
Joedicke noted that it will enable United Airlines to buy the Pacific division of Pan American World Airways for $750 million “without having to borrow or pay interest.”
Joseph G. Kordsmeier, who operates a lodging and travel industry consulting firm in Monterey, said the Westin subsidiary has been stagnant, and turning the hotel assets into cash would probably enable Westin to expand and improve its operations.
“Anybody could see the Westin chain has been stagnant,” Kordsmeier said. “It has not added too many hotels in the last five years and is not increasing its market share. Their (clientele) was in an aging group that was traveling less.”
The UAL statement said a prospectus for the partnerships will be ready in about 45 days and will contain more details, including the names of the first hotels to be sold and how long it will take to dispose of all of the hotels. Westin would continue to operate all of the hotels, it said.
HOW UAL’S WESTIN HOTELS UNIT HAS PERFORMED There are 54 hotels in the Westin chain. UAL owns all or part of 24, with the remainder managed by the company’s Westin unit. The hotels unit accounted for about 8% of UAL’s operating revenues and 10.8% of its operating profits in 1984. In thousands
1984 1983 1982 1981 1980 Revenue $556,504 $485,284 $462,086 $454,378 $425,921 Operating 69,398 52,239 58,631 74,634 72,591 Earnings Assets 818,311 776,195 703,798 620,625 554,153 Hotel 73.05% 72.7% 72.4% 77.0% 80.4% occupancy rate Average 12,000 11,000 12,000 14,000 14,000 number of employees