Hyatt has sold Alila Ventana Big Sur, just months after buying the hotel.
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.
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?