Hyatt CEO on benefits of JVs, growth in China

SINGAPORE — Fresh off the news of a joint venture and strategic partnership with China Resources Land to expand Hyatt’s presence across China, Hyatt Hotels Corp. President and CEO Mark Hoplamazian was asked which kind of deal he preferred.

“It’s interesting because I haven’t commented on this publicly… We’ve done both. We’ve tried some collaborations, and we’ve done JVs. Collaborations are great, but they’re not durable and they tend to morph in one direction or the other. You either get closer and it becomes part of a unified effort, or you drift apart and it changes,” Hoplamazian said during the second day of the Hotel Investment Conference Asia Pacific (HICAP), which is run by Northstar Travel Group’s The BHN Group. “I’d prefer if it’s a brand that we’re talking about co-ownership.”

Hoplamazian, who was interviewed by The BHN Group President Jeff Higley, mentioned a few recent examples of JVs or M&A that he thinks have worked well (another JV in China for the UrCove by Hyatt brand and the acquisition of London-based Mr & Mrs Smith, which added a million potential guests to the company’s loyalty program).

“We used to have, by way of an example, a collaboration with Small Luxury Hotels and we now own Mr & Mrs Smith. Why did we make that transition? Well, it didn’t make sense to us for us to be continuously building the brand equity of someone else’s portfolio without having a stake in it,” he said.

Regarding the deal this week with CR Land, Hoplamazian said the companies have been working together for over 15 years already.

“We’ve done a lot with CR Land already, and we’ve been through a very great history with that,” he said. “We started these conversations, I don’t know, more than five years ago, about creating a joint venture (Yuen Kai Holdings Ltd.) together where we co-own a JV for both brands (Mumiam and Kapok), which would be staffed largely by CR Land people, but also by Hyatt.”

In addition, Hoplamazian said Hyatt and CR Land signed a strategic collaboration agreement to develop more Hyatt-branded hotels across China and have signed agreements for the Park Hyatt Xi’an and Andaz Dongguan.

“They think that we can superpower, supercharge those brands and grow with this partnership, and they’re going to continue to develop standalone hotels that we will manage,” he said.

Hyatt CEO Mark Hoplamazian with Accor CEO Sébastien Bazin (along with Jeff Higley and Raini Hamdi) in between their sessions.

Hoplamazian talked about several subjects in his wide-ranging interview at HICAP.

On Hyatt’s current business model…

“First and foremost, we’re staying more true to and getting to know our customers and guests by brand much more intensively. We’re using many technology platforms to do that and human-to-human interaction that translates into a brand portfolio approach…. because ultimately, we’re selling brands and brand performance with respect to management versus franchising. We are still primarily managing the company. Seventy percent of all the hotel rooms around the world will be managed directly. We have expanded our franchise base a lot, and we will franchise in places and in circumstances where it really matters and makes sense. So, we’re not averse to it and at the same time, if it doesn’t make sense, we won’t go there just for the sake of adding another flag on the map.”

On what he would change…

“A lot of time is spent on the embedded conflict between owners and brands, or between operators or third-party operators and brands and owners, or between satisfying the guest or customer and satisfying the owner. These are all false choices. The framing is managing conflict across the different players… If you don’t design your business so that one serves the other… then you have the wrong business model.”

On why he stopped scenario planning for recessions…

“We stopped it because I can’t tell if it’s going to happen or not. By the way, most of the experts [in the U.S.] were completely wrong most of [last] year, and it never happened. We never ended up in a recession… The thing I spent my time on all last year, and all year this year, has been building the muscles to be able to be responsive, to adapt, to recognize change and to be able to pivot quickly. That agility, if you build that into the company, then you’re resilient. Running scenarios doesn’t improve your resiliency at all.”