Hyatt aims to become a player in the all-inclusive market by acquiring a 20% ownership stake in Playa Hotels & Resorts, which will place some of its resorts under the Hyatt brand.
Playa, a Virginia-based hotel investment company, has a portfolio of 17 all-inclusive properties in the Dominican Republic and Mexico, which are separately managed by Barcelo Hotels & Resorts and by AMResorts under its Dreams and Secrets brands.
Under the terms of the agreement, Hyatt will invest $100 million in Playa and will spend an additional $225 million for convertible preferred stock in Playa.
In connection with the Hyatt investment, Playa will add 13 resorts to its portfolio, totaling approximately 5,800 rooms across the Dominican Republic, Jamaica and Mexico, and will enter into franchise agreements with Hyatt for six of them, or approximately 2,800 rooms. They will operate under Hyatt brands once significant renovations are completed.
The first two Hyatt-branded all-inclusive resorts, located in Mexico, will be introduced later this year following multimillion-dollar renovations of existing properties.
Four Hyatt-branded all-inclusive properties in the Dominican Republic, Jamaica and Mexico will follow in 2014 and 2015.
The transaction is expected to close by the end of September, subject to approval by relevant authorities.
In a statement, Hyatt said, "We will be in a position to share more information, including which of the resorts will be Hyatt-branded, once the transaction closes."
Terms of the agreement call for Playa to purse the acquisition or development of new all-inclusive opportunities under Hyatt's brands.
Playa also will have certain exclusive rights to operate Hyatt-branded all-inclusive resorts in five Latin American and Caribbean countries through 2018.
The agreement with Playa opens up a lucrative market for Hyatt, one that has grown rapidly over the past 20 years, according to Stephen Haggerty, global head of real estate and capital strategy for Hyatt.
"This transaction will position us to introduce Hyatt's authentic hospitality to a new guest base while offering great new resort options in sought-after destinations for our existing guests," he said.
The agreement with Playa provides Hyatt with a platform for future growth "in an attractive segment, and our investment is structured to generate strong returns through our common and preferred interests as well as recurring franchise fees," Haggerty said.
The all-inclusive market has been a mainstay in the Caribbean and Mexico for years, with Sandals, Club Med, AMResorts, Couples, Barcelo, Riu, Iberostar, Sandos, Palace Resorts, Karisma and Occidental among the major players.
The large global hotel chains have remained out of the picture for the most part.
Starwood opened its first all-inclusive in 2011, the Westin Playa Conchal Resort & Spa in Costa Rica, and the Hilton Puerto Vallarta debuted in 2012, but that is pretty much it for the large U.S.-based chains dabbling in the all-inclusive arena.
Hyatt's entry into this market as a well-known brand could give it a strategic edge in luring a new customer base as well as offering its repeat guests an opportunity to sample a new Hyatt experience.