Hyatt to Add Hotels in Markets That Feed Its All-Inclusive Resorts

Hyatt just lapped the one-year anniversary of acquiring the all-inclusive resort company Apple Leisure Group in a $2.7 billion deal. The Chicago, Illinois-based hotel group is now looking to expand its hotel presence in European cities that could help feed its all-inclusives, according to comments executives made as they reported its earnings.

Hyatt announced last month that it had cut a deal with Lindner Hotels, a German family-owned developer, to bring into its portfolio 30 of the Lindner hotels and resorts across 15 cities in Germany and in Central and Eastern Europe. They’ll add most of them to the JdV by Hyatt brand, and most of the 5,500 rooms will join Hyatt by year-end.

On Thursday, Hyatt’s executives said the move was significant in that it would help boost the cross-selling of its all-inclusives in Greece, Spain, and Bulgaria. The idea is that while guests stay at those hotels and through post-trip emails, Hyatt would have the opportunity to pitch their all-inclusive properties to them as a great spot for their next vacations.

“It’s a very important network move because Germany is the number-one feeder market for the Balearic Islands and the number-two feeder market for the Canary Islands, where we have significant all-inclusive resort presence,” said president and CEO Mark Hoplamazian.

As context, TUI Group and other European tour operators have largely had a lock on the giant all-inclusive market in Europe. So Hyatt thinks its land grab will help it start stealing share. If guests join its loyalty program, the company can then do more marketing, helping to promote future bookings at its all-inclusive resorts as well as its traditional hotels.

“So there’s an intentionality to what we’re trying to do,” Hoplamazian said. “It’s not just a representation play for Germany and for Europe. It’s also to extend and bring millions of additional customers into the world of Hyatt and expose them to now our much bigger resort portfolio in Europe.”

Hyatt plans to seek similar deals to the Lindner one.

“Some of the people at ALG [Apple Leisure Group] who have decades-long relationships with families in Europe that have portfolios,” Hoplamazian said. “So we feel very, very well positioned to both understand exactly what’s going on in the marketplace… and we have a unique position from which to seek these kinds of transactions out.”

Robust Quarter

In the third quarter, the company produced $28 million in profit on $1.5 billion in revenue. It generated $252 million in adjusted earnings before interest, taxes, depreciation, and amortization — a different measure of profit.

In the quarter, the hotel group reported that its revenue per available room, a key industry metric, topped pre-pandemic levels at last. The figure rose to rose to $133 worldwide. In September, global revenue per available room was 3 percent above 2019 levels.

The segment of individual business travelers grew in September, though levels remained at least 20 percent below pre-pandemic highs.

Upbeat on 2023

Hyatt recently opened its 1,200th property and said its pipeline looked strong. It plans to open about 10,000 rooms, including the Lindner ones, in the fourth quarter. In the U.S., there’s been a lull in select-service properties opening because of the market gyrations affecting financing. In China, construction has been disrupted by pandemic restrictions.

Yet executives believed the company’s expected 6.5 percent annualized growth in net rooms in its network this year may be sustainable through 2023.

“We’ve got other portfolio deals on which we’re working, which give us great confidence that we’re going to sustain this net rooms growth into next year,” Hoplamazian said.

Future bookings for group business next year at the company’s full-service, managed properties in the U.S. are currently 30 percent higher than the pre-pandemic 2019 level.

Future bookings for the company’s all-inclusive resorts are also promising. Fourth quarter bookings are so far up 30 percent over 2019 levels, while first quarter 2023 bookings are up more than 10 percent over yet year-earlier quarter, executives said.

Hyatt executives also said the company was managing its debt load. As of September 30, it had total debt of $3.8 billion. Through October, it had cut its outstanding debt by $136 million year-to-date. It has a total liquidity of about $2.9 billion. Now through 2024, it plans to sell $1.27 billion of real estate, net of acquisitions, to become more asset-light.

“We’re pursuing other asset-light platform opportunities beyond our ongoing organic growth through individual development deals,” Hoplamazian said.