About Hyatt Hotel Corporation
Forming a vital relation among the financial performance of an organization and its financial statements is considered important for any company to attain excellence. The current study is directed towards examining the overall performance of Hyatt Hotel Corporations and this is carried out by assessing the financial statement for the year ended 2020. Hyatt Hotel Corporation is evidently a world-class leader in the hospitality industry. For the current report, Hyatt current performance will be reviewed and a detailed examination will be done regarding its service quality management. Additionally, the report will also assess the revenue management and marketing strategies undertaken by Hyatt to its customers.
Irrespective of where a person is travelling, finding an accommodation is every time considered of top most priority. It may be for tourism purpose, business associated or simply a casual living standard, each aspect should be located in a very good place to live in. When in need for accommodation, Hyatt Hotels is viewed as the leading and much famous brand in hospitality sector (Hyatt 2022). The hotel was first constructed in the year 1957 when an entrepreneur named as Jay Pritzker bought the “Hyatt House Motel” close to the “Los Angeles International Airport”. As per the CNBC (2021), the operations of Hyatt is not just restricted to hotel accommodation, but also operates, maintains franchises, acquires leases, administers, licences and instructs facilities to collect properties throughout the world.
The main segment of Hyatt operations can be classified under four categories, “owned and leased hotels, management and franchising, ASPAC management and franchising and EAME/SW” Asian management and franchising. This not only results Hyatt Hotels a big player in the hospital industry, but it also makes sure that the business operations are very much diverse to take part in other business segment as well.
The actual headquarters of Hyatt is based in Chicago, USA. It is worldwide hospitality operations with the arrangement of around 20 head brands. As per Hospitality Net update as on 30th September 2019, the company had portfolio of 875 properties located in more than 60 nations and spreading across six continents (Tariq et al. 2020). The main motive of Hyatt is to emphasize on individuals so that they are better able to educate its business choices and development system. Hyatt emphasizes on drawing new customers, holding up the top-level executives, develop relations with visitors and create an incentive for investors.
Hyatt owns and extends its operations under a number of renowned brands which include the “Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt Ziva, Hyatt Centric”, Hyatt Residence Club etc. All the aforementioned brand are still operating under single brand operator named as Hyatt Hotels (Golubovskaya, Robinson and Solnet 2017). Hyatt further manages, offers services or licences its trademarks with regard to the residential rights units which is very time and again next to Hyatt-brand complete service hotel. The hotel refer with its third parties in the designing and development of such type of mixed use ventures.
Hyatt provides licences to some of its trademarks with regard to holiday proprietorship units, as these are considered as part of “Hyatt Residence Club”. Hyatt also provides services and in certain circumstances, it also manages rental plans and property holder associations related with co-operative possession of units (Staff 2021). Hyatt mainly generated incomes from its held and rented hotel accommodation operations, hotel managements and licencing of its portfolio brands to franchisees. For the financial year ended 31st December 2020, the total revenues of Hyatt stood $2.1 billion with net loss of $703 million that is attributable to Hyatt Hotel Corporation and “adjusted EBITDA” negatively total stood $177 million.
Hyatt’s Brands and Operations
For the recently concluded financial year Hyatt Hotels had reported a net loss that was attributable to the Hyatt amounting of $203 million or $2 per diluted shares during the final quarter of 2020. This was in comparison to the sum of net income that was attributable to “Hyatt of $321 million or $3.08 per diluted shares” during the final quarter of 2019 (Luiten 2020). The adjusted amount of net loss which was attributable to Hyatt stood $179 million or $1.77 per diluted shares in the final quarter of 2020 in comparison to the “adjusted net income” that was attributable to Hyatt amounting of $49 million or the sum of $0.47 per diluted shares during the final quarter of 2019.
The CEO of Hyatt Hotels have however expressed a positive outlook regarding its team all through the year 2020. The Hyatt Hotels have showed resilience in spite of the difficult decisions and also took meaningful act to place Hyatt at a very robust place based on the recovery develops. In the middle of thought-provoking operational rudiments, the net rooms of Hyatt grew strongly in order to demonstrate the power of our brands. The company opened 72 hotels and has entered 27 new marketplaces (Dev 2020). The Hyatt Hotels teams have also carried out new signings in order to maintain the channel signifying a growth of more than 40% of its current hotel rooms in future.
