Less than a month after announcing its acquisition of three wellness resorts located in Texas, Arizona and Massachusetts, as well as a new spa brand, Hyatt is looking for similar opportunities as “guest tastes and preferences evolve,” the company’s CEO, Mark Hoplamazian, told analysts on Thursday.
“We didn’t buy the brand to just end up with three resorts,” Hoplamazian said on Hyatt’s fourth quarter earnings call. “This is a platform and a very leverageable brand on a global basis. We believe we will be able to extend and expand the brand in destination wellness resorts [and] in standalone spas.”
That new brand for Hyatt is Miraval, owner of the Miraval Arizona Resort & Spa in Tucson, Arizona and the Travaasa Austin Resort in Texas, along with the Miraval Life in Balance Spa at the Monarch Beach Resort in Southern California. In addition, Hyatt last month spent about $20 million to buy the Cranwell Spa & Golf Resort in Massachusetts, which it is folding into Miraval’s brand.
Hyatt values the Miraval acqusition at $375 million, though that sum includes improvements planned for the resorts in the next two to three years.
Shifting Corporate Demands
In recent years, Hoplamazian said, Hyatt has noticed corporate customers are increasingly focused on wellness. And they don’t want to give up that focus when they plan hotel meetings, so Hoplamazian said Hyatt needs to evolve to keep pace.
“There are a number of large corporate clients that we serve in our hotel business today that are dedicating increasing amount of time and resources to their own wellness programs within their workplaces,” he said. “They want to also bring these practices into their meetings, for example.”
As a result, Hoplamazian said said the new brand will probably trickle down beyond the resorts into Hyatt’s core hotel business.
“We view this very much as a wellness platform, that we can extend to destination resorts, into Hyatt hotels, and ultimately to get closer and closer to corporate customers,” Hoplamazian said.
No plans to spinoff real estate
On the call, Hoplamazian acknowledged Hyatt owns more hotels than many of its competitors, but he said the company has no plans to change its approach. He said Hyatt also has no plans to split into two parts — one for real estate and the other for hotel management — as La Quinta said last month it might do.
“We view our ownership in hotel real estate as a part of our business,” Hoplamazian said. “We believe it makes us better managers— we eat our own cooking everyday.”
Hoplamazian also said that owning real estate allows the company to expand faster in important markets.
“The idea that we can utilize that asset base to fund investments in markets in which we want to grow has yielded a tremendously level of opportunity and benefits for us,” he said. “It has allowed us to expand in some key markets in convention hotels, in key resort areas, and gateway cities. And it is the key thing that has allowed us to build such a strong base in our select service brands.”
For the fourth quarter, Hyatt reported net income of $41 million on revenues of $1.09 billion. Adjusted earnings before interest, tax, depreciation and amortization, or EBITDA, decreased 3.9 percent to $172 million.
Revenue per available room, or RevPAR, increased 2 percent systemwide, though it was down 0.3 percent at hotels Hyatt owns or leases. In the United States, RevPAR increased 2.4 percent.
Hyatt also provided 2017 guidance. It said it is predicting full-year net income between $94 million to $129 million, with adjusted EBITDA of roughly $795 million to $830 million. It expects comparable systemwide RevPAR to increase between 0 and 2 percent.
Michael J. Bellisario, an analyst with Baird Equity Research, noted that Hyatt’s RevPar guidance is a full percentage point less than Hilton’s and half a percentage point less than Marriott’s.
“We suspect the lower relative outlook is due to Hyatt’s portfolio being skewed toward higher-rated, more urban-focused properties,” he said.