Hyatt Hotels the Hotel Industry Term Paper

Excerpt from Term Paper :

High-road competition focuses on service quality (Working for America Institute 2004), which means developing property in prime locations and the regular upkeep and upgrade of property. Hotels using high-road competition charge high room rates but provide top-class amenities, satisfying customer service and on-site attractions, such as restaurants, lounges, conference sites, gift shops and concierge service to attract customers and incline them to spend. Upper segments are likelier to engage in high-road competition and lower segments, in low-road competition. Hotels in the limited-service segments must differentiate themselves from low-cost providers by offering better service, while upper-upscale and upscale hotels must reduce costs to increase or maximize profit (Working for America Institute). The amount and quality of service in the upper segments allow them to charge higher prices and to directly reward investment.

The high-road strategy may, however, not be conducive to the level of productivity that owners and managers would want, which is revenue per available room or RevPAR (Working for America 2004). RevPAR is a measure of capital productivity of hotel services per unit of the physical plant. It does not directly measure labor productivity, but the amount of service per hour rendered by hotel employees. It measures the value of the investment in the hotel labor force. RevPAR is equivalent to the product of the average daily rate of the room and the hotel room occupancy rate, which leads owners and managers to equate high room prices and high occupancy rates with success. This standpoint may then distract them from perceiving and improving the effectiveness of their internal operations and workforce by a constant reference to pricing and marketing innovations (Working for America Institute).

RevPAR does not reveal or contain turnover costs, for example, and reflects only room availability, thus hiding the high cost of a transient workforce. Knowing these turnover costs would be beneficial, as reducing them would also reduce training, hiring and recruitment expenses. Owners and managers tended to favor RevPAR and a study conducted in the 90s on the structure of hotel revenues reinforced this position among these owners and managers (Working for America Institute 2004). Revenue from room rental increased from 59.3% in 1992 to 73% in 1997, along with reduced sales of meals and alcoholic beverages within hotel premises and a slight increase in the sales of packaged items. But critics believed that these were due to the growth of limited-service segments and the outsourcing or the closure of some hotel restaurants in the 90s. These segments did not offer food and beverages operations or supplementary revenue-generating services within the premises. The observed increase in revenue from room rentals could be attributed to the increase in size of these segments (Working for America Institute).

II. Hyatt Hotels

The Hyatt Corporation opened its first hotel property in Los Angeles International Airport on September 27, 1957. It was first called Hyatt House, owned by a local entrepreneur, Hyatt R. von Dehn (Hospitality Online 2004). Hyatt's hotels grew aggressively along the West Coast in the decade following, but became known with their brand name only after Hyatt opened the world's first atrium hotel in 1987. This 21-storey tower lobby and dramatic difference from the traditional hotel architecture altered the course of the lodging industry. Architects would veer from eliminating extra space to utilizing or creating wide and open public spaces (Hospitality Online).

There were 13 Hyatt hotels in the U.S. By 1969, the year the first international hotel was opened. This was Hyatt Regency Hong Kong, operated by the newly established company, Hyatt International (Hospitality Online 2004). Hyatt Regency hotels became Hyatt's core brand, which offered opportunities to broaden one's horizons and to rejuvenate. The hotels' lobbies and rooms reflected the best of the indigenous culture, with creative food and beverage outlets and sophisticated technology, meeting and sports and fitness facilities.

To deepen its identity and present the varied types of Hyatt properties worldwide, the Corporation introduced the Grand Hyatt and Park Hyatt brands in 1980 (Hospitality Online 2004). The Grand Hyatt series addresses culturally rich destinations that attracted leisure and business travelers in addition to large meetings and conventions. Hotels in this series have been known for their grand scale and refinement, as exuded by such features as state-of-the-art technology, business and leisure facilities, world-class banquet and conference facilities, and programs customized for discriminating business and vacation guests (Hospitality Online).

On the other hand, Park Hyatts were smaller, luxury hotels intended for discriminating travelers who wanted privacy, personalized service and elegance traditionally found in small European hotels (Hospitality Online 2004). They also offer state-of-the-art technology, excellent food and beverage, conducive surroundings and 24-hour personalized service.

