Industry & Co. Overview Hyatt Hotels Corporation “HHC” (NYSE: H) Meghan Shevlin

Industry & Co. Overview
Hyatt Hotels Corporation
“HHC” (NYSE: H)
Meghan Shevlin
January 15, 2014
Industry Overview
• Lodging industry is highly competitive with growth mainly in
international sectors
• Franchise in order to expand operations without need for
substantial capital
• Start up costs are immense
• Subject to government regulation regarding marketing,
manufacturing and sale of certain products
• Shift to use of the internet and bargain websites (highly
vulnerable to economic downturns)
Industry con’t
• Chains are sometimes involved in the management of, but not
ownership of the hotel and will receive management fees
• Ownership varies from publicly held companies to individuals
• Ownership through a REIT is becoming highly popular in order
to avoid double taxation
• REIT’s enable investors to invest in large diversified portfolios of income
producing property
• Use industry unique performance metrics:
• Average Room Rate
• Average Food Check
Porter’s Five Forces Model
Forces
Lodging Industry’s Susceptibility
Industry Competition
Strong (Price wars, internet expands potential
market, differentiated services)
Bargaining power of Customers
Low-Moderate (rates only change with special
scenarios i.e. convention package/group
discount. But, customers are able to use bargain
websites)
Bargaining power of Supplier
Weak (labor shortage with aging population,
employees in great demand, only 24% unionized)
Threat of Substitution
Strong (Many lodging options i.e. B&B, motel,
hostel, all ranging in price and services)
Threat of Entry
Moderate (high costs to start up, difficult to
differentiate, need expertise. But, internet makes
finding suppliers/marketing easier.
Hyatt Hotels Corporation
• Hyatt Brands:
• Grand Hyatt, Hyatt Regency, Park Hyatt etc.
• Mostly Luxury and upscale hotels but also provide extended stay and
residential options
• Worldwide portfolio of 500 properties (135,144 rooms) in 46
countries
• Year ended Dec 31, 2012 revenue of $3.9 billion and $1.4B
borrowing capacity
• 79.5% revenue attributable to operations in the United States
• Hyatt Gold Passport: guest loyalty program to attract new
customers and to demonstrate loyalty to best guests
accounted for 33.5% of total room nights in 2012
HHC con’t
• Increase market presence by entering new management and
franchising agreements
• Increase franchising in order to gain access to capital from developers
and property owners that target franchise business opportunities
• HHC collects management fees, franchise fees related to these
agreements
• Has never declared or paid cash dividends in order to further
develop and expand business
HHC con’t
• Business life-cycle stage
• With operating cash flows being positive and both investing and
financing cash flows being negative, HHC is in a Mature business
cycle
• Operates in 20 of the 25 most populous urban centers and continues
to search for new opportunities
SWOT Analysis
Internal Factors
External Factors
Strengths
Opportunities
•
•
•
•
•
World Class Brands
Experienced management teams
Strong capital base
Move into markets not yet involved in
Expand alternative lodging options
(offer more extended stay and lower
scale hotels)
Weaknesses
Threats
•
•
•
•
High operating costs
Aging labor force, need for new
experienced workers
Inability to compete effectively
Third parties can’t access capital to
fund current operations or plans for
growth
Conclusion
• Hyatt Hotels is a global company with highly regarded and
recognized brands that have been serving loyal customers for
over fifty years
• Taking innovative measures to deal with environmental
concerns, technology improvements and updating facilities
• Actively seeking expansion and alternative franchising
opportunities
Sources
• Hyatt Hotel Corporation Annual Report 2012
• Hyatt Hotel Corporation Investor Fact Book 2012
• http://www.irs.gov/Businesses/Hotel-Industry-Overview--Complete-Version#3