Hyatt CEO Interview: We’re Looking Beyond Hotels to Serve Evolving Needs of Guests

This year will be a pivotal one for Chicago-based Hyatt.

In 2016, the company debuted a new soft brand, the The Unbound Collection by Hyatt, formally launched discounted loyalty member rates, and announced plans to completely overhaul its loyalty program.

This is the year when all of those efforts will ultimately converge: The Unbound Collection by Hyatt will turn one year old in just a few weeks, and Hyatt’s direct bookings push, as Hyatt CEO Mark Hoplamazian noted, will continue this year and for many years to come. And in March, the new World of Hyatt will replace Hyatt Gold Passport.

Reception for the new loyalty program hasn’t necessarily been the most laudatory — and a very awkward Reddit Ask Me Anything session in November didn’t help. Nevertheless, Hoplamazian thinks World of Hyatt represents the kind of loyalty shift in travel that’s completely necessary, especially as consumer needs and wants continue to evolve.

Hoplamazian also hinted at some possible new ventures he may launch this year as part of the company’s desire to expand in “adjacent spaces” like food and beverage, wellness, and alternative accommodations. Hyatt previously invested in luxury alternative accommodations provider onefinestay before it was acquired for $168 million by AccorHotels in the spring of 2016. Hoplamazian also disclosed that the company is exploring various business models that would enable it to get back into the sharing economy space.

And as Hoplamazian noted last spring, there could be more deals to come from Hyatt, which was rumored to have considered buying onefinestay before AccorHotels swooped in. Hyatt was also reportedly very close to purchasing Starwood Hotels & Resorts before Marriott made its move. Could this be the year that Hyatt makes its own move to get bigger? Hoplamazian didn’t confirm anything, but he also didn’t rule anything out.

And at the heart of it all, he said, brands should be focused on bringing humanity back into travel, a theme echoed by Skift’s own Megatrends for 2017, too. (We promise we didn’t ask him to say that, either.)

Skift spoke to Hoplamazian in December, shortly before the holidays, to get his thoughts on the future of hospitality in 2017 and beyond. What follows is an edited version of that conversation.

Skift: If you had to sum up 2016, how would you describe it in terms of Hyatt’s business, and the overall hospitality and travel industry?

Hoplamazian: 2016 was actually a tremendous year in many ways. It’s, for us, a record year. Based on the earnings guidance that we provided during our Investor Day in November, we’re on track to have record earnings as a company. Associated with that record revenue, we will open more hotels this year than we ever have in the past, so I would say it’s been a year of positive momentum and, in our eyes, setting new records.

We launched a new brand early in the year, the Unbound Collection by Hyatt, so we’re very excited about the quality of the properties that we’ve started off with and seeing good momentum for the brand across the world. We’re also seeing an acceleration of growth in a brand that we launched last year, in 2015, called Hyatt Centric. For us it’s really been an exciting time for new growth and new markets and new brands.

Some of the most important things over the course of the year have had to do with people, since we are first and foremost and fundamentally a people business. I’m happy to say that we were ranked as one of the great places to work and amongst the world’s best multinational workplaces. We also rolled out a new family leave policy internally, which was really met with great positive feedback, and I added to my team. I’ve got two new members of my team on board now from outside of the company: Pat Grismer as our CFO and Anne-Marie Law as our chief human resources officer.

I would say the last area that we’ve been really focused on is how we can really extend the practice of empathy and fulfill our purpose as a company, which is that we care for people so they can be their best. Through the application of some technology that’s actually designed to enhance the guest experience, but also to really improve the lives of our colleagues, we want to make their lives a little easier as they do what they are doing to serve and care for our guests. We’ve launched a few new platforms that we are now rolling out across the globe. It’s been a very busy year and one of positive momentum.

Skift: What do you think 2017 will be like for the hotel industry and for Hyatt’s business in particular?

