Hyatt’s Two Problems

The Hyatt chain is too small, and the growth in properties they’ve achieved has been in the limited-service sector which means it’s of little help to the upscale guests that their loyalty program appears to have been built for.

Hyatt ended the first quarter of the year with 737 hotels. That’s only about 10% the size of Marriott. The biggest challenge they face is footprint. Hyatt simply isn’t everywhere you need to be.

And there’s little that they can do about it.

  • They made a play for Kimpton, but were smart not to overpay the way that IHG did (and IHG has largely bungled the integration, in my view they’re losing what’s unique about Kimpton’s properties that attracted Kimpton guests).
  • They made a play for Starwood, offering more than Marriott’s initial deal, but their complicated stock was too much of a challenge. There’s a separate class of stock giving outsized control of the company to the Pritzker family. They were willing to restructure but insisted on retaining outsized control by ‘long held shares’.
  • Now there’s really no one left to buy. Loews and Omni together would grow Hyatt only about 11%.

Hyatt seems more likely to be acquired than to grow to the size of its competitors, to be large enough to offer rooms to its loyal customers everywhere they travel. Of course given the stock structure any deal has to be a friendly one.

While the chain focuses heavily on the upscale customer segment, the truth is that there’s been outsized growth in its limited service brands. And Hyatt’s loyalty program offers little to its loyal customers at those brands, other than nights towards elite qualification so that they can spend more nights in the coming year not recognized for their loyalty.

Top tier confirmed upgrades don’t apply to Hyatt House and Hyatt Place hotels. Everyone — although soon only program members booking direct at Hyatt Place — get breakfast, so there’s no elite benefit there. World of Hyatt program changes eliminated elite check-in amenities and guaranteed turn down service. So what’s left?

  • Late check-out if you need it
  • A bottle of water

They say they’re working on confirmed early check-in at Hyatt Place properties, and so far only at those properties, a benefit not competitive with Starwood’s ‘Your24’ check-in.

While only 30% of their rooms are limited service, 53% of their hotels are.

In 2004 they acquired AmeriSuites and in 2006 this became the Hyatt Place brand. The new builds are perfectly fine properties for what they are, the legacy AmeriSuites are generally in poor condition in my experience. There were 308 Hyatt Place hotels. Their next-largest brand is Hyatt Regency which stood at 183 properties on March 31.

In 2006 they acquired Summerfield Suites and in 2012 this became Hyatt House, their extended stay limited-service brand. There were 86 Hyatt House hotels, which is as many Park Hyatts and Grand Hyatts as there are combined.

Hyatt is going to more than double its presence in Canada but every one of the new hotels is a Hyatt Place or Hyatt House.

Not all of their full service hotels offer club lounges, of course. Most Park Hyatts don’t, many regencies don’t. But lounge access and suites — the draw of the Hyatt program — aren’t even a part of the brand offerings at more than half of their hotels.

The footprint of hotels that even begins to offer meaningful elite recognition is under 350. And in that sense acquisitions of chains like Omni and Loews could move the needle — for guests, not for the overall business. Their Oasis investment is an interesting experiment but offering redemptions that top out at 1.33 cents apiece in value at about 20 homes isn’t a game changer.

Hyatt needs to do more than competitors to get guests to go out of their way to stay at their hotels. In terms of full service hotel treatment for top tier elites I think they do that. But they need to grow the footprint of hotels where it matters.


Park Hyatt Chennai

They also need to make their offerings below top tier competitive, and make spend on their credit card product more rewarding (and allow it to contribute towards top status, or at least allow top tier elites who spend on the card and don’t need the lower status the card provides to gift that lower status).

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. I totally agree with. They also have to extend a bit more in europe. I really like the brand but with the change of only nights counted and not stays it was impossible for me in europe to keep up the status and there switched to another chain

  2. You don’t propose a solution here. The only solution I can see is a brand that is even more “unbound” … exceedingly low standard and low fee, but with high guaranteed service levels to Hyatt elites.

  3. Another problem is that Park Hyatt hotels do not have a common style. For example the Park Hyatt Saigon has a wonderfully soothing traditional style in its rooms and public areas. The Park Hyatt Bangkok has a very contemporary, almost stark style, that is 180 degrees opposite. People who like one of those styles often do not like the other. Those hotels have nothing in common. They might as well be two different brands. The Grand Hyatt’s I’ve stayed at seem to be more uniform in appearance and style. What’s the point of a brand if there is no consistency other than an expensive price?

