Hyatt Hotels Corp.
) recently divested a San Francisco-based property -- Hyatt
Fisherman's Wharf -- to
Chesapeake Lodging Trust
) for $103.5 million. Post sale, the property will be managed by
Hyatt is continuously adopting a strategy of franchising its
hived-off properties to grow in a less capital-intensive way.
After the conclusion of the sale, this 313-room hotel will
operate under the Hyatt brand name and the company will enjoy a
fee from the franchised property.
Strategically positioned at North Point Street in the
Fisherman's Wharf, the hotel is in proximity to many renowned
sights and attractions of the city, such as Ghirardelli Square,
the Cannery, Pier 39, North Beach, Chinatown, Alcatraz and the
Maritime National Historic Park.
Given the strength of the Hyatt Hotels brand and the
compelling growth opportunity of the San Francisco market,
Chesapeake finds it a lucrative acquisition. After the sale is
finalized, the property will undergo a renovation worth $8
million during the fourth quarter of 2014.
The divesture will further strengthen the long term relation
between Hyatt and Chesapeake. Earlier in March, one more
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.
We believe these asset sales are part of Hyatt's strategy to
strengthen its financial flexibility, which in turn will maximize
shareholder value. This Zacks Rank #3 (Hold) company aims to
unlock the real estate value by giving away ownership of
selective assets. A higher concentration of franchise fees
reduces earnings volatility and provides a more stable growth
Nowadays, transition to an "asset light" business model has
gained momentum in the hotels and real estate investment trust
(REIT) industry. Many other hoteliers including
Starwood Hotels & Resorts Worldwide Inc.
Morgans Hotel Group Co.
) have embarked on this strategy.
CHESAPEAKE LODG (CHSP): Free Stock Analysis
HYATT HOTELS CP (H): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MORGANS HOTEL (MHGC): Free Stock Analysis
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