Why Hyatt’s deal for Apple Leisure is a ‘win-win’

Dreams Jade Resort & Spa - Riviera Maya
Dreams Jade Resort & Spa - Riviera Maya. (Apple Leisure Group)

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Hyatt had to cough up a fair amount for Apple Leisure Group, but this might look like a bargain in the long run. Not only will it help Hyatt’s asset-light quest to generate 80% of its earnings from fees by the end of 2024, it will also enable it to tap into the booming market for leisure travel. Other hotel companies like Marriott had already moved ahead in that area, now Hyatt is arguably the market leader in luxury all-inclusive.

Hyatt’s deal to buy Apple Leisure Group (ALG) for $2.7 billion in cash has probably been the most talked-about hotel deal of the year – at least so far.

The transaction highlighted the premium buyers are placing on leisure brands as we exit the pandemic but as Fernando Fernandez, vice president of development at ALG explained recently at IHIF, the two companies have been talking for a while. Not only that, he also revealed a couple of other potential suitors.

“We’ve been talking with Hyatt for the last two years, this didn’t start like six months ago. So we’ve been talking not only [to] Hyatt, we’ve talked to Marriott, we’ve talked to Hilton… finally we did it with Hyatt,” Fernandez said.

Fernandez couldn’t talk too much about the transaction as it has not closed yet, that will happen sometime at later in October or possibly in November. He did, however, go on to explain why it was a “win-win”.

“My company Apple Leisure Group is going to benefit from the loyalty programme, the 25 million customers of Hyatt, so it’s going to become another distribution channel,” he said.

As well as being a resort manager with properties across Mexico, the Caribbean, Central America and Europe, ALG also has a substantial distribution arm, which moves about 3.5 million U.S. travellers to the Caribbean every year.

“For Hyatt, Hyatt becomes the number one resort operator in the all-inclusive segment,” Fernandez said.
Hyatt’s prescience in looking into this deal will likely stand them in good stead over the coming months and years with leisure travel predicted to benefit from pent-up demand from the Covid-19 lockdown restrictions, as well as the savings made by middle and upper-class consumers in rich countries.

“We’re happy to say that right now, in the Caribbean, we are over the numbers in 2019. So is this going to last? I think it will. Especially for the next couple of years. I think people, they saved a lot of money, they’re willing to spend, they’re willing to have fun, they’re willing to forget about everything that they have gone through,” Fernandez said.

When it closes, the deal will add around 100 hotels to Hyatt's existing portfolio of more than 1,000.

“The addition of ALG’s properties will immediately double Hyatt’s global resorts footprint. ALG’s portfolio of luxury brands, leadership in the all-inclusive segment and large pipeline of new resorts will extend our reach in existing and new markets, including in Europe , and further accelerate our industry-leading net rooms growth," Hyatt CEO Mark Hoplamazian said when the deal was announced.