Introduction
Hyatt Hotels Corp. was founded in 1957. Its headquarters are located in Chicago . Hyatt possesses 111 hotels and resorts and more than 55,000 guestrooms. Annual revenue of Hyatt is $ 3.4 billion. ( Dela Cruz, 1999)
Hyatt Hotels Corp. may not be showy, but its strong upscale reputation is paying off in new properties and a burgeoning luxury brand. In recent years, Hyatt Hotels Corp. hasn’t been much of a headline-grabber. There have been no blockbuster acquisitions, no splashy brand launches, and no zig-zag stock price fluctuations. It was once a public company, but now is privately held by the media-shy Pritzker family of Chicago . Even Hyatt’s management changes have a staid quality; Scott Miller’s promotion to president in January 2000 was announced six months before it occurred in a carefully orchestrated succession plan. ( Geoga, 1995)
While Hyatt may have been overshadowed in the
past few years by more active competitors, its
steady focus seems to have benefited the company.
Agents and industry experts agree that the Hyatt
name connotes a consistent, upscale hotel and
resort experience, a reputation that the company
is now leveraging to expand its luxury brand,
Park Hyatt.
Indeed, the relatively quiet Hyatt is now “turning up the volume to the outside world” on its Park Hyatt brand, and intends to create greater differentiation between its other two brand names, Hyatt Regency and Grand Hyatt. As it does, the company is keeping up its aggressive development pace of the past few years. Many significant Hyatts have either recently opened or are under development—including additions to the Hyatt Resorts portfolio that will serve to underscore the successful collection’s trendsetting reputation. ( Salomon, 1998)
Hyatt’s recent growth included the opening of the Park Hyatt Chicago, the flagship of the Park Hyatt Chicago, the flagship of the Park Hyatt brand. Constructed on the site of the original Park Hyatt—which was built in 1980 and razed to make way for the new property—the stunning hotel has surpassed expectations. Peter Carideo, CTC, president of CRC Travel in Chicago, says he doubted that the Park Hyatt would rival the Four Seasons Hotel Chicago, which he believed was “the only game in town” when it came to high-end properties. (Dela Cruz, 1999)
As it does with its resorts, Hyatt intends for its luxury hotels to blend in well with their locations. Unlike their competitors—who they think are more interested in developing their hotels in a lab and duplicating them around—their reflect the local culture and community. The Park Hyatt Chicago, for example, “resonates the architectural history” of the city. Guest rooms have such details as Eames chairs and original black-and-white photos of city buildings. ( Salomon, 1998)
Of the 19 Park Hyatts, only eight are in North
America . The rest are operated by Hyatt’s
sister company, Hyatt International. In fact,
Hyatt International is overseeing all the Park
Hyatts under development. The relationship between
the two companies is interesting—especially
since, to customers, the division is seamless.
Both are owned by the Pritzkers, and both have
headquarters in the same building. But they’re
operated separately, with different management
teams (Bernd Chorengel, a 31-year Hyatt veteran,
is president of Hyatt International). . ( Geoga,
1995)
Despite the division, at least one consultant believes that Hyatt has more consistency between its domestic and international product than many chains that are operated out of one central headquarters. Gregory Hartmann, managing director of HVS International in Boulder , Colo said that they’re pretty consistent between the two, while some of the other brands don’t have that reputation. Work is being done to achieve even more consistency between the two Hyatts. They are getting smarter about aligning their marketing programs and their sales propositions. A new, sleek brochure highlighting all the Park Hyatts worldwide was just released, for instance. ( Salomon, 1998)
Mission/Core Values of Hyatts
Hyatt s are known for their outstanding facilities and personal service, especially when dealing with meetings and incentives. From shimmering mountain peaks to warm powder soft beaches, meeting and incentive planners who are searching for that special place where business and pleasure meet have an incredible range of Hyatts from which to choose. No two Hyatts are alike except for this: the ability to make one’s meeting or incentive rise above one’s expectations, leaving one’s group inspired and renewed. ( Terdoslavich, 1995)
Hyatts are designed to soothe the soul and revive body and mind with lush surroundings, fine accommodations and dining, and every kind of activity and adventure under the sun. One will find championship golf courses, tennis, and skiing, catamarans, and casinos, exhilarating water sports and rejuvenating spas--all which is needed for maximum enjoyment and attendance.
