• Hyatt continues experience drive

Hyatt Hotels Corporation has acquired its second wellness brand this year, with the purchase of Exhale, the US and Caribbean-based group.

Earlier this year saw the company buy Miraval Group from KSL for USD215m, as Hyatt’s CEO described the group’s growth strategy as extending the Hyatt brand “into adjacent spaces beyond traditional hotel stays.

Steve Haggerty, Hyatt’s global head of capital strategy, franchising and select service, said: “Everything we do is to improve the value proposition for our World of Hyatt community, and that effort has led us to expand in the wellness space. We know our guests demand that and want that at home and when they travel. So our acquisitions of Miraval and Exhale are components of an overall strategy to deliver wellness to our guests and our colleagues.

“We will continue to offer hotel owners multiple solutions for a wellness offering with their respective properties. Wellness for us is an integrated strategy, and we believe we can strategically differentiate our company on that dimension.”

Annbeth Eschbach, founder & CEO, Exhale Enterprises, said: “With Hyatt’s support, the Exhale brand will be positioned for global expansion – in free-standing locations, existing locations, and Hyatt properties where the brand and offering fits. We couldn’t be more excited about the next path in the Exhale journey.”

At the time of the Miraval purchase, Mark Hoplamazian, president & CEO, Hyatt Hotels Corporation, said that the deal “extends the Hyatt brand into adjacent spaces beyond traditional hotel stays, which is core to Hyatt’s global growth strategy. We recognise the business opportunity within the USD420bn wellness-tourism category and understand the rising demand for wellness offerings among our targeted high-end travellers”.

Commenting to analysts last month, Hoplamazian said that Miraval’s operating results had “exceeded our expectations” and that the brand was track with expansion plans.

The company formed a new “wellness” category within the Hyatt portfolio of brands, which Exhale is expected to join. Miraval was added to Hyatt’s loyalty programme over the summer, with the latter also announcing that Steve Rudnitsky, Miraval’s president & CEO, would step down at the end of September, to be replaced by Marc Ellin, Hyatt SVP, operations, Americas.

Wellness has not been the group’s only foray into the area beyond hotels. The company also acquired a minority stake in curated sharing platform Oasis Collections.

The new brands are expected to draw more members into the group’s World of Hyatt loyalty programme, which was launched in March this year, focusing on experience. Hoplamazian said at the time that the programme was “designed to deepen our relationship with our community beyond traditional hotel stays”.

The company was looking, it said, to “inspire irrational loyalty”.

On the group’s third-quarter earnings call, the CEO said enrolments year-to-date were “up significantly” over the last year, with awareness of the programme growing since its launch.

Concurrently, the group increased its member discount rate, with Hoplamazian commenting that “over 70% of the bookings through the member discount is either new or previously inactive World of Hyatt members. And since the launch of the programme, about half of those new and previously inactive members have booked more than once, so we’re seeing repeat business come from them.”

He added that the majority of hotels using the member discount were seeing an improved revpar discount, “so we believe that it’s been constructive both in terms of engaging new customers, reengaging previously inactive customers within the World of Hyatt, but also yielding positive results for the hotels that have deployed”.

HA Perspective [by Katherine Doggrell]: Hyatt has been keeping us busy over the summer months. Not to the extent of needing a wellness break – we’re made of sterner stuff – but between the comments that it was becoming a net asset seller as it focused on its fee-paying business, and the wrangling with Expedia, Inc, it’s a good job there hasn’t been any sun to distract us.

The two are, of course, connected. Hyatt has been something of a trend setter with its loyalty programme, which it is now leveraging to see off the threat of the third parties and attract owners with promise of high-spending guests who like ancillaries. Early innovations included partnering with MGM Resorts in 2013, offering free wi-fi to members (now free for all) and becoming the first hotel operator to integrate Uber into its app, in 2015. What bought all of its early actions together was the realisation that hotels were more than just a bed, something it has taken even further with its purchase of a stake in Oasis Collections (which followed a stake in Onefinestay – lost when Accor bought the group) and proof that it is staying ahead of what hospitality means.

So far it’s working. The group expects 2017 to be a year of record openings and, at Q3, had experienced net room growth between 6% and 7% over nine consecutive quarters. In the last earnings call, the company said that it was continuing to look at possible brands. A nod, no doubt, to Exhale. But unlikely to be the last.

Additional comment [by Andrew Sangster]: Hyatt is sometimes seen as the smallest of the global major hotel brands, following on the heels of the big four: Marriott, Hilton, Accor and IHG. But Hyatt has ploughed its own course, initially standing out from its bigger brethren by sticking with assets rather than going all-in with asset light.

That initial reluctance to sell has changed, albeit in a small way. My favourite explanation from CEO Hoplamazian was: “It’s not a change of strategy… it’s really an elevation of discipline.” He stressed that it’s more a case of growth in the fee business than exiting ownership, although it was clear than increased ownership was off the agenda.

So it’s a very gradual switch to a fee orientated business. We’ll see how well shareholders put up with that as they see the greater returns on capital employed from the fee business and start liking the cash thrown off by disposals. If Hyatt can resist the pressure it will be unusual: for other groups once the selling started, it didn’t stop until all assets went.

So far, Hyatt is making the right noises by stating that funds raised from disposals are going to be reinvested in the business, either in new hotel assets or in the acquisition of new business lines.

The more share repurchases it makes, however, the harder it will be to keep the siren calls at bay. In 2016 it bought USD272m but it exceeded this in the first half of this year, hitting USD288m. Time to talk less about its “history of returning capital to shareholders” which was on the first page of August’s investor presentation.

Even more distinctive from the other global majors (apart, perhaps, Accor) is the push by Hyatt into wider parts of the experience travel economy. Just as Hyatt has a reputation for delivering some of the best F&B experiences in the business, it looks set to be heading the same way with spa and wellness.

The move into “adjacent spaces” such as the home rentals business with Hyatt’s “significant minority stake” in Oasis Collections is a further push into serving high-end customers with more than just a hotel offering.

All of these moves are being wrapped up in a loyalty programme, World of Hyatt, that is looking notably different from its peers. The Hyatt story is certainly distinctive and seems sensibly focused on building a product offering that is truly unique and special for its customer base. It would be a shame to see these efforts destroyed by shareholders demanding more c

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