Hyatt has been on quite the shopping spree lately. In recent years, we’ve seen Hyatt acquire Two Roads Hospitality, Apple Leisure Group, Mr & Mrs Smith, Dream Hotel Group, Standard Hotels, me and all hotels, and more. Hyatt has just disclosed that it’s in discussions to acquire yet another hotel group, but this one is a bit different.
In this post:
Hyatt & Playa in exclusive negotiations over acquisition
Hyatt has revealed that it has executed an exclusivity agreement with Playa Hotels & Resorts, under which Playa has agreed to negotiate exclusively with Hyatt regarding potential strategic alternatives, which may include the acquisition of Playa by Hyatt.
For those not familiar, Playa Hotels & Resorts owns around 25 resorts in the Dominican Republic, Jamaica, and Mexico. The company actually owns those properties, rather than Playa being a marketing or branding company (in other words, it’s the opposite of Hyatt’s business model, as Hyatt takes an asset-light approach).
Currently Playa properties belong to a variety of hotel groups, ranging from Hilton, to Hyatt, to Kimpton, to Wyndham. As you can see, roughly one-third of the Playa portfolio already has Hyatt branding, including Hyatt Zilara Cap Cana, Hyatt Zilara Rose Hall, Hyatt Ziva Cancun, and more.
Here’s how Hyatt CEO Mark Hoplamazian describes this development:
“Playa has been a valuable partner for many years, is one of the world’s strongest operators of all-inclusive resorts, and owns a premier portfolio of high-quality, high-end all-inclusive resorts in iconic locations and key markets across the Caribbean and Mexico. Strategic alternatives under consideration could have compelling strategic merit to add new incremental durable fee streams for Hyatt. We remain steadfastly committed to our asset-light business model and if this process continues, we will continue to map out a clear path for an asset-light outcome for any strategic alternatives we undertake.”
Meanwhile here’s what Playa CEO Bruce Wardinski has to say:
“Our Board and management team regularly review our structure, strategy and opportunities to enhance shareholder value, and we are pleased to enter into exclusive discussions with Hyatt regarding potential strategic options. Hyatt’s interest in our company is a testament to the strength of our business and the dedication of our incredible Playa team. The Playa Board and management team will remain open-minded and continue to act in the best interests of all Playa shareholders.”
Hyatt has been super focused on the all-inclusive sector lately, so one would assume that the play here would be to acquire Playa, then rebrand all the properties as Hyatts, and then sell off the properties (with a clause that they have to maintain Hyatt branding). This would obviously be a lot of effort, so I imagine that the price would have to be right, and that Hyatt executives believe they could sell the resorts at attractive prices).
Given that one-third of the Playa portfolio is already managed by Hyatt, I also have to imagine that part of Hyatt’s motive here is to prevent a competitor from trying to acquire Playa, since Hyatt is taking a major lead in the all-inclusive space.
Still, you’d think that this acquisition on Hyatt’s part would almost lead to oversaturation in some markets for a single hotel brand, no? Like, how many dozens of all-inclusive Hyatt branded properties can there be in one country, without there being cannibalization? 
Why is Hyatt so focused on all-inclusive resorts?
Hyatt has been growing like crazy lately, though a disproportionate amount of that growth has been in the all-inclusive sector. Admittedly all-inclusive resorts are a bit polarizing — some swear by them, while others would almost never consider such a vacation.
What I really can’t wrap my head around, though, is why Hyatt is focused on all-inclusives to such an extent. It seems like a vast majority of Hyatt’s growth is either in the limited service sector or in the all-inclusive sector, rather than than in the full-service hotel sector.
Admittedly part of the issue is that interest rates are quite high, so the current appetite for building expensive new hotels isn’t that high. But still, it’s just puzzling to me how Hyatt is focused on all-inclusives to such a degree.
Does anyone understand Hyatt’s sudden over-the-top interest here?
- Is Hyatt just trying to be a market leader with all-inclusives, thinking it’s a way to differentiate itself from other major hotel groups?
