Key advantages and challenges of hotel brand acquisition
Yariv C. Ben-Ari, co-chair of Herrick's Real Estate Hospitality practice, spoke with Hotel Dive about the benefits and challenges facing Hyatt in its possible acquisition of Standard International.
Although Hyatt and Standard International have yet to confirm the potential deal, Yariv said that "it’s likely negotiations are underway given Hyatt’s recent track record of brand acquisitions. Last year, for example, Hyatt acquired the luxury hotel platform Mr & Mrs Smith."
"There are several advantages the Standard International deal poses, including the opportunity for Hyatt to expand in the highly demanded boutique hotel space. But the deal wouldn’t come without its challenges," Yariv said.
The article noted that the demand for boutique hotels and Revenue per Available Room (RevPar) has increased over the past year. According to Yariv, demand for boutique hotels is growing as more travelers seek luxury and experiential accommodations, a trend hospitality insiders say will continue through 2024. With strong RevPAR performance and improving demand fundamentals, the boutique hotel space poses significant growth opportunities for hotel companies — and that’s one reason Hyatt may be eyeing acquisition in the space, Yariv explained.
The article highlighted that the Standard International deal offers several key advantages for Hyatt. For one, Yariv said, "it’s easy to absorb something that has proven to work and is trendy, accepted and marketable... So, rather than go and start to develop something from the ground up and invest a lot of time and money to grow a new brand, by absorbing something that exists and works and is scalable — which is the most important thing — that makes a lot more sense than trying to start from scratch," Yariv added.
Yariv said that another draw of the Standard International deal is the company’s portfolio, which is larger and farther-reaching than some of Hyatt’s other recent brand acquisitions.
The article mentioned that if Hyatt acquires Standard International, Hyatt will presumably add around 19 global properties to its portfolio. "It really does give Hyatt a competitive advantage if they’re able to acquire [Standard International] and quickly bring it under their umbrella and grow it organically from that point on," Yariv said.
But, while the acquisition could give Hyatt a leg up in the boutique space, doing so and subsequently scaling up the Standard International brand wouldn’t be without challenges, according to Yariv. The "real challenge" for Hyatt would be maintaining the "coolness" and the "attractability" of hotels currently within Standard International’s portfolio — what drives guests to stay there in the first place.
Beyond the deal in question, a challenge that all chains face when they look to acquire smaller brands, Yariv noted, relates to labor.
Acquirers may also have to think about how a brand will integrate into various markets and compete with other brands, or even the acquirer’s own assets within those markets, Yariv said. This may impact a company’s pipeline, he noted.