One will also find state-of-the-art conference facilities with ample function space and sophisticated audiovisual technology. To this end, Hyatt has introduced several meeting and incentive programs designed to make any resort event--from an incentive getaway to an association gathering--a successful one, remembered long after the last putt has been sunk and the last water slide scaled. (Dela Cruz, 1999)
Hyatt's sweeping and ongoing commitment to professional
training, property renovation, and enhanced convention
services ensure that one’s standards are
met and exceeded.
Hyatt believes that a successful meeting depends not only on an uncommon location but uncommon expertise as well. That is why most key Hyatt Convention Service and Catering Managers have earned the coveted Certified Meeting Professional title. Hyatt Convention Service Managers are also certified as Learning Environment Specialists, an exclusive training program that teaches the latest in meeting theory and practice. . ( Geoga, 1995)
Hyatt is also dedicated to providing one with state-of-the-art meeting facilities. From guest rooms and ballrooms to lobbies and pools, Hyatt's ongoing property enhancements and upgrades are one of the most visible aspects of The Standard.
Competitive Advantage
After already buying approximately $800 million of hotel real estate over the past several years, Hyatt Hotels Corp. announced in February a $1 billion plan to acquire another 20 to 30 upscale hotels and resorts in the United States, Canada and the Caribbean over a three-year period. ( Terdoslavich, 1995)
The Pritzker family, which owns the Chicago-based hotel giant, has formed Hyatt Equities LLC, a real estate acquisition company that consolidates a number of the family's hotel real estate interests in one company, thereby capitalizing on the equity value of the Pritzkers' hotel portfolio, allowing the company to borrow against a collection of assets instead of individual assets and, consequently, command more favorable interest rates. ( Lucas, 1999)
Competition is stiff these days for plum hotel acquisitions, but Douglas G. Geoga, president of Hyatt Hotels and a director of Hyatt Equities, told NREI that he believes Hyatt will be able to go head-to-head with the public companies, REITs and acquisition funds dosing many of the deals. ( Arndt, 2004)
One of the principal advantages that Hyatt Equities
enjoys is that, because they are a private entity,
they can do a broader scale of deals than a public
company can do. As a private entity they have
the luxury of looking at underlying economics.
Currently Hyatt Equities' hotel portfolio consists of 32 hotels, 19 of which are wholly owned by the family and the rest of which are partnership interests in joint ventures. Two recent deals illustrate these expansion plans: A Hyatt affiliate purchased the Grand Hyatt San Francisco, which Hyatt has managed since 1973; and, after acquiring the Hotel Nikko Atlanta in partnership with Blackstone Real Estate Partners, Hyatt assumed management and renamed the property the Grand Hyatt Atlanta. One parameter will rule Hyatt's acquisition strategy: All properties will need to fit into Hyatt's existing product. ( Arndt, 2004)
While dot-com stocks are still in a prolonged free-fall, travel suppliers continues to embrace electronic commerce as a low-cost method to establish direct ties with their customers. Hyatt Hotels Corp. became the latest to use that strategy when it unveiled plans to expand its Web site to a full-service product through a deal with Sabre's recently acquired GetThere unit. ( Lucas, 1999)
Began in early 2001, visitors to Hyatt's site have the option of booking flights and rental cars along with their hotel nights. An increasing number of suppliers are incorporating such strategies into their overall distribution plans, and the question now has become whether this trend poses a threat to the traditional channels of distribution, namely the travel agent. ( Arndt, 2004)
ARTA is definitely concerned about the possible long-term impact of the site. Without question, this move constitutes a 100 percent bypass of the hardworking, independent travel retailers who send hundreds of thousands of their clients to Hyatt hotels each year. GetThere executives say that supplier sites are not designed to bypass agents, but to make online shopping easier for consumers. ( Terdoslavich, 1995)
It is argued that Hyatt's move isn't much different
from what its competitors are doing. Though Hyatt
says its would be the first branded full-service
hotel site, a number of hotel sites feature links
to suppliers and booking engines. Hilton's site
[www.hilton.com] links to airlines and Travelocity,
while the Starwood brands' sites have a "Flight/Car
Reservations" link that takes users to Expedia.
