Hyatt has a little over 600 hotels. That’s one-tenth the size of Marriott. There’s Marriott, Hilton, IHG, and Accor as players and there just aren’t chains in Hyatt’s peer group anymore.
They did try to buy Starwood themselves but their complex stock structure (two tiered stock giving outsized control to the Pritzker family) was a stopper and Marriott bested them. They tried to buy Kimpton but IHG was willing to pay far more (likely too much, this deal doesn’t seem to be working out as well for IHG as hoped).
Now who else is left to buy? There are the Omni Hotels of the world but those sorts of deals wouldn’t move the needle. Omni is one-tenth the size of Hyatt.
You’d expect Hyatt itself to be an acquisition target and it may be, but any deal has to be friendly and favorable towards the Pritzkers because of that two class stock.
So if you’re Hyatt where do you go? They’ve got a couple of things in the works, neither one possibly game changing.
- Experiments in home sharing but this gets them only 20 destinations around the world.
- Spa and lifestyle focus if they can figure out how to integrate themselves into the lives of guests outside the hotel, and become even more premium inside, their overall brand becomes more valuable and they earn more of a revenue premium.
But buying spas and colon cleansing hotels isn’t going to change their fundamentals. They do skew high end, but more of their properties are actually limited (‘select’) service and that’s where their growth has been.
So while they’ve been focused on their high end brand, they also want to be the chain for the global middle class with those select service brands ‘gateway’ hotels moving people up the average daily room rate ladder to full service properties.
Hoplamazian said the middle class, which he refers to as the commercial or consuming class, includes people traveling for business but also with their families. “These are people who are working, and have jobs that take them on the road, but also people who are choosing to actually spend money on travel,” he told Skift. “I think that population is growing tremendously.”
…“For our focus, in the markets in which those populations are growing the fastest, China would be at the top of that list,” said Hoplamazian. “Our focus is to really focus on the expansion of Hyatt Place and Hyatt House, which are select-service brands, which are at a more approachable price point than our full-service hotels.”
Hoplamazian views more affordable brands such as Hyatt Place and Hyatt House as gateways to other brands in the Hyatt’s portfolio. “We need to pay attention to developing those populations, those people, as potential outbound travelers for the brand,” he said.
Credit: Hyatt
The problem for Hyatt is that they’re not the only ones looking to China, while they’ve grown in the region they remain a relatively small presence there.
I still believe that Hyatt’s top elite tier remains the most rewarding overall hotel status. But it takes a lot of effort to remain loyal to the chain given their limited footprint. Whether focusing strategically on the worldwide middle class, or convincing Americans that all of their cleansing needs can be met by Hyatt, they aren’t going to get to scale. They need to acquire or be acquired.
generally when you want to get acquired… you window dress the company. not destroy its “loyal” fan base and then go to market with hat in hand.
If Hyatt wanted to move the needle with the middle class they would need a far far more generous rewards program. Something that creates such a value proposition that it renders their footprint worth living with.
That’s not gonna happen though I reckon. 🙂
Agreed that Hyatt’s top elite tier remains the most rewarding overall hotel status and their Points+Cash rates are a bargain in certain markets.
ha ha, half joking, half not…..
Have Choice Privileges hotels be a partner…just like Alaska and Delta used to be. Separate ownership, separate frequent stay programs, just partners.
Don’t laugh. I stay at Hyatts AND Rodeway Inn. It depends on the location. For example, San Antonio, TX, probably a Rodeway. San Francisco, probably the Grand Hyatt on Union Square.
I would like to see Hyatt purchase a chain in Europe or Asia (what about NH or Accor etc?), as I think the growth could come overseas as well as the USA. In North America they also need more top tier vacation resorts, one Park Hyatt in St Kitts and a couple Andaz and such here and there doesn’t cut it.
Also expand the WOH program to more Airline partners just like SPG did very well in the past. I think with the cheaper price of purchasing miles in bulk it is a fast way to make WOH more valuable and probably more profitable. The gutting of the program last year was not a great addition, but as a Glob/Diamond for 3 years now I am kind glad a lot of the top tiers fell off as I get upgraded 90% of the time now when I am travelling in Europe or Middle East or Asia, where in the past it was much lower with lots of credit card and nights only top tiers in play. I think they need to acquire a brand gut it bring up to hyatt standard and add to the portfolio etc.
