Hyatt has sold Alila Ventana Big Sur, just months after buying the hotel.
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Alila Ventana Big Sur sold for $150 million
Over the summer it was announced that Hyatt purchased Alila Ventana Big Sur for $148 million. The 162-acre property is located in Big Sur, California, and features 59 rooms, 63 camping areas, and 15 tent cabins.
This was an interesting move — keep in mind that for the most part the global hotel groups don’t actually own their hotels, but rather just have management contracts for them. Hyatt in particular has an asset-light strategy, and owns very few properties. So clearly Hyatt thought it was a good real estate investment, or had some other motive.
That didn’t last for long, though. Hyatt has sold Alila Ventana Big Sur for $150 million. The buyer is Host Hotels & Resorts, a huge hotel real estate investment company. This transaction was finalized in September, but has only now been disclosed.
As Host Hotels & Resorts described the decision to buy the hotel on an earnings call:
This ultra-luxury resort is one of the most uniquely located hotels in the United States, and benefits from extremely limited supply and high barriers to entry due to strict land-use regulations by the California Coastal Commission. We purchased the property at a 9.3 times EBITDA multiple on 2021 forecast.
The hotel will continue to belong to Hyatt
While Hyatt no longer owns Alila Ventana Big Sur, it’s my understanding that part of this agreement includes the hotel continuing to be managed by Hyatt. In other words, World of Hyatt members will continue to be able to earn and redeem points at this property. This is purely a real estate play on the part of Host Hotels & Resorts.
Why would Hyatt sell the hotel so quickly?
Hyatt bought Alila Ventana Big Sur for $148 million in June, and sold it for $150 million in September. On the surface that seems odd, since I’d imagine Hyatt lost a modest amount of money on the deal, when you consider how costly transactions of this size are.
If I had to speculate, I’d say there are two possible explanations (or maybe it’s a combination of both).
One theory is that this could be related to Hyatt’s purchase of Apple Leisure Group. In August it was announced that Hyatt would purchase Apple Leisure Group for $2.7 billion, which includes over 100 new hotels joining Hyatt. This was Hyatt’s largest acquisition ever, especially when you consider that Hyatt previously had a $7.3 billion market cap.
At the end of the day Hyatt only has so much money to spend. Hyatt purchased Alila Ventana Big Sur before the Apple Leisure Group acquisition was announced, and sold the hotel before the Apple Leisure Group acquisition closed. That’s likely not a coincidence. 
But there’s another potential angle here. When Hyatt announced the purchase of the property back in June, the following was stated:
“The resort is well-positioned to be considered as part of Hyatt’s capital strategy and Hyatt intends to turn to evaluating the sale of this asset while retaining a long-term management agreement.”
It’s also possible that Hyatt purchased the property in order to ensure that it remains a Hyatt for years to come. It sounds like part of the conditions of sale included a long-term management contract. Maybe that was Hyatt’s goal all along — buy the hotel, and then sell it at a comparable price, but with the guarantee of it being a Hyatt for years to come.
Bottom line
Hyatt has sold Alila Ventana Big Sur for $150 million, after purchasing it a few months earlier for $148 million. The good news is that the hotel will continue to be managed by Hyatt, so there should be limited implications for World of Hyatt members and guests.
While flipping a hotel within months seems odd on the surface, I imagine this was likely related to Hyatt’s Apple Leisure Group acquisition, or otherwise related to Hyatt being able to secure a long-term management contract for the hotel.
What do you make of Hyatt’s sale of Alila Ventana Big Sur?
Have to agree with the others. This likely had absolutely nothing to do with the Apple purchase. First, it might have been announced in August, but a deal of that size would have been worked on for at least 6-12 months. There's no way they didn't internally know in June that they were very close to acquiring Apple. So it wasn't an "oops" situation. Also, $150mil is pretty small potatoes and doesn't materially improve their balance sheet.
I know someone high up it was because they didn’t want to lose the management agreement. Nothing more. Sold it to friendly buyers.
$150MM is a blip. If they were hard up for cash they definitely shouldn’t have done the announced transaction. Come on.
I'm pretty sure they didn't want to lose the property but couldn't line up a buyer in time so they had to temporarily take it over.
I booked this hotel for my gf's sister in October and her experience sounded different from ours. We last went December 2020. She said that service was pretty good but the food was so-so: overcooked steak, something was too salty. I wonder if this drop in quality has to do with the property changing hands. We're going in December and will see if things have changed compared to the last 2 years.
As someone in the industry with a lot of exposure to deals like this, I definitely think your second theory is right - Hyatt acquired it to add a long-term management agreement contingency and then remarket it for sale. Not to sound dismissive, but $150M is a pretty small pittance to a company like Hyatt, and does little to offset the balance sheet impact of a $2.7B acquisition. Hyatt is not in the business of...
As someone in the industry with a lot of exposure to deals like this, I definitely think your second theory is right - Hyatt acquired it to add a long-term management agreement contingency and then remarket it for sale. Not to sound dismissive, but $150M is a pretty small pittance to a company like Hyatt, and does little to offset the balance sheet impact of a $2.7B acquisition. Hyatt is not in the business of owning real estate, and they know that. But they also are smart enough to understand the importance of this one single asset to the overall value proposition of WOH. Ensuring this remains a Hyatt is a win-win for them and their WOH members, and cost very little to do, as you note.
Now, the more interesting question will be "how much will Host influence/dictate how Hyatt runs this property over time?" REITs in general are not known for improving the guest experience, and have the collective reputation of Scott Kirby in his pre-United days. While perhaps not initially, I think they will try to drive ancillary revenues over time and push Hyatt, as their operator, to think more like an owner in the management of Alila Big Sur.
Yup looking at Hyatt's last 10-K they own just 38 Hotels but managers 984 hotels so they own about 3% of their properties, its not their core business. Most of the 34 they own are all Hyatt Regencys and prime downtown hotels in Nyc, chicago, austin. So makes no sense for them to hold onto this Alila. They own the three Miravals so i would imagine they looking to offload those here too in 2022....
Yup looking at Hyatt's last 10-K they own just 38 Hotels but managers 984 hotels so they own about 3% of their properties, its not their core business. Most of the 34 they own are all Hyatt Regencys and prime downtown hotels in Nyc, chicago, austin. So makes no sense for them to hold onto this Alila. They own the three Miravals so i would imagine they looking to offload those here too in 2022. So something to keep an eye on Lucky.
https://www.sec.gov/Archives/edgar/data/1468174/000146817421000011/h-20201231.htm
As long as Ventana Big Sur remains a Hyatt property and its excellent level of service and benefits doesn't decline, this sale should be fine for Hyatt guests and WOH members.
I'm keenly interested in seeing the quality of the new Apple Leisure Group properties, however. Hope their addition continues to uphold Hyatt's quality brand image.
Seventh paragraph, second sentence: lost money is written twice