La Quinta Holdings Inc (NYSE:LQ) has gotten off to a rough start after Blackstone took it public with an IPO price of $17, falling below $16.5 before rebounding above its starting price (and falling again at the time of writing). Part of the volatility may have been caused by The Blackstone Group L.P. (NYSE:BX)’s decision to price the stock below the originally stated $18 – $20 range.

La Quinta Holdings

La Quinta benefiting from improving economy

The Blackstone Group L.P. (NYSE:BX) bought La Quinta Holdings Inc. (NYSE:LQ) for $3 billion in 2006 ($2.3 billion plus debt), and held on to the company through the financial crisis when many hotels saw their sales fall sharply, but falling unemployment and increased business travel is turning those numbers around.

“We sold more rooms than ever before in 2013,” says Jan Freitag, senior VP of lodging research firm STR Inc., report Hui-yong Yu and Leslie Picker for Bloomberg. “We’re seeing demand holding up pretty well. Unemployment is coming down slowly, personal income is going up and debt-service ratios for private consumers are at an all-time low.”

But even if La Quinta Holdings Inc (NYSE:LQ)’s prospects are on the rise, even the proposed $17 share price values the hotel chain at 47x last year’s earnings, which is only justified if domestic travel is about to rise sharply and La Quinta expects to take a lot of that traffic. Its competitors have an average PE multiple of 29, and it’s not obvious why La Quinta should have such a high premium relative to the rest of the sector.

La Quinta follows Blackstone’s success with Hilton

This is the third IPO that The Blackstone Group L.P. (NYSE:BX) has held in the hospitality sector in the last six months, after the private equity firm took Extended Stay America Inc. (NYSE:STAY) public in November last year and then held an IPO for Hilton Worldwide Holdings Inc (NYSE:HLT) in December. The Hilton IPO in particular was a boon for Blackstone investors, becoming the biggest hotel IPO in history and fueling higher than expected distributions for the fourth quarter.

Even though La Quinta Holdings Inc (NYSE:LQ) won’t be able to match those impressive results, The Blackstone Group L.P. (NYSE:BX) is probably still happy with the result. The IPO pulled in around $650 million, left Blackstone with a controlling stake in a growing company, and reportedly earned enough that Blackstone has already turned a strong profit on its original investment (including operating profits over the last few years).