Carlson Selling Hotel Group to Chinese Company HNA

The Carlson Hotel Group is one of the top-10 largest hospitality companies in the world, operating more than 1,400 hotels in more than 110 countries and territories. In addition to various Radisson brands, its portfolio includes Park Plaza Hotels and Country Inn and Suites.

But the company pointed to the “larger economics” of the industry in explaining the decision to sell to HNA Tourism Group, whose businesses span aviation, hospitality, finance and online services. HNA said in a prepared statement that it plans to “accelerate growth by investing substantially in the business.”

Company officials declined to provide terms of the deal. Bloomberg News, citing unnamed sources involved in the talks, reported it could be worth $2 billion.

Family-owned Carlson will retain its larger Carlson Wagonlit Travel business. In a note to employees Tuesday, the 10 shareholders representing second- and third-generation family members spoke of the difficulty of turning a page on a new chapter in the company history.

“We believe this is an excellent, if somewhat surprising, outcome for everyone involved,” the letter said. “It comes after a careful process to find an owner that can invest deeply in the hotels business and give it the platform it will need to thrive in a consolidating marketplace.”

The companies said combining Carlson’s hotel operations with HNA’s other hotel businesses would create a deeper presence in major gateway cities, while enabling HNA to enhance investments in digital technology. They said HNA would also be able to build up the Radisson Red and other new brands with the aim of modernizing the portfolio to attract a younger and more upscale traveler.

Carlson Hotels headquarters will remain in Minnetonka, a condition Carlson said was important to the sale. The family-owned hospitality business was founded almost 80 years ago and spawned a global enterprise that grew to become one of the world’s largest privately held companies.

HNA Tourism is part of HNA Group, a Fortune Global 500 company with operations on six continents. With more than $25 billion in revenue, it has the financial capital and the resources to fund hotel expansions and upgrades.

Though the Carlson family said there were multiple suitors, the family believed the breadth of HNA’s operations and its ties to Asia made it the best fit.

“They’re in the catering business, they’re in the airline baggage business, they’re in the airline business. Those are complementary industries for us,” Carlson Hospitality Group CEO David Berg said in an interview. Berg will remain as chief of the combined company.

“They have a significant presence in China. As hundreds of millions of Chinese tourists come to the Americas and Europe, we think there’s an opportunity that they can help in securing reservations for those folks, arranging flights on their airline, providing tours and staying in the Carlson-branded hotels.”

The hotel industry is undergoing a spate of mergers in addition to facing competition from the so-called sharing economy, where consumers turn to sites such as Airbnb or other peer-to-peer alternatives for overnight accommodations.

One of the more significant deals included Marriott International’s recent purchase of Starwood Hotels & Resorts Worldwide Inc. for more than $12.2 billion, creating the world’s largest hotel company.

Another Chinese investor, Anbang Insurance Group Co., had made a play for Starwood before walking away. Had Anbang bought Starwood, it would have been the biggest acquisition of a U.S. company by a Chinese buyer, according to Bloomberg.

Carlson operates seven brands of hotels across the Americas, Europe, Middle East, Africa, Asia and the Pacific. Its hotels range from middle market to upper mid-scale and luxury. But its biggest business is Carlson Wagonlit Travel (CWT), which generated revenue of $24.2 billion in 2015, compared with $7.3 billion from the hotels.

Industry analysts said Carlson Cos. has improved its brand positioning with the more upscale Radisson Blu but the company was struggling to keep up with hotel companies with deeper pockets and stronger loyalty programs.

Though the company didn’t make a public announcement, rumors were circulating in January that Carlson was exploring strategic alternatives for its hotel unit that could include a sale.

Diana Nelson, Carlson’s board chairwoman, said the company that her grandfather Curt Carlson founded in 1938 has aimed to “create opportunity for people and positive change in the world.”

“Hospitality is in our hearts, which made this a difficult decision,” Nelson said in a prepared statement. “We strongly believe that selling our hotel business to HNA Tourism Group, a company that fully recognizes its value and heritage, is the best way for us to position it for success and to be true to my grandfather’s legacy in the long term.” 

Carlson Hotel Group began telling employees of the sale at 4 p.m. Tuesday, with a conference call to supervisors and an e-mail to all employees from the family members. The acquisition, unanimously approved by the Carlson board of directors, is expected to close in the second half of this year.