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Hyatt Hotels Corp: Strategic Analysis

Hyatt Hotels Corporation, also known as Hyatt Hotels and Resorts, is an American-based multinational hospitality organization. Founded in 1957 in Chicago, IL, it is a well-recognized hospitality property chain with 1175 worldwide locations and over 127,000 employees across 68 countries on all continents. The company operates a wide range of properties, including hotels, resorts, residences, and vacation properties, segmented by type and level of luxury. The organization typically targets business class and higher-end segments as well as top luxury offerings (Hyatt, n.d.). Hyatt is a highly successful enterprise in hospitality known for consistent improvement of quality, adding of new services, and modernization of its innovative properties.

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Macro-Environment Analysis (PESTEL)

Political As a multinational corporation, Hyatt is highly dependent on political factors for operations and stability. This includes taxation, various legislation and regulatory framework overseeing hospitality (which differs across countries), and supply chain operations. Political stability is vital for Hyatt as this affects the flow of tourism/business and influences the economy. Other legislation affecting businesses such as regulation on wages, working week, mandatory benefits, anti-trust, and trade affect Hyatt significantly.
Economic As an international business, a range of macro-economic factors, which are consistently shifting, can influence the operations of Hyatt. For example, inflation rates and currency exchange rates may impact pricing. Economic factors in the country of operation, including its growth rate, typically influence the hospitality industry in the long term. The economic system in the country of operation, financial markets, infrastructure quality, labor costs, interest rates are viable factors to consider for Hyatt when establishing or operating one of its properties in any global economy.
Social Social culture and traditions impact the operations and internal culture of the organization in any given region. Demographics are a key social indicator of the use of Hyatt services, including education levels, median incomes, class hierarchies in society, gender roles. There are also attitudes and reputation of the respective company in a given society.
Technology Despite being a service-oriented company, Hyatt heavily relies on technology for planning, booking, financials, supply chains, and other behind-the-scenes and administrative functions. Technology also matters to guests in terms of amenities, so when viable, technological integrations into the rooms and amenities with the purpose of increasing service quality can be beneficial.
Environmental As a large corporation, Hyatt produces a significant environmental input, particularly as it develops new properties. Its new and existing infrastructure produces waste ranging from literal tons of trash to CO2 emissions from its AC units, as an example. Hyatt is dependent on regulation that oversees environmental pollution for the hospitality and lodging industry. Furthermore, Hyatt business is directly dependent on environmental changes, such as weather events and climate changes that affect customer flows through its properties.
Legal As mentioned previously, Hyatt has to navigate a complex regulatory framework in each country individually. It is legally liable as an employer and a business. The firm has to protect its intellectual property rights and branding. It has to ensure all worker conditions are met, and there is no discrimination against either employees or customers. It has to ensure health and safety standards are met for local lodging and food standards. It has to ensure consumer data is protected.