Hoplamazian: Well our expectation is that we’ll see continued growth in our business. A lot of that is driven by the fact that there’s continued growth in travel. It’s also true that there are continued disruptive forces afoot that really relate to how consumers are changing and how attitudes are changing and buying behaviors are changing. I think in that kind of environment we tend to focus very much on making sure that we stay close to and fulfill our purpose as a company. We define our purpose as care, caring for people so they can be their best. In this kind of an environment, focusing on a core customer base is important to us, which is the high-end traveler, and that’s one area of focus that’s critical.

Another area of focus is ensuring that we’re delivering experiences, not just a place to stay, in all of our interactions with our guests.

Finally, as we think about the disruptive forces that we see in the marketplace, making sure that we are paying attention to how we might extend the Hyatt brand experience beyond just hotel spaces into other areas over time is also a big focus. As we head into the new year, we think it’ll be a year of growth in a somewhat disrupted environment and we think that focus is the key.

Skift: Could you elaborate more on expanding the guest experience beyond just the hotel? Were you hinting at that when you spoke about adjacent spaces during Hyatt’s recent Investor Day event in November?

Hoplamazian: Yes, so our strategy really is formed first and foremost around a focus on the high-end traveler. The key thing that we will do for high-end travelers is deliver experiences that really resonate with them, and that matter to them. A lot of that will be recognizing what their desires happen to be and to make sure that we can help to fulfill those desires, and I would say that we are open-minded in increasing the aperture through which we think about serving our guests to include, of course, hotel stays, but also extend beyond hotel stays.

The way we refer to that has been to talk about moving into spaces that might be adjacent to our core hotel business, but still relate to things that people might do when they’re traveling and as they experience life. We’re very much thinking about extending the Hyatt brand to be able to serve more types of travel and more options for our core customer base. All of it ultimately is around serving and activating our purpose as a company, so it’s really about caring for those people and making sure that, to the extent that they’ve got all the things that they’re interested in doing, we can figure out a great way to deliver that in a high-quality way.

Skift: Would a Hyatt cruise or a Hyatt tour be in the works in the near future?

Hoplamazian: Possibly. I think that what we are looking around some key areas that we already have some familiarity with through our hotel operations. So, one long-time lineage at Hyatt has been food-and-beverage excellence and we have a great deal of pride in that capability. We’re looking at different ways now in which we can extend and expand that capability to include things that might be outside of our hotels.

Another area that is very clearly in demand and an increasing desire amongst our customers is a more holistic and perhaps a more in-depth approach to wellness. Maybe a more mindful approach to wellness, but wellness extends across a number of different areas, so it could be nutrition, it could be fitness, or it might be spa-related.

I would say, overall, we’re very much focused on making sure that we can help people achieve what they want to when they’re traveling with their families. I think a lot of the guests that we serve currently are business travelers and ultimately the deeply fulfilling times for them often relate to family travel, not just their business travel. So we want to extend and expand the alternatives that we can offer to them while they’re traveling for vacations and that would be, of course, extending and expanding our resort portfolio but also looking past hotels. Because in a lot of instances, it’s very clear that our guests are looking for alternatives to hotel stays when they’re traveling with their families for vacation.

Skift: Would Hyatt be willing to invest in another part of the sharing economy going forward?

Hoplamazian: Yes, I guess what I would say is that our approach in learning about the platform that onefinestay had was really about understanding how that platform could work, but also understanding the use cases. We learned a lot through that process because we ran various pilots with onefinestay to see how we might integrate it into our hotel business. We recognized that it is a very different option to stay and that a lot of those guests are not really looking for alternatives across hotels, but rather alternatives across apartments or houses or villas. We learned a lot, and we were interested in delivering something that really reflects our brand, is a fulfillment of our purpose as a company, and is a commercial model that really will work for us. It might include something that looks like a sharing economy platform, but it might take a different form as well. We’re evaluating a number of different models, but I think that it’s clearly a use case that would be sensible for us to move into.