Bass Hotels & Resorts' Holiday Inns site
Both Wyndham International and Best Western International are working to make their Web sites full-service. Wyndham hasn't finalized plans. And Best Western have air and car booking functionality on its site.
Hyatt says it will pay GetThere a monthly service fee for its site, and GetThere will be the agency of record that receives commissions from airline and car rental bookings. ( Arndt, 2004)
SWOT Analysis
Strengths
Hyatt Hotels & Resorts this year extended its hold on the prized first-place position in the upscale category of the Top U.S. Hotel Chain Survey for the sixth consecutive year. The most crowded survey category with a field of 13, the upscale tier includes such main sta y, business travel-friendly brands as the core Marriott, Hilton and Sheraton chains. Hyatt prevailed over the pack, if only by a small margin.
The big news in the upscale category this year, however, was the come-from-behind showing of Renaissance Hotels & Resorts, which is part of Marriott International. Renaissance one year ago did not have sufficient usage by survey respondents to warrant inclusion in the final ranking. This year, it catapulted to second place behind Hyatt and ahead of third-place Walt Disney World Resorts, which last year held the number-two spot. . ( Geoga, 1995)
Other brands' fortunes rose and fell incrementally. The decline of Sheraton, which is part of Starwood Hotels & Resorts Worldwide, was noteworthy. Number three last year; the brand nose-dived to number eight this year.
Of the 13 criteria survey respondents were asked
to measure, Hyatt placed first in three, including
the ease of arranging group travel and the quality
of its business centers and in-room business amenities.
Renaissance also led the pack in four areas: corporate
rate programs, commission payment systems, quality
of food and the overall relationship of price
to value. Walt Disney scored highest on five of
the 13, for its facilities for resort and non-resort
meetings, its helpful staff, the physical appearance
of its hotels and the quality of its in-room amenities.
Hilton International, sixth place overall, received
top scores for ease in arranging individual travel.
If the industry learned anything from the downturn, it was that one have to stay close to the changing needs of one’s customer, whether that customer be the travel buyer, meeting planner or actual traveler, and they are going to keep that focus in mind going forward. On one level, this will mean introducing a host of service and product enhancements during the year. These range from a rollout of wireless high-speed Internet that will be consistent across the brand, in addition to whatever wired solutions individual hotels have implemented. Hyatt also expects to debut a new guest room product that is likely to include an upgraded, signature bed.
On the development front, the chain is expected to proceed on two fronts: opening high-profile new properties, while at the same time making major investments in renovating existing assets. Hyatt benefited from the surge of conversions that occurred in 2003 as the faltering economy caused more hotel owners to change management companies.
Weaknesses
When compared with Best Western, Hyatt Hotels are found to have little weakness. While both cultures work very well, Best Western is a totally different business model in the sense that they are a not-for-profit organization and their members have voting rights on almost everything that affects their business.
They are unique because the more they involve
their members in the big decisions; the more they
need to listen to them about what's going on in
their business.
Opportunities
Hyatt Hotels and Resorts aims to drive bookings during the seasonally slower fall and winter months with separate campaigns that will steer consumers to its Web site and tout the ease of earning free nights.
Two 15-second spots, via Cramer-Krasselt, Chicago hailing Hyatt.com's "Best Rates Guarantee." One ad shows a woman in the quintessential black dress having a moment by the pool after a great evening. Other hotel brands also are trying to preserve their direct access to consumers by flagging low rate guarantees and withholding perks from guests booking through third party Web sites. But while rivals have touted their Web sites mostly online, Hyatt is being more aggressive by advertising its site offline.