  4. They had a loyalty program that worked.
    Then they created World of Hyatt—sort of like a “world of hurt.”
    All they have to do is go back to what worked in the first place.
    AND stop getting rid of regency lounges.
    At a minimum, check-in amenity for top tier. That really took the edge off a bad travel day.

  5. And yet bloggers continue to frequent almost exclusively high end Hyatt properties. They must be doing something right.

  6. Stvr I am not sure Gary is here to propose a solution rather point out something that all of us know it’s the footprint. When Hyatt had the old program it worked well and maintained a steady loyal group now the new WOH is a disaster in my opinion. I retreated back to my Marriott LFT PLT status and with the SPG merger it works well. With the “family” becoming more and more fragmented it’s very possible that a sale could happen. I suggest given their huge following in Asia thats where I would look.

    Just sating

  7. Too lazy to bother looking up the numbers, but presumably Hyatt is suffering massive losses or comparable quarter declines given the tone of the article?

    Further, if they are predominantly a high end chain, they should not treat one Hyatt House stay similar to a Park Hyatt. The profitability from each stay is very different. Lumping all together is silly.

  8. No idea what the likelihood is, but I feel like a Wyndham-Hyatt tie up would be make sense. Wyndham is pathetically lacking in higher end properties, and Hyatt could help plug that hole, and some of Hyatt’s limited service properties could serve as an impetus for Wyndham to jettison some of its lowest quality brands.

  9. There is a way out for Hyatt. Go on a terrorist mission (just kidding) and pick off hotels one by one. Many hotels are owned by small companies or partnerships and Hilton or someone else brands them. For example, there’s a company that runs the San Antonio, TX airport Pear Tree Inn, a budget brand of Drury, and also runs the next door Five Points by Sheraton.

  10. Good Overview and assessment
    First up bring back the welcome amenity @ check in!
    Coming from Starwood side you would think Mark Vondrasek would be all over this
    Hyatt had it before Starwood was born and Marriott copied it

  11. @Bobby J

    I was thinking the exact same thing. Wyndham seems to have the money for acquisitions ATM, and they’ve already started dumping some of the worse parts of their portfolio (e.g. Knights Inn). Of the big players, it seems they’re the ones who’d get more synergies and less cannibalization out of Hyatt.

  12. Accor is on a buying spree and should pick them up, increasing their share in North America and in the upscale segments, solving two of their problems in one… but they don’t seem to care much about the US market, so I’m not holding my breath…

  13. I am more optimistic about Hyatt’s future. I travel a lot to and within China and have seen big improvements in the footprint (eg, Shanghai alone has ~10 properties ranging from HH/HP to R/GH/PH. And service levels in Asia (especially Japan) make the Hyatt stays more pleasant. And I like having the diversity of portfolio …. low to mid range for my business travel (my company has a restricted travel budget) and mid to high end for my family vacations. It works for me.

  14. When I travel, Hyatt is my first search for a property. Unless, its a former Amerisuites Hyatt Place. We have had fantastic experiences at Hyatt Regency in Mexico City and Vancouver as well as their Ziva Resorts. To your point, it is unfortunate they do not have more properties. My work placed me frequently in Tempe, AZ, for over two years. One stay at the Hyatt Place was enough. The Marriott Springhill Suites was convenient but became stale. Wanting to continue earning Marriott, I went to the new Moxy. Love the place but the Gold Elite benefits and upgrades are non-existent. I understand in high season, but in low season many upgrade rooms go unused.

  15. Nope. Not all Hyatt Place hotels have free breakfast now. I’m surprised you’re still peddling this myth.

  16. @Joey – the Hyatt Places that were testing not offering free breakfast [news which I broke] have ended that test. They will no longer offer free breakfast to folks who do not book direct and aren’t members of the loyalty program but that doesn’t start until November. Breakfast is still a brand standard, though what breakfast is varies by market eg there are some properties in Europe where it’s just a continental breakfast.

  17. I think Hyatt is primarily best within NA and Asia. For me that works best since I don’t travel to Europe much, but I can easily find a Hyatt in the middle of no where in China that is upscale. This of course doesn’t help anyone wanting to travel within Europe, their footprint in Europe is sad, but I’m pretty sure Hyatt focusing with Asia is best for the future.

  18. Hyatt should reconsider either their qualification criterion for the various WOH status or, step up the associated rewards. Considerably paltry rewards in exchange for each coresponding WOH level. Park Hyatts are among the most expensive hotels yet most of them do not have lounges, thus reducing the value that say, a Globalist may derive with Hyatt. Do something like St Regis butler service where they serve free beverages to the room 24/7.