Skift: When it comes to business travelers, we know a big point of interest for them is the loyalty program for a hotel, and Hyatt definitely made a lot of news lately with the announcement that the company will be replacing the current Hyatt Gold Passport Loyalty program and putting forth the new World of Hyatt in March. What prompted Hyatt to launch this new program?

Hoplamazian: Well, the Hyatt Gold Passport program has been around for almost 30 years and it was an award-winning program. It actually was very well-received and well-functioning, and inherently it was focused on the framework that many loyalty programs currently are focused on, which is a process by which the earning of points and awards and rewards ends up extending to our best guests.

What we recognized is that as the world has evolved, customer attitudes have evolved and changed. We’ve recognized that a lot of what I described earlier — that is a focus on the high-end traveler, a focus on experiences and a focus on extending our brands beyond just hotel stays — all of that pointed to a different approach to how we might engage with our best guests. We really conceived of the World of Hyatt as an engagement platform first and foremost. We as a company, we refer to everyone who works at Hyatt as members of the Hyatt family, and one of the realities of the Hyatt family is that there are deep and close connections that are mostly emotional ties that exist. It’s not a transactional environment in which we live at Hyatt; it’s very much an emotional environment, with emotional ties.

We thought that a powerful way to really engage our guests and our customers would be through extending the same principles of the Hyatt family to our guests and really extending that sense of family. That really goes to building a community of people who want to be a part of that and feel fulfilled by that, so that’s really the idea of it. It’s an engagement platform to build community.

We have made some changes, a few key changes to the structure of the program to support that. We expect that we will continue to extend that platform to be able to include many different types of experiences and to allow us to have a much higher level of engagement with our guests. That was really the idea behind it; it was driven by insights that we have from our customers and from consumer behavioral changes overall, but very much linked to our purpose and our culture as a company.

Skift: What’s the public perception been like to World of Hyatt thus far? I know that there was a bit of a challenging Reddit AMA with the head of the loyalty program recently, but what kind of feedback have you been receiving for the new program?

Hoplamazian: I think that the feedback overall has been quite positive. I have an expression that I use all the time at Hyatt, which is that “feedback is a gift.” I mean that very sincerely. My view is that getting feedback of all types, both positive and negative, is essential to our future because without feedback we don’t know what we need to focus on to improve.

The level of engagement was extremely high during the feedback sessions that we have held. You made reference to one of them, which was a Reddit Ask Me Anything session, but we’ve had many other opportunities to engage with our guests and with people who are interested in the World of Hyatt.

We’ve learned a lot through that and I think it was great evidence that people really cared because they have such strong feelings about the brand and I think that’s actually a great sign. The key is that we need to practice empathy in a very deep way, and make sure that we’re understanding where people are coming from and how that relates to what our goals are for the program and for fulfillment of our commitment to our guests and making sure that we’re responsive to what we hear. I would say it’s a great practice of empathy and listening and we are going to continue to do that.

Skift: Can you put this loyalty program into the context of larger loyalty shifts that we are seeing in the travel industry? Does this tie into Hyatt’s efforts to drive more direct bookings as well?

Hoplamazian: I think that for a long time we have been thinking about the ultimate goal of what it is that we’re doing, applying ourselves to, and we define it around this concept of irrational loyalty. Irrational loyalty is not achieved by transactional means; it’s achieved through an emotional connectivity. I would say, first and foremost, that’s true, and that will remain our focus with respect to World of Hyatt.

It is also true that the ability to connect with, directly connect with our best guests, is really important to us because we want to be able to have our best guests have a fully holistic Hyatt experience, digitally and physically, when they’re with us, and the digital part is increasingly important. The incidence of the use of mobile devices in researching, booking and purchasing stays or hotel nights, is increasing.

