Hyatt Hotels<\/a> is selective in where and how it adds hotels to meet the expectations of its loyalty program members, who largely have high incomes.<\/p>\n\u201cWe have so much white space,\u201d said Mark Hoplamazian, president and CEO of Hyatt, on a Thursday earnings call to discuss third-quarter results. \u201cWe see places where we are way underpenetrated relative to our larger competitors.\u201d<\/p>\n
In many cities and towns, rival hotel groups might have, say, 7 properties, while Hyatt has none within 30 miles.<\/p>\n
\u201cWe\u2019re not running into ourselves in any market in the world, so we have a lot of space to grow,\u201d he said, noting that the growth would be \u201cvery welcome by our loyalty members.\u201d<\/p>\n
Explosive Loyalty Program Growth<\/h3>\n
Hyatt wants to be strategic about where and how it expands worldwide partly to maximize the value of its loyalty program, executives said.<\/p>\n
Membership at Hyatt\u2019s rewards program surged 22% year-over-year, to 51 million members in the third quarter.<\/p>\n
That statistic highlighted that the company is succeeding in signing up repeat customers \u2014 especially well-to-do travelers. The CEO said Hyatt\u2019s loyalty members typically \u201chave relatively higher net worth and household income\u201d than the average American.<\/p>\n
Hoplamazian said one reason the company has been gaining some traction with travelers is that Hyatt is increasingly offering places to stay and types of stay at a broader array of price points, increasing the likelihood a loyalty member will find it easy to earn points and find appealing redemption options.<\/p>\n
Broadly speaking, as room count grows, so does the loyalty member base. That dynamic is one reason Hyatt has tried to scale up by adding hotels in more places relevant to its potential guests. <\/p>\n
Acquisitions as a Path to Growth<\/h3>\n
Acquisitions are another way that Hyatt will fill the \u201cwhite space\u201d it sees. On Monday, Hyatt announced plans for a joint venture to manage Grupo Pineiro\u2019s Bahia Principe all-inclusive resorts, adding 23 resorts with about 12,000 rooms.<\/p>\n
Hoplamazian didn\u2019t offer many more details than what Skift previously reported, saying that his team will reveal more after the deal closes \u201cwithin a few months.\u201d<\/p>\n
\u201cPresently, over 85% of Hyatt all-inclusive resorts in the Americas are 5-star properties, and this transaction enhances our network effect by expanding our own inclusive offerings to members and guests at multiple price points,\u201d Hoplamazian said.<\/p>\n
\u201cThis [Bahia Principe deal] is a unique opportunity to expand our all-inclusive offerings in the 4.5-star category, which fills white space in our brand portfolio.\u201d<\/p>\n
Keeping a \u201cHyperfocus\u201d on Premium<\/h3>\n
Until recently, all of Hyatt\u2019s brands were high-end, such as its upscale Hyatt Place and luxury Park Hyatt. <\/p>\n
However, in 2023, the company debuted Hyatt Studios as its first upper-midscale extended-stay brand, aiming to appeal to travelers looking for mid-priced stays.<\/p>\n
Analysts asked on Thursday if Hyatt would go further and copy Marriott and Hilton\u2019s current playbooks and add cheaper midscale or premium economy brands.<\/p>\n
\u201cOur eyes are wide open that our other competitors have very large collections of conversion brands, including some in the midscale or lower mid-scale arenas,\u201d Hoplamazian said. \u201cBut I don\u2019t see us going there because it\u2019s not a market that we currently play in.\u201d<\/p>\n
To ensure its luxury and lifestyle brands consistently differ on their promises, Hyatt made organizational changes this summer, forming separate teams to focus on its lifestyle hotels and its luxury hotels \u2014 just as it currently has a team focused on its upper-midscale brands.<\/p>\n
\u201cWhen you approach Hyatt, you\u2019re not going to have a cacophony or a laundry list of brands,\u201d Hoplamazian said.<\/p>\n
For example, in the coming months, Hyatt will debut its new dedicated \u201clifestyle group\u201d led by President & Creative Director Amar Lalvani, former executive chairman of Standard International group. The group will seek a \u201cmuch sharper definition of each brand\u201d and ensure that the company does a better job of personalizing service for high-income guests with high expectations.<\/p>\n
The goal is to \u201chyperfocus on distinct customer groups that we\u2019re serving and to more with higher fidelity and more breadth and depth,\u201d Hoplamazian said.<\/p>\n
Maintaining Hotel Quality Control<\/h3>\n
For its overall portfolio, Hyatt has lately found it more challenging to keep all its properties in a mint condition. This year, about 1.5% of net rooms have been exiting Hyatt\u2019s system, roughly double the company\u2019s historical average.<\/p>\n
