While the weekend remained relatively quiet, one of the largest hotel chains in America announced it was making a major acquisition. Hyatt Hotels (NYSE: H) announced on Sunday that it is planning to pay almost $2.7 billion to buy out a smaller resort company and hotel chain known as Apple Leisure Group. Despite the name, the private resort company has no relations to Apple but is owned by two different parent companies, KKR (NYSE: KRR), as well as a travel/leisure-focused private equity firm, KSL Capital Partners.
Although the details remain scarce at the moment, Hyatt’s announcement marks one of the largest acquisitions in the hotel and hospitality space in 2021. What’s more interesting, however, is the timing of this acquisition. Many analysts are worrying over the growing number of Delta cases around the world, with many wondering if travel and tourism will once again be curtailed. Although plenty of hotel chains are trying to grow their cash savings ahead of this possible Delta spike, Hyatt is currently one of the better-financed hotel chains out there right now.
The deal was officially announced on Sunday following a Wall Street Journal report. All companies involved in the transaction remain optimistic about the future of vacation travel in the coming months. For Hyatt, the deal will strengthen its already growing resort-management portfolio. It’s also part of Hyatt’s new strategy of moving towards an asset-light business model rather than relying on its hotels for revenue.
Apple Leisure was founded back in 1969, managing a number of vacation spas in and around the Caribbean, selling vacation packages and other offers to travels. Apple Leisure was bought by KKR and KSL Capital back in 2017 from Bain Capital. Since then, it has gone on to gobble up a number of other travel-related companies. KKR currently manages over $429 billion in private equity and assets. In contrast, KSL Capital is strictly a vacation-focused private equity firm with a portfolio of assets valued at around $15 billion.
While Delta cases are a cause for concern, a positive factor for the travel industry is the faster-than-expected growth rate from the American economy. Annualized GDP growth for Q2 came in at around 6.5%, faster than expected. Jobless claims are also falling, with the most recent week’s report showing just 375,000 new jobless claims being filed.
Shares of Hyatt aren’t really moving much in response to the news. At the moment, the stock is inching down 0.5% in pre-market trading, although this drop could increase further once traders in the U.S. wake up. For the most part, the company making the acquisition tends to see a drop in its share price.
Hyatt Company Profile
Hyatt is an operator of 982 owned (7% of total rooms) and managed and franchise (93%) properties across 16 upscale luxury brands, which includes two vacation brands (Hyatt Ziva and Hyatt Zilara), the recently launched full-service lifestyle brand Hyatt Centric, the soft lifestyle brand Unbound, and the wellness brand Miraval. Hyatt acquired Two Roads in November 2018. The regional breakdown as a percentage of total rooms is 67% Americas, 20% Asia-Pacific, and 13% rest of world. – Warrior Trading News