What's Hyatt's grand strategy?

Vinay Kamath | Updated on March 23, 2011

Mr Peter Fulton, Managing Director, South West Asia, Hyatt International   -  THE HINDU

Upcoming Hyatt property on Anna Salai. Photo : Bijoy Ghosh   -  Business Line

As the hotel chain begins to expand at a rapid clip in India, Peter Fulton, Managing Director, Hyatt International, South-West Asia, speaks on the game plan for India and the prospects it offers.

The view of Dubai is spectacular from the small conference room of the Hyatt Regency right on the seafront of the Arabian Gulf – flat as far as the eye can see, cluttered with buildings and a view of the port and the Dubai creek in the distance. Peter Fulton, Managing Director, Hyatt International, South-West Asia, gesticulates to the shoreline, to a large chunk of reclaimed land just off the coast. Yet another Palms was to come up there but got grounded with Dubai's recession.

But, the market has been resilient in this free port, says Fulton, with business travel picking up, hotel occupancies buoyant again. With a 327-room Hyatt Regency in Chennai to open shortly, Fulton, along with Sunjae Sharma, GM of the Chennai hotel, spoke to a clutch of mediapersons from Chennai on the Indian market, on Hyatt's expansion plans and its brand segmentation of the market. Excerpts from an interaction, which was followed by lunch at Dubai's only revolving restaurant, the Al Dawaar, on the 25th floor of the hotel:

As you expand the Hyatt chain in India, what will be its differentiator?

One of the key differentiators that we are trying to do with our brands is not only bring an international flavour but a touch of wherever we are as well … a local touch. It's not really about the bricks and mortar, but the brand is all about the people we hire and all that they do within it. Our track record over the years in India and elsewhere is of taking young people and developing them into hoteliers of the future; and we will continue to develop those resources in India.

It has nothing to do with the bricks and mortar but it is the personality or the soul of the property that makes the difference. As hotels proliferate around the world, it will get really difficult to differentiate with technology as it changes all the time; what you will find is a lot of reviews — people will find a 65-inch TV or a new Blu-ray DVD in their rooms … So, we will differentiate ourselves through people.

How will people differentiate your properties?

We would like to hire for attitude and personality rather than skills. Skills can be taught. Attitude and personality is something you are born with and that's the focus of who we are going to hire. Obviously we don't get it right all the time but the emphasis is on that. Those people are going to be the masters of the stage.

What potential does the Indian market hold for top-end hotels?

India has fewer five-star hotels than Manhattan! If you look at where the five-star deluxe hotels are currently located, there is tremendous scope for growth in India. Look at the secondary destinations, they are also showing a tremendous amount of growth.

What are the key driving factors for this growth?

Traditionally, if you look at where we have operated, the driving force has been business-related. We at Hyatt have not really had the distribution to get ourselves a very strong foot in the door in the supposed leisure market. At this moment in time, business travel drives growth. I will say there is opportunity for growth in leisure because India has a tremendous amount to offer. We need to keep developing that offering.

How do your revenues stack up between business and leisure?

We would probably be 70 per cent business and the rest would be leisure, for the next three to five years.

Some of your competitor brands such as Taj and Starwood have been segmenting their brands for the upper end and the mid-market. That's a huge market. What would Hyatt have for that segment of the market?

Interesting question! We entered the Indian market 30 years ago with the Hyatt Regency in Delhi. The second one which came along was the Grand in Delhi, then we got the Regency in Kolkata, Grand and Regency in Mumbai. We were stagnant for a while after that till we got the Regency up in Kathmandu.

At that time in our life we essentially had these brands internationally, the Regency and the Grand Hyatt. Recently, we started the Hyatt Place and Summerfield Suites. Hyatt Place is, we think, well positioned to be in that market. We should open our first one in the next 18 months in India.

Summerfield Suites is also coming along, we are working on a couple of opportunities. That's how we are diversifying. The experience is obviously not going to be the same as staying at the Grand or Regency. We see that as being a growth driver for India.

Will this distinguish itself in terms of tariffs and the service offering?

Yes, this is a much more affordable product. It has only one restaurant. A very functional room and only select services. It's not that we build a five-star product and then put a three-star pricing on it.

Would these brands be adequate to tap all the customer segments in the Indian market?

I don't think that will ever be ... I cannot comment if in five years there happens to be something that comes along. We really feel Hyatt Place is going to be a tremendous vehicle for growth in the sub-continent, especially when we get into the tier-two and three destinations. If you look at the distribution of the brands in a region like Delhi, there is opportunity for many Hyatt Places to come. It would be more affordable.

A guest comes to a Hyatt with a certain level of expectation of service. And Hyatt Place may not offer that, so do you really want to carry the Hyatt badge for a mid-market offering?

Yes! The person that we anticipate going there is not going to necessarily anticipate the full five-star deluxe services. We may not have 24-hour room service. There will be only one restaurant that offers all-day dining. We are not going to offer a variety of restaurants. So, it's a very specific offering. We don't want to be a five-star offering in a four-star market. It's a select service and we will specify the services that we offer.

Essentially, you will target a younger audience?

