Hyatt Hotels Corporation

Company Profile
Publication Date: 9 Apr 2010

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Hyatt Hotels Corporation

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Hyatt Hotels Corporation

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Hyatt Hotels Corporation

COMPANY OVERVIEW
Hyatt Hotels Corporation (Hyatt), formerly Global Hyatt, is a global hospitality company. Hyatt manages, franchises, owns and develops Hyatt-branded hotels, resorts and residential and vacation ownership properties around the world. The company is headquartered in Chicago, Illinois and employs 45,000 people. The company recorded revenues of $3,332 million during the financial year (FY) ended December 2009, a decrease of 13.2% over 2008. The net loss was $46 million in FY2009, as against a net profit of $170 million in 2008.

KEY FACTS
Head Office Hyatt Hotels Corporation 71 South Wacker Drive 12th Floor Chicago Illinois 60606 USA 1 312 750 1234

Phone Fax Web Address

http://www.hyatt.com

Revenue / turnover 3,332.0 (USD Mn) Employees 45,000

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Hyatt Hotels Corporation

SWOT ANALYSIS
Hyatt Hotels Corporation (Hyatt), formerly Global Hyatt, is a global hospitality company. Hyatts brand recognition and strength is key to its ability to drive preference for its brands among its associates, guests and owners. However, the recent terrorist attacks at Marriot and Taj Hotel has impacted consumer confidence, leading to reduced domestic and international customer traffic at premium hotels. Against this backdrop, Hyatts business may suffer. Strengths Brand recognition and strength drive preference among customers Strategically located hotels support revenue growth Environment sustainability and community service initiatives create goodwill for the company Opportunities Strengthened China portfolio with three new hotels Focus on improvement of guest services will create value in the long term Improving hotel occupancy rate, ADR and REVPAR in the US may boost Hyatt's business Weaknesses Downgraded debt ratings review by Moodys

Threats Terrorist attacks on top hotels impacts consumer confidence Intense competition may affect the companys market share Increased minimum wages in the US

Strengths

Brand recognition and strength drive preference among customers Hyatts widely recognized industry leading brands provide the company with a competitive advantage in attracting customers. The company has consistently received top rankings, awards and accolades for its service and guest experience from independent publications and surveys, including Conde Nast Traveler, Travel and Leisure, Mobil and AAA. As an example, 59 properties across its brands, Park Hyatt, Grand Hyatt, Hyatt Regency, and Hyatt Vacation Ownership received the AAA four diamond lodging award in 2009. The companys brand recognition and strength is key to its ability to drive preference for its brands among its associates, guests and owners. Strategically located hotels support revenue growth

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Hyatt Hotels Corporation

Hyatt has a presence in key markets around the world. The company operates in 21 of the 25 most populous urban centers (based on demographic research) around the globe. Hyatt hotels are located primarily in major business centers and leisure destinations such as Chicago, London, New York, Paris, San Francisco, Seoul and Zurich. Moreover, Hyatt hotels are strategically located near business hubs, airports or tourist attractions to generate maximum revenues. The company has a history of expanding its brands in high growth potential markets such as India, China, Russia, the Middle East and Brazil. For example, Hyatts hospitality ventures currently include 50% ownership interests in properties in Mumbai and Sao Paulo. The strategic location of hotels in urban centers and expanding presence in emerging markets provides a strong opportunity for revenue growth. Environment sustainability and community service initiatives create goodwill for the company Hyatt is committed to invest in environment sustainability efforts. The company takes initiatives to preserving the environment through Hyatt Earth. Under the Hyatt Earth program, the company integrates environmentally friendly products and services in its North American operations, for example, amenity bottles are made from 100% recycled plastic; key cards are made from 50% recycled plastic; and biodegradable valet bags were introduced. Hyatt was also recognized for its waste reduction efforts by The California Integrated Waste Management Board. Hyatt also awards grants to nonprofit groups that support youth development and education as well as organizations that improve the environment in the local communities. The companys associates also offer volunteer services through Hyatt's Family of Responsible and Caring Employees (F.O.R.C.E.). These initiatives are in line with the demand on businesses and corporate entities to take sustainability initiatives (initiatives to co-exist with the environment) and create goodwill for the company.

