Update: Hyatt deal showcases its flexibility in China

In early February, Hangzhou Trade and Tourism Group (HTTG), Zhejiang Dragon Hotel Management Group Co. Ltd. (The Dragon Group) and Hyatt Hotels Corp. agreed to drive expansion under Hyatt’s Independent Collection and select-service brands in China, as well as develop The Dragon Group and its hotel brands. On the same day, The Dragon Group was acknowledged by Hyatt as a third-party management company for franchised hotels across Hyatt’s portfolio under Independent Collection and select-service brands within in China.

Hyatt and The Dragon Group intend to develop more than 60 hotels over the coming decade, the first of which is expected to be a Hyatt Place hotel in Hangzhou.

As of the end of 2023, The Dragon Group managed more than 70 hotels nationwide, including luxury hotels, destination resorts, business select-service and cultural themed hotels with more than 9,000 rooms under management.

Hotel Investment Today reached out to Hyatt to further explain this deal and received written answers to questions from Hyatt’s President Greater China and Growth, Asia Pacific, Stephen Ho.

Hotel Investment Today (HIT): This is a unique arrangement for a U.S.-based hotel company in China, which traditionally manages its properties there. Why are you doing third-party? Is it a result of any deal to develop with HTTG where they requested The Dragon Group take management? How did this deal come together?

Stephen Ho: Whether a hotel is operated by Hyatt’s own management company or a third-party management company, we are interested in building long-term, fruitful relationships with our owners that showcase a desire to grow together. The strategic collaboration between Hyatt, HTTG, and The Dragon Group is a reflection of Hyatt’s global growth strategy by combining the strengths of HTTG and The Dragon Group with Hyatt’s diverse brand portfolio and the World of Hyatt loyalty program.

Hyatt Hotels Corp., HTTG and The Dragon Group at the signing of their strategic cooperation

The collaboration is also a key step that aligns with our commitment to staying ahead of market trends, focusing on differentiation, and prioritizing guest, member, customer, and owner preferences.

While franchising is becoming more common, direct management remains a significant part of our strategy in the market, where we continue to focus on differentiation, align with market trends, and prioritize the preferences of our guests, members, and owners. We’re keen on showcasing successful models of cooperation that highlight our adaptability and commitment to growth in China. A good example is our collaboration with Beijing Tourism Group (BTG), which has led to the opening of 38 upper midscale hotels with a strong pipeline since the establishment of our joint venture management team at the end of 2019.

HIT: Will The Dragon Group be your only third-party management company in China? Is this an exclusive arrangement?

Ho: Hyatt is committed to strategic expansion in China and The Dragon Group is an important part of our journey. However, our approach remains agile and intentional, and we center around our asset-light growth strategy. Our collaborations are guided by our purpose of care and a commitment to reinforcing our position as the preferred hospitality brand in each segment that we serve.

That is why we have also had collaborations with Minyoun and BTG, two esteemed companies that share our commitment to advancing care for our guests, staying locally relevant, and fostering our China commitment. These collaborations have enabled us to deliver exceptional guest experiences that are tailored to the unique needs and preferences of our guests in China.

We aim to continue building on our success in China through our collaboration with HTTG and The Dragon Group. At the same time, we are open to exploring additional opportunities that align with our strategic objectives and enable us to cater to the evolving preferences of our guests and owners.

HIT: Will Hyatt continue to manage new properties in China as it makes other deals?

Ho: Hyatt will continue to manage new properties in China. Our approach is guided by a clear strategy that we grow with intent while prioritizing differentiation and the preferences of our guests, members, customers, and owners.

This strategy supports our asset-light growth and enables us to adapt to the Chinese market trends, ensuring that we remain the preferred brand for high-end guests in each segment, particularly as we experience significant growth in our luxury, resort, and lifestyle portfolios.

We aim to continue building on our success in China through our collaboration with HTTG and The Dragon Group. At the same time, we are open to exploring additional opportunities that align with our strategic objectives and enable us to cater to the evolving preferences of our guests and owners.

Stephen Ho

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Franchising is only one of several strategies we're employing in China, complementing our continued success with direct management. This approach allows us to leverage the strengths of local third-party management companies that share our values, aligning with our asset-light strategy.

HIT: What do you expect to be the mix of Independent Collection and Hyatt select-service brands with this deal? Will all the select-service developments be for Hyatt Place?

