Hyatt Hotels Corp. president and CEO Mark Hoplamazian during the company's second-quarter earnings call acknowledged both Hyatt's recent intention to make an offer for Spain's NH Hotel Group and Hyatt's decision days later to withdraw any interest.
Hoplamazian said Hyatt sent a letter to NH's board on Thursday, July 26 requesting information that would allow Hyatt to develop an offer for the company. By Monday, however, Hyatt sent NH a second letter informing the board that "our path to a successful tender offer for NH was narrowed to the point of not being practical," based on a disclosure by NH's largest shareholder. According to reports from Reuters, the largest shareholder was Thailand-based Minor International, which already owns 44 percent of NH and in June had submitted a 2.5 billion euro offer for NH.
"Our interest in NH was born out of our efforts to significantly expand Hyatt's presence in Europe, where a bulk of NH hotels are located," Hoplamazian said. "We felt that the strength of our distribution channels, loyalty program and the association with the Hyatt brand would enhance NH's operating results."
Loyalty Partnership
While Hyatt's hopes to gain NH's almost 400 hotels across 30 countries may be dashed, the company nevertheless has a separate Europe scheme underway: an exclusive loyalty program alliance with Small Luxury Hotels of the World. SLH's portfolio boasts more than 500 small, independent luxury properties globally and has a footprint across more than 30 countries in Europe.
Hoplamazian said the SLH alliance will allow World of Hyatt members to earn and redeem stays at a "dramatically wider selection of hotels," particularly in markets where Hyatt doesn't currently have branded properties. Though Hyatt is investing in the integration of World of Hyatt and SLH's Invited loyalty program, Hoplamazian said Hyatt is not investing in SLH itself. The alliance is slated to launch at the end of this year.
Hyatt will continue to explore asset-light growth opportunities, Hoplamazian said. It remains on pace to sell $1.5 billion of its real estate assets by the end of 2020 as part of its long-term capital strategy. The company had sold $1.1 billion in real estate under the program as of July 31.
Trouble with Oasis
Hyatt's second-quarter accounting recognized a $22 million impairment, which Hoplamazian said relates to its investment last year in private accommodations provider Oasis Collections. "Oasis has underperformed our expectations as it relates to the scalability of that business and the synergies to be realized through the alliance with Hyatt," he said. "The business has consistently experienced shortfalls in operating cash flow, so as a consequence, we felt it was prudent to impair our investment to date."
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Q2 Results
Systemwide occupancy increased 1 percentage point year over year to 78 percent, and average daily rate rose 3.2 percent to $187.92.
Hoplamazian said corporate group demand during the quarter proved "really spectacular" in year-over-year growth of both realized business and booking pace growth. Removing the impact of the Easter shift, corporate group revenue rose almost 7 percent, Hoplamazian said. At U.S. full-service hotels, total group room revenue increased 4.9 percent.
The company added 17 hotels, or 4,686 rooms, during the quarter and is on pace to add 60 hotels during the 2018 fiscal year. Hyatt's net income declined 24.6 percent to $77 million.
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