Hyatt Tells Investors Something About Loyalty That’s Absurd

Hyatt CEO Mark Hoplamazian demonstrated again in his quarterly earnings call that he doesn’t understand the value proposition of his loyalty program.

We believe the World of Hyatt loyalty program reinforces brand preference amongst our most elite guests. And an increase of approximately 20% in new members over the past year supports that belief.

An increase in new members is not surprising. Hyatt, like other chains, offers a room night discount for joining the program so they sign people up for the program. That’s the experience other programs are having, too, with the introduction of member discounts to encourage direct booking.

New member signups are entirely distinct from the chains “most elite guests.” It would be one thing for him to talk about the behavior patterns of elites — how many nights they’re staying, how much they’re spending, the delta year-over-year and how that compares to the industry as a whole (both occupancy and average spend are up across the board). But new member signups say nothing whatsoever about the elite experience.

Hyatt’s new program was all about cutting costs. They eliminated check-in bonus points or food and beverage amenity and replaced those with rapidly expiring free nights (breakage). They eliminated the need for hotels to provide turndown service (labor savings).


Check-in Amenity

Nonetheless the introduction of more confirmed suite upgrades (which historically the program didn’t pay for) and space available suite upgrades is a positive. Providing top tier members with a dedicated reservations agent they can contact by email is at least a strong plus theoretically (providing a ‘Starwood Ambassador’ but at 60 nights instead of 100) however the execution has ranged from poor to uneven.

Focusing on member signups though, a program is built to do two things:

  • Recognition (elite experience)
  • Reward (earn and burn)

It’s the earn and burn proposition that’s most directly relevant to general members. And I’ve written recently about challenges that some hotels — like the Andaz Maui and Hyatt Regency Aruba — give the chain with redemption. They play games with inventory, creating new inferior room categories with only a handful of rooms in order to keep members from redeeming points.

The striking thing I’ve mentioned is that the Andaz Maui is actually owned by Hyatt, this isn’t a franchisee running rogue. Hyatt plans to sell the Andaz Maui (and the Grand Hyatt San Francisco as well as Hyatt Regency Coconut Point).

Our near-term plan is to execute on what is initially being packaged as a portfolio transaction involving three hotels. Two of these assets Andaz Maui and Grand Hyatt San Francisco will be considered part of our $1.5 billion asset disposition program, based on the nature and value of those hotels. The third asset Hyatt Regency Coconut Point will be treated as part of our asset recycling efforts.


Grand Hyatt San Francisco

Perhaps the Andaz Maui will get some of the capital investment it desperately needs from a new owner, and perhaps Hyatt will be willing to muscle a new owner on award availability the way they haven’t done with themselves.


Andaz Maui

Meanwhile Hyatt recently hired new leadership for the loyalty program, and circumvented the Chief Marketing OFficer in the reporting structure. Then they let go of their Chief Marketing Officer. Everyone is going to claim victory with World of Hyatt but that’s most telling.

And Hoplamazian seems to know it suggesting that now they think they’ll better engage their members,

With the addition of new World of Hyatt leadership in 2017, we have a team that is intensely focused on delivering value and distinctive experiences for our members. We’re confident in our ability to further enhance World of Hyatt to elevate the engagement of our loyal customer base.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Hoplamazian seems to view the loyalty program as a marketing program. He doesn’t seem to get the difference.

  2. Interesting though that the day after earnings came out, which didn’t blow away anyone, were kinda meh, they put out the new bonus program. Maybe he is starting to learn?

  3. It seems like such an easy proposition for Hyatt to require at least X percent of rooms be in a room category available for reward nights. If x=30 and a hotel only has a smaller percent in the standard room category, make them open up deluxe rooms and any other tiers that would get them to that percentage.

  4. Hyatt marketing should contact me if they want the basics of how to keep or lose loyal travelers. From multi year diamond and 80+ Hyatt nights in 2016 to 3 in 2017. All Of those nights went to Hilton and IHG. I am 100% in charge of where I stay and so far I see no reason that 2018 will include Hyatt other than some award stays.

  5. Forgive my ignorance, but does selling these properties indicate that they will likely be reflagged and leave the Hyatt program?

  6. Makes me wonder if they actually believe the sh*t that comes out of their mouth or if they are just trying to spin it for the unsavy investor. Both seem problematic.

  7. I am probably a small fish in the pond for Hyatt’s investors to care but just let them know I leave at least $50k a year with Starwood which I used to give to Hyatt before this genius destroyed their loyalty program.

  8. I think a basic loyalty scheme concept is easy to envision and easy to implement. Reward your road warriors with aspirational redemptions that are easy and make the slog worth it. All the programs managed this in the distant past. But then they made a money grab. The started selling their points (or free nights) in massive quantities. They gave birth to massive travel hacking, and made wide scale aspirational rewards available to everyone. Incentivizing the behavior they want to incentivize became near impossible.

