MSPeconomist

The Hyatt on Bali--I think it's Grand but it might be Regency--has/had a pool that's only for club level guests, although I'm not sure how much this has been enforced.

FlyerTalker324193

Sure, they are not just paying for the resorts. This goes back to my earlier point that the acquisition makes Hyatt closer to a travel conglomerate. It remains to be seen if they will be able to compete as such.

Point taken. And I have to admit I'm not really clued up on transfer pricing and similar techniques. Although I believe recent supranational agreements should somehow make these practices less profitable.

khabah

This.

I woke up today to a friend texting me about this acquisition and how he didn't see it coming, and I dismissed my initial "meh"-ness to my haze of awakening. After spending the day listening to the webcast and reading into some of the details - i.e. the footprint, plans and such - I still can't help but feel like this is all so lackluster in the aggregate. I'll share some thoughts below:

The good:

• From one perspective, Hyatt owning the travel platforms being brought onboard with this acquisition gives them an advantage of promoting their family of hotels above anyone else's, and they'd still collect revenue from people utilizing those platforms regardless of where guests book. Sounds good financially.
• By absorbing the planned ALG pipeline - 60 percent of the 24 confirmed properties are presently under construction, and 40 more are under negotiation - Hyatt can utilize this opportunity to negotiate with owners and grow some of their core brands. For example, design-wise, this new Dreams property in Punta de Mita could easily be an Andaz. I could see Hyatt rebranding some of the existing hotels as well as bringing some of the upcoming ones into some of the portfolios we're familiar with.

The not-so-good:

• I don't like the idea of Hyatt acquiring another company and running it separately. They've already got 19 confirmed brands, most of which have less than 50 hotels in their portfolios, and adding a new set only stretches them out further. I would MUCH rather have seen them find ways to expand what they've got.
• Most of the ALG portfolio is in the Caribbean and North America region, where Hyatt already has the bulk of its footprint. Their "landmark expansion" in Europe is literally giving them a bunch of hotels in Spain and three in Greece - unremarkable. I know Spain is an incredibly popular destination, but the focus is too singular on a particular destination rather than on a varied portfolio. Hyatt speaks of excellent expansion opportunities for the ALG brands in new destinations across Europe, the Middle East and Asia but again, these are longer-term prospects rather than immediate gains.
• None of these hotels look aspirational, and the all-inclusive thing doesn't do it for me. I have yet to stay at an all-inclusive; historically and as someone in their early 30s, they haven't appealed to me as I visualize factory settings populated by hordes of screaming children everywhere and at all hours [nightmares], loud parents exhausted to the point of insanity and not giving any f__ks, super-drunk adults, lackluster food, boom-boom music everywhere and disenchanted staff who have to deal with the fustercluck detailed above. Maybe it's better than I imagine, I'll give you that... but for the time being, none of these hotels are properties I'd seek out or necessarily be happy to have as options.
• Hyatt is paying HUGE money for this, and I don't feel like it's all that great considering what they're paying for what is ultimately 100 properties and some downmarket tour platforms... but I'm not a finance or investment guy.

I suppose I was hoping for an acquisition of something more exciting, upmarket and relevant to the existing Hyatt portfolio like Meliá or Malmaison, and instead got an overloaded beach bag full of sand and sticky plastic. Meh.

khabah

MSPeconomist

This group of about a hundred resorts would have room counts higher than the average in Hyatt's current portfolio. It's hard to evaluate the price since Apple Vacations and other stuff is part of the deal, but it doesn't look like a good business decision to me. It's not much diversification and I don't see big synergies beyond the hope of acquiring some customers who will stay in other Hyatt hotels, assuming that their employers in Europe will permit them to pick Hyatts, that business travel will resume, and that these people do significant business travel.

However I'm confused in that it seems like Hyatt is buying the actual resorts (real estate) as part of the deal and this seems to be different from Hyatt's current strategy of emphasizing franchises.

I wonder what property rights the folks who have bought into their loyalty program will have and for how long.

lowfareair

The investor deck put out earlier today shows even the absolute lowest-end brand of the group has an ADR of $125. Slide 7. Do you have a source on your overall $120 number other than a wild and biased guess?

Edit: I didn't vet these numbers, but it looks like the median ADR I'm seeing here of about $225 is a higher ADR than the Hyatt full-service line in any region. Source

skj

Hyatt simply licenses the name to HRC. HRC is owned by a company called Marriott Vacations Worldwide (which was spun off by the hotel chain company called Marriott about a decade ago)

FlyerTalker324193

Great analysis, I agree with most of your points.

On this particular one, I am with you on a personal level. All-inclusive isn't appealing to me, either. However, it should be acknowleged that Hyatt was one among several players that managed to grow all-inclusive beyond its traditional niche going back to Club Med and what not. For instance, they actually pull it off to attract young people that book luxury all-inclusive resorts for things like a honeymoon. Of course, it seems the 100 properties in question aren't quite what you would call luxury..

coleslaw

I didn't get the impression that they were buying much real estate as part of this deal. They've specifically been referring to it as "asset light" (in line with their broader strategy - and plans to divest some of Hyatt's existing assets). Did you see any details on what real estate is included?

notquiteaff

And “Hyatt Residences” is actually something else

https://www.hyatt.com/info/hyatt-residences

(I remember when that was announced/discussed here… and then promptly forgot)

FlyerTalker324193

Oops, I take that back. Not a guess, but I think I looked at numbers during a peak covid quarter. Obv, not the way to go. You're right we better stick to the number from the Hyatt presentation which are considerably higher.

MSPeconomist

I'd expect all inclusive properties to have higher ADRs for the same location and qualify level.

MSPeconomist

You may be right. I was trying to explain/justify the price tag and it seemed to me that including real estate would be the only way that would make sense.

christianj

If you are just looking at the 100 hotels and resorts it might not be a good investment in comparison to their current market value and number of hotels but I assume Hyatt thinks the tour business and bookings is worth something or they wouldn't be paying this price for them. There's clearly some money to be made on the bookings side which you seem to want to not acknowledge since you are focusing on just the properties. And just because you think they are hotels for the un-adventurous traveler (which I don't necessarily disagree with you on) doesn't mean they can't be profitable.

itsallgood

If the properties that I stay at start to downgrade elite benefits, I'll stop patronizing them. This type of hodgepodge diversification almost always causes loss of focus for companies.
It starts with little thing like less generous credits for breakfast when the lounge is closed (Hyatt's already checking that box at a couple of my recent stays)
to the smoked salmon disappearing from the lounge breakfast spread
to lower quality/cost foods in the lounge
to an all starch breakfast spread in the lounge.
And there are other small reductions in cost that hotels make to increase margins.

I'm not willing to pay a Hyatt premium for a Hilton/Marriott/IHG experience. Unfortunately, Fairmont's been taken over by Accor and diminished that brand so I'll have to start looking for another escape option. Same with Kimpton and IHG. All of these buyouts are trashing upper middle tier hotel brands.

coleslaw

I would be surprised if there was any significant property included in the purchase. I haven't seen any announcement that refers to physical property being included, everything's been focused on the management/platform side of things.