Hyatt needs — not wants — corporate travel and conventions to recover quickly to avoid further quarters of hemorrhaging hundreds of millions of dollars. Hybrid meetings are a good first step.
It wasn’t a great start to the year for Hyatt, but the company’s leaders hope rolling out hybrid in-person and digital meetings and events can soften further financial blows while they await non-leisure travel to come back to life.
The company, like most hotel groups, sees plenty of reasons for optimism around leisure travel, which was back to 2019 levels of demand across Hyatt hotels toward the end of March. The company’s resorts even garnered higher daily rates than in 2019.
But Hyatt’s hotels heavily skew toward business travel and events and finding a way to get those sectors back is vital to the company’s recovery trajectory. The two segments were only at 20 percent of pre-pandemic levels for the month of March.
“While we share trends that are encouraging, we are fully aware that group and business transient demand needs to improve meaningfully to reach a full recovery,” Hyatt CEO Mark Hoplamazian said Wednesday on an investor call.
The company does have some reasons to be encouraged looking further into the year.
Group business bookings across the first quarter for future events was up 55 percent compared to the end of 2020. While still well below 2019 levels, business transient travel rose to 35 percent of pre-pandemic levels in recent weeks. C orporate customers across the pharmaceutical, consulting, and financial industries have all indicated plans to return to travel, especially in the fall.
“All these data points fuel our optimism,” Hoplamazian said. “And it is also true that this recovery will not be linear or evenly distributed. Case counts remain high in certain parts of the world, and the pace of vaccine distribution is uneven. What we do know is the desire to travel and connect is fundamental, and there is clear positive change in the mindset of travelers after vaccination.”
Hyatt leaders diverged earlier this year from the widespread industry belief leisure travel would lead the recovery followed by business transient and then group business. Instead, they expected group business would return faster than business transient, and they still hold that belief.
The company is hosting its first major corporate meetings in the U.S. over the summer with two pharmaceutical companies. The meetings — ranging between 800 and 1,000 attendees — will utilize the company’s new Together by Hyatt event platform and have guests attending in person across a variety of Hyatt hotels as well as digitally.
“We’re opening up a very different type of thought process to enable people to actually hold a portion of their meeting or have a significant portion of their attendees attend in person,” Hoplamazian said of the platform, which launched last week. “The initial dialogue with a lot of our corporate customers has been very, very positive.”
A Financial Chill
Despite Hoplamazian’s optimism, this was still a brutal quarter for the hotel company.
Hyatt posted a $304 million first quarter loss. For comparison, Hyatt lost $203 million in the fourth quarter and $703 million for all of 2020. Revenue per available room — the hotel industry’s key performance metric — was down more than 65 percent from the first quarter of 2019 and 49 percent from the same time last year.
While occupancy rates made gains in recent months, Hyatt’s full-service (hotels with more amenities like a restaurant or spa) and select-service hotels averaged 26.3 percent and 48.4 percent occupancy rates, respectively, over the first quarter.
The select-service portfolio actually slightly outperformed the national 46.5 percent average for the quarter, according to STR data. But the full-service portfolio significantly underperformed.
Hilton CEO Chris Nassetta was more specific in providing performance trajectories earlier in the day on his own earnings call, but Hoplamazian wasn’t ready to divulge more than generalities looking ahead.
“I’d love to get that crystal ball. What I can tell you is we’re seeing sequential improvement month over month, and it’s very pronounced in March and April,” he said. “Just based on our current outlook, we will be significantly higher in terms of our expected [rooms revenue] levels by the end of the year, assuming we don’t have any significant caseload issues that come to pass.”
Room to Grow
Hyatt isn’t just banking on the eventual return of events and corporate travel. Hoplamazian indicated the company is considering strategic acquisitions and later clarified this would likely be in leisure-focused resorts.
The company acquired Two Roads Hospitality, owner of brands like Thompson and Joie de Vivre, in late 2018 with a similar mindset.
“As we look into potential opportunities that would be meaningful to us, we’re looking to ensure that we’ve got very compelling resort alternatives for our guests,” Hoplamazian said.
Photo credit: Prolonged recoveries in corporate travel and group meetings stung Hyatt in the first quarter. Mike from Midwest / Wikimedia