Hyatt Hotels Corp. and Playa Hotels & Resorts have each confirmed negotiations to discuss the future of Playa's brands and properties in Mexico and the Caribbean.
Per the agreement, Playa has agreed to negotiate exclusively with Hyatt on "strategic alternatives," which could lead to the acquisition of Playa by Hyatt.
"Playa has been a valuable partner for many years, is one of the world’s strongest operators of all-inclusive resorts, and owns a premier portfolio of high-quality, high-end, all-inclusive resorts in iconic locations and key markets across the Caribbean and Mexico. Strategic alternatives under consideration could have compelling strategic merit to add new incremental durable fee streams for Hyatt," Mark Hoplamazian, president and CEO at Hyatt, said in a company news release.
According to the release, "there can be no assurances that any transaction will result from Hyatt's exclusive discussions with Playa, or on what terms."
The two companies have been linked for more than a decade. Hyatt initially entered a partnership with Playa in 2013. Hyatt invested a total of $325 million into the owner, operator and developer, gaining an ownership stake of 20% in the process. Hyatt currently owns 9.99% of Playa's outstanding shares, according to the company.
Playa currently owns and manages several Hyatt resorts across Mexico, the Dominican Republic and Jamaica under the Hyatt Zilara and Hyatt Ziva flags.
This strategic partnership furthers Hyatt's commitment to the all-inclusive resort segment. In 2021, Hyatt acquired developer and owner Apple Leisure Group for $2.7 billion in a deal that doubled its portfolio of resorts.
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.
All of the major global hotel brands have been vying to expand their presence in the all-inclusive space. The current trend has been to prioritize the quality of these properties and guests over the room count, HNN's Stephanie Ricca reported from the Caribbean Hotel Investment Conference and Operations Summit in November.
Playa currently owns and operates 12 resorts with Hilton, Wyndham, IHG or Marriott flags. It owns and/or manages a total portfolio of 24 resorts with 9,027 rooms. The company owns roughly two-thirds of its portfolio and manages the rest.
“Hyatt’s interest in our company is a testament to the strength of our business and the dedication of our incredible Playa team. The Playa Board and management team will remain open-minded and continue to act in the best interests of all Playa shareholders," Bruce Wardinski, chairman and CEO at Playa, said in a news release.
C. Patrick Scholes, managing director of lodging and leisure equity research at Truist Securities, said Playa potentially up for sale sold isn't a surprise, but Hyatt becoming the front-runner to buy it is.
"We had always thought that a private buyer such as a high-net-worth family would be the most likely buyer as opposed to Hyatt, which has become much more of an asset-light company over the past several years by selling hotels as opposed to buying them," Scholes said in an email report. "While hardly a 'done deal,' we see a greater likelihood than not that this transaction will be completed."
Michael Bellisario, senior hotel research analyst and director at Baird, said in an investment note that a deal between the two companies wouldn't be straightforward.
"Too much of Playa's value is real estate ownership (i.e., not consistent with Hyatt strategy), and competitor brands would not approve Hyatt as an owner or operator," he said.
A more likely outcome would be Hyatt finding a partner to acquire Playa's independent and Hyatt-branded resorts before entering new long-term agreement on the franchise and management side, Bellisario said.
"We believe an 'asset-lighter' transaction from Hyatt's perspective could be a relative positive/win; an 'asset heavy' transaction with disposition and execution risks would not be a favorable near-term outcome, in our opinion," he said.
Hoplamazian said in Hyatt's news release that the company remains "steadfastly committed to our asset-light business model and if this process continues, we will continue to map out a clear path for an asset-light outcome for any strategic alternatives we undertake.”
According to Playa, the exclusivity agreement will remain in place until a definitive agreement is struck, or 11:59 ET on Feb. 3, 2025, whichever comes first.