If there’s something we can all learn from Madonna, it’s this: You have to keep reinventing yourself over and over to stay on top of the game, or else the constant churn of young pipsqueaks who can hold half a tune will inevitably threaten your crown.
Some (OK, fine — maybe it’s just the hotel reporter writing this story) could argue Hyatt has taken a page from the Material Girl in recent years with its own brand strategy.
While the company was known for decades as a lofty hotel chain that catered to business travelers, it eventually started to reinvent itself into a luxury and lifestyle powerhouse with brands like Alila, Andaz and Thompson Hotels. High-profile openings in the last quarter include the new Park Hyatt London River Thames and Alila Shanghai.
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The reinvention continued in recent years with a more bespoke luxury play with the acquisition of the Mr & Mrs Smith booking platform. Now Hyatt has ventured into all-inclusive resorts with the addition of the Apple Leisure Group network of brands like Secrets and Dreams, and a planned joint venture announced earlier this month with the parent company of Bahia Principe Hotels & Resorts. Hyatt also flexed its lifestyle hotel muscle earlier this year with the announcement that it was absorbing Standard International’s network of brands that include The Standard and Bunkhouse Hotels.
Hyatt’s overall development pipeline is more than 40% of the company’s current hotel room count.
“Our openings provide more opportunities for our guests and members to engage with us while our growing pipeline allows us to expand into new markets in the future,” Hyatt CEO Mark Hoplamazian said Thursday morning on a company earnings call.
But even this nimble Chicago-based hotel giant faces headwinds from time to time and — gasp — must ponder if it should do what the competition is already doing.
While the company reported a hefty $471 million third-quarter profit on Thursday, an investor call showed many analysts are curious about a higher-than-usual number of rooms leaving the Hyatt orbit. Hoplamazian said some of this is due to Hyatt’s strict brand standards and owners not wanting to keep up with modern requirements on older properties.
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“Some of it is markets that have become, I would say, more challenging, or where the central business district has moved and we are looking for new representation,” the Hyatt CEO said to investor analysts Thursday morning. “In a couple of cases, owners that we didn’t come to an agreement with on bringing hotels to brand standards. So, part of that has to do with just discipline and maintaining standards and elevating the quality of our portfolio.”
The conundrum is both a blessing and a curse for Hyatt. On the one hand, Hyatt wins rave reviews by catering to the high end of each of its segments. Part of this means keeping hotels in top shape and maintaining stringent brand standards no matter how old the property is.
The competition at Marriott, Hilton and IHG will say they have similar standards around each of their brands, too. But they also have an off-ramp for owners who don’t always want to keep up with those standards but do want to stay in the company orbit. DoubleTree is Hilton’s conversion brand in the upscale space, while Spark has become a rapidly growing brand in the premium economy space. Marriott’s Delta brand has been touted as an option for owners who didn’t want to go through the process of upgrading to new standards rolling out at Sheraton.
“We do not at this point have a brand into which we would encourage owners who want to downgrade their hotels to something that’s at a lower level,” Hoplamazian said. “That’s different than our competitors.”
Given this seems like low-hanging fruit for a company that has shown in recent years it isn’t exactly shy about adding new brands, is one in the works?
“There is opportunity. It’s something we’ve been looking at since the beginning of time,” Joan Bottarini, Hyatt’s chief financial officer, said with a laugh during the earnings call Thursday morning.
The conundrum here goes back to the logic that Hyatt focuses on the high end of travelers, whether they’re leisure or business travelers. So, the concept of a “downgrade” of anything might appear at odds with Hyatt’s brand and guest logic.
“We’ve got our eyes wide open,” Hoplamazian said. “It is something new that we really haven’t had an issue with or had to consider as much as we do today.”
New brands and bragging rights
Hoplamazian added further details on the recent Standard acquisition and upcoming joint venture with Grupo Piñero, owner of Bahia Principe Hotels & Resorts. The company’s Standard takeover will mean 22 lifestyle hotels with roughly 2,000 rooms combined join World of Hyatt. An additional 10 hotels with 1,300 rooms are in the Standard-affiliated development pipeline, and more than 20 other projects are in earlier phases of development.
“I’m also pleased to share that we’ve already engaged in conversations resulting from inbound calls for new projects since we announced the acquisition,” Hoplamazian added of the Standard deal.
Of the new Bahia Principe partnership, Hoplamazian noted that it was about filling out Hyatt’s all-inclusive resort portfolio with more options and price points. More than 85% of Hyatt’s existing all-inclusive resort portfolio in the Americas are “five-star properties,” and the Bahia Principe network will bring in more value-oriented resorts (what Hoplamazian referred to later in the call as “4.5-star”).
It does all signal more options coming to the World of Hyatt orbit, which now has a record 51 million members — up 22% from a year ago. Cobranded credit card use is up 16% for the first nine months of the year compared to the same time last year.
“Our members continue to benefit from our greater system size and expanding collection of world-class brands,” Hoplamazian said.
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