Ho: The strategic cooperation between Hyatt, HTTG, and The Dragon Group aims to drive the expansion of hotels under Hyatt's Independent Collection and select-service brands in China. The agreement sets the stage for the opening of a projected 60 hotels across China over the forthcoming decade, with the inaugural project anticipated to be a Hyatt Place hotel in Hangzhou.

It is important to note that these select-service developments are not exclusive to Hyatt Place. The Dragon Group will serve as a third-party management company for franchised Hyatt hotels under Independent Collection and select-service brands such as Hyatt House and Hyatt Place within China. A decision to develop specific brands is informed by a thorough analysis of the market situation and needs, ensuring that our offerings align with the preferences and requirements of the local market.

HIT: Can you explain what “foster the strategic development of The Dragon Group” means outside of its new third-party opportunities for Hyatt developments? Will you develop franchises with other companies than HTTG where Dragon takes management? If so, can you offer details about other developers you plan to work with in the near term?

Ho: Our collaboration is designed to elevate The Dragon Group within Hyatt's Independent Collection, granting them access to Hyatt’s extensive resources. This support aims to propel The Dragon Group not only within China but on an international scale, enhancing their visibility and brand value while preserving their distinct identity.

Our current focus remains on the announced collaboration itself, which is set to leverage Hyatt's resources to support The Dragon Group's expansion, ensuring their growth aligns with our commitment to excellence and innovation in hospitality.

HIT: How many true franchises does Hyatt already have in China, or will these be the first? What is the key to making a franchise arrangement work where there have previously been so few?

Ho: We are actively working to grow our franchise presence in China while emphasizing the importance of aligning with likeminded owners and operators who are integral to this expansion.

We believe that finding the right third-party management companies who share our passion for expanding the Hyatt brand, and will uphold Hyatt’s brand standards, is crucial to our success. That is why our collaboration with HTTG and The Dragon Group is a testament to this philosophy. By pooling our collective strengths and expertise, we can tap into new markets and expand our market share. This approach has proven to be groundbreaking in the industry, and we are confident that it will lead to even greater success in the future.

HIT: How are franchise agreements different with HTTG than traditional U.S. property franchise deals?

Ho: The franchise model we use in China is aligned with our strategy in the Americas region. As part of our global expansion strategy and our commitment to being the preferred brand across all our collections, our franchise agreements with HTTG are specifically designed to suit the unique market dynamics of China.

By pooling our collective strengths and expertise, we can tap into new markets and expand our market share. This approach has proven to be groundbreaking in the industry, and we are confident that it will lead to even greater success in the future.

Stephen Ho

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Our collaboration with HTTG is based on shared values, mutual goals, and working together to leverage our collective strengths and expertise. This approach gives us a competitive advantage and the flexibility to adapt to changes in the market quickly. In China, the market is vast, and consumers are constantly moving into the middle class. Our ability to adapt quickly to new customer segments sets us apart from our competitors. We recognize that today's travelers want authentic experiences, and our close collaboration with HTTG enables us to deliver precisely that.

HIT: How much growth do you see with HTTG, and what will be the timeline for that growth?

Ho: Our collaboration with HTTG is based on a shared vision for the future and a commitment to expanding the Hyatt brand in China, with the planned inauguration of 60 hotels over the next decade under this collaboration alone. Like any collaboration, growth depends on various factors such as market conditions, consumer preferences, and other external factors. However, we remain committed to working closely with HTTG to ensure that we can adapt to changes in the market and take advantage of new opportunities for growth as they emerge.

We are confident that our collaboration with HTTG will be a key driver of growth for both companies in the years ahead, and we look forward to working closely with them to expand the Hyatt brand in China and deliver exceptional experiences to our customers.

HIT: What is the biggest challenge to overcome with this unique deal?

Ho: The strategic agreement between HTTG, The Dragon Group, and Hyatt presents an opportunity to expand Hyatt's presence in China, and it is our priority to ensure that all our guests receive the consistent service and brand experience that Hyatt is renowned for. Our goal is to ensure the successful integration of Hyatt’s global standards with the local expertise of HTTG and The Dragon Group, and we will do this by leveraging our strong relationships with both managed and franchised owners and staying committed to our purpose of care.

In our current venture, we have three powerhouses, BTG, Minyoun and HTTG The Dragon Group each with their own distinctive strengths and diverse backgrounds, but united by a common goal - to provide guests with exceptional hospitality experiences and guarantee the longevity of our business model in the years to come. By pooling our resources and expertise, we are poised to achieve unprecedented success and set new standards in our industry.