Hyatt Strikes Balance Between Growing Franchising and Focusing on Ownership

by | Aug 30, 2017 | Chains

During Hyatt’s recent second-quarter earnings call with investors, top executives of the Hyatt Hotels Corporationemphasized that fee-based franchising is an area in which they see the strongest possibility for major growth, but that they also believe the company must focus on ownership and capital investments.

Essentially, Hyatt is working to grow its franchising without diminishing the importance of ownership. This is all especially relevant to the many hospitality industry experts who have been curious for some time to see whether Hyatt Hotels Corporation would begin spinning off and divesting their owned assets, a common trend in recent years among other major hotel brands. So while the future for Hyatt may lie in fee-based franchising, for the time being major company execs say they will not back off of the importance of strategically owning and developing real estate as well.

This all comes following a second quarter in which Hyatt posted stronger financial results than many expected, which was good news all around for the owners of Hyatt-branded hotels. Hyatt’s comparable RevPAR, which means hotel revenue per available room, went up 1.4 percent as compared to the same quarter last year among its hotels in the United States, while its full-service and select-service hotel RevPAR went up by 1.3 percent and 1.5 percent, respectively. Across Hyatt’s portfolio, the company saw a 2.9 percent year-over-year increase in its revenue per available room for the second quarter of 2017.

This past quarter was also one of overall growth for Hyatt, with the company adding 14 hotel properties to its portfolio in the Americas. What may, however, be telling, is the fact that all 14 of those properties were telling. For those interested, 13 of the 14 properties also happened to be hotels located within the United States.

This all comes as many other hotel companies have recently announced or completed spinoffs of their owned real estate. Those companies include La Quinta Holdings, which plans to spin its owned real estate assets into an investment trust, dubbed CorePoint Lodging. Wyndham Worldwide has also recently unveiled a plan to split its hotel business from its timeshare ventures.

During the second quarter, Hyatt for its part completed the sale of two major hotels: the Hyatt Regency Grand Cypress in Orlando Florida, which features 815 rooms, and the Hyatt Regency Louisville, in Louisville, Kentucky, which has 393 rooms. The Grand Cypress went the route of being converted to a long-term management contract through its sale, while the Louisville property was signed into a long-term franchise agreement. Hyatt executives have noted that Hyatt’s position as a net seller is related to the fact that Hyatt was a net buyer in both 2015 and 2016, and it does not necessarily indicate that Hyatt is executing a long-term strategic shift away from ownership and real estate development.

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