\u201cPart of that has to do with just discipline in maintaining standards and elevating the quality of our portfolio,\u201d Hoplamazian said. One example he cited was that some Amerisuites properties it acquired in 2004 and rebranded as Hyatt Place are now older and need repair and updating.<\/p>\n
Other hotel groups, such as Marriott and Hilton, have more brands across more price points. When one of their properties \u201cages out of a brand,\u201d they can rebrand it into a cheaper brand with lighter standards for amenities, decor, and paint quality rather than lose a property from its network.<\/p>\n
Truist analyst Patrick Scholes asked whether Hyatt might copy that tactic and add an upscale conversion brand, perhaps equivalent to something like Hilton\u2019s DoubleTree.<\/p>\n
\u201cI learned a long time ago that you never say never,\u201d Hoplamazian said, but he suggested no such plans to create a brand were imminent.<\/p>\n
\u201cWhat we don\u2019t want to do is do something that is going to be a detriment to either our brand reputation or serving the higher-end guests in each segment,\u201d Hoplamazian said. \u201cWe also don\u2019t want to end up in a situation \u2026 where guests can\u2019t tell what they\u2019re going to get.\u201d<\/p>\n
To cover more ground, the operator will speed up the pace of conversions, taking over existing properties and running them as Hyatt brands. It will occasionally also temporarily buy hotel assets, but only if it believes it can resell them years later at a profit.<\/p>\n
Hoplamazian gave the example of Hyatt waiting decades for the right opportunity in Mexico City, eventually paying $190 million for a prime property \u2014 which it later sold for about $400 million.<\/p>\n
Loyalty Program Payoff<\/h3>\n
While the loyalty program isn\u2019t driving all of Hyatt\u2019s strategy, it\u2019s an important pillar. High-end consumers tend to value exclusivity over ubiquity, so Hyatt wants a portfolio that reflects their tastes.<\/p>\n
That\u2019s why Hyatt is resisting the temptation to copy recent Hilton and Marriott moves downmarket by creating midscale and premium economy brands that can be added more quickly and cheaply. <\/p>\n
Selective growth with a focus on luxury and upper-upscale segments may eventually leave the group more exposed to economic downturns than other hotel groups that are better diversified.<\/p>\n
Yet selective growth may help make its loyalty program more lucrative on a per-member basis than those peer companies.<\/p>\n
Management claimed consumer spending on Hyatt\u2019s co-branded credit card \u201cleads the industry.\u201d However, conclusive claims are impossible because companies don\u2019t disclose comparable figures. <\/p>\n
Hyatt saw spending on its co-branded cards rise 16% year-over-year through the first nine months of the year.<\/p>\n
Executives didn\u2019t reveal the fee income Hyatt gets from banks for the cards. However, they said Thursday they would renegotiate their contracts with banks for a better \u201cstructure\u201d by the end of next year. <\/p>\n
Third Quarter Results<\/h3>\n\n- Net income<\/strong>: $471 million, roughly flat year-over-year.<\/li>\n<\/ul>\n
\n- Revenue per available room<\/strong>: up 3%<\/li>\n<\/ul>\n
\n- Room pipeline<\/strong>: About 135,000 rooms (up 10% year-over-year)<\/li>\n<\/ul>\n
Segment Trends<\/h3>\n\n- U.S. leisure travel<\/strong>: Bookings at Hyatt\u2019s U.S. hotels showed some softness as more well-to-do American vacationers traveled abroad this year.<\/li>\n<\/ul>\n
\n- Business travel and groups and events<\/strong>: Continued to grow worldwide.<\/li>\n<\/ul>\n
\n- All-inclusive resorts<\/strong>: The segment showed slight weakness, with package revenue per available room declining 0.9% compared to last year. Executives blamed \u201cthe impact of hurricanes.\u201d<\/li>\n<\/ul>\n
\n- Europe<\/strong>: Saw a 15% RevPAR boost, helped by the Paris Olympics and an influx of American vacationers.<\/li>\n<\/ul>\n
\n- Asia Pacific<\/strong>: Rose 10% (excluding Greater China) <\/li>\n<\/ul>\n
Hyatt executives said they were optimistic about booking trends for the fourth quarter and first quarter of 2025 overall.<\/p>\n
\u201cComing out of September and into October, our leisure booking pace has really accelerated,\u201d said Joahn Bottarini, chief financial officer. \u201cInto the first quarter, we have a very strong booking pace.\u201d<\/p>\n
Mark Hoplamazian, president and CEO of Hyatt<\/strong>, will speak at Skift Global Forum East on November 20, 2024.<\/strong> Get tickets<\/strong>.<\/p>\nWhat am I looking at?<\/strong>\u00a0The performance of hotels and short-term rental sector stocks within the\u00a0ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares. <\/p>\n