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.
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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.
Complications
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.
Valuation
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.
Why Rosewood?
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.
Conclusion
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?
Not an expert in the business as you are, I always thought Rosewood was competing with Four Seasons to a degree. I don’t disagree that it would be an excellent asset for Hyatt, but do you feel Hyatt would preserve the overall Rosewood image of being a high end, sophisticated brand?
Also, do you feel Four Seasons would ever be acquired? What about a Four Season – Rosewood Merger?
Have you been to a rosewood Kyle? the suggestion is totally laughable. first of all, Rosewood aren’t selling, nor do they need to be. Do a little DD on who owns the brand, and the family behind it. They aren’t sellers at this point in time since as you mentioned, they have about 15 hotels in the pipeline. Would you sell your company before you even see what comes to fruition?
2. RW are too high end to be sold to a chain brand which then will offer free nights which I assume is what you are after. if RW’s started offering free nights, they’d just be another Park Hyatt or Waldorf Astoria. Need to keep the points scum out of the hotels in order not to cheapen them.
Lets not invent facetious scenarios out here for content. I’d elaborate even more to tell you why this deal will never happen, but its not worth my time.
Hey Jim, welcome and thank you for your first comment on the blog.
While I appreciate your position, there have been a bunch of successful acquisitions by major brands, one of which you mention. Waldorf-Astoria was purchased by Hilton, Ritz-Carlton by Marriott, Regent by IHG, Starwood (not SPG) also by IHG, Raffles and Fairmont by Accor. In fact, by virtue of such acquisition some of those brands were able to expand beyond their wildest dreams, like Regent moving from six properties to 40. Ritz-Carlton was able to use the massive built-in market and capital resources of Marriott to expand in a meaningful way that would have taken far longer if it ever occurred organically.
Expansion is a key driver for our divergent opinions. As I pointed out in the post, “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.” The chain would reach a final total of 56 by the end of 2030. I read about the initial sale and then the acquisition by the HK group (I believe I mention that too) but that’s not really here nor there as to whether a company will or won’t sell. There’s significant uncertainty as to whether the pipeline properties will be delivered: as planned, on time, on budget, or at all. The hall of broken dreams is long in the hotel business as the Grand Hyatt Baha Mar (also developed by a major Chinese company) will show and the Park Hyatt Marakech which has been imminently opening for nearly a decade. Assuming those hotels will operate (especially if there’s a recession) as they were intended to is also like betting 16 times in a row and winning every bet. It might make more sense for Rosewood to sell while there’s a promise of that beautiful future rather than risk what the reality of it actually becomes (for good or bad.) There are plenty of reasons to sell besides “needing” to sell and waiting until you “need to sell” would be a disaster for their valuation.
Lastly, it doesn’t sound like you’ve experienced the top end of Hyatt resorts. I don’t see a dratic difference between some of the brand’s more unique premium properties and Rosewood’s. Maybe you just prefer Rosewood over other brands or in particular, Hyatt. Ok, cool. But Thompson hasn’t been handcuffed by Hyatt following acquisition. AMR is getting ready to open a private island resort with the seclusion of the Riviera Maya, but white sand beaches, and convenience of Cancun airport.
Mike, regarding Four Seasons, ask Bill Gates.
As for Hyatt, I’m not certain the culture would be a fit. But, if it happened, it would be interesting.
Yea I have a harder time imagining FS being acquired given Gates unique liquidity (and if anything it seems as likely to be acquired by Berkshire Hathaway as Hyatt anyway. Rosewood would be really interesting though. The cash rates on most Rosewood properties are another level, getting decent redemption options on points would be great.
Tempting New World Development on the sale would be a tough ask at a time when luxury hotel rates are through the roof and intense competition is on going with Hong Kong rival Jardine Matheson’s Mandarin Oriental. It almost feels as if Aman would be an easier purchase given the Russian links to the ownership structure.
Noooo! I love Rosewood and the last thing I want is people staying at Rosewood on points; point people are not the clientele of Rosewood.
would love too see them acquire NH hotels, Montage/Pendry, Anantara, Shangri-la
As someone who stays at Rosewood properties, I REALLY REALLY hope this never ever happens. It would honestly destroy the brand, and the experience. I just had another stay at the Rosewood São Paulo, and every detail, in the service, in the design, in the decor, is not only paid attention to, but HIGH quality. You can tell they invest in every aspect. Nothing feels flimsy or cheap or even middling in quality. Everything just feels…solid. Even your laundry is delivered in a beautiful leather box. But nothing is flashy or gauche, either. It’s classy and understated, as well.
If Rosewood were ever acquired by a major chain, the expenses to maintain quality would be way too high to operate with the cost structure that comes with points, upgrade certificates, etc.
Keep Rosewood Rosewood.
Rosewood is also owned by a family that is not looking to give up control…
This is highly unlikely. And I really question if you understand Rosewood’s approach. Calling them more “relaxed” leads me to wonder. Many of their properties (i.e. Vienna) are quite formal.
As long as Four Seasons remains independent, so will Rosewood. If anything you can see the two eventually merging to form a large and cohesive luxury brand. Neither is interested at all in becoming points oriented and seeing them decimated into factories like Ritz Carlton or St Regis. Park Hyatt has been able to avoid this same demise with a more conservative and closely managed growth.
The only luxury brand that could potentially be a future target by Hyatt is MO. That one might actually work. MO already has developed a non points loyalty scheme that could be easily moved into WOH. It has suffered greatly from problems with management at US properties and Hyatt would give them the wherewithal to fix the brand in North America. Further, they are not as closely guarded as Rosewood or Four Seasons. Lastly, it would give MO the ability to move a few properties into other Hyatt brands that remain MO more as to footprint than truly capturing the essence…Singapore being a perfect example that might do better as a rebrand.
From the perspective of me, somebody who doesn’t stay at Rosewood properties, largely because I can’t afford them, I’d be delighted if they joined the Hyatt profile. Heck, why don’t they just nab Aman as well and make the Amangiri a Cat 1 property. That would be great for program engagement, right?!!
In the real world, though… I don’t see how a Hyatt acquisition would benefit Rosewood in any way. Like FS, they have devoted followers that are happy to pay whatever price they set. They don’t want customers like me because they don’t need customers like me.
What a completely random article without any basis in rumors or proper business analysis.
Other bloggers have also gone into bait stories, I have stopped reading. When will you bloggers realize that your value is in deals, hard facts, analysis and tips. Wild rousing and dreams are completely useless and put that blogger on the ‘don’t bother in the future’ list.
Relax. Speculation + conjecture are fine
As above, sounds like Kyle has never set foot in a Rosewood.
They are an ultra lux chain who compete with Aman, Belmond and Soneva.
They do not compete with PH, StR or WA.
Kyle should provide links to the valuations. Its a wide range.
Interesting take. I don’t think it would happen. So many commenters here I don’t think know that much about Rosewood either. The thing is that Rosewood isn’t really a one size fits all. In select markets it competes with an Belmond or Aman (it competing with Aman is a stretch) but in other markets it’s similar to a top end Four Seasons, St. Regis, etc…like the Rosewood Abu Dhabi (great hotel by the way). It’s also not true that the groups aren’t involved in ultra luxury properties. Bulgari Hotels, which is I would say is even more exclusive than Rosewood, is technically part of Marriott. In urban markets I would say Rosewood competes well with Bulgari. The thing is, Rosewood has absolutely no reason to be acquired right now. Also they would absolutely need to do it so that it wasn’t blended into the WOH points program. That would change the brand and the brand has not reached where it wants to yet and they don’t need to be part of Hyatt to do that.