They have seen research that shows guests prefer to book on hotel branded Web sites. They are saying one is going to feel better about it; one will have more confidence talking directly to Hyatt.
Meanwhile, a global print and outdoor initiative
flagging Hyatt's "Faster Free Nights"
promotion broke. The recruitment and retention
effort for the loyalty club dangles a free night
after two stays through Feb. 29. Faster Free Nights,
making its fourth appearance, is a perennial favorite
for Gold Passport members because redemptions
do not rely on complicated points and rules. (Hyatt
expands…..2002)
Threat
Hyatts may have threats from rivals. Hyatt competitors such as Washington, D.C.-based Marriott International Inc. are building high-end facilities, but they're enlarging their potential customer base by extending their brand to other segments, such as the mid-priced Courtyard by Marriott and lower-priced Fairfield Inn. Marriott International is the most formidable competitor of Hyatt Hotels. It is also doing everything to push its efficiency. Marriott is pushing all its efforts to compete in all the segments of the hotel market.
Guests who don't want to pay the penalty fee (that will include just about everyone who has ever stayed in a hotel) will have a well-prepared "emergency" explanation for the departure. The end result will be longer lines at the check-out desk, angry guests, no extra revenue and still an empty room. And if the hotel is steadfast in its demand to make the early departure pay a penalty, then surely that guest will look to book another hotel on his return to that city. ( Terdoslavich, 1995)
Hyatt’s Business Level Strategy
One of their goals is to have the best published rate on their Web site. Their message to clients is going to be, "Surf where you want, but come back to Hyatt.com and we will match it." This, of course, is primarily aimed at leisure and business travel. They also are going to continue to grow and invest money in their product and go after business in other markets. They are pretty well represented in all the major markets, but they are failing in some second-tier cities like Pittsburgh and Cleveland . In January 2003, they have opened properties in Huntington Beach , Calif. , and in South Beach , Miami . And they just got the OK on Denver — that will open in 2006. (Wolff, 2003)
They also are spending on expansions. There
will be a $60 million expansion at the Hyatt Grand
Champions Resort in Indian Wells, Calif. ; their
Grand Hyatt in New York City will get an $8.5
million renovation, and their Lake Tahoe property
will get a $60 million renovation. (Global update…2001)
Government business has become a huge market for them. They will be very active at the Society of Government Meeting Professionals' annual convention in May. In 2001, they had one property represented. In 2002, they had 26. This year they will probably double that number.
It is no secret that government planners felt hotels did not want their business back in the good times. They hope the message is getting out that they sincerely care about their business, because they do. (Weiner, 1990)
This is the first year that Hyatt became a full partner with Helms-Briscoe. Its associates get a 5 percent commission when they book business with them and another 5 percent when the business actualizes. They believe this has helped to direct business their way.
Timing Issue
Hyatt Hotels Corp. has begun charging a fee of $25 to guests who depart prior to the date they agreed to vacate when they checked in. While most other hotel companies will probably pan the idea, saying the most lasting effect of such a policy will be guest anger, many of those same naysayers will look with envy at this partial solution to a problem that has nagged hoteliers for decades.
Although travelers have become more and more sophisticated, most think nothing of demanding a late check-out (which hotels often provide) at no charge; and they think nothing of making a sudden departure. The hotel is left with a room that, unless the property has a great deal of walk-up business, will produce no revenue that night. ( Terdoslavich, 1995)
Financial Performance
Hyatt , for instance,
hopes to lure guests by spending over $200 million
in the following years to renovate more than 30
hotels. Owned by the Chicago-based Pritzker family,
the chain has seen gross operating profits climb
45 percent since 1990. To enhance earnings, Hyatt
continues to focus on improving its internal operations.
During the recession, Hyatt discovered that customers
in the 1990s weren't demanding extravagant extras
as they did in previous decades. As a result,
the chain has made some changes. In the past,
Hyatt had always turned down guest bed sheets
every evening, which required extra maid service
each day; today, the hotelier provides the service
only on request, and it has found that just 2
percent of its guests actually ask for the amenity.
