In the competitive world of global hospitality, data and intelligence are often key to hoteliers maximizing the performance of their properties in a dynamic marketplace.


Commercial real estate information provider CoStar Group will acquire STR for $450 million in an all-cash deal. Formerly known as Smith Travel Research before a recent rebrand, STR is the premier global provider of data on hotel performance and market dynamics. The company is headquartered in Henderson, Tennessee, and employs 370 workers in 15 countries.

STR expects to post strong revenue of $64 million in 2019, with about $16 million in profit, according to a press release announcing the deal. CoStar expects 20 percent revenue growth per year in the next few years after the deal closes in late 2019. The multiple on the deal shows the value of information and data companies in the travel and real estate ecosystems.

STR helped pioneer data benchmarking in the hotel world over the years and the value of this deal shows the business opportunity present as global hospitality continues to grow into the next decade. The company’s STAR report subscription product represents about half of STR’s revenue with the rest coming from trend reports and other areas.

“We are very excited to become part of CoStar,” said Amanda Hite, STR’s president and CEO, in a release. “CoStar brings leading technologies, analytics, and sales capabilities that we believe will enable STR to accelerate growth and increase the value and insights we provide to our hospitality clients. This combination also represents an outstanding career opportunity for all of our employees around the world.”

CoStar is best known for providing data and insights in the commercial real estate world, owning the Apartments.com and a variety of product suites for brokers and property owners. It already provides basic information for the hotel sectors and the deal will help flesh out its offerings in the world of hospitality.

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“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, in a release. “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.”

Florance said the opportunity after integrating STR into CoStar could represent threefold growth — that’s up to $500 million in growth — on an investor call to discuss the deal. STR’s dominance in the sector, with the next closest competitor representing just 2 to 5 percent of the market for hospitality analytics, made this an attractive deal for CoStar.

There is also the reality that commercial real estate companies often buy STR products to figure out what to do with a particular property, but STR doesn’t offer complementary data and analytic products these clients can use to figure out performance across different types of properties like office buildings or retail outlets in a market.

STR’s domestic business in the U.S. represents about 70 percent of its overall business, with its international STR Global arm contributing the remaining 30 percent. Right now only 28 or 30 hotel chains are customers of CoStar’s commercial real estate products, but the opportunity will be there to sell to hotel developers and service providers with STR integrated into its platform.

“STR’s share for providing benchmarking analytics in hospitality is in the very high double digits of those people purchasing,” said Scott Wheeler, chief financial officer of CoStar Group. “They are well saturated in the U.S., the overwhelming majority of hotels in the U.S. contribute their operating data to STR. Outside the U.S., they have been very successful but one-fifth as penetrated as they are in the U.S.

“There’s revenue growth [for us] in launching new products as well as forecasting forward booking and operating numbers. One of the biggest opportunities is moving [STR’s] content into CoStar on an aggregated basis… so [customers] can see super-timely revenue and occupancy data; we see a lot of our customers buying that from STR and renewing in the high 90 digits.”

CoStar anticipates a small drag on its earnings from the acquisition over the next few years but predicts a 40 percent margin on STR’s business by 2023.

Source: Skift

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