- Are all-inclusives somehow much more lucrative for hotel groups to manage, in terms of the revenue they can get?
- Is there some amazing loyalty play here, where Hyatt hopes that investing big in all-inclusives will make its loyalty program more profitable?
- You’d think that those who are all-inclusive fans wouldn’t necessarily be the “stickiest” customers in terms of developing loyalty across brands, since it’s not like a business traveler who is on the road constantly; like, do people say “I loved our stay at the Bahia Principe Grand Jamaica this year, so let’s go to the Alua Illa de Menorca next year?”
Bottom line
Hyatt has entered exclusive negotiations with Playa Hotels & Resorts, which could see Hyatt acquire the company and its 25 all-inclusive Caribbean properties. Since Hyatt has an asset-light strategy, the goal would likely be to rebrand all the hotels, and then sell them, ultimately increasing Hyatt’s long term property revenue stream.
I can’t say that I love Hyatt’s laser focus on all-inclusives, but that seems to be the direction the company is headed…
What do you make of Hyatt possibly acquiring Playa, and of Hyatt’s general focus on all-inclusives?
Interesting discussion.
I do think there is demand for high quality all inclusives from loyal business travelers who want a simple family holiday when they are not working but still want quality.
I think there's also still a COVID hangover where people want to travel but don't want really complex itineraries where something could go wrong. All inclusives fit that bill.
The ability to earn a free night at a Hyatt AI seems like a better offer to a potential CC user to keep their spend on a Hyatt card than using a Marriott card and getting a free night at an airport Fairfield Inn in East Overshoe for the same spend.
That can be right only if your luxury travel is to East Overshoe. I get that Bonvoy properties are more expensive but what really luxury properties Hyatt have?
Park Hyatt Chicago, NYC, Paris, Zurich, Tokyo, Kyoto.
Lucky, I think this is mainly driven by the opportunity set more than a true focus on all inclusive. Hyatt has been wanting to grow aggressively, and most hotel companies believe that leisure travel will be very important over the long run. Apple Leisure was available to buy, so Hyatt went after it. Playa has long had a bit of a connection with Hyatt due to Zara and Zaliva, and Playa is also now available;...
Lucky, I think this is mainly driven by the opportunity set more than a true focus on all inclusive. Hyatt has been wanting to grow aggressively, and most hotel companies believe that leisure travel will be very important over the long run. Apple Leisure was available to buy, so Hyatt went after it. Playa has long had a bit of a connection with Hyatt due to Zara and Zaliva, and Playa is also now available; Hyatt is probably the most logical buyer. Hyatt, more than Marriott and Hilton, has the appetite to buy hotel groups with a lot of real estate and to sell them.
Other commentators have made good points on why all inclusive may be a good place to be as well. Your (and my) tastes seem to lean more into higher end city hotels, and non all inclusive resort hotels globally. The issue is that not many of those are being built, and frankly, when they are being built, I am seeing more Marriotts and Hiltons being built.
They need to focus some of their energy into building up their European presence.
I suspect it also has an aspect of people tending to return to the same AI hotel every year, and in some cases on multiple occasions every year, so having the high usage, and very frequent customer interaction which could then be tempted to use other Hyatt branded properties for business or other leisure travel (seeing family and friends) is a highly tempting proposition. Also, looks like Hyatt is seeing these AI properties they are...
I suspect it also has an aspect of people tending to return to the same AI hotel every year, and in some cases on multiple occasions every year, so having the high usage, and very frequent customer interaction which could then be tempted to use other Hyatt branded properties for business or other leisure travel (seeing family and friends) is a highly tempting proposition. Also, looks like Hyatt is seeing these AI properties they are hoovering up over the last 18 months as a proposition to Hyatt customers as a high value proposition to using their points at these resorts in order to tempt customers to spend more money at the branded properties.
I feel that there is someone at board level that has looked at Covid and the direction of customer travel desire thinking this is the way to go to generate further revenues going forwards, and would also give Playa, if operated as a subsidiary within Hyatt, the capital to buy more land and build additional resorts.
