Hyatt has been expanding over the last few years, but Rosewood Hotels & Resorts might be a nice boost to the top end of the chain.
A Chance At Redemption
Matthew and I disagreed early in our partnership about whether Hyatt should acquire Starwood Hotels. Hyatt was competing with Marriott and had a better offer but Hyatt’s share structure was something the Pritzker family was unwilling to adjust and Marriott closed the deal.
At the time, the brand would have doubled in size with a good mix of select service hotels and plenty of top-end properties. More than that, a rabid group of dedicated loyalists was on offer. I still think Hyatt missed a golden opportunity, but it’s put together a string of acquisitions since then that added all-inclusive, and premium business hotels in major cities with the purchase of Thompson. Rosewood would not satisfy the same level of expansion but would add to the luxury aspect of the brand recognized by a different group of travelers.
Rosewood Hotels & Resorts Development
Rosewood Hotels & Resorts is a group of luxury hotels now owned by a Hong Kong development company adopting the Rosewood name. The chain offers a residential-style feel to its resorts and features smaller properties than some of Hyatt’s more popular brands. Much of its development is in Asia, but it also shares the Baha Mar resort with the Grand Hyatt in the Bahamas, its famous Las Ventanas Al Paraiso in Los Cabos, or Rosewood Mayakoba in Playa Del Carmen on the Riviera Maya.
Current Hotels vs Pipeline
Rosewood currently has just 29 hotels in its chain. However, it has 27 more in development of which 16 are slated to open in the next 19 months. That’s an expansion of 55% by the end of 2024 which will make the brand far larger than it is now. There’s always some level of risk in how many hotels will actually open on time but buying the chain while those hotels remain unfinished is an opportunity.
Adding 45 top-end hotels to the brand in the next 19 months would provide an immediate lift to Hyatt’s overall portfolio where it’s likely to have a significant impact in both the short and long term.
Purchasing Rosewood Resorts would not be a straightforward process. From price to structure to ongoing strategy, a purchase of Rosewood would be fraught with complications.
In my research of Rosewood, I came across five different revenue valuations for 2022 that ranged from $500 million to $2.7bn USD. That ranges from something relatively easy for Hyatt to acquire to a more substantial offering (especially when considering the multiple that might be expected to move the needle and close the deal.)
Hyatt has a market cap (as of writing) of $11.5 bn. Depending on the valuation of Rosewood and what it would take to get the deal done it could be a substantial investment.
Contradiction to Hyatt’s Strategy
Hyatt has been focused on being “asset light” meaning they don’t want to own and operate hotels, they want to manage and market them instead. Buying Rosewood could mean some departure in that direction but wouldn’t constitute a complete shift in its business plan as it consists of just a few dozen hotels. For the right product, there are always exceptions.
The properties are some of the most elite in the world. They operate in premium locations, the brand has been held to a high standard; this is an acquisition that would add only to the top. Reverting back to a prior reference of Starwood Hotels, many of us think about the top end of that chain, hotels like the St. Regis and W brands, but we forget about just how many Sheraton Four Points were part of that deal. This is just a focus on the top end of the brand with no filler.
What Hyatt found in its all-inclusive business is that the market for certain products is more resistant to economic headwinds. Many would argue that luxury chains remain in a similar position. They may not be recession-proof per se but are less prone to business pauses and customers are less likely to choose another property due to budget.
Rosewood also adds a new brand type to the chain. Andaz is geared toward a younger, well-heeled crowd, the Park Hyatt for the wealthy but predominately in business markets. Rosewood adds the sophistication of a Park but with a more relaxed approach.
There are fewer targets for mergers and acquisitions. Organic growth takes time and investment too and Hyatt does intend to grow. It has seen great value in the Unbound and premium boutique market, but Rosewood adds so many properties so quickly at the top of the brand that typically grows slower than the bottom of the chain. At the select service end of the brand, land is cheaper, construction and furnishing too, but for properties like Rosewood, careful selection of location can add orders of magnitude to the cost. It seems to me that the time to pick up Rosewood is now before the majority of the pipeline is in service and get a better deal for a great brand.
What do you think? Should Hyatt buy Rosewood? Is there a better target for Hyatt?