Hyatt’s president and chief executive Mark Hoplamazian talks to Tom Otley about the company’s latest expansion plans
You recently bought the Hyatt Regency Birmingham for a reported £35 million and have announced an investment of some £6.5 million in the property. Why did you think it important to secure your presence in Birmingham?
We don’t have very extensive distribution or presence in the UK so we thought it was very important to maintain a presence there. Birmingham is a transportation hub both inbound and outbound, and the group business that congregates within that city and the hotel is an important piece of our customer base. We also felt that the hotel needed some capital investment. By owning it and managing it, the additional capital we are going to put into it would help us get to a good result.
Will the prices for rooms justify that kind of investment?
Clearly we believe they will. We underwrite all our developments whether management agreements, acquisition or real estate investments with a return profile to ensure that we receive a return commensurate with the risk we think we are taking. Our output is that we will end up having both control over our future in that market as well as a good real estate investment. It’s not a hotel I would imagine we would think about owning for the next 50 years on the other hand, so in the period of time subsequent to the renovation we would probably entertain selling it because part of our strategy is to recycle the capital we have invested our hotels to apply it to other new opportunities.
Distribution is important for travel managers. Are you focusing on expanding the number of hotels you have under the various Hyatt brands?
We are. We now have around 500 hotels, and have 175 properties in our pipeline for future openings, 75 per cent are outside of the US and 50 per cent of those are in China and India. Balancing our growth with quality of growth means we are not in a race to be the biggest hotel company. We are being deliberate and targeted so we can maximise the incremental impact of each project we take on, which is fundamentally different to putting as many flags as you can on the map.
But you are returning money to shareholders - wouldn’t it be better to use that money to expand?
For those ones in China and India, we are not using our own capital and we don’t need to do so to expand more quickly. We have a very strong balance sheet and resource base including a lot of liquidity and so we can have a continued focus on investment for future growth and provides us with another tool for return of capital to shareholders.
Our growth is significant by any measure. Our pipeline of 175 properties under contract is large relative to our existing base of 500 hotels, and our new openings represent a greater proportion to the existing hotels than our competitors, which to some extent you’d expect if we are going from a smaller base, but it is significant growth, including the Andaz brand in Amsterdam, for instance.
Andaz has been troubled, hasn’t it? Only nine have opened in four years and it’s a difficult one for travellers to understand when compared with the other Hyatt brands?
We launched it in 2007 and we have others we have announced, but we launched the brand into the teeth of a pretty significant financial meltdown. So if you compare it with the Edition brand by Marriott, we are doing well. If you look at it relative to the rollout of the W brand, then we are currently ahead of where they were at the same time. People talk about launching brands but when you are doing something which is a very conventional service model and you’re doing it in a difficult time, development generally speaking was quite difficult to accomplish - it takes a lot longer than people think. I really believe that we’re on the right path with Andaz.
You have found it difficult to expand in Europe and London in particular, though.
Park Hyatt is a high priority for us to introduce into London, but we have not found the right opportunity. London is such a large market we could have other Hyatt Regencys there, and we are certainly looking.
The Hyatt Place select service brand has done well in the US but you seem to be having difficulty bringing it to Europe?
We have a couple under construction now, but we have looked mostly at conversions or repurposing existing real estate into Hyatt Place and that’s where we have dedicated our time but it’s been difficult to conclude those transactions. We opened our first one in Costa Rica and others following in Chile and in China at the end of next year, so it will be a significant expansion of Hyatt Place and Hyatt House. But the megatrend is in the affluent middle class around the world and we are very well placed for that with the Hyatt brands, Hyatt Regency, Hyatt and Grand Hyatt.
Do you think people understand the difference between those brands?
I think it’s a matter of exposure. As far as Grand Hyatt is concerned, it has a centre of gravity in Asia, but in Europe we only have two – in Istanbul and Berlin, and so it’s not as crisp as it could be, and we have a limited distribution of that in the US as well.
The Grand Hyatt brand carries a lot of high-end F&B (food and beverage) and meeting spaces which make it a place to see and be seen, and that’s an elemental part of the brand but also why you don’t see distribution in certain markets.
[In addition] We have had a Hyatt brand in place for some time, but the definition of it has become far more precise. The most recent Hyatt is at New York at 48th and Lex and another Hyatt is opening in Union Square. The true archetypal Hyatt-branded hotel tends to be almost exclusively hotel rooms with very limited or in some cases virtually no meeting space. [To take another example], the new Hyatt Times Square will have some 500-odd rooms, but will have only 2000 sq. ft. of meeting space, excluding the roof top bar and restaurant, but it is designed to create a vibrant atmosphere for short stay transient business or leisure guests, and the principal distribution and focus for that brand that is business travellers in commercial markets. That really does distinguish it from Hyatt Regency, which is very much for corporate meetings.