Since late 2010, transition to an "asset light" business model
has gained momentum in the hotels and REIT industry. Hoteliers
Hyatt Hotels Corporation
Starwood Hotels & Resorts Worldwide Inc.
Red Lion Hotels Corporation
Morgans Hotel Group Co.
) have embarked on such a strategy.
HYATT HOTELS CP (H): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MORGANS HOTEL (MHGC): Free Stock Analysis
RED LION HOTELS (RLH): Free Stock Analysis
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The asset sale is part of the companies' long-term strategy to
improve financial flexibility, which in turn will maximize
shareholder value. The companies aim to unlock real estate value
by giving away ownership of selective assets. A higher
concentration of franchise fee reduces earnings volatility and
provides a more stable growth profile. Companies use the sale
proceeds to invest in brand positioning as well as to restructure
their balance sheet that often includes debt repayment.
As part of this asset-light strategy, Hyatt recently offloaded
the 451-room Hyatt Regency Denver Tech Center property to an
affiliate of JMI Realty for $60.0 million. Post sale, the
property will be managed by Davidson Hotels & Resorts under
the Hyatt Regency brand.
Despite the divestiture, Hyatt will be able to retain its brand
presence in the Denver Tech Center area and increase its capital.
The property's meeting space underwent an extensive makeover
recently. The renovated space is likely to be a prime location
for meetings and events at the Denver Tech Center.
This Zacks Rank #2 (Buy) company has adopted this strategy of
divesting properties to grow in a less capital-intensive way. In
Jun 2013, the hotelier divested a San Francisco-based property,
Hyatt Fisherman's Wharf, to Chesapeake Lodging Trust for $103.5
Earlier in March, a Manhattan-based Hyatt branded property, Hyatt
Place New York Midtown South, was sold to Chesapeake for $76.2
million. In addition to this, Chesapeake owns two other
Hyatt-branded hotels - Hyatt Regency Boston and Hyatt Regency
Mission Bay Spa & Marina - in the U.S.