Asset-light earnings, hotel asset disposition support further expansion in luxury and lifestyle, well-being and all-inclusive sectors while increasing shareholder value.
PLAYA DEL CARMEN, Mexico – Hyatt Hotel Corp.'s 2023 Investor Day presentation was basically a sizzle reel highlighting the business- and brand-building benefits of its ongoing transformation into a flexible, asset-light global hospitality giant.
In his opening remarks at the 90-minute hybrid event held May 11 live at the luxury, all-inclusive Moxché Resort in Mexico, and virtually, Mark Hoplamazian, president and CEO of Chicago-based Hyatt, zeroed in on the twin themes of momentum and growth.
On the financial side, the message was about the payback for asset disposition and asset-light earnings. Taken together, these two strategies paved the way for:
• Free cash flow generation forecasted to reach $550 million in 2023 (up substantially from 2022’s $473 million) and up to $750 million in 2025.
• Reinstatement of the quarterly dividend, initially at $0.15 per share
• A $1.5 billion total share repurchase authorization
Not only will that grow shareholder value, it also positions Hyatt “to capitalize on global macro trends,” he said. Among the key opportunities he sees are increasing traveler interest in all-inclusive experiences, “the durability of leisure travel and the growing momentum in group and business transient demand.”
Mark Vondrasek, Hyatt's chief commercial officer, drilled down on those points, detailing plans to capitalize on shifts in travelers’ demands especially in the luxury and lifestyle sector. “We’re seeing our guests and customers focusing on experiences over products, stopping and enjoying more experientially while staying with us today more than ever before. A recent American Express global study found that 76% of global travelers want more from travel that improves their well-being and well over half of them are willing to pay extra for that opportunity in those services,” he said.
That demand will likely drive fast growth for Hyatt as its acquisitions and alliances have thoughtfully been with companies that share a common strategy of increasing share of wallet from high-end customer segments. Tightening its focus on luxury, lifestyle and resort properties, which now make up 44% of the entire portfolio (up 12% since 2017), Hyatt is leveraging both portfolio and platform acquisitions. It also has 33% global market share in the luxury all-inclusive resort space – larger than its three top competitors combined - thanks in part to the 2021 Apple Leisure Group (ALG) deal. “Together, we formed the Inclusive Collection, which is comprised of nine all-inclusive brands across 121 resorts with 38,000 rooms,” Hoplamazian said. That netted system-wide revenues of $3 billion in 2022. Cross-portfolio and cross-platform plays will continue to, as Vondrasek put it, ”multiply the network effect of having come together.”
“If I illustrate this in Europe, for example, when we added ALG last year, we gained a heavy presence in the Canary and Balearic Islands in Spain," Vondrasek said. "The Lindner [Hotels] deal [a collaboration begun in 2022 that so far has brought 30 European properties into the Hyatt portfolio] now gives us a strong presence, especially in Germany, but it also represents the largest feeder market to the Canary and Balearic Islands in Spain, therefore helping our ALG resorts as well.” Hyatt plans to add 12 more resorts this year, totaling around 5,000 rooms on a gross basis across four countries and eight destinations.
Vondrasek added that the company will be taking a leaf out of the ALG playbook – why not when ALG has had a 16% compound annual growth rate – as it looks to close the Mr & Mrs Smith acquisition in Q2 2023."With ALG, we have seen the power of leveraging an effective distribution platform in a complementary segment and we’ll be looking to replicate that approach with Mr & Mrs Smith’s European focused, boutique luxury portfolio to harvest the value of growth for the entire system. In addition to meeting many new guests, this growth also allows us to form relationships with hundreds of new owners as well,” Vondrasek added.
The success of these platforms is also drawing conversion opportunities to Hyatt. “We see conversions as an important part of our industry leading growth,” Hoplamazian said. “The power of our system and momentum in our brands is leading to increased preference for owners. There's a vast opportunity for conversions of independent hotels and we will continue to focus on this area to drive incremental growth.”