A wholly owned subsidiary of hotelier
Hyatt Hotels Corp.
) recently announced its plan to buy The Peabody Orlando hotel
for $717 million. Once rebranded, this 1,641-guestroom Orlando
property will be unveiled as Hyatt Regency Orlando Convention
Center. The deal is expected to be sealed by Oct 1, 2013.
We view the deal as strategically positive for both parties. We
believe that the owner of Peabody Orlando hotel has been offered
a fair price for this buyout. On the other hand, this big-ticket
acquisition will strengthen the Hyatt's presence in the dynamic
Orlando market -- the second largest hotel market in the US with
a significant number of convention and leisure travelers.
This property will be the sixth Hyatt-branded hotel in Orlando,
but the first large convention hotel for the company. The
hotel is strategically positioned in a market, which is quite
popular among associations and corporate groups. This prompted
the company to transform the asset to the Hyatt Regency brand,
which is known globally for its meeting facilities.
Further, the hotel is attached to the Orange County Convention
Center, which presently has a strong convention booking calendar
ahead. The Orange County Convention Center alone boasts over two
million square feet of space. The new Hyatt Regency plans to add
another 200,000 square feet of meeting space, thus making it the
biggest in terms of convention facility offered by any Hyatt
Regency hotel in the U.S. Quite evidently, the new property is
all set to garner huge convention business in the coming years.
Moreover, the hotel recently underwent a $440 million multi-year
expansion and renovation program. This implies that Hyatt does
not have to invest extensively on refurbishments. All these
attributes in Peabody Orlando property make it a lucrative
acquisition target. Hyatt expects the hotel to generate EBITDA of
approximately $10 million in the fourth quarter of 2013 and
approximately $55 million in 2014.
Of late, Hyatt has been active on the acquisition front. In Mar
2013, Hyatt declared acquisition of The Driskill Hotel under
Destination Hotels & Resorts brand in Austin, Texas for $85
Competition in the Orlando market is intense. Several other
Marriott International Inc.
Wyndham Worldwide Corp.
Starwood Hotels & Resorts Worldwide Inc.
) are also making their presence felt in the market.
HYATT HOTELS CP (H): Free Stock Analysis
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