Arnie Weissmann
I've been interested in meeting Tom Pritzker for many years. In addition to being executive chairman of Hyatt Hotels, he also owns a considerable minority stake in Royal Caribbean Cruises Ltd., and so has a unique perspective on two of the most important segments of leisure travel.
I finally got a chance to sit down with him last week when the Americas Lodging Investment Summit, run by sister company Burba Hotel Network, presented him with a lifetime achievement award in Los Angeles.
I found Pritzker to be approachable, candid and thoughtful on a wide range of topics. The interview has been edited for space, but here are Pritzker's thoughts on Hyatt's entry into the all-inclusive business, what hotels can learn from cruise lines, how the company makes branding decisions and the economic outlook for investing in hotels.
Arnie Weissmann: Hyatt was the first major hospitality company to get into all-inclusives through a partnership with Playa and the Zilara and Ziva brands. You've been in it for a few years now. How is it working out?
Tom Pritzker: We don't yet know its complete potential, whether it'll be huge or less than huge, but we want to be there. I stayed in one, and I think it's a better guest experience when you take money off the table. When you're interacting with the waiter or waitress, you don't have to think about how much you're going to tip them. It's friendlier, it changes the nature of the relationship.
I came back and asked the team if my impressions were accurate. Was that just my experience, or is it generally true that taking money off the table creates a closer bond between the employees and guests? Where could we go with that? What might we be able to import into full-service or select-service brands?
AW: You have an investment in Royal Caribbean Cruises Ltd. and are on its board. For the most part, it seems as if cruise ships have learned from hotels, but does that flip the other way? What can hotels learn from the cruise industry?
TP: Efficiency. On our largest ships, you've got to provision for a week during which you serve 25,000 meals a day, and you can't throw out any garbage. It's superefficient. The logistics are awesome.
And cruise ships are, basically, all-inclusive, right? You see that same phenomenon I just talked about, where employees who are serving becoming friends. There's a much easier flow.
Hotels have been around a lot longer than the cruise business, and there are still areas where [cruise lines] can learn. For instance, Royal Caribbean's mattresses were not up to what we were providing in Hyatt, and we literally 're-mattressed' the entire fleet. That's a huge thing, but if you're sleeping on a really miserable bed, you're going to wake up cranky, and then you're going to be bitchy at our people. We don't want that.
Our Hyatt senior team knows Royal Caribbean's senior team, and we regularly pick up the phone and say "Do you have this problem? How are you handling it?" There's a very healthy cross-fertilization between the two. Best practices, but in first-cousin industries, not the same industry.
AW: Architecture has played a large role in the development of Hyatt. Is it as important these days to your branding?
TP: It was profoundly important. The [atrium design of the] Hyatt Regency Atlanta changed what Hyatt was. It put us on the map. [Architect] John Portman was brilliant. It created a great experience not only for guests, but for employees. I think those two are highly correlated. In the hospitality industry, I don't think we can have miserable employees and satisfied guests.
If you could create architecture that contributes materially to the experience, as it did at the Hyatt Regency Atlanta, then yes, sign me up. But I don't think architecture is as important now. I think the experience is more important than the physical. That's not to say it's unimportant; you obviously have to hit a threshold, below which it's not fair to the guests. The expectation is created by the brand, and you need to meet that.
AW: From the outside, it appears that the proliferation of lifestyle brands is still the trend that has the most momentum within large hospitality companies. Is that what Hyatt is still most focused on?
TP: What the trend toward lifestyle hotels is trying to capture is the human element of what we do. "Lifestyle" really means "experience." I think the big challenge is, can we harness the value of technology but not lose the human element? We're doing a lot of work in the area of data analytics, and we've got a lot of information on our guests. But what do we do with our customer insights? It's interesting to think about, because if we do it right, we can almost be a refuge from what could be a very robotic, non-human-to-human world.
We think about, on one hand, what are you able to do without human intervention? Guests can order room service, and a robot will deliver it. That's coming very fast. But, inherently, the hospitality business is about people, and so how do we provide guests with an experience that's the experience they want? There may be some who want a purely digital experience and don't ever want to have someone talk to them, but I think we humans are hard-wired for human interaction. If lifestyle is just an articulation of experience, I don't think that should just be a digital experience. The challenge is to marry all this.
