If you listened to any U.S. hotel earnings call in the last two years, Hyatt stood out among the pack for not going with the trend of appealing to more affordable points of the market.
Hyatt’s larger competitors like Marriott and Hilton raced to more affordable ends of the travel segment by acquiring or launching brands like Mexico-based City Express and Spark, respectively. They weren’t done there: Marriott also launched Four Points Flex and StudioRes while Hilton added LivSmart Studios to its orbit. Even competitors across the pond got in the action, with UK-based IHG launching the conversion-friendly Garner.
But Chicago-based Hyatt’s leadership instead touted the company’s commitment to the top tier of the traveling public in each market segment the company has served. Further, its own acquisition streak reflected this by targeting the premium end of all-inclusive resorts with the Apple Leisure Group takeover and luxury and lifestyle offerings with Two Roads Hospitality (owner of brands like Alila and Thompson Hotels) and Standard International (owner of The Standard and The Manner brands, among others).
For decades, Hyatt competed primarily in the full-service hotel segment with brands like Park Hyatt and Hyatt Regency and less with select service, a segment Hyatt only entered with Hyatt Place after a rebrand of the AmeriSuites chain it acquired in 2005. Hyatt then launched Hyatt House in 2011 in a similar rebrand fashion from the previously known Hyatt Summerfield Suites and Hotel Sierra offerings.
Even Hyatt’s focus on high-end travelers can’t ignore Wall Street expectations that hotel companies (and their stock price) live and die on net rooms growth—and it’s a lot easier to build and operate select-service hotels these days than full-service ones, thanks to high interest rates and construction materials costs.
That might explain why Hyatt launched Hyatt Studios, billed as Hyatt’s first true “upper-midscale” brand for the Americas, in recent years and then Hyatt Select, the company’s first conversion-friendly upper-midscale brand, last month in the Americas. Hyatt also has upper-midscale offerings in China with the UrCove brand and in Europe with the German Me and All Hotels brand.
At face value, Hyatt leadership doesn’t appear to see these brand adds as tossing out the high-end traveler playbook. The company’s top brass still maintains—even with more than 120 upper-midscale hotels in the Hyatt development pipeline—they are only after the premium traveler in these segments.
“This is a view to our future, differentiated offerings across distinctive brands and a highly focused approach to leveraging our [World of Hyatt] loyalty program and the insights that matter the most as we serve high-end travelers across more and more of their stay occasions,” Hyatt CEO Mark Hoplamazian said on a company earnings call last month before later adding, “We will not use a lowest common denominator approach in any aspect of our business. This leads to greater loyalty and share of wallet among our members and customers at a higher average rate and at a lower cost of acquisition, driving better returns for our owners.”
But these new brands quietly help Hyatt in a few areas of potential vulnerability. For starters, it’s easier to gain geographic footing with lower-priced offerings like Hyatt Studios—which opened its first hotel in Mobile, Ala. earlier this year—and Hyatt Select than pricier-to-build and certainly pricier-to-stay brands like Alila and Park Hyatt, which only pencil out in some of the world’s hottest real estate markets.
Brand offerings across all price points help build a truly robust hotel ecosystem and also helps feed the food chain of a company’s loyalty program, increasingly seen as a valuable tool to both retain customers and drive more lucrative direct bookings.
Further, it helps Hyatt keep existing owners in the brand orbit.
Hoplamazian and Joan Bottarini, Hyatt’s chief financial officer, fielded a question late last year on a company earnings call regarding the opportunity for owners to “trade down” on brands instead of keeping up with brand standards that require significant capital. Hyatt Place was used as an example for owners who might not want to keep up with renovation requirements.
“It's something we've been looking at ever since the beginning of time actually,” Bottarini said last year. “And we constantly listen to our owners and take their feedback and consider that into how we think about brand standards. It's also true that serving the high end of each segment that we serve requires investment into the properties that we have.”
Further, the Hyatt leadership team isn’t ruling out additional conversion-friendly brands in other segments of the market.
“What we don't want to do is do something that is going to be a detriment to either our brand reputation or serving the higher end guests in each segment,” Hoplamazian said.
But the Hyatt CEO noted the reason the company hasn’t launched as many conversion brands as its competitors is that the company’s existing hotels, especially upscale select-service offerings like Hyatt Place and Hyatt House, aren’t as old as the competition.
Whereas some brands are on their fifth or sixth generation of brand standards, the first batch of Hyatt Place hotels are only just hitting the 20-year mark—meaning those owners are only just beginning to face the conundrum of renovate to keep up or look to convert to something a little more economical.
Further, owners of Hyatt House and Hyatt Place hotels who do renovate want to make sure there is brand consistency and there aren’t any laggards in the portfolio—putting more pressure on Hyatt leadership to have an option or two for owners to downshift toward.
“Our owners, especially in the Hyatt Place and the Hyatt House category, are coming to us and saying, ‘Hey, you need to hold everyone’s feet to the fire because we’re investing, we want everyone to invest because it’s our brand equity,’” Hoplamazian said last year. “We’re experiencing something new that we really haven’t had an issue with or had to consider as much as we do today prior to this time.”
This still shouldn’t be seen as Hyatt suddenly having a mid-market brand bonanza.
Despite all the attention on more affordable ends of the hotel spectrum, Hyatt is still very much rooted in full-service and higher-end brands. Luxury and lifestyle brands like the recently acquired Standard International portfolio are seen as key drivers to Hyatt’s expected 6 percent to 7 percent rooms growth this year.
Overall, the company has doubled its luxury room count since 2017 while tripling the number of resort rooms and quintupling the number of lifestyle hotel rooms in the same timeframe.
“Our growth in luxury and lifestyle will continue to be very intentional, ensuring we protect the ethos of each brand and to not just grow for the sake of growth,” Hoplamazian said.
This article was originally published in the April edition of Hotel Management magazine. Subscribe here.