    The travel hacking community wants a loyalty based model because we know how to accumulate massive numbers of points without doing anything other than accumulating miles. But we’re too far down the road. Selling miles is an addiction at this point. We can’t go back. They are just a currency.

    Hotels and planes will continue to try to induce loyalty with perks for night on pillow and butt in seat activity, but it’s a losing game. All programs are facing these problems. WOH has been spectacularly bad at navigating it. So has American. SPG and Alaska have been better. But these are short-term comparative adavantages. The underlying fundamental problem exists.

  9. @PSL- The majority of the hotels you stay at are not owned by the operator. An investor like a REIT owns them and Marriott or Hyatt have a long term management contract. These hotels will be sold with brand new agreements in place that firmly establish Hyatt as the operator, no way does Hyatt want to lose their flag here. And the lesser brands like Courtyard or Fairfield are not even operated by these brands; a regional owner/franchisee operates them; Marriott essentially becomes pure brand and marketing for them. These systems provide the best return on capital for the shareholders of the management company. This was mostly all innovated by Marriott in the 90’s real estate downturn, when they were bloated with debt to own hotels; they spun the hotels off into what is now Host Hotels and kept the higher margin and less capital intensive management business. Marriott would not have even owned these three like Hyatt; they are very strict about not owning hotels; though it happens sometimes. Starwood used to own a fair bit still; I would guess those are sold or being sold.

    Re Hyatt; I am a first year globalist and think its great. They have the best value award availability around; and the only program that truly works with cc points – Chase. Getting airfare value is fairly easy; getting hotels is not always. Yeah I can get a theoretical 10 cents per point on first class airfare; the times I get 3-4 cents per point with Hyatt is way more “real” and is as valuable or more. If they ever devalued the ability to use Chase points I would likely drop any loyalty to them and stay at Marriott, where the earn on stays is quite good.

    My concierge is great, hops on whatever I need, Marriott needs to add that. I have more struggles with individual property quality than anything, in comparison to Marriott; but I learn which Hyatts I like as I go. I understand Hyatt made changes some people don’t like; but when you compare to other programs it looks totally fair to qualify and benefits you get.

    Recent program tweaks have been very positive, the name and branding are dumb, unbelievably dumb.
    Globalist? Really? That word is being used as a prejorative today. Are you totally tone deaf to cultural and political trends, or virtue signalling is that important to you? I am not saying which side is right, I am saying major corporations should just stay away from controversy.

    Hyatt needs to add in 5 qualifying nights/yr on their card. Right now I refuse to get it for that reason.

    I also have no idea what the Hyatt brands mean… Grand? Regency? I know what a Park and a Place are; but in between is very muddled. I know people say that about all hotel companies; but I actually have an idea what Marriotts brands mean.

    I am also Marriott platinum. Marriott status and Hyatt status is a great combo; I like both programs. Return on stay at Marriott as platinum is excellent and way underrated, especially with the Fly & Stay package as your points goal; great way to get miles to tougher programs like Alaska or something. 20%+ return on hotel spend is easy.

  10. @RF – You got that right. I have about a year of Globalist left, but between the 60 night qualification criteria for Globalist and other negative changes, I have no interest in pursuing top status again.

  11. I only stay at Hyatts when the convenience and my corporate rate make sense for me. Generally I find Hyatts WAY, WAY overpriced for the product offered. For you fans, who travel on other people’s money, now that Hyatt has supposedly screwed you, it is a big deal. Getting $700-1,000 rooms constantly, for free is not sustainable. I had that figured out a long time ago…..

  12. “perhaps Hyatt will be willing to muscle a new owner on award availability the way they haven’t done with themselves.”

    Is this serious or sarcastic? I can’t decide. either way it makes me very sad.

    I knew Jeff Zidell was fired when he flagged the Andaz Maui as his favorite property, a place where you basically can’t use Hyatt points.

  13. Yeah Hyatt drove me away and anecdotally I know of lot of other people who have switched their hotel loyalty. The latest problem I see is that in addition to making it harder to qualify for top tier “globalist” status they also made the other levels virtually worthless. Requalifying as an “explorist” doesn’t especially help me or seem that attractive, and it’s too difficult (vs their competitors) given their footprint. I can’t believe they don’t value their 30-40 night per year guests at all, but that is certainly what they have expressed through their loyalty program. SPG is now the better program imho.

  14. By contrast, Arne Sorensen of Marriott just emphasized that more than half of its rooms are booked by loyalty program members, and that Marriott needs to keep the program strong to keep driving business.

    I suspect that the strength of MR is one reason, perhaps the key reason, why its properties command a premium over other chains in many cities.

    Not surprising that many former Hyatt loyalists left for Marriott or SPG.

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