Good morning. The summer travel season is set to heat up and many consumers want luxurious resort stays.
Hyatt Hotels Corporation’s leisure travel bookings for July 4 are up 25% year over year at resort properties in the Americas. Despite inflationary pressures, consumers continue to prioritize leisure travel with the higher-earning demographic still driving growth, according to Hyatt CFO Joan Bottarini. About 50% of the company’s revenue, globally, is leisure-based travel, 20% is business, and about 30% is group travel, Bottarini said.
Hyatt's goal is to attract high-income level consumers with a focus on luxury. When the business started over 60 years ago, it was concentrated on large, upscale hotels for group meetings. But there’s been a pivot to building a luxury resort and lifestyle portfolio. “We're smaller than our bigger peers,” Bottarini said. “But we're mighty from a brand recognition perspective.”
The Chicago-based company's global pipeline has grown by nearly 85% since 2017, reaching 129,000 rooms, a record for the company. That’s a result of its “asset-light” business model that has been in place the past seven years, she told me. This has included selling off hotel assets and reinvesting the proceeds into acquisition opportunities, whether that's M&A, or portfolio deals focused on luxury. Hyatt has a goal of $2 billion in hotel asset sales by the end of the year.
The asset-light model is fee-based growth, and additional contracts that increase its distribution, Bottarini said. “Right now, as a company, we have far more management fees, and asset-light earnings, which translates into a business model that has lower capital intensity and greater operating leverage,” she explained.
Since the business model was put into practice in 2017, Hyatt has doubled the number of luxury rooms, tripled the number of resort rooms, and quintupled the number of lifestyle rooms, according to the company. In Q1, Hyatt’s revenue per available room, a key performance indicator in the industry, rose 5.5% year-over-year, and its all-inclusive resorts rose by 11%. For the quarter, the company reported a net income of $522 million and adjusted EBITDA of $252 million.
Earning loyalty
Building customer loyalty is a big part of the hospitality business. The 2024 "State of Loyalty: Hospitality Rewards" report from iSeatz, a travel loyalty technology provider, finds 63% of U.S. consumers surveyed plan to take one to four more trips this year than they did in 2023. Hotel brands are increasingly looking to enhance guest experience by offering more on and off-property options within their loyalty programs, according to the report.
Hyatt’s loyalty program, World of Hyatt, has quadrupled its membership since 2017 and is up 22% as of the end of Q1 2024, compared to the same period last year, reaching 46 million members globally. For example, a program called Guest of Honor allows loyalty members with qualifying points to grant status to family members. Bottarini can grant her father her loyalty status at a Hyatt Place near her home when he comes to visit, and she can use her points for his stay, she explained.
World of Hyatt's growth is due in part to a “network effect” among the guest base, Bottarini said. So it's providing opportunities to engage with guests, listening to the high-end customers' wants, and keeping that in mind when creating new luxury resorts and lifestyle offerings. And the result: "They spend more, stay longer, and tell us where they want to travel," she said.
Bottarini, CFO at Hyatt since 2018, has been an executive at the company for more than 20 years. In responding to a “very dynamic macro environment,” Hyatt has learned to take advantage of opportunities to grow and innovate offerings, she said.
Sheryl Estrada
sheryl.estrada@fortune.com
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