  19. Outside of a comment about making people choose to stay at Hyatt this blog entry is saying that Hyatt needs to either buy or sell. Hyatt does have an option to remain as they are, and if they can modify WOH enough they’ll still attract business.

    It’s incredibly too speculative to assume that Hyatt’s current strategy doesn’t include status quo (minus some organic growth, that is).

  20. “That’s only about 10% the size of Marriott. The biggest challenge they face is footprint. Hyatt simply isn’t everywhere you need to be.”

    I’m curious — what are some examples of places Hyatt where needs to be, but currently isn’t? My impression is that a lot of the size difference is simply Marriott or Hilton having 10X as many properties in a given metro area as Hyatt, not that Hyatt is missing from the area.

  21. @David

    There are several important gateway and Tier 1 cities where Hyatt has next to no presence or a laughable presence for an international chain. Having 1 property in a city does not truly ‘cover’ it. For good coverage, there need to be multiple options at multiple price points in multiple suitable locations.

    To give you an example, Starwood (with 1300) properties had critical mass and had the right coverage despite being 3.5x-4x smaller than Hilton and Marriott (pre merger). I’m speaking internationally. Infact in most cases, it beat out both of the other two because it had the right mix of properties in the right locations whereas Hilton for instance has massive gaps in its portfolio despite being a nearly 5000 hotel giant.

    Here is a partial list of cities where Hyatt is atrocious or was until recently:
    Dubai (7 hotels including entire portfolio, not a single one in a major area. 0 presence in top 3-5 localities for tourists or business guests)
    Most other Middle Eastern Cities (have one Hyatt property)
    Delhi (1 old hotel)
    Mumbai (2 suburban hotels)
    Bangalore (1 converted hotel)
    Chennai (single Park Hyatt)
    Hyderabad (single Park Hyatt)
    Sydney (had one Park Hyatt for the longest time, recently remedied)
    Paris (one super expensive Park Hyatt for the longest time, recently remedied quite well)
    London (total 3, but really just 1 with a good location)
    Barcelona (nothing)
    Madrid (nothing)
    Rome (nothing)
    Milan (one super expensive PH)
    Vienna (one super expensive PH)
    Africa (mostly nothing)
    Bangkok (had one Grand Hyatt, now remedied very well)
    Singapore (one GH until 6 months ago, now 2)
    Edinburgh (zilch)
    Birmingham (zilch)
    Manchester (zilch)
    Every other UK city (nothing)
    Every German city has 1 outlet at most, of one brand, one price point, in exactly one location. If that price point, category or location does not suit you, tough luck.
    Prague (nothing)
    You get the idea….

    Hyatt has a problem with footprint and its not a small problem. The city above with the largest number of Hyatts (Dubai – 7) is actually one where not only does Hyatt not have a single property in a great location despite having almost its entire portfolio present, it is beaten by almost every chain (Marriott, Starwood, Accor, Hilton, Radisson) and even the smaller players (dozens of brands including those with just 1 well located property).

  22. @ Gary – Thank you for your reply. I’m aware of the testing that was underway with some properties in the US (congratulations on breaking the story). However, if breakfast is a brand standard why do properties like the one at Frankfurt and Heathrow airports have specific B&B rates that are more than the standard room only rates? If breakfast is (currently) included for all guests as a brand standard, why the separate, higher rate?

  23. Throwing in maybe a newbie question since we are in the topic about hotel brand acquisitions.

    Apart from Loews and Omni, what about acquiring brands (or even merging with) such as Peninsula (13 properties), Viceroy (19 properties), Pan Pacific (20 properties), Rosewood (22 properties), Langham (28 properties), Mandarin Oriental (41 properties), Shangri la (95 properties) and Four Seasons (100 properties)?

    These brands mostly cater to a very niche and upscale market, which is in sync to the vision of what Hyatt is aspiring its brand to achieve.

    They all have very solid portfolios not only in Asia, but also in major cities that Hyatt is lacking footprints in.

    If Hyatt management can wrap their head around their WOH loyalty program (still cannot fathom how globalist is even a word) paired with certain strategic acquisitions of brands mentioned above, they night have very good potential for growth as a mid-size luxury chain of hotels like what “starwood” had left off. Given so how Marriott is commercializing Starwood, there might a shift in competition to steal back the “original SPG elites” from the new giant.

  24. @Gary — Since acquiring Omni and Loews would only increase Hyatt’s footprint by 11 percent, it would seem that Hyatt would need to acquire a chain like NH, or ???

    /\/\/\/\/\/\/\/\/\/\

    @Gene — Good lord, I hope not! IHG really screwed up Kimpton.

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