Did they say, “all-inclusives in Europe, Asia and the Middle East?” Why let Cancun have all the fun?
In a Monday morning conference call about Hyatt’s acquisition of Apple Leisure Group, much of the excitement seemed focused on expanding its global reach—and that includes bringing the highly successful all-inclusive (AI) model to brand new markets under the Hyatt flag.
Of course, that’s not the only reason Hyatt Hotels Corp. will be buying Apple Leisure Group (ALG). The benefits include “increasing Hyatt’s footprint and capturing the growth in luxury leisure travel,” especially in the resort segment in general, and in keeping with Hyatt’s “asset-light strategy” of managing but not owning properties, Hyatt president and CEO Mark Hoplamazian said. In short, the exciting combination of Hyatt and ALG “significantly accelerates our asset-light transformation and our growth platform, our footprint in luxury and our share of wallet by providing increased choices for guests,” he said.
Within his presentation were many references to an expanded presence in major markets across the globe, doubling the number of resorts in the Hyatt system and expanding its “European footprint” by more than 60%, with a focus on Spain and Greece.
Unlike in past acquisitions, Hyatt will keep the ALG management team intact, Hoplamazian said, bowing to its superior skill in managing luxury all-inclusive resorts.
“We learned with Hyatt Ziva and Zilara that it’s a very specialized business,” he said. And so, “recognizing that this is a different business than Hyatt, that includes a very different channel profile and operating loads than ours,” Hyatt is “bringing the entire team, and it will operate as a separate unit.”
Hoplamazian also credited “the remarkable cultural fit” of the ALG management team with Hyatt, and its personal relationships with managers and hotel owners. “The company will largely look the way it does now,” he promised.
The Global View
While all the pieces of the ALG business fit with Hyatt’s vision of its future, it’s the global all-inclusive segment that seems to shine the brightest.
Europe “continues to grow at a good pace, and we’re very excited about that,” Hoplamazian said. “They are only beginning to scratch the surface of the five-star brands in Europe, so we think that’s another leg of growth.”
The AI business model “provides superior economics for owners and great returns on investment,” he noted, and its “fee structure is robust. So this is a preferred format” that also can apply in the Middle East and Asia—and it’s growing fast in these pandemic times. “With our brand recognition we see opportunity to make this a really robust and superior brand platform around the globe.”
In addition to ALG’s existing pipeline of properties, an additional 50% is under construction and a significant number of other deals are in advanced stages. New deals totaling 23% of the existing room base already are executed and fully financed, another 7% are under contract, and an additional 32% are in final negotiation, “so momentum is very high,” he said.
The Big Picture
The acquisition benefits Hyatt in three ways, Hoplamazian said: it accelerates the transformation of Hyatt into an asset-light company; it accelerates the growth of the resort segment, and especially the luxury resort segment; and it expands Hyatt’s presence in new markets, especially Europe. It adds “significant growth, not just from ALG’s existing platform but also the pipeline it represents,” and expands the customer base across a bigger and broader portfolio.
In addition to AMResorts, it brings the Ultimate Vacation Club, with 100,000 active members; the ALG Vacations distribution platform; the Amstar and Worldstar DMCs; and Trisept Solutions’ unique leisure travel technology platform.
The ALG Vacation business is high volume and low margin and already includes many Hyatt properties. Trisept Solutions, gained in the acquisition of Mark Travel, is a “very sophisticated platform” that combines air, ground transportation and excursions in an integrated platform. Amstar “is very experienced in working with providers of experiences” in Mexico, the Caribbean and Europe – and “an opportunity for other Hyatt resorts.”
In short, the acquisition “significantly accelerates our asset-light transformation and our growth platform, our footprint in luxury and our share of wallet by providing increased choices for guests.” It is expected to generate “significant revenue” that can be invested in marketing and technology, and help Hyatt “capture the growth in luxury leisure travel.” Real value also comes from digital capabilities that will drive more direct bookings, and from the combined talent of the two management teams.
With more than 3 million customers, ALG Vacations in particular “is a massive platform with an incredible reach” and “I think the way it will provide extra support in shoulder seasons is very valuable,” Hoplamazian said. “We’ve been focused on increasing the direct channel, and our own direct has been exceeding the volume of the OTAs, so we see the strategic value of ALG Vacations,” whose revenue base is largely non-AMR hotels.
“We’re very bullish on leisure travel, and excited about luxury in particular,” he noted. Hyatt, AMR and ALG Vacations all have seen “remarkable increasing momentum in the last four or five months,” benefiting from the post-Covid surge in demand, and while the delta variant might have a short-term impact, “we’re encouraged to see the durability of [ALG’s] customer base.”
To download the full presentation mentioned, please click here.
Cheryl’s 40-year career in journalism is bookended by roles in the travel industry, including Executive Editor of Business Travel News in the 1990s, and recently, Editor in Chief of Travel Market Report and admin of Cheryl Rosen’s Group for Travel Professionals, a news and support group on Facebook.
As an independent contractor since retiring from the 9-to-5 to travel more, she has written regular articles about the life and business of travel agents for Luxury Travel Advisor, Travel Agent and Insider Travel Report. She also writes and edits for professional publications in the financial services, business and technology sectors.