I am not sure about the HP/HH strategy, as I think that will help for certain biz travelers, and I also would like to see more global HP/HH hotels, but I also am not sure that will then later equate to PH or Andaz stays.
Radisson – Weak in the USA with high and mid-tier hotels, much better representation in the rest of the world where Hyatt is weaker.
Perhaps spin off Country Inns and convert some to the Hyatt standard.
HNA likely wishes to dispose of its control.
Or they can buy Motel 6 and Motel 8, and they can have more properties than Marriott.
First of all they need a CEO. The fact that Starwood and Marriott are combining actually opens a big opportunity for them to provide better service to those who do actually show real loyalty. The sheer size of Marriott/SPG makes it difficult for them to provide service. But they seem to have gone the other way which is kind of stupid dumb, no?
It would be best for Hyatt (not necessarily for its guests) to be acquired, if it can fix its current ownership structure. Hyatt doesn’t have much confidence in its current mission as a hotel management company, as is searching for growth ideas outside of that. Hyatt has little to no leverage (compared to Marriott or Hilton) with OTAs; strangely Hyatt has discouraged business from a lot of direct-booking frequent guests by revising their loyalty program in 2017.
Hyatt is still a pretty profitable company, last year they had $4.7bn in revenue and were pretty firmly in the black, so I don’t see the logic that they’re stuck and need to be bought. This has just generally been a confusing premise for me, the idea that a good sized company with solid revenue and stable annual profits is somehow a failure because it’s not growing 30% every year (Hyatt’s revenue grew about 8% year-on-year for 2017 from 2016).
For those of us who like traveling overseas it’s hard to be loyal to Hyatt. Not enough properties. Not having a single property in Rome or Barcelona is unacceptable. I found one property in Rio de Janeiro, but the location so far out, I would not stay there if it was free.
Bonuses on stays at House and Place properties plus Chase points transfers make Hyatt very viable for me; less so than in the Gold Passport days but still not all that bad. Vacations can be arranged around where Hyatt properties are found, if they can’t then I’ll book somewhere else. But I’ll agree with @Stephen, Hyatt might not be a direct competitor to the Marriotts of the world but is that a bad thing?
For top elite travelers, service and convenience are the keys to choosing hotel chain. Hyatt has the service, but not the convenience. Cannot image as a top elite, they have to choose a different chain when traveling to some different countries.
For middle elite travelers, value is more important, values including the value of points, flexibility of points, the chance to redeem when on vacation and traveling with family, etc.
So for myself, cannot image I could be loyal to it.
Hyatt, you can win back elites. Bring back Gold Passport.
I think Hyatt needs to, should they choose to aquire more brands, look at buying multiple regionally groups, rather than looking for some non-existent silver bullet.
Choice has a lot of dead weight at the bottom end, along with dead hotels walking parked in brands like Clarion, but they also have some solid mid-range properties, a handful of aspirational properties, and some good geography.
Given Accor’s weakness in Asia (relative to their footprint in Europe), along with their complete abandonment of North America, they might also prove to be a great partner.
Both would give Hyatt reach that’d put them in the big leagues again.
Drivel. Acquisitions more often than not destroy shareholder value. It’s been a finance PhD dissertations topic mill for decades.
Adding debt in a rising interest rate environment- likely will not end well.
Better to focus on creating and expanding a superior value added product and identity.
It’s like going to a mid level pasta restaurant and not getting enough pasta to be full. The pasta costs $0.69 to the restaurant.
Similarly, how much does it cost to offer a disruptive set of value added services:
Internet. Basically free to provide
Water – $0.10 a bottle from Costco.
Breakfast – This is a big ticket item. Perhaps tier the benefit from continental to full menu.
Upgrades – unused rooms are almost free, so allow every tier some upgrade ability but like unlimited internet from cell providers throttle it – based on tiers.
Late checkout – again throttle it. Allow lowest tier ability to have 2 a year at their discretion, giving more to each tier. Lower tiers can get on space available basis.
