Motel 168: Hot Property in Budget Chains

Talk is heating up that a sale could be near for Motel 168, as Morgan Stanley (NYSE: MS) looks to exit an investment that should bring it handsome returns in China’s booming budget hotel sector. (English story; Chinese story) My former colleagues at Reuters first broke this story last week, saying France’s Accor (Paris: ACCP) and homegrown players Home Inn (Nasdaq: HMIN) and Jinjiang International were among those sniffing out the property in a deal that could fetch up to $1 billion. I have no doubt the $1 billion figure is wishful thinking on Morgan Stanley’s part, given that sector leader Home Inn’s own market cap is less than $1.5 billion, and another top player, 7 Days Group (NYSE: SVN), has a market cap of just about $1 billion. Still, this could be an interesting play, helping Home Inn to cement its place as sector leader if it doesn’t overpay. Accor could also be an interesting buyer, though other foreign firms have previously balked at a Chinese business model that sees chains seek out existing non-hotel buildings and then quickly jump in and convert them to low-cost hotel use. Oh, and one final disclosure: I do own some shares in Home Inn, which I purchased a few years back on belief that the budget hotel sector is poised for rapid growth in China.