Hyatt's Travelin' Man
Mark Hoplamazian helped the Pritzker family assemble the Hyatt Hotels business, and then found himself running it. So far, he's doing great. Build global, think local.
July 14, 2012
A decade ago, Hyatt was a sturdy and storied global hotel brand, sought out by the fractional-jet-share set for luxurious urban accommodations and business road warriors for clean sheets. But it wasn't a company, yet.
Hyatt's several hundred properties were owned through a web of private holdings controlled by three generations of Chicago's Pritzker family, whose leader, Jay Pritzker, had purchased Hyatt von Dehn's share of a travelers' rest stop at the Los Angeles International Airport in 1957. By the early 2000s, the Pritzker heirs had grown past the point of shared financial priorities, and were looking for ways to allow some family members to cash out.
To help disentangle these holdings, the family called on Mark Hoplamazian, a Pritzker executive and honorary family member, whose Armenian surname literally translates as "one who doesn't jump or dance," but figuratively means a serious sort. And that, he was. Navigating the family's fractious politics, Hoplamazian worked to weave together the multiple strands of the hospitality business now known as Hyatt Hotels (ticker: H). As CEO since 2006, he also shepherded the company through its late-2009 initial public offering, and has overseen its subsequent growth into a multibrand lodging concern with $4 billion of annual revenue and a $6 billion stock-market capitalization.
HOPLAMAZIAN HAD LITTLE TRAINING in lodging, but plenty in numbers. He earned an undergraduate degree in economics at Harvard in 1985 and worked as an analyst, banker, and consultant on Wall Street before attending business school at the University of Chicago. Jay Pritzker hired him straight out of there in 1989, and put him to work in the Pritzker Organization, which controlled both a large real-estate portfolio and a huge industrial conglomerate. Most of the latter subsequently was sold, as Marmon Group, to Warren Buffett's Berkshire Hathaway (BRKA).
Hoplamazian never intended to become Hyatt's boss, and says he was shocked when Tom Pritzker, Jay's son and chairman of the Pritzker Organization, offered him the job. As interim CEO, "I was very focused on making sure the CEO search got done and I could move on and move up," he said recently at Hyatt's headquarters tower near the Chicago Loop. "Within a few months, I came to the conclusion that there was something amazingly special about this opportunity, because you had this amazing brand that had been around for 50 years, and you had an amazing culture and great people around the world."
Pressed on what made Hyatt's culture so special, he concedes that many companies claim that their employees are a corporate family. But "it's very pronounced here," he says. When visiting Hyatt outposts, he claims to have been reminded of the story of the janitor at NASA in the space program's early days, who, when asked what he was doing, replied, "I'm helping to put a man on the moon."
Helping to give Hyatt guests a first-rate experience was something Hoplamazian learned on the job. "Not growing up in the business was a huge advantage," he observes. "I was ignorant. I got to go around and ask ostensibly stupid questions, and did that for the better part of nine months before making any decisions."
Hoplamazian focused first on evaluating and motivating Hyatt employees in ways related to measures of guest satisfaction. As a result, individual hotel managers and staff have been given substantial latitude in tailoring services to their customer base and region. The new boss learned, through both conversations and analytics, that regular guests appreciate differentiated service and personal recognition much more than loyalty-point awards that can be used to buy other things. Hyatt's guest-loyalty program was reoriented toward promoting longer stays among regular customers, rather than encouraging more guests to book at a Hyatt hotel.
SAYS MACKEY MCDONALD, A HYATT board member, retired CEO of VF Corp. and a director of Kraft Foods: "Mark is a remarkable individual. He's one of the smartest financial people I've ever been around, but he also has a good understanding of the overall business."
McDonald credits Hoplamazian with quickly committing resources toward producing better consumer analytics, an area that was "not well-developed" when Hoplamazian arrived. The creation of laboratory hotels, says McDonald, is a manifestation of his systematic approach to testing what resonates with guests about the Hyatt experience across the company's various brands.
There are 488 Hyatt hotels worldwide, operating under seven brand names, which range from the ultra-luxury Park Hyatt and upscale Grand Hyatt and Hyatt Regency to the lower-frills Hyatt Place and Hyatt House. Yet, despite its brand awareness, Hyatt is thinner on the ground than competitors such as Hilton, with 3,800 properties, Marriott International (MAR), with 3,700 and Starwood Properties (HOT), which operates 652 hotels under the Sheraton, W and Westin flags.
Hyatt's smaller footprint was an asset after the financial crisis, which left most chains with too much capacity. Today, Hyatt has more room to grow, and the financial might to do so, given its nearly debt-free balance sheet. The company has contracts to add an additional 170 hotels, or more than a third of its current portfolio. Twenty properties are slated to open this year, including the Grand Hyatt Kuala Lumpur and the Hyatt Union Square in New York. Some 70% of locations in the pipeline will be outside North America, and half are in China and India.