The financial results for the fourth quarter of 2020 as compared to the fourth quarter of 2019 states that the net income (loss) declined from $321 million to stand at $(203) million. The adjusted EBITDA also declined in 2020 from $191 million to stand at ($98) million, around half of this is related to the cost which is experienced on behalf of its managed and licenced possessions that Hyatt has no intention of recovering from the hotel owners (Law, Sun and Chan 2019). For the year 2020, the comparable organization revenue PAR also declined to stand at 68.9%. For the year ended 31st December, 2020, Hyatt had reported a cash, cash equivalent along with the short-term investment amounting of $1882.
For the financial year of 2020, the financial results in comparison to the fiscal year of 2019 for Hyatt includes the “net income (loss)” has declined from $766 million to $(703) million. On the other hand, the “adjusted EBITDA” declined from $754 million to $(177 million). The comparable organization “wide RevPAR” has declined from 65.4%. The growth in net rooms also stood 5.2%. For the financial year ended 2020, the pipeline of company comprised of about 500 hotels or around 101,000 rooms. The establishment has maintained a strong position in liquidity whereas the fourth quarter represented a modest progressive improvement in “RevPAR”.
The service quality in hospitality industry is regarded as one of the vital factors to gain a sustainable “competitive advantage” and assurance of its clients under a highly competitive market and hence “service quality” allows hotels under hospitality industry to obtain a wider chance of finding competitive differentiation for organizations (Ricca 2021). The service quality management is regarded as the central concept and also a critical factor in attaining success at service sector.
Hyatt’s Revenue Sources
At Hyatt the quality of administration in affability business ends up as the standout amongst the highly significant element for picking up the maintainable upper hand and trust amongst the client is highly focussed as the commercial centre. The quality of administration gives Hyatt with a friendliness business as the incredible opportunity to carryout aggressive separation for its associates (Westcott and Anderson 2021). For Hyatt, it is considered as a noteworthy way of centre idea and also acts as the basic achievement factor in its other franchisee business. Hyatt provides its client with astounding quality administration and the quality of administration is treated as the life span of Hyatt.
With the help of service quality management and quality administration, Hyatt is able to build consumer loyalty by adding up to business pictures, sets up for client unwaveringness and provides the business with an upper hand to business.
Apart from this, the view that strategic management drivers holds a significant impact on hotel service quality. The conclusions were completely based on the objectives involving service quality drivers at Hyatt that has a significant impact on hotel. The strategic management drivers at Hyatt is considered as significantly and positively creating an influence on the service quality of hotel.
Findings from the study have suggested that Hyatt operates under significant amount of competition. It can be stated that Hyatt needs to embrace its service quality drivers so that it can attain sustainable competitive advantage. The outcome that was obtained from this study were considered very much vital in reflecting the circumstances about the usage and service levels of strategic management drivers at Hyatt performance (Guzzo, Abbott and Madera 2020). The study has shown that there is a positive relationship amongst the individual drivers of service and quality of service at Hyatt.
Later, it was found that the customers at Hyatt have also shown high degree of customer satisfaction with around 78.7% of the total respondents have expressed satisfaction with their stay at hotels chains. A large number of respondents have shown to anticipate quality service from hotels, that involved facilities such as customised food at restaurants, advance level of tech facilities at board rooms and 24 hour personal assistance are some of the highly sought after factors (Lugosi 2019). The Hyatt Hotels service executives were prompt enough in addressing the issues of customers and resolving their queries with 54% of the respondents have stated that Hyatt service executives responded to queries immediately. These factors at large stood as the motivating factor for the customer satisfaction which exhibited their overall service quality management.
Hyatt Hotel Corporation seeks to increase its revenues in every unit it operates with the help of a revenue management team comprising a team of qualified professionals. Hyatt Hotel also gives “revenue management services” to its franchisees on demand. The “revenue management” leader at Hyatt make use of proprietary technological tools that helps the company in setting up right price for its each hotel (Nunkoo 2018). The actual aim of “revenue management” is to actually protect the rights of consumers on the correct day at an accurate price. The prospects of business are simply revised and it is approved by the team of Hotel management.
Hyatt’s Financial Results for Q4 2020
Hyatt has committed itself towards significantly expanding its revenue management abilities by making use of MaximRMS as an advanced mode of technology. “Hyatt and MaximRMS” have settled upon three main initiatives;
- Customizing highly progressive most important market based revenue management abilities that features reasonable pricing, response towards market demand and establishing dynamic pricing of its profit maximisation.
- Immediately full placement of “MaximRMS hospitality” commercial “intelligence system”.
