Hyatt Boosts Latin American Presence

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Chicago, Illinois-based, Hyatt Hotels Corporation (H) recently announced that one of its affiliates has completed the earlier announced acquisition of Hotel Nikko Mexico for approximately $190 million. The 756-room hotel was previously owned by Japan-Mexico Hotel Investment Co.

Post acquisition, The Hotel Nikko Mexico has been rebranded as Hyatt Regency Mexico City. Moreover, a Hyatt affiliate will invest around $40 million by 2015 for the renovation of Hyatt Regency Mexico City to strengthen its position in the most preferred area of Mexico City, Polanco.

With the affluence of the middle class in Latin America, inclination to spend on travel and leisure has somewhat risen. Apart from tourism, the region is also successfully emerging as a business hub. All these factors testify to Hyatt’s motive to have one of the largest hotel development pipelines in Latin America. 

In addition to the above acquisition, the company expects to add 8 Hyatt-branded hotels to the 4 previously announced hotels under construction, bringing the total of under constructed hotels to 12. Additionally, with the completion of these properties, Hyatt will have 20 hotels in the Latin American region.

Of the 4 previously announced developments, 2 are in Costa Rica and 1 each in Brazil and Panama. The construction of 8 Hyatt-branded hotels will include 6 in Mexico (Park Hyatt Los Cabos, Park Hyatt Riviera Maya, Andaz Mayakoba, Hyatt Playa, Hyatt Place San Jose del Cabo and Hyatt Place Tijuana) and 1 each in Colombia (Hyatt Regency Cartagena) and Chile (Hyatt Place Vitacura). There are currently 8 Hyatt-branded hotels in Latin America, including 2 in Argentina, 4 in Mexico and 1 each in Brazil and Chile.

With these acquisition and development activities, Hyatt expects to expand its brand presence in most desirable locations across the Latin America.

The company should be wary of its competitors, as they too are on the expansion mode. One of its peers, Marriott International Inc. (MAR) recently revealed its intention to double its presence in the Caribbean and Latin America by 2017. Moreover, several other major hoteliers like InterContinental Hotels Group (IHG) and Starwood Hotels & Resorts Worldwide Inc. (HOT) are also poised to beef up their portfolio in that region, thus making the market competitive.

Hyatt, a leading global hospitality company, owns, develops, manages and franchises Hyatt-branded hotels, resorts, residential and vacation ownership properties throughout the world. The company operates under the brands - Hyatt, Park Hyatt, Andaz, Grand Hyatt, Hyatt Regency, Hyatt Place, Hyatt House, Hyatt Residences and Hyatt Vacation Club. As of March 31, 2012, Hyatt's portfolio consisted of 488 properties in 45 countries worldwide.

It currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Neutral recommendation on the stock.

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