For the third time in four years, Hyatt Hotels Corp. is expanding its all-inclusive resorts portfolio through a major acquisition or deal. This time it's through a planned acquisition of Playa Hotels & Resorts for $2.6 billion.
Playa, a publicly traded owner and operator of 24 resorts across the Caribbean and Latin America, has been in exclusive negotiations with Hyatt since December. The deal, announced by both companies this morning, prices Playa at $13.50 a share, including the assumption of $900 million in debt. Playa's stock was trading at $12.94 at the close of markets Friday.
Hyatt officials have already announced plans to sell off Playa's owned real estate, setting a target of $2 billion in asset sales by the end of 2027. Executives believe that 80% of the Playa acquisition, which will be funded with new debt for Hyatt, will eventually be covered by proceeds from real estate sales.
Playa currently has eight resorts under the Hyatt Ziva and Zilara brands, and several others under Marriott International, Hilton and Wyndham Hotels & Resorts brands. As recently as Jan. 30, Playa announced the opening of the Marriott-branded Paraiso de la Bonita, a Luxury Collection Resort, Riviera Maya, Adult All-Inclusive in Mexico.
Playa owns 17 properties in its 24-resort, 8,627-room portfolio, with management agreements in place for the rest.
As part of the announcement, Hyatt officials said the acquisition of Playa will be "an opportunity to secure long-term management agreements for Hyatt’s luxury all-inclusive Hyatt Ziva and Hyatt Zilara branded properties," indicating that non-Hyatt branded resorts in the Playa portfolio are likely to be converted to Hyatt brands. Playa currently owns seven properties and manages five more with branding from companies other than Hyatt. The balance of Playa's portfolio is independent.
For several years now, Hyatt has been both selling off owned real estate — selling more than $3.6 billion in owned hotels since 2019 — and using cash proceeds to grow through brand and management platform acquisitions, including a pair of previous deals in the all-inclusive segment.
Hyatt purchased Apple Leisure Group for $2.7 billion in 2021. In October, Hyatt struck a 50/50 joint venture with Grupo Piñero to bring the Bahia Principe brand's properties — and the Cayo Levantado resort in the Dominican Republic — into Hyatt's Inclusive Collection, adding in total 23 properties with 12,000 rooms across the Dominican Republic, Mexico, Jamaica and Spain.
Hyatt officials expect to add the Playa portfolio to their own distribution channels, including ALG Vacations and Unlimited Vacation Club.
The deal is still pending shareholder and regulatory approval and includes a $56.3 million breakup fee if Playa walks away before closing. Hyatt currently owns 9.4% of Playa's outstanding shares.
In a note to investors on the deal, Michael Bellisario, senior hotel research analyst and director at Baird, said the deal raises several questions for Hyatt.
"Why pay $2.6 billion to buy real estate — when the asset-lighter narrative has been such a tailwind for the valuation multiple — and to grow net units by only 1.6%?" Bellisario wrote. "What are proceeds from and [earnings before interest, taxes, depreciation and amortization] multiples for the planned asset sales? What is the net effective multiple of the transaction? What happens to the competitor-branded resorts ... ? Can Hyatt terminate and rebrand these? At what cost?"
Hyatt executives said they remain committed to an asset-light model with plans to "identify third-party buyers for Playa's owned properties."
“Hyatt has firmly established itself as a leader in the all-inclusive space, a journey that began in 2013 through an investment in Playa Hotels & Resorts that launched the Hyatt Ziva and Hyatt Zilara brands,” Mark Hoplamazian, president and CEO of Hyatt, said in a statement. “We have respected and benefited from Playa’s operating expertise and outstanding guest experience delivery for years through their ownership and management of eight of our Hyatt Ziva and Hyatt Zilara hotels. This pending transaction allows us to broaden our portfolio while providing more value to all of our stakeholders through an expanded management platform for all-inclusive resorts.”
Playa Chairman and CEO Bruce Wardinski said the deal is the culmination of a long-term review process for his company.
"Following a deliberate and comprehensive review of opportunities, the Playa Board concluded that the proposed transaction with Hyatt is in the best interest of the company," he said in a statement. "As a result of our robust process and engagement with a number of potential counterparties, we are confident that this transaction maximizes shareholder value. The transaction will deliver to Playa shareholders a 40% premium to the company's unaffected stock price prior to the disclosure of exclusive discussions with Hyatt."