- Establishing a long-term worldwide licensing of MaximRMS by obtaining patent of its technologically developed predictive analytical calculated projection and also optimizing its system.
As the important part of Hyatt revenue management strategy, the company has also made new investment in “MaximRMS” progressive extrapolative and analytical tools to increase the overall performance of “Hyatt Hotel properties” in US, Canada and Caribbean countries. The overall objective is to enhance the realisation of revenue, speed up the response of competitive actions and respond to the change in demand, increase in efficient decision making and improving the profits all through the brands.
Hyatt is making full use of MaximRMS and e-FLEX system in its properties. Furthermore, the company has positioned a form of e-flex at its service facilities (Bodkhe et al. 2019). In the year 2020, the company has also introduced the latest Group Sales functions of Maxim system in order to administer and apply right pricing of group rooms at the “full-service Hyatt Hotels”. At present the market leader “MaximRMS hospitality business intelligence system” is being employed all through the Hyatt properties.
The Hyatt decision making personnel are installing the “MaximRMS hospitality business intelligence system”. This tool is useful in providing comprehensive packages for hotels and chain of hotels so that it can recognise, administer and generate revenues from their numerous hotel properties (Hayes et al. 2021). Hyatt has further adopted and customized its advanced new features and also its capabilities in its very flexible “MaximRMS technology”. The new technological capabilities can simply span the advanced mathematical estimation and revenue maximization methods as the new tool for conducting predictive analysis and functions of “group revenue management”.
This market leading abilities as well as features is intended in such a manner that it would contributed to improved hotel performance of Hyatt, larger revenues and lesser physical labours by users. The system involves capability of progressive “revenue management” to dynamically incorporate the price elasticity from the changes in consumer behaviour under “MaximRMS” price sensitivity optimization to generate profit by increasing prices and optimum amount of control.
Hyatt Hotel is completely focussed towards the high-end traveller as it positions its brand at the top of every section in which it operates. The marketing policy of Hyatt is completely intended to drive customer loyalty and community, while it also aimed towards meeting specific needs of business for operation of hotel (Guix and Font 2020). Creating and differentiation of every single brand is considered important in increasing the Hyatt’s overall brand preference. Hyatt is entirely focussed on targeting the different segment of guest which each of its brand serves and also supports the need of hotel by conducting a detailed analysis and applying specific types of data.
The World of Hyatt loyalty program and its digital platforms are also considered as the important component of creating loyalty and driving revenue. The loyalty programs of Hyatt is useful in producing substantial amount of repeated guests by frequently rewarding its guests with stays points that can be redeemed for hotel nights and other kind of rewards. Inspired by its purpose, the world or Hyatt is involved in building strong community and engagement with higher end travellers (King 2017). The members of loyalty program are able to enjoy additional amount of rewards because they attain the milestone rewards and advance under three elite tiers on the basis of qualifying nights or by the base points during the calendar year.
Hyatt’s Financial Results for FY 2020
The members are able to earn points on the basis of night spend on Hyatt properties, by simply transacting with its strategic loyalty alliances or simply in connection with the night spend on Hyatt co-branded credit card. The loyalty program points can be simply redeemed by guests at properties across Hyatt brands. It can be converted in airline miles with several other participating airlines and can be redeemed with the third parties.
The loyalty program is mainly funded with the help of contributions from the eligible revenues which is produced from the members of loyalty program. These funds are easily applied to reimburse the hotels while availing room nights when members simply redeem the loyalty program. By the end of financial year of 2020, the loyalty program had more than 25 million members and during the year 2020, it represented around 36% of total room nights based on the Hyatt accommodation system.
Hyatt Hotel also manages and franchise properties that is owned by the third-parties under the partnership or terms of management and franchise agreements. The hotel anticipates the ownership to regularly increase over the time. These type of agreements simply requires the third-party property holders or the franchisees to adhere with the standards which is considered important in maintaining its brand integrity and reputation as well (Alexakis and Jiang 2019). Hyatt Hotel is dependent on the third-party property owners or the franchisees to adhere with these requirements by simply maintaining and improving the properties with the help of investments in fixtures, furniture, amenities and personnel. Hyatt Hotel on regular basis evaluates and executes new initiatives that includes new brands or programs relating to marketing. Hyatt has also made investments in both owned and leased real estate, development of property and brand promotion.