AW: There's a rise in the number of hotels labeled with consumer brands, like West Elm, Equinox, even Shinola. Does Hyatt have an interest in bringing an existing consumer brand into hospitality?
TP: We've looked. We've kicked the tires, and we've not pulled the trigger. I never want to say never, but frankly, the cost of associating with a lifestyle brand that is not hospitality is high, and so far, we haven't found the value proposition that we would need. And we may not be perfectly aligned [with the other brand]; their main business is this tangible product, and of course they want the freedom to move and reposition and think about market segments, and that may or may not fit what we're doing with that brand of hotel.
We considered this before we created Andaz, and the conclusion we came to is that we could do it ourselves. And that has been a very successful brand.
AW: Your larger competitors have launched lifestyle brands in areas you haven't. How does the decision to launch a new brand get made?
TP: The ability to attain critical mass is important. So, for instance, when we wanted to go into select service, we didn't say "Let's build ourselves a select service hotel, and then build another, then another." We bought AmeriSuites, and that came with 145 hotels. They were very homogeneous, so that meant we could do a single retrofit design and create Hyatt Place. We quickly had a brand that had enough critical mass that we could then go to potential owners and say we could serve their needs well.
We did the same with Hyatt House. We bought a company that had extended-stay hotels.
Centric and Andaz were white paper exercises. We created them, and then we began to proliferate them. Those are larger, more expensive hotels than the select service. That's worked, and we've got to continue to push that, because the more critical mass we have, the better off all the owners will be.
The bigger question is "Okay, can you compete with the huge guys?" There are, sort of, three groupings. One is the huge guys, Marriott, Hilton. Global and multi- multi-brand. Huge.
Next is global, multi-brand but not of that scale.
And next is mono-brand -- Four Seasons, Shangri-La, that sort of thing.
Scale is a legitimate strategy and it's helped a lot of companies win. But it's not the only strategy. We're kind of the only guy in the middle, and we think we can use that to our advantage. We have the disadvantage of not being able to throw a zillion dollars at every program that we can think of, but we have more agility. And we see the advantage anecdotally when we talk to owners, and they say "Look, your loyalty program is not as big as Marriott and Hilton's. But I want to do a hotel with you because I have someone to talk to who will listen."
And, we think we can more easily cater to guests and tailor guest experiences because we're going to give more authority to our guys in the field. There's a lot the general manager can do for you if we give him both the room to cater to your needs and the information to understand what your needs are.
We've designed tactics around caring, programs that are tied, mechanically, into how do we produce caring. It goes to people, training, systems. You're just seeing the beginning of it. If we get it right, we can not only be an exceptional global hospitality company, but a U.S. company that people in the widget business will say, "How can I pull ideas out of what they did?"
A lot of this goes to the issue of us as a public company. You've got to be careful not to just think about quarterly returns. We have the luxury of a concentration of ownership, which gives us the ability to think longer-term, and we exploit that advantage.
AW: Are there ways that you can use the travel agency community to make the experience better for your guests?
TP: In the cruise business, absolutely. It's a complicated experience, and travel agents can explain what guests can do on the ship, the way the ship looks and feels, that [clients] should sign up for the spa. There's a lot to talk about. And for a resort vacation, if they know their customer better than we do, they can add value to that experience.
For groups, association and business travel, no, I don't really see how they can add enough value to get embedded in the space.
AW: We're at an investment conference. Everyone's wondering how long growth will continue before the cycle ends.
TP: I know, I know. We're in extra innings. I don't know the answer. Demand is increasing, so supply is increasing. But I don't know how long the recovery will last. If I knew that, I wouldn't have to work so hard.
AW: Do you have enough supply in the areas where demand seems to be growing fastest -- Asia?
TP: We would like to be bigger in China. We're reasonably strong in China, but China's so huge that nobody is strong enough in China. It's like the United States in the '50s or maybe '60s. We're really strong throughout the rest of Asia. Outside the U.S., Asia is our homeport.
AW: Is there still enough money and interest among investors to maintain the level of growth you want?
TP: Yes. If they got math, they got money, right? Show 'em the math. There's plenty of money.