Shares of Playa Hotels and Resorts NV soared nearly 30 per cent last week following a disclosure that it has entered exclusive strategic discussions with Hyatt Hotels Corporation which could include a possible acquisition of Playa by Hyatt.

“Our board and management team regularly review our structure, strategy and opportunities to enhance shareholder value, and we are pleased to enter into exclusive discussions with Hyatt regarding potential strategic options. Hyatt’s interest in our company is a testament to the strength of our business and the dedication of our incredible Playa team. The Playa Board and management team will remain open-minded and continue to act in the best interests of all Playa shareholders,” said Bruce D Wardinski, founder, chairman, and CEO of Playa in a release on Monday.

This exclusivity agreement will remain in force until February 3, 2025, but there is no assurance that both companies will enter into a definitive agreement. Playa even noted that it would not give any additional comments unless necessary disclosure is required.

In the same release, Playa stated, “Playa’s Board of Directors has been evaluating opportunities to maximise value for shareholders and has engaged with a number of potential counterparties. Consistent with its fiduciary duties, the board is committed to enhancing shareholder value and regularly reviews the company’s opportunities to advance the best interests of all Playa shareholders.”

Hyatt first got its foot through Playa’s doors in July 2013 when it purchased 14,285,714 ordinary shares for US$100 million and 26,785,714 preferred shares for US$225 million through HI Holdings Playa. This deal took place six years after Playa was founded.

After a decade, Hyatt owned approximately 10.22 per cent (12,143,621 ordinary shares) of Playa up to October 31 and earned US$35.56 million in franchise fees during 2023 from Playa, which owns eight Hyatt-branded resorts. Hyatt also earned US$78,000 in management and marketing fees through the brand management platform AMResorts.

Playa is a hotel owner, operator, and development company with a combined managed and owned portfolio of 8,627 rooms spread across 24 resorts in the Dominican Republic, Jamaica, and Mexico (Yucatán Peninsula and Pacific Coast). Playa’s proprietary portfolio composes of 16 resorts with 6,004 rooms. The Dutch company was formed in 2006 and is listed on the Nasdaq in the United States of America. Wardinski owns an estimated 5.18 million shares or 4.37 per cent of the company.

Playa shares closed Thursday at US$12.26, which left it up not only 28 per cent over five days but pushed it to a market capitalisation of US$1.45 billion. The company’s stock price peaked at a record high of US$12.70, greater than the US$10 per share price that PACE Holdings raised in its 2015 initial public offering (IPO). PACE Holdings was a special purpose acquisition company (SPAC) and merged with Playa in Q1 (January to March) 2017. PACE had raised US$450 million in its IPO, a figure that far exceeded Playa’s planned US$300 million IPO.

C Patrick Scoldes at Truist Securities upgraded his guidance on Playa from US$10 to US$13 per share with a buy recommendation; Tyler Batory from Oppenheimer has outperformed at US$12; and Chris Woronka from Deutsche Bank gives Playa a buy rating at US$13 per share.

Hyatt is the third-largest hotel franchise business in the world, with more than 1,330 hotels and all-inclusive resorts in more than 65 countries. Hyatt manages a small portfolio of proprietary hotels and provides management services to the hotels under its portfolio.

The announcement by Hyatt on potential strategic interests in Playa comes less than three months after Hyatt acquired Standard International for US$150 million on October 1. That deal is subject to the standard customary adjustments and contingent consideration of up to US$185 million.

Standard International is a hotel management company with several boutique brands, such as The Standard, The StandardX, The Peri, Bunkhouse Hotels, and The Manner spread across 22 hotels and more than 2,000 rooms in several cities, like New York; London; Bangkok; and Victoria, Australia.

In that same month, Hyatt announced that it had formed a 50/50 joint venture with Grupo Piñero to manage Bahia Principe-branded hotels and resorts and own the Bahia Principe brand. This joint venture is expected to expand Hyatt’s all-inclusive portfolio by 30 per cent, while Grupo Piñero will have a larger platform for travellers in its current markets of the Dominican Republic, Mexico, Jamaica, and Spain. Bahia Principe’s current CEO Julio Pérez is expected to lead this joint venture while Grupo Piñero’s Global CEO Encarna Piñero would chair the board of that entity.

Playa currently operates the Hyatt Ziva Rose Hall, Hyatt Zilara Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Paradise Cove Beach Resort & Spa, and Jewel Grande Montego Bay Resort & Spa in Jamaica, with 1,428 proprietary rooms. Following its November 2021 acquisition of Apple Leisure Group (ALG) and the AMResorts collection, Hyatt operates the Breathless Montego Bay Resort & Spa, Hotel Secrets St James Montego Bay, and Hotel Zoëtry in Montego Bay.

Playa has reported a net 14 per cent dip in owned resort revenue to US$147.03 million for Jamaica over the nine months as average occupancy dipped from 80.8 per cent to 72.9 per cent due to the impact of the US State travel advisory and Hurricane Beryl. That travel advisory impacted the broader Jamaican tourism market, with Playa estimating a US$10-million impact on an annualised basis from the advisory. The only positive during the period was Playa signing a new 15-year agreement with another company to lease equipment to produce electricity and chilled and hot water at the Hilton Rose Hall for US$11.8 million.

Playa’s overall results for the nine months showed that its total revenue dipped two per cent to US$719.63 million but saw a 23 per cent rise in net profit to US$64.78 million due to lower interest expenses. Playa’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was down four per cent to US$202.29 million, with the company expecting US$250-255 million for 2024. The company began accepting reservations at the Wyndham Alltra Punta Cana, Dominican Republic, earlier this month, which is its latest managed all-inclusive property.

During the month of November, Sangster International Airport (SIA) processed 373,900 terminal passengers, which was a 7.4 per cent dip on a comparative basis, while Norman Manley International Airport (NMIA) processed 132,800 passengers, which was a 7.8 per cent improvement. There was a net decrease of 20,100 passengers for November. SIA has processed 4.59 million passengers or three per cent less traffic in 2024, while NMIA processed 1.6 million passengers or 0.5 per cent more traffic in the same time frame. Jamaica is expecting 12,300 new hotel rooms over the next three years, with Wyndham and Secrets to open new hotels.

Hyatt’s ($H) share price has trended up five per cent over the last five days to US$159.49, which gives it a market capitalisation of US$15.32 billion, with the stock up 22 per cent in 2024. Hyatt’s nine months revenue was marginally up over the nine months (January to September) to US$5.05 billion, while net profit also increased sixfold to US$1.35 billion. However, this sharp increase was due to a US$1.27 billion gain on the sale of real estate. Hyatt had a consolidated asset base of US$11.87 billion, with cash of US$1.10 billion and equity attributable to shareholders of US$3.70 billion.