The world’s largest privately owned hotel company claims it has no formal strategy for international development. And that’s not the only thing that’s different about it. Jenny Webster finds out more.
Bernd Chorengel, president of Hyatt International Corporation, differs from many of his competitors. When questioned about development strategy for the upmarket hotel chain he laughs at the suggestion that he has one. “Strategy?” he says. “We’re constantly after new markets but our strategy is not to have a strategy.”
For Chorengel this so-called lack of strategy comes as a direct result of ownership. The company is divided into two parts: Hyatt Hotels Corporation and Hyatt International Corporation. The former is predominantly a management company that operates 121 properties in the USA, the Caribbean and Canada; the latter is the overseas arm with 81 properties worldwide, a mixture of joint ventures and management contracts. They are both owned by the Pritzker family, making Hyatt the world’s largest privately owned hotel corporation.
In development terms the company can therefore move quickly without having to wade through layers of bureaucracy. “Being a private company we don’t have to have that corporate strategy that says in five years I want to be here and in 10 years I want to be there,” elaborates Chorengel. “By not having a corporate strategy we believe we are much more flexible and dynamic and can go with political and economic growth.”
As an example of this Chorengel cites China, a country that will join the World Trade Organisation later this year and has recently clinched the 2008 Olympic Games in Beijing. Hyatt already operates six hotels in China and has just announced a management contract to operate a 600-room Grand to open in the capital by the end of the year.
What also makes Hyatt different is the fact that whereas many of its competitors have gone down the acquisition and merger route or gone public to raise funds for expansion, Hyatt has shunned this type of development. The result, says Chorengel, is stability for both guest and employees. “Guests don’t have to think whose name will be above the door and employees don’t have the constant worry about whether the company is going to be sold or not.”
Diversification, too, has been minimal; a toe in the water of resorts (40 in total across both parts of the business). It has also largely avoided franchising with a no-franchising policy in the overseas business, and only four franchisees in the domestic market. “Franchising dilutes control and the ability to maintain a consistent product,” says Chorengel.
And while competitors such as Six Continents (formerly Bass) and Marriott operate brands at all levels of the market, Hyatt has stuck to the top end, a policy it intends to maintain. “We will not go three-star and we will only go into destinations where we can get a rate. We stick by our brand policy,” says Chorengel. In broad terms getting a rate means achieving $150 (£103) for Regency, $300 (£206) for Park and $220 (£151) for Grand.
The original brand was Regency, a five-star core product aimed essentially at the business market. As society and styles changed and customers became more demanding, two other brands were introduced. These were Grand, the large scale end of the business focusing predominantly on large scale meetings and conventions as well as leisure, and Park, smaller and more intimate properties aimed at the more discerning traveller. In its bid for new markets Chorengel says there is no reason why all three brands should not operate in harmony in the same area, fulfilling different needs.
A good example of this is in London, where Hyatt’s contract to run the Carlton Tower – Hyatt was never allowed to put its name above the door – will revert to owner Dubai’s Sheikh Mohammed, and his hotel company Jumeirah International from the end of this year. This leaves Hyatt with just one property in the UK (a Regency in Birmingham) and a big gap in the London market.
“We’re looking very hard for something else in London and that could be for any or all three of our brands,” says Chorengel. “Were we surprised that we lost the Carlton Tower? No, not really. We could see it coming as our contract was up. We remain on good terms with Jumeirah. We already have one hotel in Dubai and plan to open another next year. So it’s good to have friends there.”
There are no set views either on how overseas development should progress. Alongside its management contracts Hyatt International has a growing amount of equity in some properties and it is Chorengel’s view that each new development should be taken on a case-by-case basis.
“Primarily we are still a management business but sometimes we take equity or we have friends who are willing to invest,” says Chorengel. “Things are viewed on an individual basis. What you can do in Brazil you can’t do in England. We are reading the world market.”
There are unavoidable blips in this reading. Nepalese capital Kathmandu is one of these, with occupancy levels at the 290-bedroom Hyatt Regency as low as 15% after the recent massacre of the royal family and general political unrest. “Kathmandu is almost empty,” admits Chorengel. “What do you do? You pray. Seriously, what can you do? We can discount [there is currently a special offer of US$415 (£285) for a three-night stay] but that won’t fill the hotel. All you can do is to try to instil in the government a sense of trying to put the lid on the problem.”
As for the future, there may be no defined expansion strategy but there are favourite areas containing clear opportunities. London, Scandinavia, Europe in general, South America, China and more properties in India are on the current wish list, giving an overall target of 100 more hotels in the international arena by 2010.
Last week’s tragic events in the USA will clearly have an effect on development both internationally and in the domestic market, although it is largely too early to say what these will be. Chorengel has, however, issued the following statement:
“The management and staff of Hyatt express our deepest concern and sympathy for everyone affected by the tragic events in the United States. We are doing all we can to care for the wellbeing of our guests, employees and others in need. The world is still in shock, and there will certainly be a global impact on the hotel industry, as on many other businesses.
“Each hotel has been asked to assess the likely impact on its business for the remainder of 2001. The immediate priority is to be sympathetic to companies directly involved. We will waive cancellation charges and do our utmost to accommodate individuals unable to return to the USA immediately.”
Hotels under development in the international arena
Hyatt Regency Warsaw, Poland
October 1, 2001
Hyatt: the background
Hyatt Corporation opened its first hotel in September 1957. But it wasn’t until 1967, when Hyatt opened the world’s first atrium hotel in Atlanta surrounded by 900 rooms, that the Hyatt name became well known.
The hotel’s 21-storey atrium tower lobby signified a departure from traditional hotel architecture. The challenge to hotel architects was no longer to eliminate extra space, but to create grand, wide-open public spaces. This policy culminated in the Grand Hyatt, Shanghai, which opened in 1999 with a 30-storey atrium starting on the 58th floor.
By 1969 there were 13 Hyatt hotels in the USA, and also in that year the first international property, a Regency, opened in Hong Kong.
Hyatt International Corporation
81 properties in 37 countries; a mixture of management contracts and equity.
Gross revenues: 2000 $1.6b (£1.09b); 1999 $1.5b (£1.03b)
Hyatt Hotels Corporation
121 properties in the US, Caribbean and Canada predominantly management contracts.
Gross revenues 2000: $4b (£2.74b)
Ownership: private, Pritzker family holdings
Brands: Park (five-star, boutique); Grand (five-star, medium-sized); Regency (original brand four-star, larger, often convention hotels); Hyatt Resort & Spa