Weaknesses

Downgraded debt ratings review by Moodys Hyatts debt ratings were recently downgraded by Moodys. In March 2010, Moody's lowered Hyatts senior unsecured debt ratings to Baa2. The downgrade reflects a significant decline in the companys EBITDA margins and interest coverage metrics. Hyatt's EBITDA margins declined to approximately 19% in 2009 from nearly 30% in 2007 while EBITDA/interest dropped to about fives times in 2009 from 10.3 times in 2008. Moodys ratings also reflect the view that the company's profitability will decline again in 2010 although hotel occupancy is going up. Recent ratings by Moodys may increase Hyatts cost of borrowing funds.

Opportunities

Strengthened China portfolio with three new hotels

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Hyatt Hotels Corporation

Hyatt strengthens its presence in China through new management and franchising agreements. In January 2010, Hyatt entered into an agreement with Suning Real Estate Development to provide management services to three hotels in the busy hubs of China's Jiangsu province. Grand Hyatt Nanjing is currently slated to open in 2013 and the remaining two hotels, Hyatt Regency Wuxi and Hyatt Regency Xuzhou, are expected to open in 2012. The future openings in three of China's most dynamic growth centers will further strengthen the Hyatt-branded portfolio in the country. Focus on improvement of guest services will create value in the long term Using innovative ways to offer better services has been characteristic of Hyatt since its founding. More than forty years ago, the company opened the Hyatt Regency Atlanta, a large-scale atrium lobby hotel. Hyatt Regency Atlanta hotel was both an architectural icon as well as a functional hotel property. Since then, Hyatt has introduced new service models to the industry.The company launched its Hyatt Place brand in 2006 and Andaz brand in 2007, each of which features an internally developed service model that eliminates a number of de-personalized aspects of the hotel experience. In May 2009, the company launched Hyatt Concierge, making it one of the first hospitality companies in the world to deploy a designed concierge site on Twitter, thereby enhancing the quality of hotel guest services. Hyatts focus on improving guest services has laid a strong foundation for value-creation in the long term. Improving hotel occupancy rate, ADR and REVPAR in the US may boost Hyatt's business The US hotel industry reported slightly positive results in the key performance measurements during the week of 7-13 March 2010, according to data from Smith Travel Research. In year-over-year measurements, the industry's occupancy ended the week with a 4.6% increase to 57.7%. Although average daily rate (ADR) dropped 1.9%, revenue per available room (REVPAR) for the week was up 2.6% to $56.44. Improving performance in these metrics may have a positive impact on Hyatts business in the medium term.

Threats

Terrorist attacks on top hotels impacts consumer confidence The tourism industry is affected by threats from terrorist attacks. For example, in September 2008, Marriott, Pakistan was attacked when a massive bomb blast hit the hotel, killing at least 40 people. This was followed by terrorist attacks in Taj Hotel and Oberoi Hotel in Mumbai, India in November 2008. These incidents are indicative of the visibility of top hotel brands and the vulnerability of the hospitality industry to acts of terrorism.The aftermath of these terrorist attacks has impacted consumer confidence and filled certain international customer pockets with doubt and fear. Terrorist attacks have affected business and leisure travel leading to reduced domestic and international customer traffic at premium hotels. Against this backdrop, Hyatts business may suffer. Intense competition may affect the companys market share

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Hyatt Hotels Corporation

The hospitality industry is characterized by a large number of players, with many of them having a worldwide presence similar to Hyatt. Many large hotel chains such as Accor, Hilton Group, Marriott International and Host Hotels and Resorts, are also expanding in potential growth regions such as Asia. Furthermore, a large number of independent hotels provide acquisition opportunities to large chains. Consolidation in the industry would intensify competition and result in a loss of revenues. Intense competition threatens to erode the company's market share and reduce its profitability. Increased minimum wages in the US In recent times, tight labor markets, increased overtime, government-mandated increases in minimum wages and a higher proportion of full-time employees have resulted in an increase in labor costs, which could materially impact the company's operating margins. As per the US Department of Labor, the federal minimum wage rate in the US rose for the third year in a row to reach $7.25 an hour in July 2009 from an earlier wage rate of $6.55 per hour in July 2008 and $5.85 in July 2007. An increase in wage rates and related costs will adversely affect the companys profitability.

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