Hyatt Spends $2.7 Billion To Become World’s Largest Operator Of Luxury All-Inclusive Resorts
Do you love your luxury all-inclusive resort getaways? You may be surprised to learn Hyatt Hotels Corporation has just made an acquisition that now marks it as the world’s largest operator of these destination resorts. As more people are looking for exclusive, luxury experiences, Hyatt will soon offer more locations and high-end destinations than ever before. Read more about it here:
Today Hyatt Hotels Corporation announced that it is buying luxury resorts operator Apple Leisure Group (ALG) for $2.7 billion in cash. The acquisition comprises 33,000 hotel rooms in 10 countries, making Hyatt the world’s largest operator of luxury all-inclusive resorts based on room count and the largest operator of luxury hotels in Mexico and the Caribbean.
Apple Leisure Group’s portfolio has exploded from nine resorts in 2007 to approximately 100 properties by the end of 2021, and there is an additional pipeline of 24 executed deals with a large number of additional hotels in development. With this deal, more than 110,000 members of ALG’s Unlimited Vacation Club will be brought into the Hyatt fold.
ALG’s AMResorts is the largest portfolio of luxury all-inclusive resorts in the Americas, with well-known high-end brands Secrets Resorts & Spa, Dreams Resorts & Spas, Breathless Resorts & Spas and Zoëtry Wellness & Spa Resorts, as well as Alua Hotels & Resorts, which is expanding quickly in Europe.
The deal will quintuple the number of Hyatt-owned resort properties in Mexico from nine to 46, and greatly expand the company’s footprint in the Caribbean from five properties to 27. In addition, the acquisition will also bring Hyatt’s brand into 11 new European markets. In particular, Hyatt will gain 40 properties in Spain and three in Greece.
“We’re very bullish on leisure travel. It’s proven its resiliency and durability,” said Mark Hoplamazian, president and CEO of Hyatt, on an investor call this morning. “Leisure travel has recovered more quickly than business travel. We’re excited about luxury in particular because we expect the global luxury travel market to grow at about 11% from 2021 to 2027.”
The AMR Collection checks that box, specializing in “unlimited luxury” all-inclusive experiences like gourmet a la carte dining and many amenities and perks usually not associated with all-inclusive resorts. The prices are high-end, too; at Zoetry boutique properties, the average daily rate (ADR) is $400 a night. At adults-only Secrets Resorts and family-friendly Dreams Resorts, rooms average $300 and $225 a night, respectively.
The acquisition of ALG fits well into Hyatt’s long-term strategy of flipping its business model to favor fee-based earnings. “ALG is fundamentally an asset-light business with no hotel ownership, aligning perfectly with our strategic goals,” said Hoplamazian. In 2009, 63% of Hyatt’s earnings came from owned and leased properties, with fee-based earnings making up the remaining 37%. By 2019, the split had shifted to 57% fee-based earnings. “We expect Hyatt to reach 80% fee-based earnings by the end of 2024,” said Hoplamazian.
Hyatt expects to fund more than 80% of the purchase with a combination of $1 billion of cash on hand and new debt financings, and the remainder with approximately $500 million from equity financing, according to a statement. The hotel company has secured a $1.7 billion financing commitment from J.P. Morgan. Cash proceeds from the $2 billion asset sale program are expected to be used to pay down debt, including debt incurred to fund the acquisition. Hyatt expects to sell $3.5 billion of hotel real estate over the next three years, including $1.5 billion worth of properties this year.
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