Hyatt Hotels have also co-branded its credit card agreement with the third party and under the terms of agreement. The hotel has numerous obligations relating to performance that grants licence in the name of Hyatt, arranging for the fulfilment of points that is issued to the cardholders with the help of loyalty program and it also awards the holder of cards with free room nights on attaining certain program milestones. The loyalty points along with free room nights acts as the material rights which can be easily redeemed without paying any charges or can be availed as a discount services in future. In exchange of products and services provided, it has received both the fixed and variable consideration that gets assigned on performance requirements on the basis of relative separate selling prices.
Significant amount of judgement is needed in ascertaining the relative separate selling prices. As a result, Hyatt has hired a third-party valuation expert to help the company. Hyatt obtains relief from royalty method to ascertain the revenue that is allocated to the license that is identified over the time because the licensee obtains value by gaining access to Hyatt’s brand name.
Hyatt makes use of media channels in order to assure that its customers know about their hospitality services. Hyatt has specially designed to create and preserve a positive awareness and its brand value through word of mouth or by any other means. This is achieved by Hyatt by gaining higher customer satisfaction and by giving excellent customer relationship management (Chan and Hsu 2016). The Hotel provide numerous discounts and festive schemes that is beneficial for the customers. They provide reward to customers under loyalty program through Hyatt Gold Passport that is accepted throughout the world and helps the guests in fetching additional discounts and perks.
Hyatt’s Growth and Hotel Pipeline
Hyatt Hotel has dedicated set of team that works to provide opinion regarding the hotel operating functions to satisfy both the company and its guest’s requirements. Hyatt Hotel simply emphasizes on premium pricing strategy for its products because they can meet the demand of high profile business class and upper class of society. This strategy has been successful among its guests because they are ready for paying extra money to get premium service. Beside the complimentary meals, the hotel also provides its guests with complimentary suits and other types of lucrative as well as feasible deals that are normally fancied by customers across the world.
Conclusion:
To conclude with a SWOT analysis framework has been for Hyatt to understand the competitive position in its business environment. This is done by identifying the internal strengths and weakness followed by the recognition of opportunities and threats that it faces in its business environment.
Strengths:
- Distribution and reach: Hyatt Hotel has big number of outlets in every state. This is supported by a robust network of distribution which assures that its can easily provide services to big number of guests within timely way.
- Cost Structure: The lower cost structure of Hyatt enables in attracting large numbers of customers (Lee et al. 2016). The customers find it affordable.
- Dealer Community: Hyatt Hotel has strong dealer relationship which not only allows them with supplies but also helps in promoting the company services.
- Diversified workforce: Hyatt Hotel has large diversified labour force, as employees are from several geographical, cultural and educational backgrounds (Álvarez-Risco et al. 2020). This allows the company to bring diversity of ideas and methods in doing things.
Weakness:
- High rental expenses: There are wide number of properties which is owned by Hyatt Hotels Corporation are on rent instead of purchasing it. The company is required to pay big amount of rent and this adds to its operating costs.
- High day sales inventory: The time taken for products bought and sold is higher than the usual industry average. This implies that Hyatt Hotels large unsold inventories which results in unnecessary business cost.
- Quality Control: Hyatt Hotel has set lower budget for its quality control purpose than its competitors. This actually results in lack of reliability and also there is a likelihood of loss in quality all through its numerous outlets.
Opportunity:
- Technological advancements: Technology comes with several benefits for several departments. Operational procedures can be automated to lower the costs. Technology allows better collection of customer data and also helps in improving the marketing efforts.
- E-commerce: Through e-commerce there is a rise in sales. This implies that a large number of potential guests can make use of online mode to avail its service (Köseoglu et al. 2019). Hyatt Hotels can derive revenue through online stores and making sales through its website.
- Tourism growth: Global rise in tourism is considered beneficial for Hyatt Hotels because it will help the company in getting new potential customers and gain wider market share.
Threat:
- Bargaining power of suppliers: The suppliers bargaining power over the years has increased significantly and there is also a decline in total number of suppliers. Consequently, this adds to the threat of increase in input cost for the company.
- Threat of new entrant: There is also a rise in new players in market and they are gaining market shares of current market participants (Khan 2019). This acts as a threat for Hyatt because the company can lose its potential customers to new entrants.
- The fluctuating rate of interest in the company fails to provide stable financial and economic environment and this can be threat to smooth operation for Hyatt.
References:
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Álvarez-Risco, A., Estrada-Merino, A. and Pérez-Luyo, R., 2020. Sustainable development goals in hospitality management. In Sustainable Hospitality Management. Emerald Publishing Limited.
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