Because, you know, it's all about that shareholder value.
During an investor day event in New York on Tuesday, Hyatt Hotels Corporation announced it would sell off an additional $1.5 billion in real estate asset sales for a total of nearly $3 billion in property sales to be completed by 2022.
The Chicago-based company, which has more than 850 hotels worldwide, has traditionally stood out among its larger U.S.-based peers for being relatively smaller in scale, as well as owning and/or leasing a fair number of its hotels. As of December 31, 2018, Hyatt owned or leased at least 40 hotel properties around the world.
By comparison, Marriott International, which has more than 6,700 hotels worldwide, owned or leased a total number of 63 hotels by the end of 2018. A number of hotel companies, including Marriott, Hilton, and even Red Lion Hotels Corporation have, in recent years, adopted asset-light growth models because it’s a business strategy that frees up capital and allows for faster growth.
In November 2017, Hyatt announced its initial commitment to an asset-lighter growth strategy, saying it would sell off $1.5 billion in its owned real estate by 2020, transforming itself from more of an “asset recycler” to being more “asset light” like its peers.
To date, the company has sold off approximately $1.14 billion in real estate assets, just $350 million away from that initial $1.5 billion goal.
Hyatt Chief Financial Officer Joan Bottarini made the announcement during the second half of the investor day event, but “driving asset-light growth” was the overarching theme of the entire conference.
Hyatt CEO Mark Hoplamazian defined it as “growth with a third-party owner or developer that is either building or going to buy and convert hotel to one of our brands that we manage or franchise” and said it “is the key outcome of all of our activities.”
News of the commitment to sell off additional real estate was welcomed by the investment community, and Hyatt’s shares rose slightly after the event.
“This is the kind of growth that takes time,” Amanda Sweitzer, a vice president and senior research associate with Baird, told Skift. “It’s a methodical approach and the additional $1.5 billion is a positive update. It answers investors’ questions about what’s next for Hyatt’s asset-lighter growth strategy.”
A Morgan Stanley investor note said the “new asset sale guidance [was] potentially conservative” and added that “Sales of Grand Hyatt New York, the Park Hyatt New York, and Hyatt Regency Orlando alone could finish off [management’s] new commitment.”
The Grand Hyatt New York, which hosted the Hyatt Investor Day event, is being redeveloped and will eventually include a new Hyatt hotel.
A Glimpse Into Hyatt’s Future
In addition to selling down its assets to generate more capital — and to put that capital toward more growth and back into shareholder’s wallets — Hyatt executives also used the investor day event as an opportunity to lay out the company’s overall strategic plans for the future.
Those plans include a focus on personalizing both the guest and customer experience, as well as transforming the company’s portfolio to comprise at least 67 percent franchise and management agreements by March 2022.
Now that Hyatt owns Two Roads Hospitality, the company also announced the debut of its “Boundless” grouping of lifestyle brands which includes Andaz and Hyatt Centric, Two Roads’ Alila and Thompson Hotels, and Exhale. Joie de Vivre Hotels, which Hyatt acquired through its purchase of Two Roads, is now a part of the “Independent” group which also includes Hyatt’s soft brand, the Unbound Collection by Hyatt,” and Two Roads’ Destination Hotels.
Hyatt’s executive vice president and chief commercial officer, Mark Vondrasek, also said the company would focus heavily on incorporating wellness and wellbeing throughout the company’s portfolio, particularly in terms of its meetings and event offerings, as well as make significant investments in digital enhancements, including a new mobile app.
Vondrasek, who played a key role at Starwood Hotels and Resorts previously as the head of its Starwood Preferred Guest program, also noted the ways in which Hyatt would continue to evolve its own World of Hyatt loyalty program via partnerships with brands like Small Luxury Hotels of the World and American Airlines. Those investments,
“Our World of Hyatt program had a 47 percent lift in new enrollments last year, a 22 percent increase in year-over-year active members,” Vondrasek noted. “The value proposition for our owners, as it relates to World of Hyatt, couldn’t be clearer. This is a base that spends nearly 30 percent more than non-members and books directly with us. Our room night and revenue penetration of the program grew 300 basis points in 2018 alone. These results, for us, are all a testament to our strategy, which, again, is centered on listening, driving a direct and deeper relationship with us, with our guests and customers.”
Sweitzer, for her part, saw Hyatt “slotting itself as a replacement for Starwood” by “appealing to more upscale and high-end consumers,” as well as “focusing on partnerships,” and knowing “they don’t need to be all things to all people.”
That also, in some way, relates to Hyatt’s new approach to homesharing, for instance. When asked if the company would continue to experiment in the private accommodations space after the company incurred a $22 million impairment charge related to its investment in Oasis, Hoplamazian said “there’s a pretty obvious demand that’s out there.”
However, he added, “We see there’s a different way to play in the vacation side of the equation that has more durability and frankly more opportunity for us going forward,” referring to working with Destination Hotels’ rental management business which was a part of Hyatt’s purchase of Two Roads. “We continue to evaluate on the B2B side of the equations as to how we play in this in the future,” referring to finding private accommodations solutions that work for business travelers.
As for the company’s outlook ahead, it seemed fitting that Hyatt executive chairman of the board, Tom Pritzker, said, “We remain underrepresented in virtually all markets in the world.”
For Hyatt, that underrepresentation is not a disadvantage. It’s just an opportunity to continue to grow in an asset lighter way.
Photo credit: Hyatt Hotels plans to sell off an additional $1.5 billion in real estate assets by 2022. Christopher Dilts / Bloomberg