Basically. Every tier gets some rockstar treatment.
Lifetime benefits should be a hard contract and hard to obtain with some minimum annual maintenance to keep.
Hyatt can become the T-Mobile of hotels and do just fine.
@Gary
‘colon cleansing hotels isn’t going to change their fundamentals’
Hah, actually laughed out loud.
Any comments on the Globalist situation? Every hotel I goto, they swear their Globalist bookings have gone way up, including people I’ve known for a while.
What I haven’t seen suggested is a more innovative and rapid approach to expanding not the Hyatt hotel management service but to strengthen WoH with partnerships. Multiple such regional partnerships with regional giants would go a long way in solving the problems and these are infinitely easier to negotiate than a whole merger. Something similar to the MGM deal though that was too limited in geography.
Say Radisson/NH (HNA assets) in Europe
or Steigenberger/Movenpick/Millennium/Kempinski
One of the 3 groups operating in Scandinavia/Nordic countries
Jumeirah/Emaar/Rotana in Middle East
Taj or Oberoi in India
Shangri La or one of the Chinese groups for China
Taj and Shangri La already have such a relationship.
Or a relationship with LHW, SLH, Preferred
Smaller groups like Constance, LUX, Banyan Tree, Six Senses, Alila
You can quickly transform your footprint within months. Some of these are not suitable acquisition targets due to ownership structure and strategy (Accor has a very different asset model) but for loyalty partnerships, anyone is suitable.
The dirty secret is that Hyatt is having immense trouble growing even organically which is far more worrying, the gap between them and the front runners is *increasing* not decreasing.
@Malthus
Why do you feel Accor is weak in Asia? Accor is so strong in some markets that it can beat *all* other hotel groups put together in size and distribution (Australia for instance). It is also on par with best in South East Asia (Thailand etc), India and all ex-French colonies and the strongest in Middle East and possibly Africa. Do you mean East Asia specifically?
@PR chef
I’m inclined to agree. Problem is they’re not organically growing much at all.
Breakfast is actually ridiculously cheap to provide, a full 5 star buffet breakfast is anywhere between 5 to 10 USD in marginal price once you have a bare minimum to break even. The opportunity cost is possibly larger because they charge between 30-50 USD for it, but those figures look worse for upgrades.
The cost to provide a suite over a room is double the housekeeping cost (not much, but still double) but the opportunity cost is in the 100s of USD potentially. But I agree, with the right inventory controls (don’t promise every last suite away) there is a lot of room to ramp up benefits especially at the mid end of all programs. This segment is ripe for disruption
What Stephen said. Pritzkers have billions, plus this keeps throwing off cash to the great-great grandchildren. If their business is to be adversely affected by consolidation, then maybe. But I reject that. In hotel business location and price (value) is going to trump even corporate contracts. They can compete.
What Hyatt does need to do is invest in the future with multiple points of entry to their core travel market, perhaps even outside their real estate and operating competency. An example of what can happen is Hearst, another family conglomerate, but in print media (at first). The reason there is a big, beautiful (relatively new) Hearst building in Manhattan – and the Hearst clan has never been happier? The San Francisco Examiner and other newspapers? Hell no. Hearst O&O TV stations? Not really … Marie Claire and Esquire, and Good Housekeeping? Hilarious. The reason is they diversified .. in 1980 they bought (and still own) a 20% piece of a cable network off of RJR Nabisco that everyone thought was a silly idea, with a silly name (ESPN) …. it now throws off like $400-500 million a quarter in free and clear profit to Hearst …. supposedly half or more of their total now … most of the rest of Hearst is just busywork by comparison.
If I was a Pritzker, I’d want to take my lottery payout over a lifetime instead of a lump sum. Dotcom travel startups or acquisitions in the space. A feeder subbrand below existing offerings with a distinctive flair. Etc. With a war chest like theirs and a stable business beneath them, why sell?
You can’t screw your customers, break your word repeatedly, and bring in “World of Hyatt” and expect to keep customers. I was a Hyatt loyalist, was once even Diamond level, and had the Hyatt credit card. I dropped the card last year and have not stayed in a Hyatt in the past year. Watching Hyatt was like watching an old friend jump off a cliff.