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Start for freeHyatt's Bold Move: Selling Billions to Invest in Luxury
In an era where the hospitality industry faces rapid changes, Hyatt Hotels is taking a decisive step towards reinvention. By selling off a significant portion of its real estate, Hyatt is channeling billions into acquiring new platforms and focusing on luxury, management, and franchising. This strategic shift, spearheaded by CEO Mark Hoplamazian, aims to cater to a higher-end customer base while reducing the capital intensity of their business model.
The Genesis of Hyatt's Transformation
The journey began in 2017 when Hyatt decided to move towards an 'asset lighter' strategy. This pivot involved selling over $4 billion worth of properties and reinvesting in acquisitions that align with their luxury and upscale vision. Names like Miraval, Two Roads Hospitality, Apple Leisure Group, and Dream Hotel Group have since joined Hyatt's portfolio. This expansion has not only doubled their luxury hotel numbers but also tripled their resorts and quadrupled their lifestyle hotels, offering a more diverse and geographically spread portfolio.
Competing in the Luxury Space
Hyatt's strategy also involves a keen awareness of its competition. Major players like Marriott and Hilton have historically invested heavily in real estate to build their brands. However, Hyatt chose a more deliberate path, ensuring they did not rush the sale process to avoid selling at a discount. This approach allowed Hyatt to sell properties at an average of a 16 multiple while acquiring new platforms at an average multiple of eight, thus creating substantial value.
Risk and Reward
The transition to a more asset-light model was not without its risks. Hyatt had to consider investor preferences for a business model that translates more earnings into cash flow through reduced capital requirements. However, this strategy has proven successful, allowing Hyatt to become better managers and more empathetic partners to hotel owners. This shift has also enabled Hyatt to debunk underestimations of their real estate value and demonstrate the strength of their asset base.
A People-Centric Approach
Despite these substantial changes, Hyatt remains committed to its biggest asset - its people. With a global workforce of approximately 200,000, Hyatt continues to invest in career paths for individuals from underserved communities, including a commitment to hire 10,000 'opportunity youth'. This focus on people not only serves as the company's largest operating cost but also as its greatest opportunity for impact.
Franchising and Growth
Hyatt's strategic shift has also significantly grown its franchise base, particularly in select service and mid-scale categories, areas of high growth in the hospitality industry. This expansion into franchising, especially in Europe, allows Hyatt to offer a diverse range of experiences to guests while supporting owner-operators with a model that maintains Hyatt's high standards of care.
Responding to Market Trends
Hyatt is also keenly aware of the evolving landscape of hospitality, including the impact of platforms like Airbnb. By focusing on providing diverse and experiential offerings, Hyatt aims to differentiate itself in the 'hospitality' sphere, as opposed to the 'shelter' business that such platforms offer. This emphasis on unique experiences, from wellness to local adventures, positions Hyatt to attract guests looking for more than just a place to stay.
In conclusion, Hyatt Hotels' strategic pivot towards a luxury-focused, asset-light model represents a bold reinvention of their business. By selling off properties to invest in new platforms and focusing on high-end experiences, Hyatt is setting a new standard in the hospitality industry. This transformation, while challenging, positions Hyatt to better serve its guests, partners, and communities, proving that luxury and empathy can go hand in hand in the world of hospitality.