Five Forces Analysis

  1. Threats of New Entrants – Weak force – The hospitality industry is tremendously difficult to navigate, commonly requires years operating at a loss, and is highly volatile to external influences making it not a strong business investment. To compete with top chains, it will require billions in capital to acquire infrastructure and land (Hoare, 2015). New entrants to industry are unlikely, major firms buy out smaller players who see any success in their segment.
  2. Threats of Substitute Products – Moderate force – To combat growing hospitality prices, substitute arrangements have been arising, such as staying at motels and hostels (levels where Hyatt and other luxury chains rarely operate). AirBnb was a rapidly emerging business with a sharing economy of living space. However, the Covid-19 pandemic has largely led to a significant drop in prices in upper-scale hotels while these other alternatives have experienced some reputation loss. Even so, there is usually no viable alternatives for business-level and above for overnight stays.
  3. Power of Suppliers – Weak force – Hospitality and hotels are not a commercial product that relies on specific components to produce, they are largely a service and an experience. While hotels require a lot of products, items, and outsourced services to function properly, they are all relatively generic, ranging from towels and soaps to food and working cable television with Wi-Fi. While large chains such as Hyatt build brand partnerships and reliable supply chains for every one of its locations, by all means, there is rarely any unique supply product that cannot easily be found somewhere else. Suppliers typically seek out large contracts with hotel chains as it guarantees a stable expense account, so the hospitality companies have the leverage (Kaplan, 2018). Since Hyatt operates around the globe, there may be regions where supplier force is higher due to lack of alternative suppliers, there is a need for high-quality products that only select suppliers carry (common in luxury chains), or the switching cost is high due to contractual obligations.
  4. Power of Buyers – Strong force – Hospitality relies strongly on consumers choosing to stay at its properties and remain loyal customers through the years, selecting the property chain in their travels around the world for business and leisure. Therefore, buyers have a strong force as their decision ultimately decides the profitability of the business. In most circumstances and global locations, buyers have the choice between several local and international hotel choices, so customer acquisition and further maintaining loyalty are absolutely crucial for hotels. Consumers in this industry have low switching costs, as prices are relatively similar across the specific segment for that client, and there are no long-term contractual obligations. The consumer wants the best offering of services and products for the lowest price when it comes to hospitality, forcing hotels to often bargains or incentives to remain competitive and maintain consumer loyalty (Britt, 2021).
  5. Competition in the Industry – Strong force – There are only a few select brands operating at this business and luxury level of hospitality properties. However, with virtually no differentiation among their products (each brand has its regular as well ultra-star luxury locations with largely the same amenities for each segment), the brands are forced to compete for consumers on the smallest differences such as service, quality, and potentially some unique amenity that others have not yet adopted (Campagnoli, 2020). Fixed costs are high within the industry, so companies adopt various strategies ranging from undercutting prices to building a strong reputation to diversify themselves in any way possible.

Internal Analysis

A range of internal factors can influence a corporation of the size of Hyatt Corp. Management is one critical element, as leadership and approach to management, both at corporate and local levels, can determine how the company progresses and operates. The company operates a hierarchical management structure with segmentation by both geographical region and type of product. The company follows modern corporate governance recommendations with a board of directors as well as committees on audit, talent and compensation, finance, and nomination, and corporate governance committee (Hyatt, 2021).

Culture is a significant internal factor. Hyatt attempts to follow corporate social responsibility and business ethics principles outlined in official codes and guidelines. According to official releases, Hyatt maintains an employee-centric culture to generate positive attitudes and care that can be passed down to the guests. Human resource management is another internal factor to consider, to ensure that the company maintains a healthy workforce, does not experience staff shortages that would impact the quality of service, and has a loyal development program within the company allowing for upward promotion mobility (Helvey, 2014).

Hyatt uses HRM strategically and offers both training and development programs for its employees wishing to grow within the company and building a strong culture within. Other internal factors may include resource management, location, product offerings, marketing, finances, and technological or economic change.

Financial Analysis

Sales and revenue figures for Hyatt Corp.
Figure 1: Sales and revenue figures for Hyatt Corp. (WSJ Markets, 2021).
Hyatt operating activities
Figure 2: Hyatt operating activities (WSJ Markets, 2021).
Hyatt asset listings
Figure 3: Hyatt asset listings (WSJ Markets, 2021).
Hyatt liability listings
Figure 4: Hyatt liability listings (WSJ Markets, 2021).

The graphs below represent the most fundamental data on Hyatt Corp. over the last three years. Notably, 2020 was one of the hardest economic years for firms that relied on travel and mass gatherings, as due to the Covid-19 pandemic, travel was restricted and lockdowns continue to persist regionally into 2021. Globally, hotel occupancy dropped by as much as 75% resulting in $125 billion losses in the industry and more than 3 million jobs lost, with an expected total loss of $910 billion in travel-related economic output in 2020 (Aharon et al., 2021). Virtually all lodging and hospitality companies saw significant net losses.

