A buy-what-you-need approach could drive transaction rates and ROI.
This year’s hospitality M&A headlines more likely will be about millions than billions and, unless some radical agent of change comes along, they’ll be dominated by strategic tuck-in plays. Although 2023 is less than a month old at press time in late January, this tuck-in template is already gaining momentum as a means to optimize the upside of niche buys in an economic climate with a lot of question marks.
Opportunistic Means to Fill Gaps
Highgate Holdings put sector plays high on the radar in recent months. Its $2.8 billion buyup of Colony Capital’s hotel assets and its $1.5 billion joint venture with Cerberus Capital to acquire Core Point Lodging aside, this New York City-based investment giant has been scooping up more targeted value-add acquisitions with real-world asking prices—whether complementary tuck-ins such as tech companies and senior living specialists or a core portfolio addition such as luxury hotel brand Viceroy Hotels & Resorts (no financial details were released on the deal which is expect close in the near future).
More typical will be transactions such as a Hyatt Hotels Corp.’s soon-to-close acquisition of the 12-hotel Dream Hotel Group brand and management platform for $125 million, with a possible $175 million extension as the current roster of 24 hotels comes into the pipeline and opens. Similarly, Sortis Holdings in mid-January announced a definitive agreement to acquire the 11-hotel Ace Hotel Group International for $85 million.
More than just a riff on traditional curated deal models, the acquisitions of 2023 have a modular functionality—much like the plays tech companies have been making to build out specific service sectors or bolster core offers with scalable, one-stop-shop capabilities that directly address the maturing needs of current clients and fill demand gaps in prospective markets.
Cash is king
Take the Hyatt-Dream deal, for example. It has all the hallmarks of the M&A that will drive the transaction pace this year. It reflected a slightly high but still acceptable multiple in the 10x-plus range. It was all cash, which mitigated valuation concerns from rising interest rates. And, on the business-building side, it gave Hyatt one more tool to bolster one of its sought-after growth sectors—lifestyle, a presence in new markets, including 30% more inventory in New York City, an amped up profile in Miami as well as a MICE/resort destination coming online in Las Vegas in 2024 as well as a robust 24-project pipeline.

International is the whitespace for these tuck-in deals.
Michael Bellisario
“Hyatt could do this deal because it improved its balance sheet and credit metrics, so the big picture is good,” said Michael Bellisario, senior research analyst R.W. Baird. “The company has been able to be more acquisitive because it is using money from asset sales to acquire these kinds of brands within an asset-light strategy."
Bellisario added that dealmaking is not going to be about organic net unit growth for companies such as Hyatt as it would be for Hilton or even a blend of M&A and organic growth as it is for Marriott. “That’s an important distinction at a time when the brands are realizing that being bigger, better and newer is more important today than it’s ever been,” he said. “Their customers, owners, developers and other partners want more options to choose from and brands such as Hyatt are going to have to get bigger to compete better."
Think global; act now
Watch for smaller strategic acquisitions to make “bigger” translate to more global.
As C. Patrick Scholes, managing director, lodging and leisure equity research at Truist Securities pointed out, “2023 will continue to offer opportunities for global tuck-ins – not massive stuff because there’s just not that much out there. Besides, a mega-deal like Marriott-Hyatt would never make it past antitrust regulations.”
Scholes expects to see more small groups coming to market as travel technology makes it harder to get their names in front of clients.
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Iberostar Gran Paraiso, Puerto Morales, Mexico
“It’s definitely harder for niche players to compete—and harder still for newer brands,” Scholes said. “They don’t have a lot of name recognition in the travel community, so they have to pay a lot [for marketing or web positioning] to get noticed. For instance, many urban and international travelers haven’t heard of Dream. It doesn’t take away from the quality of the product, but people have to know about it."
Bellisario agrees on the importance of opportunities beyond U.S. borders. “The whitespace for these tuck-in deals is going to be international,” he said. “Some of the smaller companies made it through the pandemic, but now there are other challenges. Most of the opportunities will be in EMEA—though not in countries too close to Russia or Ukraine—and Asia.
These niche plays are tailor-made to tap the upside of emerging markets. Not only do they provide a platform that connected to the local business and travel community, but they also provide a ready-made base of local experts who can help brands based offshore navigate some of the increasingly complex regulations that govern doing business in these attractive fiscal incubators. The result is high name recognition without a hefty M&A price tag.
For more established overseas destinations, expect to see additional moves like IHG Hotels Group’s strategic partnership with Spain’s Iberostar Group. The long-term commercial agreement allying the U.S. giant with the 65-year-old resort specialist will give IHG its 18th brand and up to 70 hotels under the Iberostar Beachfront Resorts brand. Not only will that increase IHG’s global system size by 3%, it also puts dots on the map where the company is under-represented or has no presence in hot resort markets in the Caribbean, Mexico, South America, southern Europe and North Africa. More importantly, the deal builds out IHG’s 260-resort group and expands its international reach without a big-ticket acquisition.
This new generation of tuck-ins is structured to reap the benefits of a curated brand attitude and big-brand infrastructural support—from points to marketing and booking. “It’s great because the acquired company can keep its brand name and a certain degree of independence,” Scholes said.