Hyatt Hotels Corporation (H) has recently sold five service hotels under the brand name Hyatt Place for $53.0 million as part of its asset light strategy. The company had entered into franchise agreements with NewcrestImage and BPR Properties in Dec 2014. The purchasers would spend approximately $6.0 million for renovation of the hotels. However, the hotels will be run under the same brand name.
These properties are spread across Texas, North Carolina and South Carolina. The hotels namely Hyatt Place Dallas, Hyatt Place San Antonio-Northwest, Hyatt Place Greensboro, Hyatt Place North Raleigh-Midtown and Hyatt Place Columbia enjoy a strategic location.
The sale that is a part of the company’s asset light strategy includes selling selected hotels, maintaining brand presence by entering into franchise agreements, and re-investing the sales proceeds into new hotels and other growth opportunities. Following the sale of the asset, the owner/developer partners provide the capital and the company then earns a fee for managing/franchising the hotel.
Nowadays, transition to an “asset light” business model has gained momentum in the hotels and real estate investment trust industry. Hyatt, like many other hoteliers including Starwood Hotels & Resorts Worldwide Inc. (HOT) and Marriott International, Inc. (MAR) has adopted a strategy of franchising its hived-off properties to grow in a less capital-intensive way. Consistent with this, In Sep 2014, Hyatt Hotels Corporation announced that its subsidiaries have agreed to sell 38 hotels for approximately $590 million to Lone Star Funds – a private equity firm that invests in distressed assets. (Read: Hyatt Adopts Asset Light Policy, Divesting 38 Hotels)
Hyatt currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the same industry is Choice Hotels International Inc. (CHH), which has a Zacks Rank #2 (Buy).
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