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News
HYATT IS DOUBLING DOWN ON LUXURY WHILE ITS COMPETITORS FOCUS ON BUDGET HOTELS
Cameron Sperance and Meghna Maharishi
Articles
Feb. 16, 2023
•
7 min read
Hyatt is doubling down on luxury while its competitors focus on budget hotels
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The future of Hyatt is about luxury, lifestyle and resorts.
Cheap hotels? Leave that to Hilton and Marriott.
Hyatt on Thursday reported hefty profits ($294 million for the last three months
of the year and $455 million for all of 2022) and significant growth —
increasing its room count by nearly 7% last year. That’s higher than Marriott’s
3.1% net unit growth and Hilton’s 4.7% (though both companies have larger
portfolios than Hyatt’s).
Marriott and Hilton both made moves in recent months to court travelers at more
affordable price points. Marriott plans to acquire the Mexico-based City Express
chain of midscale hotels later this year. Hilton launched the premium economy
Spark brand last month.
Don’t take that as a sign every hotel conglomerate is looking to jump into this
space, though.
“Our strategy is to focus on the high-end customer and to serve and operate at
the high end of every segment that we're in right now,” Hyatt CEO Mark
Hoplamazian said during an investor call Thursday morning. “We continue to focus
on filling out our portfolio to be able to add the number of experiences and the
critical mass that we have to that high-end traveler.”
The commentary reinforces some industry logic that major hotel companies make
more money by focusing on higher-paying market segments like luxury hotels and
lifestyle hotels. These are properties with enhanced food-and-beverage programs,
and a greater focus on design and experiences.
Players in the lifestyle segment include Hilton’s Canopy, Marriott’s W and
Edition brands, and Accor’s Ennismore partnership which includes brands like The
Hoxton and Delano. Hyatt’s lifestyle hotel brands include Andaz and Thompson
Hotels while its luxury mix includes offerings like Alila and Park Hyatt.
It appears Hilton and Marriott’s strategy aims to bring newer types of customers
into their loyalty programs. Spark could be an entry point for younger travelers
with less disposable income to still earn and redeem points, Hilton CEO
Christopher Nassetta said earlier this month.
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Hyatt’s is more about providing increased options for its expanding mix of
high-end and leisure travelers.
That’s evident with some of Hyatt’s hefty rate increases. Average nightly rates
across Hyatt’s entire global portfolio jumped 24.5% from a year ago. Hyatt’s
average room rates, excluding those in China, ended the year 14% above 2019
levels.
“I'm a believer in never saying never [about] extensions into other segments,”
Hoplamazian said. “But [focusing on high-end travelers] has been our very
deliberate strategy over the last five years, of which I feel like we've made
tremendous progress.”
HYATT’S LUXURY LIFTOFF
It’s clear the Chicago-based hotel company leaned into luxury in recent years,
but company leaders provided data Thursday on just how monumental that growth
was. Hyatt now has 135,000 luxury and resort rooms — a number greater than
Hyatt’s entire hotel portfolio a decade ago, Hoplamazian said. Resort properties
also accounted for 66% of the rooms Hyatt added to its portfolio this past year.
The company’s performance in the Americas in 2022 was largely driven by its
growth in luxury hotels.
“We now have more luxury branded hotels and resort locations than any other
hospitality company in the world,” Hoplamazian said.
Some of Hyatt’s expansion into luxury, resort and lifestyle hotels includes the
acquisition of Apple Leisure Group and its hefty all-inclusive resort
collection; it also acquired Dream Hotels and Two Roads Hospitality, which
brought the Thompson Hotels and JdV brands into the World of Hyatt orbit.
While Hyatt’s performance fared well in the Americas and Europe, the company saw
a decline in Asia. This was mostly attributed to China, which had stringent
COVID-19-related restrictions in place for much of 2022.
China’s coronavirus restrictions included mass lockdowns, testing and strict
travel limitations to stymie transmission. However, these restrictions
eventually sparked mass protests, prompting China to gradually remove its
stringent policies.
As China lifted its COVID-19 restrictions, the country reopened its borders and
removed quarantine requirements for travelers in January. Hoplamazian said
January was “a stunning month of performance” once China lifted the
restrictions.
That growth has not wavered since China fully phased out its zero-COVID-19
policy.
“The first week of February, we ran higher occupancies in our system in China
than we did in the United States,” Hoplamazian said.
Hoplamazian credited the almost instantaneous growth in China to leisure travel
and the Lunar New Year; he also said business travel was experiencing a rebound
in the region.
Hyatt also expects to open 24 hotels in China this year.
HYATT’S SHOPPING SPREE ISN’T OVER
Some might scratch their heads over Hyatt’s profits being less than its
competitors (Hilton’s full-year profit exceeded $1 billion while Marriott’s
soared above $2 billion). However, part of that involves Hyatt owning more of
its hotel real estate than its competitors.
That’s quickly changing.
The company sold billions of dollars in hotel real estate in recent years and
plans to offload another $2 billion by the end of next year. Hotel sales play an
important role in Hyatt’s seismic growth in the luxury, lifestyle and resort
sectors.
Over the last five years, Hyatt offloaded $3.8 billion in hotel real estate. In
that same time frame, it spent $3.6 billion acquiring Miraval, Apple Leisure
Group and Two Roads Hospitality. The company also went on to acquire Dream Hotel
Group and partner with Germany-based Lindner Hotels AG, which provides more
European options.
While it might seem like Hyatt needs time to digest all these brands,
Hoplamazian on Thursday indicated the brand integrations were going well.
Don’t expect the brand acquisitions to stop there.
The guidelines Hyatt uses for potential takeover targets are whether the brand
fits in with the Hyatt portfolio (like Dream did with lifestyle hotels) and
whether it enhances the network (like Dream did with expanding Hyatt’s New York
City presence by 30%, and Lindner will with its significant footprint in
Germany). It also has to come with growth potential.
“We don't feel like we are dragged down by further integration efforts that are
going to really consume a lot of our time,” Hoplamazian said. “So we will
continue to look for [other] platforms.”
Related reading:
* Everything you need to know about World of Hyatt
* The best credit cards to reach elite status
* What is World of Hyatt elite status worth?
* Which credit cards offer the most lucrative rewards for hotel stays?
* The best hotel rewards programs in the world
* Best hotel credit cards
Featured image by CLINT HENDERSON/THE POINTS GUY
Editorial disclaimer: Opinions expressed here are the author’s alone, not those
of any bank, credit card issuer, airline or hotel chain, and have not been
reviewed, approved or otherwise endorsed by any of these entities.
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* New: Card Members get 15% off when using miles to book Award Travel on Delta
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* Earn 2X Miles at restaurants worldwide including takeout and delivery in the
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