Why Hyatt Covets Luxury and Lifestyle Hotels: "A Network Effect"

21.07.2024 - 13:05 / skift.com / Mark Hoplamazian / Sean Oneill / Hyatt Hotels

Hyatt is reportedly near to closing a transaction with Standard International, owner of the luxury lifestyle brand The Standard and other brands.

What’s behind the potential deal? The Standard is part of a category of hotels that Hyatt and all major hotel groups increasingly covet. While a typical hotel is just a place to sleep, “luxury lifestyle” hotels are boutique-like places where the lobby looks like a modern art gallery and the rooftop bar serves drinks with names you can’t pronounce.

Hyatt CEO Mark Hoplamazian has previously told investors that adding luxury and lifestyle brands can create a “network effect,” driving loyalty program growth and engagement.

This network effect works out roughly this way: The more fancy hotels an operator has, the more well-to-do people want to stay there and book directly.

Over the past six years, Hyatt has doubled the company’s number of luxury hotels and quintupled the number of high-end lifestyle resorts.

Hyatt said a year ago that roughly 45% of its portfolio was “luxury, lifestyle or resort.”

Hoplamazian believes Hyatt’s strength in luxury and lifestyle helps it stand apart from competitors and attract developers and owners. It hopes this will build a self-sustaining momentum in deal flow, adding luxury and lifestyle properties at an increasing pace and stealing deals for independent hotel conversions away from rivals.

The CEO has noted in talks with investors that Hyatt’s growth in revenue per available room, a key industry metric, has been driven by its higher-end customer base. These travelers haven’t been impacted by inflation or higher interest rates, broadly speaking, thanks to a broader “wealth gap” appearing in U.S. travel.

So luxury and lifestyle properties typically generate higher fees per room for Hyatt.

Another side benefit: People who like luxury lifestyle properties will tend to sign up for Hyatt’s loyalty program. Members of loyalty programs disproportionately book directly, which means more money for Hyatt than travelers booking through online travel agencies.

Hoplamazian has said his team is looking for acquisitions and related opportunities that either grow their existing high-end customer base or expand to similar demographic profiles.

A case in point: Hyatt closed its acquisition of the lifestyle brand Dream Hotels last year for $125 million in cash. The goal was to target Dream’s customer base — typically 20 years younger but financially similar to Hyatt’s existing base. The deal added about 1,700 rooms to Hyatt’s lifestyle portfolio.

Last year, Hyatt bought the boutique hotel booking site Mr and Mrs Smith for £58 million in cash (about $72 million at the time). In April 2024, it began letting members of its loyalty program book at