Hyatt Hotels Corporation said that it was looking at multiple ways to drive guest engagement as it pushed direct bookings and sought to distinguish its brands from its competitors.
The company, which recently acquired Two Roads Hospitality, said that it was also investing in its digital capabilities, as well as expanding into wellness.
The company paid USD480m for Two Roads, with the possible investment of an additional USD120m. The deal was paid for with cash raised through the group’s USD1.5bn sell-down of owned real estate and took it to 19 brands across more than 800 hotels.
The company said that it remained on track to sell approximately USD1.5bn of real estate by the end of 2020, having sold USD1.14bn so far. During the period the group also acquired two hotels, both in the US and both previously operated by the group under management contracts.
Mark Hoplamazian, president & CEO, Hyatt Hotels Corporation, told analysts: “Importantly, developer interest in the Two Roads brands has been high, resulting in their significant pipeline of signed deals, totalling approximately 5,000 rooms with a large number of additional rooms in advanced stages of negotiation.”
Based on the pipeline growth as well as synergies between the groups, the CEO said that transaction was expected to yield an implied multiple of approximately 12 to 13 times adjusted Ebitda by 2021. It was also expected to drive the proportion of earnings driven by fees at Hyatt, one of the group’s key strategies.
The comments were made as the company reported its third-quarter earnings, with revpar up by 2.8%, net income increased to USD237m from USD18m last year, aided by gains on sales of real estate and adjusted Ebitda was down by 0.9% to USD175m, also because of the disposals.
Looking to the full year, the company upgraded its expectations, with net income expected to be approximately USD726m to USD771m, compared to previous expectations of USD680m to USD729. Revpar was expected to increase by approximately 3.25% to 3.75% against the earlier forecast of 3.0% to 4.0%.
During the third quarter, the group reported net rooms growth of 7.6% year-on-year, marking four consecutive quarters of year-on-year net rooms growth of at least 7%. Hyatt’s pipeline of signed deals stood at approximately 73,000 rooms, an increase of about 6% compared to the same time last year and the equivalent of nearly 40% of its existing portfolio.
Commenting on guest engagement, Hoplamazian said: “When we talk about guest engagement, we mean an intense focus on guest centricity that is characterised by our engagement with guests on their terms, not ours.
“Our goal is to develop direct relationships with guests over time, not just during a given stay and to serve that relationship by delivering tailored experiences. We believe this approach has differentiated our brands and will continue to do so in ways that will allow us to strengthen guest loyalty over time.”
Recent efforts include the group’s deal with Small Luxury Hotels of the World, where, by mid-November, World of Hyatt members will be able to earn and redeem World of Hyatt points for eligible bookings at participating SLH hotels.
Hoplamazian said: “We are driving guest engagement as a means of building loyalty and driving direct bookings. It’s an area of significant focus for us as a means of further differentiating our brands, building relevant scale, and strengthening our competitive position. The enhancements we made are resonating with our guests, leading to an increase in World of Hyatt member room night penetration of approximately 250 basis points on a year-to-date basis. Additionally, new member enrolments are up 45% versus prior year.”
Hyatt said that it was committing “a significant portion” of its share of proceeds from last year’s sale of Avendra toward the enhancement of its digital capabilities. The group described growth in digital direct booking channels as “outpacing all other channels”, with new features and functions on its mobile platform over the new year.
The company has also looked to wellness to drive engagement, following the acquisitions of Miraval and Exhale last year. Hoplamazian said: “Our focus in this area is based on listening to our guests and responding to what they’ve indicated as an area of increased emphasis in their lives. We believe our unique position in this area within the hotel industry affords us the ability to engage with our guests in ways that build deep and meaningful connections that drive loyalty over time.”
HA Perspective [by Katherine Doggrell]: Hyatt has come into the running after being something of a dark horse, the also-ran in a number of deals and, to labour a point, we hadn’t seen it prancing much in the winners’ paddock. But before the call to the good folk at Pedigree Chum was made, deals such as that at Miraval and now Two Roads have shown that it has been thinking about what might set it apart from the other operators in the eyes of its customers.
In the eyes of its owners, the danger of asset-light expansion is that each deal comes with a certain flight, from owners who seek to buck the trend (yes, that dead horse is still being flogged) and would rather not be consumed into a growing behemoth. Only ownership guarantees loyalty and Hyatt, which is looking towards fee-driven growth, faces the same challenges as others looking to management and franchise growth.
It is investing where it counts, in digital and we suspect it won’t be giving up its fondness for the high-profile deals, as the temptation to join the sector’s current bunfight, for Belmond, may prove overwhelming.
Additional comment [by Andrew Sangster]: If Marriott’s purchase of Starwood was a bargain, and Accor’s purchase of FRHI was fairly rich then Hyatt’s Two Roads deal looks outrageously expensive. It seems there is nothing like a fancy boutique hotel chain to get people’s cheque books out, whether you’re a guest or a would-be owner.