CoStar Group to acquire STR for USD 450 million

CoStar Group to acquire STR for USD 450 million

CoStar Group, a leading provider of commercial real estate information, analytics and online marketplaces, plans to acquire STR for USD 450 million in cash, subject to adjustments in the definitive agreements. The transaction is expected to close in Q4 of 2019, subject to customary closing conditions.

STR was founded in 1985 as Smith Travel Research to provide performance benchmarking and comparative analytics to hotels. Today, STR aggregates data from over 65,000 hotels worldwide, representing nearly nine million guest rooms in over 180 countries. 

“The STR team has built an extraordinary company that partners with the hotel industry to create benchmarks and analytics that are the primary tools hotel management and investors rely on to optimize and improve their assets,” said Andrew C. Florance, founder and CEO of CoStar Group. “STR brings an unrivaled reputation within the global hospitality industry for their data integrity, reliability and strict confidentiality, and we look forward to continuing to build on these core values in the next chapter of STR’s growth.”

The value of the STR benchmarks extends well beyond optimizing hotel operations. Valued at over USD 3 trillion globally, hotels are a massive commercial real estate asset class. In the way that CoStar’s acquisition of enabled CoStar to extend valuable new services to investors and service providers in multifamily real estate, we believe that STR will complement CoStar’s existing offerings and empower CoStar to provide valuable new services to investors and service providers in the hospitality industry. CoStar currently provides basic building information on 80,000 hotels, 45,000 hotel sale comparables, and 4,500 hotels offered for sale. Among many other things, STR’s information provides aggregated anonymized information on occupancy rates, average room rates, and revenue per available room. We believe that the combination of the two companies’ offerings will allow us to create valuable new and improved tools for investors, lenders, and service providers for use in developing, financing, valuing, and selling hotel properties.

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The potential growth area for CoStar include:

Creation of a powerful hotel data and analytics in CoStar Suite: Plan to integrate STR data with CoStar to create exciting new products that provide building data, income level and trend reports, sales comps, for sale information, etc. We believe this product will bring substantial benefits to customers, thereby enabling the sale of more CoStar subscriptions to investors, brokers, appraisers, lenders, and developers who can use the information to understand investments, assess potential new developments and support property purchase and sale decisions. There is a clear opportunity to utilize the CoStar sales force to reach thousands of additional potential clients.

Drive international penetration: STR is currently selling to over 15,000 hotel customers outside of the United States, representing a small fraction of the over 350,000 international hotels. The combined international presence of STR and CoStar will create opportunities for further penetration around the world.

Build and sell new products: STR primarily focuses on providing historical data around timely revenue and occupancy benchmarking. There is a growing demand from hotel clients for additional aggregated and anonymized bookings and revenue information, including robust forecasts. Both companies’ combined technology design and development capabilities are expected to accelerate these new product efforts, and bring them to market more broadly. In addition, CoStar plans to invest in and grow STR’s net operating income benchmarking and analytics products.

Expand benchmarking to other areas: STR has exceptional expertise in all aspects of benchmarking, which Costar plans to extend to other commercial real estate segments within CoStar. Combining STR’s capabilities with the significant CoStar data assets will allow for the creation of new benchmark products for commercial leases and multifamily operating metrics that would be extremely valuable to owners, brokers, lenders, tenants, and property managers.

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