So as we think about direct booking for example, which you asked about, we think about the ability to have a direct connection with our best guests and we’ve provided a path for our best guests, our loyalty program members, to book directly with us and in that channel, to offer them a unique discount, a unique benefit for the purpose of actually pulling them into the Hyatt environment, so to speak. What we found was that it’s been very productive for us because first, we’ve attracted a number of new members. About a third of the total engagement that we’ve had through the member discount program has been with people who are signing up afresh. About 40 percent of the bookings that we’ve seen through the channel have been made by previously inactive members, so we’re attracting people back into the Hyatt family.

Then the remainder are bookings that are made by existing members, so first we’re extending and expanding the number of people that we have regular contact with, which I think is really essential to us. Then the second element to this is to make sure that, as an owner of brands and a manager of hotels, that this is actually productive and constructive for our hotels themselves and for the hotel owners, and we’ve also found that because we’ve maintained expansion of RevPAR [revenue per available room] index and expansion of our rate index in the hotels that have been participating in the member discount program. So, a majority of hotels are expanding their share. That really is a key measure for us, we want to make sure that we are both serving our core customer base, first and foremost, and then derivatively, by way of serving them better, and ensuring that they have great experience digitally in their booking path, that we are also serving our hotel owners as well, so far it’s been very constructive and very productive for us and we expect to continue to do it.

Skift: The year 2016 seemed to be characterized very much by the so-called direct booking wars being waged between hotels and online travel agencies. Do you think that in 2017 the industry as a whole will have moved beyond the direct booking wars, and that direct bookings will simply be an ongoing push for hotels?

Hoplamazian: I don’t know that I see it the same way that you described it. I’m not sure that 2016 would be, for us at least, be characterized as sort of the year of the direct booking initiative. For us, we actually prototyped and piloted the direct booking idea in a number of hotels. I think we were in eight different markets for almost a year before we actually extended and expanded it this year, so we were in the market in 2015 for a lot of the year.

We’ve been actually in this mode for some time and I think it’s also clear that as things continue to evolve, as consumer behavior continues to evolve and attitudes continue to evolve, so too do we. I guess what I would just say is that if you’re not on the mode of a constant evolution of how you’re refining how you want to interact with and engage with your guests, then you’re not doing what you need to do. I would say I’m not sure that it’s defined by way of the chapter of direct booking moving onto something else. I think it’s a constant evolution for us.

Skift: Going into 2017, what do you identify as the most disruptive force, or the biggest threats or challenges, to the traditional hospitality industry?

Hoplamazian: Maybe the best way for me to characterize it is not so much as the biggest threat or challenge, but really maybe the most important things are those derived from the changes that we can see in the marketplace, not just in the hotel industry, but across consumers generally, and that is that there’s this unambiguous, very clear draw, or pull toward authentic human connection.

I think it’s a big issue that we see unfolding and manifesting in many, many different ways and so our hyper-focus around care as the central principle for, our central purpose and central principle for what we do is really on topic to that major force that we see. The way we define it is empathy plus action equals care, so you have to practice empathy and get to know someone in order to be able to care for them.

Having gotten to know them, you have to do something about it, otherwise all you’ve done is elevated your understanding without doing anything about it. If you apply yourself to engage in empathy and apply action, then you actually are caring for someone. I think travel in itself is experiential, which is very important and I think it’s great for the whole industry, but I think that the core fundamental reality, which is this draw toward humanity, toward authentic human engagement, is really the key big issue. I think staying focused around how you actually serve that and be a part of that and engage in that is really the key issue.

There is another megatrend that we see across the globe and that is that there is a very significant increase in the number of people traveling. A lot of that’s driven by significant increases in what we call the consuming class or the commercial class in China and in India. China in particular has significant growth in the number of people who are able to and are interested in traveling outside of China and so I think that will also be a very, very important trend as we head into next year.

I would say, stay human and be highly engaged and in our experience, it’s the extension of care, and paying attention to what’s going on globally. Those are the two key themes for this coming year, in my opinion.