Yes, it will target those people who are coming through the mill. It may not be the MD, although, I would say, I have heard of people who are extremely well-to-do, travel frequently and are comfortable in a Hyatt Place, essentially because they can do what they want. The level of service is unobtrusive so they can get on with their business.

Is that a big segment in India?

Not yet, but there is an opportunity.

So, now that you are close to opening in Chennai, what's the big bang launch you are planning? There is high anticipation ...

( Laughs) Everybody's waiting! There is a level of anticipation because of what this hotel is and its location in the city, it's been around for over a decade. (The building where Hyatt has come up is over 12 years old; it was owned by the Balaji group and an Oberoi hotel was to come up but the project was stalled because of various issues the group faced.) It's going to be an interesting product.

It will be a fresh approach to hospitality in Chennai and the whole package with the mall also completed will add tremendously to what's on offer in that location, smack in the middle of the city. We have been discussing numerous opportunities to open with a bang. Essentially, we will be getting into the community. We like our hotels to be in with the community they are in and we need them to come in and see.

How do you view the Chennai market, now that you're close to opening a property there and one more is in the offing? There's a lot more room stock coming into the city, so what will be the impact?

We are going to be opening three, eventually. Obviously, with the exponential growth coming out of Chennai, everybody's going to suffer a little bit. But, once the concrete gets into the ground it's going to be there for 30-40 years. In the long term, everybody is going to do extremely well. It has traditionally been an under-served market; there hasn't been a tremendous amount of stock there. In Chennai, if you note, over the years, once there is an upswing in supply, it takes a little while for demand to catch up. However, there is good demand, there is a lot of movement into Chennai. Maybe Chennai is a little behind the development curve compared to the other metros in India and that's now coming into the forefront. I think within five years, the supply will be absorbed quite well and everybody will do okay. Obviously, if you introduce 600-700 rooms into any market anywhere in the world in a short span of time, there will be a softening in (room rates).

You said Chennai has traditionally been an under-served market – what did you mean by that? In terms of rooms?

Yes, in rooms, Chennai never seemed to be, I use the word, discovered, the same way as Bangalore or Hyderabad – that's my personal opinion, not backed by fact. But, now I think it's beginning to – it's a very vibrant city and a lot of industrial hubs are coming up around it and it's proving to be quite beneficial while its proximity to Sri Lanka and other hubs in Asia would be beneficial as well.

Have you tied up with real estate groups for your various projects?

Yes, we have tied up and the process has been going on. We have a development team based in Delhi and that team solely looks at developing opportunities for various brands in the sub-continent. The team has been quite active over the last few years in identifying opportunities and developing it.

The hotel industry and the government talk about a doubling of room capacity in India in the next few years - what kind of an impact will that have?

That's difficult to say. But there would be a significant increase in the number of rooms in India. I am not sure about doubling of numbers. Look at the growth in the past – from 2001 to where we are now. Brands such as Red Fox and Lemon Tree didn't exist then. All these have gained traction in India and these new brands are working well now.

I think there are going to be a lot of changes in the face of the Indian hospitality industry in the next 5-10 years. There is going to be tremendous growth. As the infrastructure development continues to grow, the demand for hotels and rooms will also increase significantly.

With the proposed addition of so many rooms, will be there any pressure on room rates and margins?

It depends on the location. There hasn't been a big impact on room rates except some blips due to some unfortunate events in 2008. When the demand softens obviously the rate reduces. For example, in Mumbai during the Nasscom events, the rates were in the region of Rs 15,000 to Rs 22,000 for upper five-star categories of rooms.

The room rates are competitive and it will remain competitive. The supply-demand equation is to actually drive whatever the price will be in the upper five-star segment. We are going to see more hotels coming online in the country and the air travel to and from the country is going to increase. The demand is going to grow with it.

How important is India as a destination for Hyatt Group?

We think in the long term India is an extremely important destination. It is very important too for us in relation to growth. If we look at the Indian market, it's not only Indian travellers to India, and our distribution through India will also help our hotels in West Asia, Europe and the US. As the Indian market matures and people travel, with better representation there are better chances to attract customers to the rest of Hyatt worldwide.

We have tremendous growth potential in India. Look at the developments that are occurring, a lot of them are primarily in primary destinations and a lot of secondary and tertiary destinations are to come along.

How does India compare with China and your experience there?

China is the number one area of growth and India is the number two worldwide. We have got 12-15 projects in operation there and there is tremendous potential for more.

Why have you not used the Hyatt badge with Andaz? What is the logic?

There was lot of research done. Hyatt is always the strongest brand name and there was a feeling that we may need to diversify a little bit as we try to separate our branding in big markets worldwide. Andaz is a very clear differentiator in the upper five-star segment between Grand and Regency. The demographic studies we did showed us there is a niche in the 5-star deluxe brands – more specific types of services, not as traditional but more relaxed, yet offering luxury comforts. That's how Andaz came up and the catchword for Andaz is personal style. For example, in the Andaz brand, there won't be a front desk.

While some traditional customers may find it a little uncomfortable, younger, upwardly mobile customers would find it more refreshing. I don't see any reason why the concept will not be embraced in India where an increasing number of travellers want to experience something different. (The Hyatt has an Andaz hotel coming up in Delhi).

Published on March 23, 2011

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