Skift Take
Sean O’Neill
Hyatt is reportedly on the verge of inking a deal with Standard International, which owns luxury lifestyle brand The Standard and other brands.
What’s behind this potential deal? The Standard belongs to a category of hotel that Hyatt and all the big hotel groups are increasingly coveting: While regular hotels are just places to sleep, “luxury lifestyle” hotels are boutique places, with lobbies that look like modern art galleries and rooftop bars serving drinks with unpronounceable names.
Hyatt CEO Mark Hoplamazian previously told investors that adding luxury and lifestyle brands would create a “network effect” that would drive growth and engagement for the loyalty program.
This network effect works roughly like this: the more luxury hotels an operator owns, the more wealthy people will want to stay there and book directly with them.
Hyatt’s Growth in Luxury and Lifestyle
Over the past six years, Hyatt has doubled the number of its luxury hotels and increased the number of its luxury lifestyle resorts fivefold.
A year ago, Hyatt said about 45% of its portfolio was “luxury, lifestyle and resort.”
Hoplamazian believes Hyatt’s luxury and lifestyle strengths will help it differentiate itself from competitors and attract developers and owners. He hopes this will create self-sustaining momentum in deal flow, leading to more and more luxury and lifestyle properties and helping it steal independent hotel conversion deals from rivals.
In talks with investors, the CEO pointed to Hyatt’s growth in revenue per room (a key industry metric) as coming from a premium customer base that is largely immune to inflation and rising interest rates due to a widening “wealth divide” in U.S. travel.
That’s why luxury and lifestyle hotels typically charge a higher price per room than Hyatt.
Another side benefit is that people who prefer luxury lifestyle properties tend to sign up for Hyatt’s loyalty program, whose members are more likely to book directly, generating more revenue for Hyatt than travelers who book through online travel agents.
Hyatt Luxury & Lifestyle Shopping
Hoplamazian said his team is looking for acquisitions or related opportunities that would expand its existing luxury customer base or expand to a similar demographic profile.
As an example, Hyatt last year acquired lifestyle brand Dream Hotels for $125 million in cash to target Dream’s customer base, which is generally about 20 years younger than Hyatt’s existing customer base but has similar financial standing. The acquisition added about 1,700 rooms to Hyatt’s lifestyle portfolio.
Hyatt bought boutique hotel booking site Mr & Mrs Smith last year for £58 million in cash (about $72 million at the time) and plans to make about 700 boutique hotels and villas vetted by Mr & Mrs Smith available to book through its loyalty program members by April 2024, with more to come.
In 2018, Hyatt acquired lifestyle group Two Roads Hospitality for $408 million, adding about 85 properties.
Now, there are reports that the company may be seeking a deal with Standard International. In response to questions, a Hyatt spokesperson said, “As a matter of policy, we do not comment on questions of this nature. We remain focused on asset-light growth through both organic growth and strategic acquisitions and have no new information to announce at this time.”
If the company does pursue some kind of deal structure, it may fit into a broader strategy given the company’s past statements and actions.
“To summarise at a very high level the core premise of our strategy, all stakeholders – colleagues, guests, customers, corporate clients and hotel owners – all want to enhance their engagement with Hyatt,” Hoplamazian told investors.
Hyatt is not alone in the luxury and lifestyle space.
In the U.S., developers and hotel groups plan to open about 60,000 branded lifestyle and soft-branded boutique hotels between mid-2023 and 2027, according to Highland Group’s analysis of CoStar STR data. Hilton this year acquired Nomad Hotels, a small brand of luxury lifestyle hotels, and Graduate Hotels, a collection of about 30 college-themed lifestyle properties near universities. IHG’s luxury and lifestyle portfolio accounts for about 13% of IHG’s total rooms and about 21% of its pipeline. If the company did not sign any more hotel deals and only opened its pipeline, its luxury lifestyle distribution worldwide would increase by about half. In the U.S., lifestyle hotels account for about one in three branded hotels open, a share that has risen 26.3 percentage points since 2000, according to a report this year from brokerage JLL. The firm expects market share for branded lifestyle hotels to accelerate due to rising demand.
Accommodation Sector Stock Index Year-to-Date Performance
What I am looking at is the performance of stocks in the hotel and short-term rental sector within the ST200. This index includes companies listed on global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations and timeshares.
The Skift Travel 200 (ST200) compiles the financial performance of nearly 200 travel companies worth more than $1 trillion into a single number. See more hotel and short-term rental financial performance.
Read the full methodology behind the Skift Travel 200.
Photo credit: Bedroom suite at The Standard Hua Hin, a luxury hotel in Thailand.
