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UPDATE 1-Hotel chain La Quinta makes subdued debut in crowded IPO market

* Shares open at $16.75, below IPO price of $17

* Blackstone-backed company valued at about $2 bln

* IPO raises $650 mln

(Adds details, analyst comment)

April 9 (Reuters) - Shares of Blackstone-backed hotel chain La Quinta Holdings Inc made a subdued market debut as investors took the view that the stock was fully priced in a crowded IPO market.

La Quinta's shares, which priced below the expected range at $17, fell as much as 4 percent in early trading before recovering their losses to trade slightly up.

At $17, the company is valued at just over $2 billion.

More than a dozen companies, including auto lender Ally Financial Inc, are expected to price share offerings this week, making it the busiest week for IPOs since 2006.

"(La Quinta's) offer price is reflecting a very high price-earnings ratio for a company in a very competitive industry," said Jay Ritter, an IPO expert at the University of Florida.

Based on the offer price, the company has a trailing price-to-earnings (P/E) ratio of more than 46, almost double the industry average of 24 percent.

La Quinta - which operates or franchises more than 830 hotels in 46 U.S. states, Canada and Mexico - was bought by Blackstone Group LP in 2006 for $2.3 billion plus debt.

The hotel chain had about $2.10 billion in debt on a pro- forma basis as of Dec. 31.

Blackstone, which did not sell any shares in the offering, will hold a stake of about 64 percent in La Quinta after the IPO if the underwriters fully exercise their option to buy additional shares.

JPMorgan and Morgan Stanley were lead underwriters for the offering.

The IPO marks the third hotel chain offering in the past six months by the private equity firm, which is the biggest owner of hotels in the United States.

Blackstone took Hilton Worldwide Holdings Inc public in December in the biggest-ever hotel IPO that raised $2.34 billion. In November, the IPO of Extended Stay America Inc raised $566 million.

Shares of both Hilton and Extended Stay, which is co-owned with Centerbridge Partners LP and Paulson & Co, have risen since their IPOs.

La Quinta, which owns and operates hotels under the La Quinta Inn & Suites and La Quinta Inns brands, raised $650 million from the offering of 38.25 million shares.

The company's revenue rose 11 percent to $909 million on a pro-forma basis in 2013. Net income was $44.9 million, compared with a loss of $35.8 million a year earlier.

La Quinta, founded in 1968 by real estate entrepreneur Sam Barshop and his brother Phil, has more than doubled the number of its hotels since Blackstone took the company private.

U.S. business travel grew more than expected in 2013 and spending will likely rise by almost 7 percent to about $290 billion in 2014, according to the Global Business Travel Association, a trade group for business travel managers. (http://r.reuters.com/rem86v)

IPO activity during the first quarter totaled $47.2 billion, an increase of 98 percent from last year at this time and the strongest annual start for global IPOs since 2010.

About 75 percent of U.S. IPOs in the first quarter were from companies backed by private equity firms, according to a report by auditing firm PricewaterhouseCoopers.

(Reporting By Neha Dimri in Bangalore; Editing by Saumyadeb Chakrabarty)