Wellness, all-inclusives the key to Hyatt Hotels' growth

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The walkway to the Life in Balance Spa at the Miraval Arizona.
The walkway to the Life in Balance Spa at the Miraval Arizona.

In a lodging industry where larger competitors continue to expand their hotel numbers at a record pace, Hyatt Hotels is staking its own growth on the assumption that guests are looking for a little tender, loving care.

Long known for full-service brands such as Hyatt Regency and Park Hyatt as well as its eponymous badge, which celebrates its 60th anniversary this year, Hyatt is boosting its investments on both the wellness-spa arena and the all-inclusive sector.

Last month, Hyatt bought resort and luxury-spa operator Miraval Group from KSL Capital Partners for $215 million and pledged to spend another $160 million within the next three years expanding its Arizona property and building out its Texas and Massachusetts sites.

Privately held Miraval in 1995 opened the 117-room Miraval Arizona Resort & Spa, which offers more than 120 wellness activities, fitness classes and lectures each week. The company last year began operating its Life in Balance Spa at Southern California's Monarch Beach Resort.

Meanwhile, the hotelier is poised to boost its presence in the all-inclusive sector via its Hyatt Ziva and Hyatt Zilara brands, which it co-developed with Playa Hotels & Resorts, in which Hyatt invested $325 million in 2013.

Playa Hotels, which in December announced plans to go public, operates four Hyatt Ziva properties and three Hyatt Zilara resorts in Mexico and Jamaica. David Tarr, Hyatt's senior vice president of real estate and development, said at the Americas Lodging Investment Summit (ALIS) last month that the company was pursuing further opportunities for the two brands in the Caribbean and expects to announce plans within the next three to six months.

Like Hilton and Paris-based AccorHotels, Hyatt is among a group of companies looking to at least hold their own against the growing influence of Marriott by continuing to expand its breadth of service, if not its footprint. As of Sept. 30, Hyatt had 679 hotels worldwide, while Marriott had 5,974 properties and Hilton had 4,820.

"One of the knocks on Hyatt for much of the 90s and into the 2000s," said Patrick Scholes, a hotel-industry analyst at SunTrust Robinson Humphrey and a former Hyatt employee, "is that it really didn't branch out from its core Hyatt brand, whereas if you were at Hilton or Marriott, you were growing by leaps and bounds. There's been pressure on [Hyatt executives] to increase their scale, and one of the reasons you do this is because the loyalty programs are very important."

Hilton is expanding largely via new brands; since January 2016, it has launched its Tru mid-scale badge and Tapestry soft brand, bringing its brand total to 14. Meanwhile, AccorHotels continues to acquire companies such as luxury hotel operator (and Fairmont parent) FRHI and higher-end, peer-to-peer accommodations service OneFineStay.

Hyatt, for its part, appears to be focusing on newer or less established full-service brands.

Part of the reason could be the sheer level of competition in the select-service sector, as the Hyatt Place and Hyatt House brands are substantially outnumbered by Marriott's Courtyard by Marriott and Fairfield Inn brands as well as by InterContinental Hotels Group's (IHG) Holiday Inn Express.

"We frankly have much less of a presence in North America than much of our peer set," Tarr said at ALIS.

With that in mind, Hyatt is focusing largely on wellness as a way to garner higher-spending leisure and business guests.

"Wellness is a key area of focus for high-end travelers," said Hyatt CEO Mark Hoplamazian last month. "The whole idea of wellness requires an approach that's different than how hotel companies have looked at it."

That logic predicts that the Miraval acquisition can boost Hyatt's revenue by both adding properties under the Miraval brand and adding Miraval-developed wellness products and services at existing Hyatt properties.

"We expect a lot of cross-pollination between [the] Life and Balance Spa [brand] and destinations," said Miraval Group CEO Steve Rudnitsky, who joined Hyatt with his management team to run the newly-acquired division.

How much the Miraval and Ziva division will add to Hyatt's annual growth remains a question, as neither Hoplamazian nor Tarr projected any particular goals in terms of how many Miraval and Ziva/Zila properties the company expected to add in the next few years.

And while Hyatt boosted its hotel count by 8.3% for the fiscal year ended Sept. 30, its total of 52 new hotels pales in comparison to the 295 hotels Hilton added in the same time period and the 1,300 hotels Marriott added when it acquired Starwood Hotels & Resorts in September.

"They're well regarded as business hotels in major cities, and their guest rewards system is quite popular," Scholes said of Hyatt. "It doesn't sound like [the Miraval acquisition] is going to immediately move the needle, but wellness has been a hot area during the last couple of years."

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