Q2: Hyatt touts SLH deal, clarifies NH Hotels pursuit
Q2: Hyatt touts SLH deal, clarifies NH Hotels pursuit
02 AUGUST 2018 7:44 AM

Hyatt Hotels Corporation executives are hopeful about the prospects of further growth, fueled by a new deal to add Small Luxury Hotels of the World’s properties to its World of Hyatt platform and continued development interest in the Hyatt House and Hyatt Place brands.

CHICAGO—Shortly after throwing in the towel on a brief pursuit of NH Hotel Group, officials with Hyatt Hotels Corporation announced a deal with Small Luxury Hotels of the World, designed to bolster Hyatt’s loyalty offerings.

Hyatt President and CEO Mark Hoplamazian announced the partnership during the company’s second-quarter earnings call, noting the only financial investment in the deal would be spending to integrate the companies’ loyalty programs.

He noted the alliance with SLH provides World of Hyatt loyalty members with the ability to earn and spend points at SLH hotels, which are largely high-end boutique properties in areas where Hyatt has no existing presence.

“Our respective footprints are complimentary with little overlap,” Hoplamazian said, noting he expects the partnership to boost membership in World of Hyatt.

He said the more than 500 SLH properties will go live on Hyatt channels “later this year.”

Hoplamazian spoke briefly about Hyatt’s interest in NH, noting that disclosures from Minor International came to light after Hyatt first reached out to NH’s board, and those disclosures made it clear a deal was unlikely. He said a deal with NH, which would have significantly bolstered Hyatt’s presence in Europe, is unlikely unless circumstances change significantly.

Hyatt officials had been drawn to a potential NH deal in part because they believed there was the possibility to increase performance of that company’s hotels by tying them into Hyatt’s existing distribution network and by separating the brand and hotel ownership portions of the business.

Hoplamazian said his company will continue to evaluate potential acquisitions, in line with the company’s asset-light strategy, that would be funded by the proceeds of the company’s $1.5-billion sale of owned real estate and that can occur “in a manner that will preserve our investment-grade credit rating.”

Growth in select service
Hyatt officials devoted a portion of Wednesday’s earnings call to the performance and development pace of the company’s two select-service brands: Hyatt House and Hyatt Place. Hoplamazian noted those two brands continue to win share from their competitors, and Hyatt Place in particular is seeing several improvements that will drive both developer and consumer interest going forward.

He said the changes made at the brand recently were “derived from direct engagement with owners.”

Hoplamazian said some changes are meant to target service enhancements for loyalty members, including “seamless early check-in options and new mobile functionality” and complimentary breakfast for World of Hyatt members.

The brand is also keying in on a “new initiative to bring well-being to the brand in a meaningful way,” in part by leveraging the company’s Exhale spa brand. Wellness-related improvements at Hyatt Place include offering in-room fitness video content and investing in fitness centers.

Hoplamazian said the company’s select-service brands currently make up roughly 40% of the company’s pipeline, and the Hyatt House and Hyatt Place combined pipelines represent roughly 55% of Hyatt’s “existing base of select-service rooms.” He believes the development of those brands continue to maintain momentum, and that the company will likely double its global select-service footprint within five years.

“To enable this growth, we’re investing in select-service-focused resources globally,” he said.

Hoplamazian said growth prospects for those brands are especially good in heavily populated countries like India and China, which have ever-growing numbers of travelers.

Q2 performance
Hyatt saw revenue per available room increase 4% year over year for the second quarter of 2018. U.S. hotels saw RevPAR increase 3.4%, while globally, select-service hotels had a 2.1% increase and full-service hotels had a 4% increase.

Fueled by the company’s planned sell-down of real estate, the company spent $513 million in share repurchases during the quarter. CFO Pat Grismer said the company is nearing the sale of another owned property to reach the goal of $1.5 billion, but did not provide further details.

After the strong operating results of Q2, Hyatt officials revised their full-year RevPAR guidance upwards to a range of 3% to 4%, compared to earlier expectations of 2% to 3.5%. Grismer said those full-year numbers are still based on conservative expectations for the second half of 2018, but he expects the fourth quarter to be stronger than the third.

Hyatt’s stock was trading at $79.40 per share on Wednesday afternoon, a year-to-date increase of 8%. The Baird/STR Hotel Stock Index was down 1.6% for the same period.

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