FlyerTalker324193

Yeah, but the target customer isn't exactly Hyatt clientele. Those all-inclusive bookings at those 3*/4* (or 5* mostly in name) properties are sold by OTAs such as TUI, STA Travel, FTI, or Expedia or specialized hotel or tourism companies such as Iberostar.

I understand the point made by previous posters that Hyatt sees growth potential in the market segment. But 29 properties in Europe where Hyatt has much less clout than in the US? And I gotta repeat the point I made earlier. Traditionally, Hyatt is not positioning itself in the middle of the market. A Hyatt Regency is supposed to be a little better than a Hilton or a Sheraton. HP has supposed to have slightly nicer rooms and slightly better service than an HGI or CY. Etc. Hyatt will have to sell a ton of rooms in places like the Balearics and Canary islands. And the resorts aren't at the level of a 7Pines Ibiza. The new resorts will have to compete on price. I don't see how Hyatt can justify its usual premium.

coleslaw

But isn't that kind of the point? Diversification.

FlyerTalker324193

You want diversification, but not in the old-school, conglomerate kind of way. Stock markets haven't been particularly fond of conglomerates for a long time (several decades).

So diversification into a leisure market segment that is more resilient during times of pandemic (or other crises) is fine. But you'd also want synergies with the remainder of your portfolio. Maybe it's my own ignorance, but I don't really see them when looking at those properties on the Balearic islands.

lowfareair

I could actually see this being the other way around. Hyatt has a huge US-based loyalty program today. By expanding into a leisure group that has a good number of Europe/UK loyalists from a leisure perspective (only a couple stays per year, but those clients want to be at these hotels/brands), they gain access to that market and can potentially get those of them who also do business travel in Europe to start staying at Hyatts in order to get rewards/benefits when staying at the leisure properties.

All-inclusives are a huge leisure market for the UK and Europe, Hyatt just gave that group a huge reason to start staying at Hyatt for business. I don't think any other business chain has as much leisure pull in the all-inclusive segment, so this could be a good way for Hyatt to establish a bigger business footprint in Europe.

GUWonder

Of the Scandinavians and some other Europeans whom I discovered to have gone to some of these places — perhaps even using TUI — during peak school vacation periods, some of them are the very ones who have rented homes in the US for $10k+/month for vacation. After finding that out, I sort of learned my lesson about not jumping to conclusions about the people who take some of these charter tourist trips to these resorts which I’ve been avoiding because it’s just not my thing.

And the people looking at paying $10k+/month for a vacation rental home in the US are usually of sufficient financial means and of such position that staying at Hyatt business-oriented hotels for work is nothing but a question of choice and convenience. In this regard, Hyatt may now be in a position to grow its European base of business travelers too.

Adelphos

Can't say I agree with this - I've stayed at many shabby older Hyatt Regencies that were more run down than a newly renovated Sheraton. New HGI and CY are positioned basically exactly the same as a new Hyatt Place IMO. Maybe Hyatt hopes that these are seen as "slightly better" than their brand counterparts but I don't that is their actual reputation. In contrast the reputation of Andaz and Park Hyatt seem better, on average, than comparable Hilton/Marriott brands, but there are fewer of them.

GUWonder

As I would see it, the point is not just diversification of segments; it is also of cross-selling and capturing more and more types of lodging-related revenue from the segments’ existing customer bases.

This move is far removed from being an attempt to be a multi-industry conglomerate. It’s more akin to being a multi-segment player within an industry, all to capture more accommodation-related revenue.

coleslaw

The point is diversifying their client base - which is exactly what this is doing. It shifts more towards leisure and more towards European clients. Both of which Hyatt have historically not been very strong in vs. their business orientated properties. Synergies can be secondary - and may not be of much relevance at all if Hyatt chooses to have these properties as a somewhat loose affiliation (like SLH) vs. being tightly integrated. I can see them going the "loose affiliation" route for the near/medium term.

coleslaw

Agreed. This isn't a GE type play.

