Hyatt Hotels Corp.

In 2018, Hyatt spent around $500 million in the aggregate net of cash acquired to purchase certain management and licensing agreements of Two Roads Hospitality LLC. The transaction added 65 hotels and 12,000 rooms to Hyatt's system under Alila, Destination, Thompson, Joie de Vivre, and tommie brands, predominately in North America and Asia. We have assumed Hyatt's Two Roads investment delivers a modest $20 million-$25 million EBITDA contribution in 2019 excluding one-time costs and will ramp up over the next several years to an approximate 12x to 13x forward multiple. In 2017, Hyatt initially spent $237 million to acquire the Miraval Group, the brand, and its Tucson, Ariz. and Austin, Texas resorts. Hyatt will likely ultimately spend another $180 million

...Despite Hyatt's planned accelerated asset sale strategy toward a higher mix of fee-based revenue from management and franchise contracts, the company remains exposed to the operating volatility of its owned hotels.The company has stated it is committed to selling an incremental $1.5 billion of hotels over the next three years in addition to $1.5 billion of hotel sales completed since 2018. Hyatt has a track record of selling assets at attractive multiples, such as its $1 billion aggregate sale in 2018 of three hotels to Host Hotels & Resorts Inc. at a reported 17x EBITDA multiple. Still, we estimate about 45% of Hyatt's EBITDA is currently from owned hotels and about 55% of its EBITDA is currently from higher margin and less volatile management and franchise fees. In the event the company completes its planned incremental hotel sales within its desired timeframe, the mix of EBITDA from management and franchise fees could increase significantly to around two-thirds of total EBITDA, depending...

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