Hilton and Playa Hotels & Resorts have come together to form a strategic alliance to unite Playa’s experience in the all-inclusive resort space with Hilton’s global portfolio and loyalty program.
FAIRFAX, Va. and MCLEAN, Va., Sept. 17, 2018 -- Playa Hotels & Resorts N.V. (NASDAQ: PLYA) and Hilton (NYSE: HLT) today announced plans to leverage Playa Hotels & Resorts’ industry-leading, all-inclusive expertise with Hilton’s global portfolio of brands, and over 78 million participating members in Hilton Honors, Hilton’s award-winning loyalty program, to accelerate the growth of Hilton’s all-inclusive resorts.
"Our strategic alliance with Hilton is a win-win for both companies. This alliance will empower us to reach more guests, on more occasions, and in more geographies, than ever before. We view this as just a first step toward what is possible as part of this strategic alliance, and Playa is thrilled to continue to grow along-side Hilton and our other world class partners," said Bruce Wardinski, Playa's chairman and chief executive officer.
As part of the alliance, by the end of 2018, two Playa resorts, THE Royal Playa del Carmen, and the Dreams La Romana, will be converted to Hilton all-inclusive resorts, with the potential for the conversion and management of eight additional resorts by 2025. The converted properties will allow guests to earn and redeem Points through Hilton Honors.
“At Hilton, we are dedicated to offering our guests the type of world-class hospitality that matters most to them, in the destinations they want to visit,” said Christopher J. Nassetta, president and chief executive officer, Hilton. “Today we are pleased to begin our ambitious expansion journey with Playa. Together we are responding to our shared guests, who are seeking attractive resort offerings. And as our all-inclusive portfolio grows, so too does our commitment to world class hospitality in the Caribbean and Latin America.”
Although we anticipate some initial disruption, strategic alliances with world class partners such as Hilton can be transformative for Playa in the long-run. As a result of rebranding and renovations, as well as competitive discounting among our peers in Playa del Carmen and Cancun, at the midpoint, we currently expect our 2018 and 2019 EBITDA outlooks to decrease by $4.5 million and $26.0 million, respectively.
Key strategic positives for Playa:
- Increased brand and sourcing diversification: delivering the best products and service to more guests, more often, in more locations.
- The ability to leverage the expertise and cost of Playa's existing loyal local and regional management teams.
- As part of the transaction, Playa will commence management of the resort currently known as Dreams La Romana. The property will be rebranded as the Hilton La Romana, an All-inclusive Resort by year-end.
- Targeted stabilized cash-on-cash returns of 25% - 31%, on capex of $39k - $42k per key for the two projects combined.
“We look forward to capitalizing on the power of the Hilton brand, the strength of our respective development teams, and Playa’s world-class all-inclusive management expertise, to accelerate the growth of Hilton’s all-inclusive resorts,” said Fernando Mulet, senior vice president, head of development at Playa.
For more information about the financial and strategic implications of the rebranding and conversions described herein, please see the supplemental presentation posted on our website at investors.playaresorts.com, as well as our Current Report on Form 8-K, filed today with the Securities and Exchange Commission.
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