Hyatt to Acquire ALG; Additional Properties will Double Hyatt’s Portfolio of Resorts

(19 Aug 2021)
Hyatt has entered into a definitive agreement to
acquire Apple Leisure Group (ALG), a luxury
resort-management services, travel and hospitality group, from
affiliates of each of KKR and KSL Capital Partners, LLC for $2.7
billion in cash.

The transaction is anticipated to close in Q4 2021, subject to customary closing conditions.

ALG’s resort brand management platform, AMResorts,
provides management services to the largest portfolio of luxury
all-inclusive resorts in the Americas under the AMR Collection
brand portfolio, including Secrets Resorts &
Spa, Dreams Resorts & Spas, Breathless Resorts & Spas and Zoëtry
Wellness & Spa Resorts as well as the fast-growing Alua Hotels &
Resorts brand, which is expanding in European leisure
destinations.

The acquisition also includes ALG’s membership
offering, Unlimited Vacation Club, travel distribution business
ALG Vacations, as well as destination management services and
travel technology assets.


Following the completion of the
transaction, ALG’s business will continue to be led by current ALG
CEO Alejandro Reynal and the current ALG leadership team. Mr.
Reynal will become a member of Hyatt’s executive leadership team
and report to Hyatt CEO Mark Hoplamazian.

“With the asset-light acquisition of Apple Leisure
Group, we are thrilled to bring a highly desirable independent
resort management platform into the Hyatt family,” said Mark
Hoplamazian, president and chief executive officer, Hyatt. “The
addition of ALG’s properties will immediately double Hyatt’s
global resorts footprint. ALG’s portfolio of luxury brands,
leadership in the all-inclusive segment and large pipeline of new
resorts will extend our reach in existing and new markets,
including in Europe, and further accelerate our industry-leading
net rooms growth. 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.”

ALG’s hotel portfolio consists of over 33,000
rooms operating in 10 countries. The portfolio has grown from nine
resorts in 2007 to approximately 100 properties by the end of 2021
and has a pipeline of 24 executed deals with a large number of
additional hotels in the development process.

ALG’s Unlimited
Vacation Club is an exclusive travel club whose participants
enjoy preferred rates and other benefits at AMR Collection
properties. With over 110,000 members, Unlimited Vacation Club
membership has grown at a compounded annual growth rate of 18%
over the last five years.

“Combining Hyatt’s deep expertise and global brand
footprint with ALG’s strong resort brands, operating capabilities
and robust development plans will elevate our differentiated
position and create a leader in luxury leisure travel,” said
Alejandro Reynal, chief executive officer, Apple Leisure Group.
“On behalf of everyone at ALG, I am grateful to our partners at
KKR and KSL who supported us in building the platform into what it
is today. I am excited to have our team join the Hyatt family and
I anticipate a robust growth journey ahead as the industry expands
and we are able to provide a best-in-class leisure offering to an
even larger group of travelers around the world.”

The acquisition will expand Hyatt’s presence in luxury leisure
travel and immediately add approximately 100 hotels and a pipeline
of 24 executed deals in Europe and the Americas to its portfolio.
Following completion of the transaction, Hyatt will offer one of the
largest portfolios of luxury all-inclusive resorts in the world,
will double its global resort footprint, will be the largest
operator of luxury hotels in Mexico and the Caribbean, and will
expand its European footprint by 60 percent. The acquisition will
extend Hyatt’s brand footprint into 11 new European markets,
greatly enhancing Hyatt’s growth potential in Europe, a critical
region for global growth in leisure travel.

ALG’s strong
developer and owner base will expand Hyatt’s relationships in key complementary geographies.
Hyatt
plans to apply the combined strength of the teams to expand beyond
ALG’s current pipeline in new geographies in which ALG does not
currently have hotels.

The acquisition
of ALG’s asset-light business will meaningfully increase the
percentage of revenues and earnings Hyatt will generate from fees.
Additionally, Hyatt anticipates fulfilling its current commitment
to sell $1.5 billion of hotel real estate in 2021, resulting 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 17x
EBITDA as compared to Hyatt’s original estimate of 13x to 15x.
Hyatt is further committing to an additional $2 billion in
proceeds from the sale of hotel real estate by the end of 2024.

At closing, Hyatt expects to fund more than 80
percent of the purchase with a combination of $1.0 billion of cash
on hand and new debt financings, and the remainder with
approximately $500 million from equity financing. Hyatt 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.

See also:

How’s Business in Koh Samui? Interview with
Adrian Pulido, GM of Hyatt Regency
.

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