Hotels Corp. president and CEO Mark Hoplamazian this month spoke with Business
Travel News lodging editor Michael B. Baker about his outlook for 2013, the
company's recent emergence as major multibrand competitor and how that has
affected Hyatt's relationship with corporate accounts.
What's your outlook on corporate travel demand next year?
The corporate demand has been quite strong over the course of the year and has remained so over the last couple of years. We will see continued positive corporate travel trends over the coming year. "How positive?" is the question, and part of that has to be getting resolution in Washington over the fiscal cliff issues and getting to more consistent economic performance. We've had some clear signs that the housing market may be at the beginning of a recovery period. If we had a number of quarters in which good data were strung together, that would make a difference in people's perceptions. There's been some volatility on the employment side and some volatility on the manufacturing side. One of the other things I pay attention to is whether companies are making commitments, both capital expenditure commitments and forward-booking commitments. There's some measure of caution that remains. Looking at the next year, our pace for corporate bookings is certainly up. A lot of that has to do with the timing of the resolution of the fiscal cliff issues. The sooner it gets taken care of, the more robust the bookings and business will be this coming year for sure.
What is Hyatt's growth plan?
We have significant brand awareness and brand strength in a lot of markets around the world, but we don't have significant depth of coverage in markets in which we already have representation. In emerging markets, we have gateway representation, but we've been committed to both expanding in those gateway cities and to other markets that are high-growth markets but not necessarily the gateway cities. That's true for China, for India and the Middle East. In Europe, we have very limited current coverage, and almost all of it is in key cities, which has served us well this past year, but as we look forward, we want to further penetrate those key cities and make sure we expand into other countries in which we don't have a presence currently. The key for us has been making sure we've got brand strength and brand identity based on key gateway cities, great hotels in great locations, and leverage that into penetration over time, and that's how we've gone to market in the primary growth areas, which are China and India, but in other markets as well. When you look at our pipeline for properties that we have under development, it's bigger today than it's ever been in the company's history. We have more than 175 projects underway, and 75 percent of those are outside of the U.S. and 50 percent are in China and India, so they do represent a significant portion of the future growth.
How have you established both the Hyatt Place and Hyatt House brands so quickly during the past few years?
We've been able to accelerate coverage through acquisition. The Hyatt Place brand was born out of the acquisition of AmeriSuites, and most of the growth since then has been through development, largely with third-party developers. Hyatt House started with the Summerfield Suites acquisition, and we very importantly bought the LodgeWorks operations last year and converted most of those hotels into Hyatt Houses.
More coverage in more markets was important to our corporate customers, and it was a demonstration to the development community that we were prepared to put our money where our mouth was. As a consequence, we have been able to generate future commitments to more markets to be serviced. From Hyatt's perspective, Hyatt Place and Hyatt House provide more coverage in more markets. Even as a major multibrand company, we have more modest presence and distribution than some of our other major competitors. From our perspective, that's great, because it's an opportunity to get more targeted and deliberate about how we're growing and where we're growing, but it means our coverage of many markets is more limited. Hyatt Place and Hyatt House are a great opportunity to cover more markets at a different price point than our full-service offerings. That's significantly changed how we compete for major corporate clients, and that is the key strategic rationale to why we've committed ourselves to growth in those brands.
Where do you see those brands five years from now?
On the growth front, five years from now we'll end up with significantly larger coverage and a larger number of properties in key markets. In the United States, that means significantly more urban representation. If you look across our current penetration of markets, it's really much more limited in urban markets, and it happens that we are now at the very front end of a significant expansion in urban markets. We have New York opening. Chicago will open next year. Austin will open next year. Nashville is under construction. We have a number of other markets in which we have projects underway, both funded by ourselves and with third parties. They also will be much more global brands. We've already opened our first Hyatt Place outside the U.S., and we have projects underway in a number of countries. India is the most significant one in terms of number of projects, but we just launched the brands in China. The first Hyatt Place and Hyatt House properties will open next year in Shanghai. So, you will see increasing coverage around the world.
Is it a challenge or an advantage that both the extended-stay and select-service segments still are somewhat new to those markets?
The one major trend in India and China for sure, and in some other countries, is accelerated growth of what I describe as a commercial class: middle managers, if you will, of companies that may be multinational or may be domestic companies, but the travel mandates for those executives are really intra-country travel. That's going to be a trend that really governs and informs travel patterns in China and India over the next couple of decades. This is not a one- or two-year thing. This is a 25-year issue. Urbanization is taking hold in China in a big way. The reason I'm [in China] today is we're launching the sponsorship of an urban sustainability program with the Paulson Institute, because urbanization is really a key issue and doing it in a sustainable way is going to be critical for the country's development over time. These brands are at a price point where we can serve a much larger population base, but they're a quality where the aspirational traveler still feels fulfilled and feels like they get a great experience.
What feedback from travel buyers have you received?
The key to each of those two brands was creating a service model and an offering that's different to what's otherwise available in the marketplace, and that's what's compelling. We continue to remain committed to delivering on other refinements based on feedback we're getting. We revamped our food and beverage operation for Hyatt Place this past year largely based on feedback and continued work we were doing on consumer needs. Five years from now, they will reflect this continuous process of getting feedback from customers and translating that into refinements.
The feedback from the corporate customers and the individual guests we're serving for Hyatt House is very fresh and resulted in the brand launch of Hyatt House last year; we were running Hyatt House as Summerfield Suites up until that time. The way we programmed the service model and created daily events for in-house guests was driven by a lot of ethnographic research we did following guests as they lived in these properties over time and led us to create a new way in which we would provide either food or other supplies that guests would need. We recreated the guest market and the social spaces, and also adjusted the timing of a number of these gatherings, because they historically in this segment were governed around a daily schedule that looked more like a corporate office rather than reflecting that we were having guests coming back after a long day of engagement in their jobs or whatever they were doing.
Those were all key things that sound very simple, and they are, but it requires you to think about and know and understand what they're living, how they're living and what they're doing. On the Hyatt Place side, the key initiative this past year revolved around food and beverage. We significantly revamped the breakfast offering, which is a key thing for guests when they're staying with us at Hyatt Places. It took us a while because we actually launched a number of different alternatives and experimented with them over time. That led to further refinement. The total elapsed time was probably one or two quarters in which we did extensive testing and refinement.
Do you see any new brands on the horizon for Hyatt?
We launched Andaz in 2007, which is our boutique brand. I'm very happy with the segments that we cover currently. Park Hyatt at the luxury end, Hyatt Place and Hyatt House in the select-service arena ... when I look behind those brands to the customers we're serving, it's a compelling base of the traveling population. It's also clear to me that we have a lot of cross-brand stays going on, which is really great to see. We bought two brands last year—Hotel Sierra and Avia—and in those cases, we converted them into existing Hyatt brands. If we found a brand acquisition that was possible and would further enhance our ability to serve those customers I just mentioned, then I could easily see us retaining the brand and expanding our brand portfolio.