I’ve stayed at over half of the Mexico list, and it’s clear Playa has been trying to reduce their expenses (typical when you want to be acquired) - to the point where I wouldn’t go back. F&B quality has dwindled significantly over the last 10 years.
The major loyalty tie isn’t necessarily them trying to go somewhere else in the portfolio, it’s that people incessantly go back to whatever their first positive AI hotel (or...
I’ve stayed at over half of the Mexico list, and it’s clear Playa has been trying to reduce their expenses (typical when you want to be acquired) - to the point where I wouldn’t go back. F&B quality has dwindled significantly over the last 10 years.
The major loyalty tie isn’t necessarily them trying to go somewhere else in the portfolio, it’s that people incessantly go back to whatever their first positive AI hotel (or brand) was. That’s why all of the vacation clubs work.
If they fold these into the AMR/UVC scam club, could be a ton of extra new club members.
Hyatt would also now have a monopoly on all of the true beachfront resorts in Playa del Carmen proper.
My thoughts on the big all-inclusive play as someone who stays once-twice per year: A combo of:
Being a true leader in a space among the big chains, especially when it comes to the higher-end All-Inclusives (nobody comes close to matching the breadth of high-end AIs). A lot of business travelers want to go to these, and Marriott does not have anything like the Secrets brand)
AIs are the new full-service hotel outside of events....
My thoughts on the big all-inclusive play as someone who stays once-twice per year: A combo of:
Being a true leader in a space among the big chains, especially when it comes to the higher-end All-Inclusives (nobody comes close to matching the breadth of high-end AIs). A lot of business travelers want to go to these, and Marriott does not have anything like the Secrets brand)
AIs are the new full-service hotel outside of events. IMO, technology has killed the need for traditional in-city full-service hotels unless someone is attending a conference or similar there. Doordash has replaced room service, Uber/Blacklane has replaced hotel taxi queues / car service, and Google Maps and OpenTable has replaced the concierge.
Probably as a result of that, I talk to a lot of people who make mid-six figures and there are many more people who are fine staying at a mid-tier hotel like a newer Courtyard or AC vs paying a bunch more for a full-service hotel in a city. For regular resorts in the US, incidental pricing out of control, especially if you plan to drink. I was at one in the Keys last month for a night (literally did 3 rounds of drinks, dinner, and breakfast) and the 2 of us spent close to $400 in F&B alone. I get that AIs don't have amazing food, but regular resorts don't tend to be much better outside of the luxury ones, and you're often paying very inflated prices.
AIs offer the ability to not worry about incidental pricing, and higher end ones tend to have food that is "good enough" for most who aren't looking for anything mindblowing. It is luxury for the masses, and Hyatt has likely identified that it is a large growth market and one where people want the full-service offering.
I completely agree with this segmentation. I would even go a step further and note how there seems to be surging demand for all inclusives among the relatively affluent. I think it's both the price transparency as well as lack of desire to spend the time planning out some daunting glob trodding trip when the desire is often just a winter weekend getaway. I think it's connected to same surge in cruises among the upper middle class
Completely agree with the relaxed getaway, as someone who does that a couple times per year and then does the crazy globetrotting trips the rest of the time.
Price transparency and the ability to not think about spending money (besides tips) while there is why I go to so many AIs. Seeing people talk about how they prefer non-AI resorts and then talking about how it's a bit out of budget but they want...
Completely agree with the relaxed getaway, as someone who does that a couple times per year and then does the crazy globetrotting trips the rest of the time.
Price transparency and the ability to not think about spending money (besides tips) while there is why I go to so many AIs. Seeing people talk about how they prefer non-AI resorts and then talking about how it's a bit out of budget but they want something nice so they'll save money by "overeating at the free breakfast, buying some heavy snacks and alcohol for the room, putting vodka and seltzer in our "water" bottles for the pool, and going for the chicken at dinner" sounds like the exact opposite of fun time to me.