- GeneralM&A
- August 17, 2021
- 4 minutes read
Deal: Hyatt Buys Resort Operator Apple Leisure For $2.7B
In a major deal in the hospitality industry, Hyatt, a hotel chain giant, has agreed to buy one of the…
In a major deal in the hospitality industry, Hyatt, a hotel chain giant, has agreed to buy one of the world’s biggest operators of resorts and spas. It’s buying Apple Leisure Group, a fellow American company specializing in luxury resorts at chic destinations.
- Hyatt will pay $2.7bn in cash to buy Apple Leisure from its current owners, private equity firms KKR and KSL Capital Partners. Both PE firms bought Apple Leisure from a fellow PE firm, Bain Capital, in 2017 for an undisclosed price. Now selling for $2.7bn, it seems they’ll be walking away with worthy gains.
- By buying Apple Leisure, Hyatt is greatly upping its game in the luxury resorts market. Apple Leisure operates many resorts, precisely about 100, in 10 countries with a portfolio covering 33,000 rooms. With it, Hyatt which also operates a high number of luxury resorts is increasing its strength in the market.
- Hyatt is a major hotel brand, owning both hotels of its own and franchising its name to others. But, it’s betting its future mostly on franchising whereby it’ll make the most money from management fees rather than properties of its own (80:20 ratio target by 2024), the same model Apple Leisure adheres to. They are in that vein called “asset-light” operators.
- To meet its 2024 target, Hyatt is largely selling its own hotel real estate and using the money to equip its franchising business. In that tone, it’s raising significant debt to finance its Apple Leisure takeover and then says it’ll use proceeds from hotel sales to pay down the debt.
- Hyatt will finance the acquisition with $1bn of cash at hand and $1.7bn in combined equity and debt financing, most of it debt. It shows that the company is keen on buying Apple Leisure to prop up its franchising business where it’s largely placed its future prospects.
- Hotel chains like Hyatt got battered by the Covid pandemic last year and now seem to be pinning their recovery prospects on luxury leisure travel as international travel restrictions have eased. Buying other existing resort operators seems like a good way to do that, the path Hyatt has taken.