Looking at the Hyatt Corp. balance sheet, the company is at average financial health, it is not healthy, but it is not failing. First, the company has a relatively large cash pile, larger than all years prior. It is also seeing an increased cash net flow this year, up from 2020. The company does carry debt liabilities worth more than its current cash and revenue. At the same time, its stock value has continued to grow since 2020, making the company value at a $9.31 billion market cap, allowing it to easily raise funds to cover debts and liabilities. The company’s current, quick, and cash ratios to liabilities are exemplary, demonstrating signs of a decently healthy company. As travel begins to pick up on larger scales internationally, with many countries opening their borders, Hyatt should see its revenues increase exponentially, potentially to a greater extent than before the pandemic.

SWOT Analysis

Strengths Weaknesses
  • Globally recognized brand with a developed portfolio
  • Extensive network of properties and supply chain distributions
  • Expertise in the industry and strategic partnerships
  • Successful marketing and high levels of customer satisfaction
  • Lack of affordable lodging sub brands
  • Sometimes lack of adaptability to modern trends and conservatism as an old company
  • High fixed and operational costs in the business
  • Limited success or application of the business model outside core business
Opportunity Threats
  • Expansion of global portfolio towards greater diversification and development, such as the recently announced purchase of Apple Leisure Group to double the company’s global resorts footprint.
  • Greater technological integration throughout its product offerings and services to ensure the business is modernized both on the front and back-ends.
  • Expansion to new markets or to new regions within existing markets if possible
  • Improved marketing capabilities to shift Hyatt brand perspective beyond a hotel company but a wholesome hospitality and experience firm
  • Continuous COVID-19 restrictions and lockdowns
  • Environmental factors and climate change, many of Hyatt’s properties are near waterfronts and in vulnerable regions
  • No regular supply of innovative products or services, lack of diversification
  • Drop in quality of service and customer satisfaction due to shifting changes in the global workforce

TOWS Analysis

Strengths/Opportunities Weaknesses Opportunities
  • Use the brand recognizability to strategically expand portfolio across a range of hospitality and leisure type properties.
  • Use strategic partnerships and brand leverage to form a comprehensive partnership with a technology firm that can supply electronics and integration for both the front and back-end needs of Hyatt.
  • In the expansion of property portfolio, include cheaper locations to appeal to cost-conscious consumers.
  • Use technological integration to propel Hyatt as a future-proof company and use big data to track expenses and keep costs down.
Strengths/Threats Weaknesses/Threats
  • Maintain a variety of locations in each region so that if environmental impacts/Covid-19 outbreak closes one, another one is available within an hour’s distance.
  • Consistently adapt and shift service offerings at its properties while using traditional HRM tools such as training to ensure service quality.
  • Manage environmental threats by diversifying property portfolio at various locations and cost segments.
  • Supply innovation and diversification by implementing forward-thinking technology (potentially even robots and AI) to simplify service while appealing to consumers.

References

Aharon, D. Y., Jacobi, A., Cohen, E., Tzur, J., & Qadan, M. (2021). COVID-19, government measures and hospitality industry performance. PLOS ONE, 16(8), e0255819. Web.

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Brit, P. (2021). What does customer experience in the hotel industry look like today? CMS Wire. Web.

Campagnoli, R. (2020). Competitive Agility: How the hospitality industry can win amidst new challenges. Entrepreneur. Web.

Helvey, K.M. (2014). Recruiting from within: How Hyatt hotels engineers talent mobility. Web.

Hoare, D.J. (2015). Hospitality industry characterized by high fixed costs. Web.

Hyatt. (n.d.). About Hyatt. Web.

Hyatt. (2021). Corporate governance highlights. Web.

Kaplan, D. (2018). Five tips for managing hotel supplier relationships. Web.

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WSJ Markets. (2021). Hyatt Hotels Corp. Web.

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