Top
executives at Hyatt and Marriott discussed the Taylor Swift effect, leisure
demand and weakness in China at a lodging conference in New York City.
NEW YORK
CITY — Hyatt Hotels Corp. CEO Mark Hoplamazian said there was an event in Europe this summer that had
a serious positive impact on business, and it didn’t involve the chance to earn a
gold medal.
“A lot more
Americans, and I mean, a lot more Americans traveled to Europe this year,” he
said. “That’s multi-dimensional. There is a Taylor Swift effect because it was
cheaper to take a flight to Europe, see Taylor Swift and come back than it was
to get tickets sometimes for the Taylor concerts in the United States.”
There were
other events driving traffic to Europe, too, Hoplamazian said (the Paris
Olympics and the Euro soccer championship in Germany, to name a few), but
neither matched the power of Swift’s Eras Tour, at least for Hyatt.
“I still
believe someone should do the math. I think [Taylor Swift] contributed a couple
hundred basis points to global GDP this year,” he said. “I’m not kidding. It’s
incredible. She had a much bigger impact on Hyatt than the Olympics in Paris
did.”
I still believe someone should do the math. I think [Taylor Swift] contributed a couple hundred basis points to global GDP this year. I’m not kidding, it’s incredible. She had a much bigger impact on Hyatt than the Olympics in Paris did.
Mark Hoplamazian
Hoplamazian
and Hyatt CFO Joan Bottarini were interviewed last week by Shaun Kelley, senior research
analyst for Bank of America Merrill Lynch, at the Bank of America Gaming and
Lodging Conference in New York City.
Hyatt
lowered its full-year RevPAR guidance as part of its second-quarter earnings
last month, but Hoplamazian said those numbers need some context.
“A lot of
those comments were really about year-over-year comparisons and last year was
extraordinarily strong, for leisure in particular. So, that’s really the thing
that caught so many people’s attention,” he said. “Just to put that in context: if you look at the levels that we achieved last year, we were 20% above
pre-pandemic levels. We’re maintaining that. So we’re not down from last year.
We have roughly the same leisure demand and leisure revenue base for the
company globally this year as we did last year… Overall, for the whole year, we
expect the leisure total revenue base to maintain itself. And I do think that
over time, you’ll see a more natural balancing out of where people are
traveling, and then you’ll see a resurgence of Caribbean and Mexico next year.”
How Hyatt will spend sale proceeds
Hyatt has
made some recent news, completing a $2 billion sell-off commitment as part of
its asset-light strategy, most notably with the $1 billion-plus sale of the
Hyatt Regency Orlando to Los Angeles-based Ares Management and Houston-based
Rida Development. It also made news with its $150 million acquisition of the
lifestyle company Standard International.
Regarding
exceeding the $2 billion sell-down commitment, Hoplamazian said he wouldn’t be
putting up any “Mission Accomplished” banners any time soon but added that
Hyatt is now where it aspired to be, which is at 80% to 85% fee-based earnings.
He
mentioned several deals where sales have led to rebrands and renovations of the
properties by the new owners, which has also elevated the brand and the
property (the Grand Hyatt Indian Wells Resort and the Hyatt Regency Scottsdale
Resort & Spa At Gainey Ranch).
It’s a super interesting time for us to be proactively turning the assets that we have into new opportunities.
Mark Hoplamazian
He also mentioned the Hyatt Regency Irvine,
which the company shut down and completely renovated. The renovated hotel not
only saw a return of business demand but also an increase in weekend leisure
demand. “That’s a hotel that when we bought it, we said we’re going to do these following things, and we’re going to improve performance and we’re going to sell. That’s what we expect to see over the next year,” he said.
Hoplamazian
said the same is true for a couple of hotels Hyatt owns and is positioning for
sale in the coming year: the Hyatt Grand Central New York and the Andaz London
Liverpool Street - A Concept by Hyatt.
“It’s a
super interesting time for us to be proactively turning the assets that we have
into new opportunities,” he said. That doesn’t mean Hyatt will get to a time
where it doesn’t own a single hotel, but “it’ll just be so small that it won’t
be relevant to the total picture.”
Bottarini
said that since 2017, when the disposition program started, Hyatt has realized
$5.6 billion in gross proceeds at a 15x average multiple. Its asset-light
acquisitions are $3.4 billion in investments in asset-light companies with an
approximate 9-9.5x multiple.
Hoplamazian
said future acquisitions are more likely to be on a smaller scale. “The fact is
that a number of the things that we are looking at are relatively smaller
purchase prices, whether they be brand or management platforms or big
conversion opportunities,” he said. “The conversion opportunities are more like
credit support and other financial engagement, but not acquisitions. But even
for the acquisitions, nothing is in our purview right now that comes anywhere
close to the [Apple Leisure Group] deal.
“We are
pursuing additional acquisitions to fill in different places in the portfolio,
but you’re not going to see mega deals of the size and nature of the ALG
transaction.”
Marriott
on the new normal, China
Kelley also
interviewed Marriott International President and CEO Anthony Capuano at the
conference and brought up the fact that every lodging company lowered its RevPAR guidance for
the year. Capuano responded by saying while there is softening in greater China, he thinks a
lot of that shift is a new normalization reality for hotel companies,
especially with comparisons from the previous year’s eye-popping growth.
“Even on the
heels of 40% [leisure] RevPAR growth over the last five years, in Q2 we saw
global leisure growth of 2%,” he said. “In July, we
saw 2% leisure growth as well. So, it’s not as if we’re seeing leisure fall off
the cliff — quite the opposite. We continue to see good, steady growth in the
leisure segment. It’s just normalizing relative to that 40% explosion that we
saw.”
When asked
what numbers have surprised him, Capuano pointed to the resilience of group.
“There had been a lot of conventional wisdom in the early days of the recovery
that group might be the last sector to kind of limp across the threshold, and
it’s been quite the opposite,” he said.
So it’s not as if we’re seeing leisure fall off the cliff — quite the opposite. We continue to see good, steady growth in the leisure segment. It’s just normalizing relative to that 40% explosion that we saw.
Anthony Capuano
Capuano also
made headlines talking about continued weakness in greater China and mentioned
that the booking window in the country is now under three days. He said
the bifurcation of consumers (lower incomes feeling the stress of economic
headwinds but higher-end consumers continuing to be stable) isn’t just a
problem in the U.S.
“You’ve seen
the same thing in China, but the distinction is that the high-income traveler
in China is going outside of China and traveling across the balance of Asia,
and that’s why we saw such outsized RevPAR performance in the second quarter
across APAC, highlighted by Japan, where I think we had north of 20% RevPAR
growth.”
Capuano said
the numbers for July tell him the weakness in China will continue. But he’s
still optimistic about the long-term forecast for growth in the country. “Barring
some sort of dramatic policy change from the central government, we think in
the short term, that’s a market that will continue to be weak,” he said.
“However, we believe deeply in the long-term potential of that market, and I
think that the real estate development community shares that view, which is why
we’re seeing such contrast on the growth side of our business.”
Marriott
signed more deals in China in the first half of 2024 than in any
six-month-period in the company’s history, Capuano said. “There is a
view — a long-term view about the vibrancy and the vitality of the travel
sector in China,” he said. “There is some similarity, and this is where I think
about our U.S. owners. The vast majority of them are long-term investors in the
sector. They’re not necessarily saying I’m going to try to time putting a
shovel in the ground just right, whether it be because of the construction-cost
environment or the interest-rate environment. They’re often holding these
assets for decades, and they believe in the long-term return horizons for these
assets. We’re seeing the same thing in China.”