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Hyatt Forms JV to Expand in Brazil

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An affiliate of Hyatt Hotels Corp. (H) recently cut a $270 million deal with FSA Group S.A. (FSA) – a Libra Group company – to set up and own nine Hyatt Place-branded hotels in Brazil. Hyatt will manage each of the Hyatt Place hotels. The first property is slated to debut in 2016. The deal reflects the next phase of Hyatt’s expansion plan in Latin America.

In late 2012, Hyatt Place debuted in Latin America, in San Jose, Costa Rica. The company will open three more Hyatt Place hotels in Mexico, Panama and Chile this year.

With the rise of the affluent middle class population in Latin America, the inclination to spend on travel and leisure has somewhat risen. Apart from tourism, the region is also successfully emerging as a business hub. In fact, the select service segment in Latin America remains somewhat underserved.

All these factors justify Hyatt’s motive to have one of the largest hotel development pipelines in Latin America. Another hotelier Starwood Hotels & Resorts Worldwide Inc. (HOT) also plans to expand its operations in Latin America by 50% over the next five years. Yet another hotelier, Marriott International Inc. (MAR) also revealed its intention to double its presence in the Caribbean and Latin America by 2017.

Per the deal, the hotels will be unveiled in commercially and industrially developed Brazilian cities, which have been witnessing increasing demand for quality accommodation. The hotels will be located at urban, suburban and airport locations and will feature 150-200 rooms.

Among all other Latin American countries, Brazil is expected to lead the growth trajectory. Brazil is set to witness a surge in demand driven by decent economic growth and the resurgence of the middle class. A large number of hotels will be constructed in the country to cash in on the FIFA World Cup, which is scheduled for 2014 along with the Olympics in 2016.

Hyatt currently carries a Zacks Rank #3 (Hold). Other players in the same industry, which look attractive at current levels, include The Marcus Corp. (MCS) which holds a Zacks Rank #2 (Buy).

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