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Hyatt Diversifies Via Purchase of Wellness Firm Miraval Group
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Shares of leading global hospitality company, Hyatt Hotels Corporation (H - Free Report) have outperformed its peer group over the last six months. The stock gained 7.4%, while its peer group declined 6.2% in the said period. On Jan 18, Hyatt announced something that has the capability of further propelling its growth trajectory – the acquisition of Miraval Group, a distinguished provider of wellness and mindfulness experiences, from an affiliate of KSL Capital Partners, LLC.
As of Sep 30, 2016, Hyatt had a portfolio of 12 premier brands and 679 properties in 54 countries. Miraval is set to form a new wellness category within this portfolio of brands.
With the demand for wellness offerings rising among high-end travelers, this acquisition provides Hyatt with the perfect way to expand beyond traditional hotel stays into this adjacent wellness category. The company is already committed to a holistic health and wellness strategy as many of its hotels worldwide are offering healthy refreshments at arrival, curated in-room amenities, increased fitness offerings, extended menus and nutritious to-go substitutes.
In keeping with Hyatt’s strategy, Miraval offers destinations for guests who seek inspiration and self-improvement for a balanced life. Along with acquiring Miraval’s flagship property in Tucson, AZ, Hyatt will take forward Miraval’s plans of redeveloping its recently acquired resort in Austin, TX. It will also be pursuing the acquisition and redevelopment of a resort in Lenox, MA. Also included in the transaction is the acquisition of the Miraval Life in Balance Spa brand, which debuted in Dana Point, CA, in 2016.
Hyatt plans to fund the investment with its current operating cash flows and proceeds from the sale of existing assets, in keeping with its asset recycling program. The initial investment in the transaction is projected to be $215 million and an expected additional $160 million over the next two to three years for the planned expansion and redevelopment purposes. The company expects these investments to be marginally accretive to adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) in 2017 and 2018 and accomplish a high cash-on-cash yield within four to five years.
Hyatt’s earnings have beaten estimates in three out of the four trailing quarters, recording an average beat of 24.67%. Meanwhile, 2016 and 2017 estimates have also moved north by 0.6% and 1.4%, respectively, over the past two months, reflecting optimism in the stock’s prospects.
Hyatt Hotels stands to gain from increased demand in the U.S., which is supported by stronger economic metrics and the increasingly positive employment scenario in the country. Moreover, improved transient demand and greater pricing power have been driving Hyatt’s Revenue per Available Room (RevPAR) over the past few quarters.
However, the company faces tough competition from others in the space like Marriott International, Inc. (MAR - Free Report) , Hilton Worldwide Holdings, Inc. (HLT - Free Report) and Wyndham Worldwide Corporation , who also boast a large presence in both domestic and international markets.
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Hyatt Diversifies Via Purchase of Wellness Firm Miraval Group
Shares of leading global hospitality company, Hyatt Hotels Corporation (H - Free Report) have outperformed its peer group over the last six months. The stock gained 7.4%, while its peer group declined 6.2% in the said period. On Jan 18, Hyatt announced something that has the capability of further propelling its growth trajectory – the acquisition of Miraval Group, a distinguished provider of wellness and mindfulness experiences, from an affiliate of KSL Capital Partners, LLC.
As of Sep 30, 2016, Hyatt had a portfolio of 12 premier brands and 679 properties in 54 countries. Miraval is set to form a new wellness category within this portfolio of brands.
With the demand for wellness offerings rising among high-end travelers, this acquisition provides Hyatt with the perfect way to expand beyond traditional hotel stays into this adjacent wellness category. The company is already committed to a holistic health and wellness strategy as many of its hotels worldwide are offering healthy refreshments at arrival, curated in-room amenities, increased fitness offerings, extended menus and nutritious to-go substitutes.
In keeping with Hyatt’s strategy, Miraval offers destinations for guests who seek inspiration and self-improvement for a balanced life. Along with acquiring Miraval’s flagship property in Tucson, AZ, Hyatt will take forward Miraval’s plans of redeveloping its recently acquired resort in Austin, TX. It will also be pursuing the acquisition and redevelopment of a resort in Lenox, MA. Also included in the transaction is the acquisition of the Miraval Life in Balance Spa brand, which debuted in Dana Point, CA, in 2016.
Hyatt plans to fund the investment with its current operating cash flows and proceeds from the sale of existing assets, in keeping with its asset recycling program. The initial investment in the transaction is projected to be $215 million and an expected additional $160 million over the next two to three years for the planned expansion and redevelopment purposes. The company expects these investments to be marginally accretive to adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) in 2017 and 2018 and accomplish a high cash-on-cash yield within four to five years.
Hyatt’s earnings have beaten estimates in three out of the four trailing quarters, recording an average beat of 24.67%. Meanwhile, 2016 and 2017 estimates have also moved north by 0.6% and 1.4%, respectively, over the past two months, reflecting optimism in the stock’s prospects.
Hyatt Hotels stands to gain from increased demand in the U.S., which is supported by stronger economic metrics and the increasingly positive employment scenario in the country. Moreover, improved transient demand and greater pricing power have been driving Hyatt’s Revenue per Available Room (RevPAR) over the past few quarters.
However, the company faces tough competition from others in the space like Marriott International, Inc. (MAR - Free Report) , Hilton Worldwide Holdings, Inc. (HLT - Free Report) and Wyndham Worldwide Corporation , who also boast a large presence in both domestic and international markets.
Nevertheless, this recent acquisition will aid in diversification of Hyatt’s business and thus improve the competitive positioning of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>