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This week’s anticipated showdown between Hyatt and Expedia never really happened since both companies agreed “in principle” to continue their distribution relationship, but what wasn’t necessarily anticipated was Hyatt’s news about its minority stake in alternative accommodations platform Oasis.
Hyatt CEO Mark Hoplamazian broke the news during the company’s second quarter 2017 earnings call, along with detailing its solid financial performance.
Earnings for the quarter were $87 million, an increase of 30.5 percent from the same period last year, and net income was 68 cents per share, beating Wall Street estimates. Global revenue per available room (RevPAR) was up 2.9 percent, including a 1.2 percent decrease at comparable owned and leased hotels, while comparable U.S. RevPAR rose 1.4 percent.
Below are six newsy takeaways from the call.
No Hate For Expedia
After news that the crisis between Hyatt and Expedia was successfully averted, Hoplamazian was careful to emphasize Hyatt’s partnerships with online travel agencies, while also reminding those companies and investors of the “preference our customers have for our brands” and that “owners are demonstrating their preference for Hyatt because they understand the value that can be created with Hyatt-branded hotels.”
In his prepared remarks, he also took the time to explain the company’s distribution channel strategy, which is to “drive bookings through Hyatt channels so we can build stronger relationships with our guests.” He noted that the company has also expanded its discounted room rates for loyalty members, added new features to the mobile app, and “optimized the Hyatt.com booking path.”
However, he added: “We recognize the value of online travel agencies keeping Hyatt top of mind for customers,” mentioning Hyatt’s new contract with Booking.com, as well as the company’s agreement, in principle, to continue its partnership with Expedia.
“We agreed, in principle, in terms that optimize how we go to market and enhance our partnership with Expedia,” he noted.
Super Serious About ‘Adjacent Spaces’
When Hoplamazian told Skift earlier this year about Hyatt’s plan to expand to “adjacent spaces,” he certainly wasn’t kidding.
Proof of that came shortly thereafter when Hyatt announced it would purchase wellness resort and spa company Miraval Group for $375 million.
And Thursday, Hyatt announced its minority stake in Oasis. It’s not the first time that Hyatt has dabbled in the sharing economy space — it was an investor of onefinestay as far back as 2014 — but it’s clear Hyatt and Oasis both have some big plans for working closely together in the future. For more details on that partnership, click here.
As for Hyatt’s Miraval acquisition, Hoplamazian said: “We took a step down the path of creating a very clear position in the wellness and mindfulness space. We’re really happy with how that’s going so far. It’s likely we’ll continue to invest behind that, and not just with Miraval. Right now, we’re in a design phase with respect to programming we can bring into Hyatt-branded hotels, but unique content that’s allowed through our ownership of Miraval. Some of what we’re finding is it’s building off of resources we’ve already obtained. I would say it’s possible we will make more sizable investments over time.”
Hoplamazian also hinted at “evaluating other opportunities that are complementary to our hotel business and will resonate with our customer base and add to our growth story,” so it’s clear similar investments and acquisitions in adjacent spaces are likely on their way.
Not Abandoning the Asset Recycling Strategy Completely, But …
Hyatt, unlike its peers which generally operate on what’s called an asset-light model, is known for its own “asset recycling” strategy whereby it sells properties to buy more elsewhere. Its competitors, such as Hilton and Marriott, try to keep their real estate holdings as small as possible, preferring to make money from franchise fees and management contracts rather than by actually owning any properties.
While Hyatt’s asset recycling strategy remains in place, the company is now seeing a bit of a bump in its franchise-fee business as well as more interest from third-party developers who want to work with Hyatt to expand those properties via franchise and/or management agreements. That comes amid increased demand for select-service brands, especially Hyatt House and Hyatt Place.
“We will not be growing on the owned side and our pace for growth on the management and franchised side will continue to be very healthy,” Hoplamazian said.
Later, he added: “It’s not a change in strategy. It’s really an elevation of discipline.”
New Loyalty Program Is Doing Well
Hoplamazian didn’t divulge many exact numbers about the newly launched World of Hyatt loyalty program, but he did note he was “pleased with how it’s evolving” and that “enrollments are up significantly since last year.”
He added: “We’ve seen very positive member response both in terms of acquisition of new members and retention of new members and their spend. We’ve always concurrently had an increase in our My Hyatt member rate…and we’ve been progressively growing that segment of the business.”
As for member bookings, Hoplamazian said that more than 70 percent of bookings with member discounts came from new or formerly inactive loyalty members.
“We’re also seeing repeat business coming from them,” he said. “The majority of our hotels using member discounted rates continue to have improved RevPAR index. It’s been constructive in terms of engaging new customers and engaging previously inactive customers, and also yielding positive results for hotels that have deployed those discounts.”
Stance on Cancellation Policies
Hoplamazian said that when it comes to enacting cancellation policies, Hyatt’s corporate mandate is generally to leave it up to individual hotels to decide what policies work best for their respective properties and their markets.
He noted that “about 40 percent of our total full-service hotels in the Americas have already moved their cancellation policies to be at 48 hours or more” and that a “significant portion of those hotels, over 60 of them, have policies in excess of 48 hours.”
Cancellation policies have been in the news as of late now that Marriott and Hilton have recently enacted 48-hour cancellation policies for some of their properties. InterContinental Hotels Group also enacted a 24-hour cancellation policy in select markets as well.
Never Say Never When It Comes to Buying More Brands
It was widely rumored that Hyatt had intended to buy Starwood Hotels & Resorts before Marriott swooped in, and Hoplamazian seemed to affirm that the company was still open to more acquisitions going forward.
“In the past, we have been active at looking at brands….We would be very open to that,” he said. “Depending on what it is and where it is, it could be an attractive deal for us….It would also tend to accelerate the path we’re on, which is a more fee-based business. We want to make sure we’re aware of the possibilities that could fit for us. Our focus is on the higher-end traveler and the current brand portfolio.”