The old Rio Las Vegas will become several Hyatt-branded properties with Hyatt Regency the first to come online, expected in 2023.
Full service Hyatts in Las Vegas will be something new, but Hyatt isn’t telling us what other brands they’ll have yet and none of this will happen for several years. So that’s only of limited interest today.
What’s more intriguing I think is what this means for Hyatt’s MGM M life Rewards partnership. There are currently a couple of Hyatt Place properties in the Las Vegas area but for the past 8 years the chain has effectively codeshared with MGM in the city.
Hyatt is making clear that this announcement “does not impact World of Hyatt’s existing strategic loyalty alliance with MGM” but it will be interesting to watch how this develops over time.
- Hyatt has been able to earn revenue from its members’ stays in Vegas, even without a real Las Vegas footprint. It’s going to have its own Las Vegas footprint, albeit not as large and diversified as what MGM properties offer in Las Vegas.
- MGM has been able to earn revenue from its members’ stays outside of Vegas since they’re so geographically concentrated. That’s something they’re going to want to see continue.
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MGM members gain status in Hyatt’s program and earn points towards their own M life status when staying at Hyatt properties, and Hyatt members gain status in MGM’s program and earn points and nights in their Hyatt account when staying at MGM properties.
That’s been a great arrangement for both, though the volumes in each direction aren’t public. There’s no reason why the announcement of competition in Las Vegas from Hyatt will put a stop on the relationship. But what happens when the Hyatt property is up and running?
The key here is going to be partnership volume, and that will determine what happens to the Hyatt-MGM relationship.
- If Hyatt can draw volume away from MGM to its own hotels, and volume drops, then they don’t really need the relationship.
- But Hyatt still won’t offer the diversified experiences that MGM does. They’ll want guests to stay at their own properties, but they’d still rather earn revenue off of a Hyatt member staying with MGM than when that Hyatt member goes outside the partnership entirely such as to Caesars or elsewhere.
- If Hyatt’s properties aren’t filling at expected room rates there will be pressure not to incentivize World of Hyatt members to stay elsewhere through points and stay credit. There will be concern that the partnership cannibalized their own business.
However the Rio project involves franchise agreements, not Hyatt property ownership or management. If a management agreement were in place I’d be concerned about minimum revenue guarantees Hyatt might have offered to win the deal. Failing to meet minimum revenue would mean financial penalties to the chain, and could put pressure on the partnership not to divert stays. It seems far less likely that a franchise agreement would create that kind of problem.
The Rio is about 2500 rooms. MGM Grand alone is 6800. Hyatt won’t represent major competition to MGM in Las Vegas with this project, and it’ll be several years before the full project comes online. So it’s not a threat to the World of Hyatt – M life Rewards partnership… yet.