Hyatt also carefully scrutinized its food and
beverage operations, streamlining the number of
choices on its dinner menus and wine lists while
trimming the garnishes on its cocktail offerings.
Shrewd cost-saving measures like these have helped
Hyatt cut its food expenses from 32 percent of
revenues in 1992 to 28 percent today. ( Nugent,
2001)
Joint Lead Arrangers First Union and BNP Paribas closed their $400 million credit facility for Hyatt Corp., which was successfully over subscribed. Joining the respective administrative and syndication agents were JP Morgan and Firstar Bank as documentation agents. Eight other institutions committed as well. The deal is made up of a 364-day, $100-million revolver and a three-year, $300 million term loan. All-in drawn pricing is tied to a grid opening at Libor plus 70 basis points. Upfront fees were offered for various ticket levels. The deal was used for general corporate purposes as well as to replace an existing five-year, $250 million facility. Chicago-based Hyatt is the exclusive management company for Hyatt hotels and resorts throughout the US , Canada and the Caribbean .
U.S. upscale hotels in 2004 are expected to perform significantly better than in 2003 as the economy strengthens, but that improvement also is expected to moderate the following year. According to PricewaterhouseCoopers, occupancy levels for the category in 2003 increased a slight 0.8 percent over 2002. In 2004, however, occupancies are projected to rise 2.9 percent year over year, but then slide back down--again rising only 0.8 percent in 2005. Revenue per available room in 2003 actually fell 0.4 percent over 2002 but is projected to jump 6.7 percent this year before subsiding to 4.2 percent the following year. ( Fenrick & Pospichal, 2003)
Recommendations
It would seem that a penalty fee for early departures
is doomed to failure, particularly if payment
of such a fee is subject to a guest's honesty
in describing the reason for the shortened stay.
Perhaps a better idea would be a sliding scale
whereby a guest staying multiple nights pays more
for the room the first few nights. Say a guest
is staying four nights in a $100 per night room.
Charge $200 for the first night, $100 for the
second, $75 for the third and $25 for the fourth.
Global Hyatt—the holding company Hyatt Corp. will create to combine aspects of its domestic and international hotel operations—has some housecleaning to do before it can host public investors. An initial public offering of the hotel company owned by Chicago 's Pritzker clan is viewed as a likely component of the family's plan to divvy up its empire. But the privately held hotel company isn't quite ready for the public markets. Before it can compete on Wall Street with rivals such as New York-based Starwood Hotels & Resorts Worldwide Inc., Marriott International Inc. in Washington , D.C. , and California 's Hilton Hotels Corp., Hyatt must address several issues.
An initial public offering (IPO) probably would require Hyatt to separate the hotels it actually owns from its business of operating hotels owned by investor groups that contract for the use of the Hyatt name and its management services. Other hotel companies have segregated their hotel management businesses from real estate holdings before taking the separate businesses public. If Hyatt decides to go public, it also will have to clarify whether it faces liability to hotel owners. Like Marriott, Hilton and other major hotel operators that have faced legal action by owners for allegedly overcharging on operating contracts, Hyatt has settled similar claims. The extent of Hyatt's potential liability to the hotel owners, if any, is the kind of uncertainty Wall Street abhors.
Perhaps hardest of all, Hyatt will have to wait for a rebound in the tourism market—the prospect of which has been dimmed by mounting tensions in Iraq . Experts say Hyatt needs a plan to increase revenues if it plans to go public. Buying up properties—whether overseas or in the U.S. —will not be easy, however, even in a down market. There's a lot of capital waiting for assets to drop out. When good properties do appear on the market, there are a lot of birds flying around. Experts predict that Hyatt will rearrange its real estate holdings.
Investors will want to know whether Hyatt—like Marriott and other major hotel operators—faces legal action by hotel owners claiming that Hyatt breached its duty to them by taking rebates and kickbacks and competing with owners.
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