Last year, Hyatt acquired LodgeWorks, a chain of 24 North American hotels in "important cities from a travel perspective," Hoplamazian says. One is near Microsoft's Redmond, Wash., headquarters. Some have been recast as Hyatt House corporate-style extended-stay facilities, and others have been rebranded under Hyatt's hip, work-to-leisure Andaz brand. The newest Andaz hotel opened last year in Shanghai.
Hyatt also stands out from competitors in owning and managing a higher percentage of its branded properties. This has helped engender confidence among developers seeking to build and own new Hyatts. About 80% of locations in development will be owned by third parties, but Hyatt's real-estate expertise and financial resources will remain advantages, especially as the company explores joint ventures with developers who otherwise wouldn't have ready capital to build from scratch. "The availability of construction financing for hotels is very, very low, and not getting better," Hoplamazian says.
FOR A MAN WHOSE BUSINESS IS global travel, and who spends an average of one week a month on the road, Hoplamazian, a native of the Philadelphia area, is firmly rooted in his adopted hometown. He has served on the boards of Chicago's Latin School and the Booth School of Business at the University of Chicago, and on the executive committee of the board of World Business Chicago, which works with Mayor Rahm Emmanuel to push for economic development and business investment.
Hoplamazian, who lives in Chicago's Lincoln Park neighborhood, says he tries to spend as much spare time as possible with his family, including three children ages seven through 15. His own father, who owned a landscaping business, died when he was 12. Hoplamazian's personal interests range from wine to Japanese decorative textiles, and his trim frame and digital jogger's watch both indicate a commitment to running most mornings, before getting the kids off to school.
Hoplamazian has been married since 1991 to Rachel Kohler, who heads the interiors group for the Kohler fixtures and furnishings business founded in Wisconsin by her great-great grandfather. Hyatt's CEO, then, has managed the rare trick of forging close associations with two of the most venerable, privately owned family enterprises in the Upper Midwest.
With Goldman Sachs on board as an investor, Hyatt came public in November 2009 at $25 a share, in one of the larger deals to capitalize on the post-crisis market thaw. The stock rallied to the mid-$40s before retreating to a recent $34, and is up 36% since its IPO, 10 percentage points better than the Standard & Poor's 500 in the same span. The Pritzker family holds just under 60% of Hyatt's equity, and controls more than 75% of the voting power via a super-voting class of shares.
UNLIKE MOST PUBLIC companies, Hyatt won't give guidance on quarterly results. Hoplamazian defends the stance by noting that "we're not running the company on a quarter-to-quarter basis." But he doesn't ignore shorter-term trends. In Hyatt's first quarter, he says, so-called transient revenue from individual travelers was up 9% from the year,-earlier level, with the increase split between more nights and higher rates. That's a healthy sign, indicating that higher-end business travelers are hitting the road more.
Hyatt's board is thick with private-equity executives and financial types, including a Goldman Sachs representative. Tom Pritzker is executive chairman and his cousin Penny Pritzker is a director. The two most recent additions, McDonald and Susan Kronick, who ran Macy's regional department stores, were sought out for their experience in branding and customer service.
With 90,000 employees serving customers in 134,000 rooms in 45 countries, Hyatt needs to convey a consistent message of superior service and comfort, and with a local flair. That shouldn't be hard for a company that made its mark with innovative design. Hyatt introduced the first central-atrium conference hotel, the Hyatt Regency Atlanta, in 1967. The setup redefined group business travel and added a modern, convivial element to the hotel experience.
YET HERE'S HOPLAMAZIAN discussing the connotations of the Hyatt brand today: "I've said for a long time that a great [physical] product is a necessary but insufficient condition for success. Ultimately in our business, to have a durable competitive advantage, it needs to come through service and how we differentiate ourselves."
Last year, Hoplamazian hired Hyatt's first chief innovation officer to address both issues, and laboratory hotels were one result. By interviewing guests at one in Santa Clara, Calif., frequented by the Chinese employees of a nearby U.S. technology company, Hyatt got a fix on many of their preferences, from room-service garnishments to complimentary slippers.
The company also prides itself on its reputation in local markets. For much of the past 30 years, Hoplamazian says, the Hyatt Regency Delhi in India has been "the place to go for a special meal, for a celebration, for a wedding." Similarly, the Made in China restaurant at the Grand Hyatt in Beijing repeatedly has been cited for turning out the best Peking duck in the city. This merely furthers the company's goal of trying to become the preferred brand for the hundreds of millions of Chinese who travel within their country, or the tens of millions who venture to Hong Kong and Macau.
The world is smaller than ever today, but no less diverse. The CEO of a company that serves the global mobile class needs to sweat the small stuff, but with systematic rigor. It sounds like the perfect assignment for a serious sort, and Hoplamazian is handling it beautifully.