final corporate paper hyatt
TRANSCRIPT
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Hyatt Company Case
Our mission is to provide authentic hospitality by making a difference in the lives of the people we touch every day (HYATT, n.d.).
4/23/2014
Daniel Klein
Klein 1
Abstract
This report analyzes the Hyatt’s options on attracting more guests to its locations. The Hyatt is a
publicly traded company which focuses on making money from people staying in their rooms of
luxury. The purpose of this report is to analyze the Hyatt options in regards to helping this
corporation attract more guests to stay at their establishments. There are three possible solutions
for handling this serious issue for the Hyatt.
The three options that are being analyzed will help attract guests to their hotels. The first option
is making new forms or improving customer service at the Hyatt. The second option is putting
new or unique products in the rooms. The third option is to lower rates on the rooms to attract
guests in staying at these locations.
These options are evaluated by the terms of competitive advantage, ease of implementation,
profit, and cost. These options will be graded by these terms on the option matrix. Once the
grading is done, the best option will be chosen for Hyatt and its future. This option will benefit
the Hyatt the most in attracting guests into their establishments.
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Table of Contents
Abstract 1
Executive Summary 3
Hyatt History 5
Financials 7
SWOT Analysis 8
Critical Issue 9
Options Analysis 9
Possible Solutions 9
Evaluation Criteria 9
Option 1 10
Option 2 12
Option 3 14
Options Matrix 16
Recommendation 17
Conclusion 17
References 18
Klein 3
Executive Summary
The Hyatt is publicly traded corporation which strives “to bring the best hospitality to
individuals in hopes to making a difference” (HYATT, n.d.). The Hyatt faces many competitors in
the hospitality field; this area brings in fierce competition on attracting guests, this has led to a
problem on how the Hyatt will attract more guests to their hotels. The main point of this report
is to provide options where the Hyatt can utilize one of them in hopes to bring in guests to their
establishments. In this report, there are three options for attracting guests to their hotels.
The options are:
1. Better use of customer service.
2. Having new or unique products in the rooms.
3. Lower prices on rooms.
The criteria that will be grading these options are:
1. Profit
2. Cost
3. Competitive advantage
4. Ease of implementation
The first option is based on better use of customer service at the Hyatt. This option brings in
advantages in competitive advantage, ease of implementation, and profit. The disadvantage to
this solution is that cost will determine if it would be affective or not.
The second option is having new or unique products in the rooms. These products could be art
work, technology, or fabrics that are in the guest’s rooms. This option has advantages in
competitive advantage, and ease of implementation. The disadvantages are that it would bring
down profits and would cost the Hyatt money to start this solution.
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The third option is lowering prices on rooms. This option has advantages in competitive
advantage, ease of implementation, and cost. The disadvantage is that it would not bring in the
same amount or bring in fewer profits than what the original rates were.
The best option for the Hyatt in attracting guests for their establishments would be the third
option. Lowering costs on rooms was graded the highest from the option matrix based on the
evaluation criteria. This option would bring in guests from the Hyatt’s competitors, would be
easy to implement, and would not cost the hotel as much as if they raised the rates on their
rooms. The Hyatt should be focused on the volume of guests that come into their hotels because
this will bring in a larger profit margin. The only negative side to this option is that the profits
may not match out to the original rates, but if this option is implemented correctly, then the Hyatt
should make more in profits and have more guests than they ever had before. This option is best
for the Hyatt in attracting guests to their hotels
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Hyatt’s History:
The Hyatt Corporation began because of the Pritzker household. By the early 1950s, Jay Pritzker
was running the family business. Jay Pritzker graduated high school when he was only 14 years
old. He went to college and then got a law degree from Northwestern. Jay would become an
accomplished deal-maker even when he was young, this would lead him to become quick at
sizing up balance sheets and offering deals. In the beginning of 1957, Jay made the starting deals
that formed the Hyatt today. In 1957 Jay Pritzker bought a motel named Hyatt House after its
original owner, Hyatt von Dehn. They worked together as a team; Jay ran the business while
Donald managed and showed the guests his gregarious personality (Hyatt Corporation History.,
n.d.).
Thomas Jay Pritzker (Jay’s son) became president in 1980. The new president started with
promise because three significant firsts started in this decade: the opening of the Park Hyatt,
Grand Hyatt, and Hyatt Resort. Park Hyatts were made as small luxury hotels, which featured
personal service, elegance, and privacy. The first Park Hyatt opened in Chicago near the Water
Tower. Grand Hyatts were made for the high-end market guests who wanted culturally rich
destinations, and had sophisticated leisure, banquet, and conference facilities which held the
latest technology. Hyatt Resorts were specially designed to reflect the local area which offered
numerous activities and facilities for their guests. The first Hyatt Resort was the Hyatt Regency
Maui in Hawaii. In 1981, two skywalks at the Kansas City Hyatt Regency Hotel tumbled to the
ground, which killed 114 people and injured 229 in what the National Bureau of Standards called
the most devastating structural collapse ever to have ever taken place in the United States.
