Hyatt is open to adding a new brand
05 MAY 2015 10:46 AM
Hyatt’s track record of buying brands and converting them to a Hyatt brand might be due for a change, President and CEO Mark S. Hoplamazian told analysts Tuesday.
CHICAGO—In the past, Hyatt Hotels Corporation has acquired brands to convert the hotels under those flags to other Hyatt-branded products such as Hyatt House or Hyatt Place.
During a first-quarter earnings call with analysts Tuesday, Mark Hoplamazian, Hyatt’s president and CEO, was asked how strong the company’s appetite is for acquiring a new brand. Hoplamazian pointed to the company’s previous acquisitions and conversions—such as its buy of AmeriSuites and conversion to Hyatt Place—as examples of the company’s willingness to engage in such transactions.
Hyatt would be willing to take that a step further, Hoplamazian added.
“We would consider purchasing a brand that is not branded Hyatt,” he said. “I think the key from our perspective would be to assess the brand equity in that brand.” Hoplamazian did not elaborate further on what other wrinkles Hyatt’s brand acquisition strategy might include.
Hyatt executives also were asked about the overall consolidation and competitive aspects of the hotel industry.
“We live in competitive environment day to day,” he said. “I would say it is a vibrant and competitive playing field. We’re encouraged and thrilled with how our brands are performing and the resonance our brands have around the world.”
During the first quarter, Hyatt recorded comparable system-wide revenue-per-available-room growth of 4.6%. As of press time Tuesday afternoon, the company’s stock was down about 2.9% year to date. By comparison, the Baird/STR Hotel Stock Index was down 0.8% through the same period.
Regarding acquisitions and dispositions of hotel assets, Hoplamazian said the company is willing to buy and sell. Hyatt, however, does not have any properties listed for sale at this time. Hoplamazian said that because of “an unusually robust year last year” the company decided to hold onto its hotels for the time being.
“We do expect we will have assets we will look to sell in the future,” Hoplamazian said, declining to identify specific hotels that could be targeted for sale.
During earnings calls, Hyatt executives have begun giving in-depth looks at various aspects of the company’s business that typically aren’t highlighted. During the first-quarter earnings call, Hoplamazian led a deep dive into the company’s food-and-beverage operations.
F&B represented $3.5 billion of chain business at Hyatt during 2014, excluding franchised hotels and is also about 35% of total chain revenue. Further, F&B was responsible for more than $1 billion in profit. As an example of the strong F&B run, Hoplamazian said banquet revenue has outpaced group roomnights during the past seven years.
“F&B revenue is a driver of business, particularly as group business continues to recover,” he said. “It enhances the operating leverage in our business.”
While banquet revenue for group roomnights has exceeded prior peak, Hoplamazian said margins remain 100 basis points below peak. “There’s a significant opportunity to grow group margin by driving higher rated group business, which will increase margins,” he said. He added F&B spend is becoming a bigger component of the company’s business segment.
Group business was strong for Hyatt during the first quarter. Group rooms revenue was up 10%, with average daily rate up about 6%. It marked the 18th consecutive quarter of rate growth for group.
Revenue in the quarter for the quarter was up 15% over last year, with group revenue pace up 7%. So far in 2015, 85% of the company’s group business is on the books for the year, which is in line with expectations.
Finally, Hoplamazian confirmed that all of the company’s guests and staff at the Hyatt Regency Kathmandu in Nepal are safe following the massive earthquake that struck the area. The hotel also has reopened, and Hyatt has been engaged in relief efforts since the first quake ended.