As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked Hyatt’s Jim Chu eight timely questions as we prepare for the 22nd annual event January 23-25, 2023, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.
1) How has inflation and the threat of a recession affected the U.S. hotel franchising and development segments?
For Hyatt, our customer base is the high-end traveler in each segment that we serve. Research shows that among the various categories of spend for our customer base, leisure and entertainment activities are the still the top two categories will show continued strength. Booking data and hotel ADR metrics continue to show strong demand through the end of the year.
2) Most forecasts show supply growth checking in at about 1% each year for the next two or three years. How do you see it playing out based on Hyatt’s pipeline?
Hyatt occupies a unique position in the industry in terms of our size, scale, and footprint. We take a thoughtful approach to development and growing with intent.
In 2017, we announced our asset disposition strategy, and from 2017 to 2021, we sold $3 billion of assets and reinvested that money into those proceeds into asset-light businesses or return to shareholders over the course of that time. The acquisition of Apple Leisure Group (ALG) being the most recent and significant example of how we’re executing against our expanded asset disposition strategy.
Further, the strength of conversions continues to drive our industry-leading net rooms growth. In fact, 40% of our new openings from January through June 2022 were conversion hotels, largely rebranding to one of our Independent Collection brands – The Unbound Collection by Hyatt, JdV by Hyatt, and Destination by Hyatt.
3) What’s the message to hotel owners, investors, and developers from the lending community in general as 2023 approaches?
Although interest rates have been on the rise and many properties are slated to have their debt mature in the next 12 months, property performance has remained strong and continues to support a high level of transaction activity going into 2023. At Hyatt, we continue to believe that many owners will execute asset recycling plans due to strong performance.
4) Based on your portfolio and what you’re seeing throughout the industry, what segments are the most sought after for development and franchising opportunities? Why?
Hyatt’s portfolio is heavily weighted towards luxury and leisure travel – nearly 70% is classified as Luxury and Upscale – optimally positioning us to serve the more resilient, higher-end guest who continues to prioritize travel.
To serve that guest, we are focused on growing our Inclusive Collection, our new global portfolio of distinct luxury all-inclusive resort brands, in new markets within and outside of the Americas to attract diverse groups of travelers seeking immersive all-inclusive resort experiences. In fact, we recently announced plans for five new all-inclusive resorts in Bulgaria through the Secrets, Dreams, Breathless and Alua brands.
In addition, wellbeing continues to be a focus among all travelers, and brands like Miraval and Alila continue to be top performers.
5) How has the labor shortage affected the hotel development process? Is it something that the industry will deal with long term?
Staffing is a challenge across the industry, and we are continuously evolving our recruitment techniques, relationships, and strategy by examining all aspects of the candidate and colleague experience at Hyatt:
a) Piloted rapid hiring practices to get people into roles more quickly
b) Committed to advancing DE&I through our Change Starts Here commitments – hiring, promoting, and retaining diverse talent to increase the representation of women and people of color
c) Hiring 10,000 Opportunity Youth – people ages 16 to 24 who are neither in school nor working – at Hyatt hotels around the world by 2025 through our RiseHY program
Our colleagues are the heart of our business, and we always strive to be the employer of choice.
6) What’s the status of the shortage of materials and the supply-chain issues and their effect on development? How much time have these issues added to the development process?
The pandemic has certainly presented supply chain disruptions, yet Hyatt remains committed to helping address these challenges in a variety of ways, including making prototypes more efficient, simplifying building interior and exterior finishes and details to streamline costs, exploring modular construction for speed to market, and expanding our supplier acceptance so that we can collaborate with additional sources, particularly locally relevant solutions.
7) What’s the most under-estimated challenge the hotel industry faces, and why?
One of the most underestimated challenges is moving fast enough to win deals, while properly balancing volatile construction and lending costs with underwriting that accurately captures future hotel performance.
8) What’s the most under-estimated opportunity for the hotel industry, and why?
Environmental, social, governance (ESG), specifically the ‘E’, presents unique and ownable opportunities for our industry to positively impact local communities. Increasingly, sustainability is expected by our stakeholders. Fold in external pressures such as the Inflation Reduction Act and anticipated SEC Climate Disclosure requirements and prioritizing sustainability is a must. Being part of the hotel industry, we have a vital role in protecting, rebuilding, and revitalizing destinations and the opportunity to drive real impact now and in the future.
* as of December 2, 2022