Hyatt Buys Dream Hotel Group
Hyatt Hotel Corporation recently announced that it is going to buy the management and franchise business of Dream Hotels. The purchase fits in with Hyatt’s recent pattern of “tuck-in” acquisitions of boutique luxury properties.
Does this Enhance their Position with MGM?
In this case, they’re significantly enhancing their position in New York. But they’re also picking up a property in Las Vegas, which makes them that much more attractive to MGM.
The Dream Hotel Acquisition
Potentially Offers MGM an Additional South Strip Hotel
MGM’s acquisition of Cosmopolitan threw a kink into its exclusive relationship with Hyatt. Cosmo has an existing relationship with Marriott, and it appears that it will stay that way (for now). And I certainly don’t believe that MGM will desert Hyatt for Bonvoy anytime soon. There is likely quite a bit of time still left on that contract.
But Cosmopolitan of Las Vegas is a unique property, one that is able to draw in a much younger crowd. It’s also one that MGM has craved for a while, given its strategic location. There really aren’t any other hotels in the MGM portfolio that can claim the same thing.
Dream Las Vegas Offers a Cosmo Competitor AND Builds out the South End of the Strip
Dream represents Hyatt’s opportunity to offer a similar property for the MGM partnership. Dream has long tried to position the brand as a “luxury lifestyle brand.” There’s no strict definition of “lifestyle brand” but, as it pertains to hotels, it frequently means “aspirational hotels for cool people.”
Hyatt has a similar brand in Andaz, but they’d love to build out the space. They’re not shy about it either, stating “Dream Hotel Group properties are known for their vibrant dining and nightlife experiences including hotspot restaurants, lavish entertainment venues and exclusive night clubs built on strategic collaborations with innovative and award-winning industry leaders” in the press release.
Dream Las Vegas Will Play a Role in MGM’s Strategy
First announced in 2020, Dream Las Vegas has had more than its share of challenges along the way. But the recent acquisition announcement confirmed that Dream still intends to complete the building. That’s a huge boon for Hyatt, since it has few branded properties in the region.
Managing A Casino – Managing A Hotel
But the big three hotel brands know that managing a casino and managing a hotel are two different things. Dream’s casino will be managed by Peninsula Pacific Entertainment, a small operator (recently purchased by Churchill Downs). I have to think, though, that MGM would consider buying them out of the contract. There’s little doubt that MGM would be the preferred manager when the P2E contract expires.
Related: MGM, Cosmopolitan Las Vegas And Loyalty Programs. How Much Harmonization Is Enough?
Will the Southern (Vegas Strip) Location Hurt the Deal?
Most of the MGM properties on the south end of the Strip are clustered together. The Dream Las Vegas is a bit south of the beaten path. While technically on the Strip, the closest landmark is the “Welcome to Las Vegas” sign. The Little Church of the West is a quarter of a mile away. The entrance to Mandalay Bay is a half mile. 10 minute walk in most cities? No problem. In Las Vegas, where casinos are stacked next to each other? It’s a bit more of a challenge, particularly for a 500+ room property. They certainly won’t be getting visitors to walk to the property. That’s one of the reasons that it will eventually need to be part of a larger ecosystem.
On the other hand, the Pinball Hall of Fame is right next to the hotel…
South Strip Pieces are Falling into Place
Farther away from the action, the southern end of the Strip has never become its own destination. Mandalay Bay was original, but ultimately, it’s hard to push luxury when Luxor and Excalibur are anchors. Without the details of the contracts among MGM, Hyatt and Cosmo, it’s hard to know exactly how the end game plays out, but it seems logical that the MGM and Hyatt partnership will be the surviving entity. It’s not set in stone, of course. Hyatt has the most at risk here. Marriott’s distribution network is the biggest in the industry, and MGM might find that attractive.
For now, though, Hyatt’s acquisition of Dream gives it not only an attractive property on the Strip but also some ammunition to counter Cosmo. The acquisition was more about the New York presence than Las Vegas, but it is certainly an interesting angle.
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