Since the Corporation opened the Hyatt Regency Maui in 1980, the Hyatt brand also became a leader in creating and operating dramatic luxury resorts too. Among these were Hyatt Regency Kauai in Hawaii, Hyatt Regency La Manga in Southern Spain, Bali Hyatt ad Grand Hyatt Bali in Indonesia, Hyatt Regency Cheju in the Southern coast of Korea, Hyatt Regency Sanctuary Cove and Hyatt Regency Coolum Spa and Resort in Australia's Queensland state, Hyatt Regency Guam in Micronesia, Hyatt Regency Thessaloniki in Greece and Hyatt Regency Kathmandu in Nepal (Hospitality Online 2004).

Today, Hyatt International Corporation, through its subsidiaries, operates 58 hotels and 22 resorts, consisting of 28,000 rooms in 37 countries. Hyatt Hotels Corporation operates 120 hotels and resorts consisting of more than 55,000 rooms in the U.S., Canada and the Caribbean (Wet Feet 2004). Hyatts' target is the business traveler to whom they offer deluxe lodging and meeting facilities. These hotels have contributed to revitalizing many cities or areas where the chains were established, thus energizing business and population growth. New constructions also promised more than 20,000 job opportunities worldwide. These hotels and resorts have established a firm reputation for physical distinctiveness, local art and design, amenities and services. These special services included the Hyatt Gold Passport, which is Hyatt's renowned recognition and award program for the busy and frequent traveler; Regency Club for the VIP concierge; specialty restaurants; and custom catering. They operate 116 properties and manage other properties on 116 properties (Wet Feet). Many of their resorts included casinos and professionally designed golf courses, freestanding golf courses and timeshares, a luxury retirement community called the Classic Residence, and, in conjunction with Circus, also the largest cruising gaming vessel called the Grand Victoria. The Pritzker family owns the Hyatt Corporation, now headed by Thomas Pritzker as President, Chairman and CEO (Wet Feet).

While other chains went on high-profile acquisitions, Hyatt chose to go slowly and steadily in signing management contracts and buying property. Last March, it reorganized its management team and since then, there have been speculations of its going public, buying Le Meridien, and legal disputes within the billionaire Pritzker family (Webber 2004). It may rank 14th this year, but Hyatt executives, prominently Doug Geoga, expressed conviction that the company's prospects are better than ever and that the restraint placed in the past would pay off in the future. Geoga, the newly appointed president of Hyatt Corporation and the AIC Holding Company, said that they have created substantial value for the Pritzkers and find enormous opportunity everywhere in the world for their current product and for the whole line of other products under active consideration.

Hyatt leaders thought that it was time they took leverage on the strong brand image it carved since the establishment of its first hotel in 1957. Hotel experts, as a matter of fact, viewed Hyatt as reaching farther than its locations. Chairman Bjorn Hanson of PricewaterhouseCooper's hospitality and leisure practice suggested that people think Hyatt was great and covered every city (Webber).

Statistics provided evidence that Hyatt was under-represented in the hotel chain industry. Its 208 hotels worldwide dwarf in comparison with competitors, such as Marriott International with 2,600 properties, Hilton Hotels with more than 2,060 properties, and Starwood Hotels and Resorts with more than 750 (Webber 2004). it, thus, seeks to primarily grow. The first step towards expansion was to strengthen the bond between Hyatt Hotels Corporation and Hyatt International Corporation, the two separate entities that worked together to oversee Hyatt for decades. Hyatt Hotels Corporation runs Hyatt's 123 properties in the U.S., Canada and the Caribbean. The Hyatt International Corporation, on the other hand, runs 85 properties outside North America. The Pritzkers selected Doug Geoga as the most natural person to entrust the Global Hyatt charge with combining and consolidating Hyatt's activities in North America and elsewhere. He has the confidence of the Pritzkers and the favor of all the organizational levels.

Geoga functioned a president of the Pritzker-owned Hospitality Investment Fund since 2000 and president of the Hyatt Hotels Corporation from 1994 to 1999. The acquisition of U.S. Franchise Systems was the best-known deal of the Hospitality Investment Fund (Webber). His appointment was expected to raise communication and coordination levels between the sister companies, while they maintained their distinct structures. Ed Rabbin was appointed to head Hyatt's domestic arm.…

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