Hyatt shrugs off pandemic losses with European expansion plans
US hotel operator to swell portfolio by a third in the region as it targets leisure travel
Hyatt, the US hotel group, is pressing ahead with its most rapid expansion in Europe to date, with plans to extend its portfolio there by at least a third over the next three years despite suffering record losses due to the pandemic.
The company will add more than 20 hotels to its 63-site European estate targeting mostly leisure travel, as the industry expects a long-term drop in business trips with more executives using video conferencing.
The average development cost of each hotel will be about €900m, Hyatt estimated, with property owners shouldering the majority of the expense.
“We believe there is a pent-up demand to travel. Once we get the therapeutics, we get the vaccines and so forth there will be growth,” Peter Fulton, Hyatt’s European group president, told the Financial Times.
That demand would initially come from “in-country” leisure travel “before people start jumping on planes and travelling all over the world”, he added.
Hyatt, which opened its first European hotel in 1974, this month opened its first site in Stockholm, which Mr Fulton said had been a target for 16 years.
But its European push comes as the industry has endured steep pandemic-induced losses due to restrictions to international travel and government lockdowns that have forced vast numbers of hotels to close.
Hyatt, which runs more than 950 hotels worldwide, has been hit harder than some of its rivals thanks to its skew towards city destinations.
It reported a net loss of $161m in the three months to the end of September, compared with a net profit of $296m for the same period last year and in contrast to a smaller loss of $81m at Hilton Worldwide and a net profit of $100m at Marriott International.
The company has cut roughly 1,300 corporate roles but expects the new developments to create more than 2,000 jobs.
“Because we are more urban focused, we have seen the pandemic hit us a little bit harder as a result, but we also think we will bounce back a little bit better,” Mr Fulton said.
Kevin Kopelman, an analyst at Cowen investment bank, said that news of a coronavirus vaccine being approved had increased confidence in the hotel sector’s recovery “as pent-up demand more than offsets lagging business travel”.
Hyatt said that the UK remained a “priority market” for the group despite fears that Brexit could diminish London’s status as an international hub.
Peter Norman, senior vice-president of acquisitions and development at Hyatt, said: “The dynamic is one of the UK being a place to visit and a springboard to the rest of Europe. It’s still a good starting point especially if your main language is English.”
The planned expansion will see Hyatt double its UK footprint with hotels opening at the Battersea Power Station development and as part of a £1.3bn regeneration scheme at London’s Olympia exhibition hall.
It will also open hotels in nine countries it has not previously had sites in including Finland, Cyprus and Malta.