Hyatt Hotels Corp. is doubling its resort portfolio and adding several all-inclusive resort brands in a $2.7 billion deal for Apple Leisure Group.

Hyatt has agreed to acquire developer and owner Apple Leisure Group from private-equity funds KKR and KSL Capital Partners, a deal that executives say accelerates the Chicago-based hotel brand company's asset-light strategy. The two private equity companies bought Apple Leisure in December 2016 from Bain Capital Private Equity.

At a news conference announcing the deal, Hyatt President and CEO Mark Hoplamazian said the acquisition will double Hyatt's portfolio of resorts, making the company a leader in the all-inclusive segment, increasing its brand and global footprint and adding approximately 110,000 loyalty members of Apple’s Unlimited Vacation Club. The acquisition is on track to close by the fourth quarter of 2021.

“This deal will significantly accelerate our asset-light transformation and our industry-leading net-rooms increase,” he said, adding other benefits including offering a platform with more luxury, a wider choice for a wider clientele base and enhanced benefits for owners.

In a news release accompanying the call, Hoplamazian added, “Importantly, the combination of this value-creating acquisition and the $2 billion increase in our asset sale commitment will transform our earnings profile, and we expect Hyatt to reach 80% fee-based earnings by the end of 2024.”

Apple Leisure operates more than 33,000 in 10 countries and has a pipeline of 24 hotels in Europe and the Americas. Apple Leisure CEO Alejandro Reynal will join Hyatt's executive leadership team following the close of the deal.

Apple Leisure is projected to have 102 resorts by the end of 2021. Its resort-brand division AMResorts manages several brands, including Breathless, Dreams, Secrets and Zoetry, which all sit within its AMR Collection portfolio. Hyatt itself has two all-inclusive resort brands: Hyatt Ziva and Hyatt Zilara.

“[Apple's] pipeline is a reflection of how they have been successful in moving their core brands forward," Hoplamazian said. "Fifty percent of their pipeline is in construction, and some of that other percentage is in enhanced stages. Its pipeline is all fully signed and financed. There has been very little or no attrition in the pipeline in the last year."

Hoplamazian said 80% of the deal would be funded by $1 billion of cash on hand and new debt financings and approximately $500 million from equity financing. He said Hyatt has a $1.7 billion financing commitment from J.P. Morgan, and cash proceeds from its asset-sale program will help pay down debt, which includes the Apple purchase.

Hoplamazian said Hyatt is on track to fulfill its strategy of selling $1.5 billion of its hotels in 2021, which would result “in a total of over $3 billion of proceeds realized since the asset-sale strategy was announced in 2017 at a combined multiple of over 17 times [earnings before interest, taxes, depreciation and amortization] as compared to [our] original estimate of 13 times to 15 times. Hyatt is further committing to an additional $2 billion in proceeds from the sale of hotel real estate by the end of 2024.”

He added that between $350 million and $500 million worth of sales should close within the next few weeks.

“We are confident we will reach [the sales’ goal] well before the commitment deadline, continuing what we usually do, under-promising and over-delivering, so stay tuned,” Hoplamazian said.

Joan Bottarini, Hyatt’s chief financial officer, said during deal negotiations Hyatt executives “got to know [Reynal] and his team very well."

“There are very few management teams who know luxury leisure resorts like they do,” she said, adding that the debt on the deal will be “paid down over the next two to three years. It is an investment-grade profile, and we control the balance sheet prudently.”

Following the close of the deal, Hyatt becomes the “largest operator of luxury hotels in Mexico and the Caribbean,” Hoplamazian said, and expands its European footprint by 60% and 11 new markets.

In December 2018, Apple Leisure bought a majority stake in Spain’s Alua Hotels & Resorts, a Balearic Islands-based firm with 12 hotels and approximately 4,000 rooms.

Hoplamazian said Apple Leisure's strategy aligned with what Hyatt was looking for in an acquisition partner.

“The mechanics of their business is very similar to ours. Hotels make up 70% [of Apple’s revenue], the vacation club, the rest, and some of Hyatt’s properties were already represented on its platforms,” he said.

He added Hyatt also bought into Apple Leisure’s vacation-package and destination-management businesses.

“In Southern Europe, there is only 2% branded-resorts penetration, while it is 5% in Mexico and Caribbean. We are confident we can capture the growth in front of us, especially in light of the increasing attractiveness in luxury resort leisure travel. In past [recessions], this segment has returned quicker than others,” he said.

Hoplamazian said that AMResorts' compound annual growth rate has increased annually by approximately 15% every year since 2015.

In terms of expansion, Hyatt will look to grow its resort segment in Europe — including Greece and Spain's Balearic and Canary Islands — as well as markets in the Middle East and Asia.

“We see significant value in bringing our brands together,” he said, adding that Apple, like Hyatt, owns little and has a robust pipeline.

“This will reposition us to be the high-end brand for leisure travelers, and it increases our leisure portfolio to more than 50% of our mix," he said. "It will help us return higher [average daily rates] than the industry and what we have already been delivering.

“Apple is on brand with Hyatt. AMR is performing in a similar vein to what we’re talking about in our own resorts. Apple’s vacation demand has passed 2019 levels in many cases."

Hoplamazian said Apple Leisure totaled 3.1 million guests in 2019.

“It has huge reach and will give us extra support in shoulder seasons. Apple also is looking far more at direct channels, just as we are, so we’re looking at this deal through the lens of the owner,” he said.

In recent years, Hyatt acquired resort-and-spa brand Miraval in January 2017 for $215 million and independent boutique hotel company Two Roads Hospitality in October 2018 for $480 million.

“With Miraval, we feel great about its trajectory, up and above our expectations. It is only now realizing its potential given the COVID-19 issue. Two Roads is on or better than planned earnings forecasts before COVID-19, and the growth on rooms for both also exceeded our expectations,” Hoplamazian said.

“We are on a runway stage that is above the expectation we had coming in, and [Two Roads] expanded its [revenue per available room] index at double-digit rates over the last three years,” he said.

He added that while with Miraval, Hyatt has kept management of its resorts focused and embedded in the overall Hyatt superstructure, Two Roads has been totally integrated into a new lifestyle division.

Apple Leisure, however, will remain a separate division from Hyatt, with Reynal reporting directly to Hoplamazian.

“It is so unusual to buy a platform with so much embedded growth, and wind at their backs,” Hoplamazian said. “Its fee base is very robust. In Europe, it acquired Alua, which has unique positioning in style, design, market position, and the firm has grown both organically and inorganically."

At press time, KSL said it had no comment on the transaction, while KKR had not as yet returned correspondence.