This all about the luxury sector, as Hyatt gains the UK-based agency's 1 million higher-spending members and could double the number of boutique and luxury properties it offers.
“We believe this planned acquisition will help us appeal to new types of travelers in existing Hyatt destinations and introduce World of Hyatt to new members via access to the curated Mr & Mrs Smith collection,” Mark Vondrasek, chief commercial officer of Hyatt, told Skift.
The transaction is anticipated to close in the second quarter, Hyatt said in a statement. If approved, Hyatt plans to add direct booking access to properties within the Mr & Mrs Smith platform through Hyatt’s website and mobile app.
The online specialist, which offers direct booking to hand-picked 1,500 boutique and luxury properties, was founded 20 years ago by husband and wife team Tamara Lohan and James Lohan. The company began life as a travel guide.
“After 20 years building the company, it’s hugely exciting to think that a company with such a wealth of resources, experience, and support will be there with me helping to grow the business,” said Tamara Lohan, founder and CEO of Mr and Mrs Smith.
Hyatt will now seek to leverage Mr & Mrs Smith’s one-million-strong membership base. It aims to launch direct booking access to properties within the luxury specialist’s platform through its distribution channels, including Hyatt.com and the World of Hyatt app.
The deal could double the number of global boutique and luxury properties within Hyatt’s direct booking channels. At the same time, Hyatt said it was exploring ways to enable World of Hyatt members to earn and redeem points across eligible hotels in the Mr & Mrs Smith collection.
More than 100 Mr & Mrs Smith employees are expected to join Hyatt’s commercial services team. Tamara Lohan will remain Mr & Mrs Smith’s CEO, reporting to Vondrasek. James Lohan will serve as Mr & Mrs Smith’s chief creative officer.
A Boost to Hyatt
Adding Mr and Mrs Smith could make 36-million-member Hyatt’s loyalty program more valuable to users, complementing Hyatt’s offerings and further strengthening its distribution capabilities, especially in Europe. The acquisition include properties in more than 20 countries where Hyatt doesn’t have a boutique presence, such as Fiji, Croatia, Iceland and Anguilla.
The footprint of boutique properties is more than double what’s now offered within Hyatt direct booking channels, noted Richard Clarke, managing director of AllianceBernstein, in a research note on Friday.
“This deal is low risk in the structural challenges,” Clarke wrote. “It likely enhances the loyalty program in giving more redemption (and eventually earning) opportunities in more geographies and adds the first venture into Villas, [a segment in] which Marriott has been growing.”
“Hyatt management have always been clear they will look for acquisitions that enhance the brand/distribution network and enhancing to growth,” Clarke said “We would assume Mr & Mrs Smith matches these criteria, and if so, the earnings uplift from this M&A should be little different to buying back stock, i.e. little need to move [future earnings] estimates.”
Other analysts also expected the deal to be beneficial.
“Presuming Mr and Mrs Smith is back to 2019 revenues, Hyatt is paying a greater-than-four-times revenue multiple for this acquisition,” said Pranavi Agarwal, senior research analyst at Skift Research.
“Whilst this might seem expensive for what appears to be a break-even company, compared to Hyatt’s recent acquisitions, it seems like a pretty good deal for a luxury brand with high direct bookings,” Agarwal said. “The acquisition is for roughly 1,500 properties, meaning Hyatt is paying about $44,000 for direct booking access to each property for its members.”
In comparison, Hyatt late last year acquired lifestyle brand Dream Hotels for $125 million for just a dozen open properties.
A Solid Landing for Mr and Mrs Smith
Mr & Mrs Smith has financially struggled in the past few years, particularly as the pandemic hit.
In 2021 the agency reported $10 million in revenue, and a loss of $695,000, according to documents filed at Companies House. The year before, it generated $8.7 million in revenue and a loss of $4.5 million.
In 2019, it racked up a loss of $757,000 on revenues of more than $20 million, but in 2018 made a profit of $563,000 — off revenues of almost $18 million.
For a few years, Mr & Mrs Smith had a marketing partnership with IHG Hotels & Resorts where IHG selectively offered to its loyalty members access to a few hundred of its 1,500 hotels in markets where IHG didn’t already have a strong presence of similar upscale properties. That deal presumably ends by the time this transaction closes.
Lohan spoke in March at Skift’s Future of Lodging Forum (video, below) — where she urged hotels to push boundaries.
“That such a heavyweight global business as Hyatt would see what we have built and want to take our brand and nurture it into its next stage is thrilling and unbelievable to me,” said Lohan said on LinkedIn on Friday. “I truly believe that, like us, Hyatt is a force for good in this industry, and the more time I spend with the team there the more excited I get about what the future holds. We share strong values, and both companies are strongly purpose-driven.”
Story updated at 9:30 ET with additional reporting, including analysts quotes, by Sean O’Neill
Photo credit: Tamara Lohan, founder and CEO of Mr and Mrs Smith, speaking at Skift Future of Lodging Forum in March 2023. Picture: Skift Skift