GUWonder

This move probably means I’m more likely to stay at the properties brought in by the deal — despite my having a long aversion to these kind of resorts. But I think the bigger type of gain for Hyatt will be in getting European business travelers staying at Hyatt properties for work in order to get points to use for vacations at these resorts.

christianj

I'm part German and actually lived in Germany for over half my life so I will chime in here. In general, I think the way Germans have booked vacations in the past (and even today) is to go to a travel agent and book there. This is the main reason that Germans typically go on these types of all-inclusive vacations. The pricing for these can go from extremely cheap to high-end depending on someones budget and desire for a vacation. I remember us booking family vacations when I was younger this way...we would go to the local travel agent...pick up the catalogs for the destinations we wanted to go...flip through the catalog...then go back to the travel agent to see which of the choice were available and at what cost. The travel agents played a huge roll in recommending at which hotel to stay. Everything was included from flight to hotel transfer and you could book full board or half board depending on how often you wanted to eat. Honestly I remember my parents spending like $10k back in the day for a family trip to Mallorca. We stayed at the other side of the island in a super luxurious hotel and not in El Arenal near the famous Ballaman.

Anyway, I think people in Europe book these all-inclusive vacations because this is how they have historically booked vacations. This applies outside of Germany as mentioned before. Are they all cheap? Definitely not and some of the best hotels are usually options in these all-inclusive offerings.

Is investing in this type of business good for Hyatt? Only time will tell but it is diversification.

GUWonder

They still book stays this way a lot; but, at least in parts of Scandinavia, more often it seems to be an online or telephone booking after reviewing the travel catalogs for properties or running an online search on the likes of Tui or something like that to land the properties that seem to meet their interests and price point. It also tends to make planning, budget planning — and sticking to a budget — for the trip easier and more predictable.

MarkOK

The older I get, the more I enjoy all-inclusives (at least every once in a while). And I can't afford the super luxury premium tiny 5 star $1000++ a night hotels anyways, so I am not going to lament that these aren't 'expensive enough' or 'exclusive enough'. I'm not looking for more aspirational properties to spend points -- Once any property is aspirational enough, the points values drop through the floor anyways (from category placement -and- availability games), and I don't accumulate huge stacks of points on other's people money just to blow.

So, on a personal point, I think this is a very interesting purchase and some of the properties/resorts are certainly attractive enough for me. I don't see any reason to care about/pay attention to the lowest tier pieces of this purchase any more than I pay attention to a new Hyatt Place being built in suburban America. Not every business decision Hyatt makes is about me.

coleslaw

It seems like many FTers don’t appreciate this fact.

khabah

I just listened to the webcast, and picked up these important plans about the company's integration from a question posed to Mark Hoplamazian. He talked about the Miraval and Two Roads acquisitions as examples:

• With Miraval, they kept management segregated/"focused" but ultimately embedded within the Hyatt business because the on-property guest experience is so unique and was complementary to the premium positioning of the greater Hyatt portfolio
• Two Roads was fully integrated into the core business and resulted in Hyatt creating a dedicated lifestyle division
• With ALG, "It's going to be different, we're going to be bringing the entire team with the company and it will operate as a separate unit. Alejandro Reynal...is going to be reporting to me [Mark Hoplamazian] directly and joining the executive team of Hyatt, and the company will largely look the same way it does now after we close, maintaining continuity for ownership, and recognizing that this is a different business than our core hotel operating platform primarily because the all-inclusive management base includes a very different distribution channel profile than ours does and some of the operating modes and processes that they use are also different."

Regarding that very last bit about how all-inclusives operative differently, Hoplamazian said that this is something they learned from when they set up their Ziva and Zilara brands, so they recognize it's a very specialized way of doing things and as such will keep the ALG structure intact.

I would surmise that we'll see the loyalty programs integrated and give guests the fluidity to stay, earn and burn at ALG properties as if they were your regular Regency, Alila or Place hotels, but the business side of things will see them run separately.

khabah