Between the years of 1981 and 1986, more than 2,000 lawsuits were settled for $120 million. In
June of 1986, 900 individuals who remained in a federal class action suit against the hotel settled
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their claims for $1,000 each. "Gross negligence and misconduct" were attributed to engineers
Daniel Duncan, Jack Gillum, and their former company, G.C.E. International Inc., whose "hurry-
up" design system which caused them to pour concrete on one part of the building while they
finished the design on the rest of the building. Hyatt managed the hotel for its owner and builder,
Hallmark Properties, so the Hyatt was not held liable for these disasters (Hyatt Corporation
History., n.d.).
In the start of the 1990s, Hyatt's growth was challenged by the reluctance of some owners of new
hotels to hire Hyatt as managers. This was because of the given high cost of running a Hyatt
hotel. This corporation was beginning to risk losing existing contracts if they implanted this
option. The Hyatt would lay off more than 1,000 of its work force and then wanted an appraisal
of the services it was offering at its hotels. The corporation’s cost savings were interpreted in
many ways, moving to a centralized purchasing system, changing the beds from an automatic
service to one that a guest had to request, cutting down on choices offered on their restaurants
and room service menus, and outsourcing housekeeping. The company also brought in ways to
attract business travelers by describing their Gold Passport frequent stayer program. This offered
additional business-oriented amenities such which included fax machines. By 1994, Hyatt's gross
operating profits had increased 45 percent, and it was having fewer complaints from hotel
owners about costs. While its acumen in managing hotel properties was never or rarely put into
question, some observers did have doubts about the company's late entrance into areas as time-
shares and franchising. Jay and Thomas Pritzker took charge of the parent company. The
successful Pritzker track record helped the Hyatt's future (Hyatt Corporation History., n.d.).
Klein 7
Financials
Cost of R
even
ue
Gross
Profit
Interest
Expen
se
Net Inco
me
Total
Reven
ue
Operating E
xpen
se
Operating I
ncome
Operating R
even
ue
Total
Expen
ses0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
201320122011
(LexisNexis® Academic & Library Solutions., n.d.).
The chart above illustrates the cost of revenue, gross profit, interest expense, net income, total
revenue, operating expense, income, revenue, and total expenses for the Hyatt. The graph shows
a similarity in the high amounts of cost of revenue, total revenue, and total expenses. These
numbers bring into question on what options that Hyatt can apply at their establishments. The
Hyatt does not want their expenses to be higher than their revenue, because if that happens, then
they will either have to reduce workers, raise prices on rooms, or have fewer accommodations
with the guests. The Hyatt spent $200 million in renovating more than 30 of its hotels in North
America. The enhancements were to replace the worn-out furnishings, improvement in access for
people that have disabilities, coffee kiosks and convenience stores to hotel lobbies, and the
installing modem ports, large desks, and better lighting in the rooms (Hyatt Corporation History.,
n.d.).
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Competitors Net Sales
Hyatt Hotels Corporation (H) 5,876,600,000
Host Hotels & Resorts, Inc. 5,286,000,000
Marriott International, Inc. 11,814,000,000
Starwood Hotels & Resorts Worldwide, Inc.
6,321,000,000
Club Mediterranee S.A. (CU)
1,447,000,000
Melia Hotels International, S.A. (MEL)
1,834,016,623
(LexisNexis® Academic & Library Solutions., n.d.).
This table illustrates all the competitors and net sales that the Hyatt deals with. These rivals bring
in numerous amounts of guests and have advantages in the marketplace in areas where the Hyatt
does not. These rival hotels may have better customer service, more new products in the rooms,
and more money to spend in ways to improve their weaknesses rather than the Hyatt. Even with
all these competitors trying to take business away from the Hyatt Corporation, it is still one of
the leading hotel companies in North America. Hyatt manages or licenses of 87 hotels and
16 resorts in 83 cities in the United States, Canada, and the Caribbean.
SWOT Analysis
Strength
1. Company's worldwide portfolio consisted of 488 properties / hotels2. Food and beverage, banquet facilities3. Collaboration with top corporate 4. Technology upgrades from time to time5. Hygiene standards and customer experience6. One of the most popular hotel chain brands
Weakness 1. Discontent amongst employees based on salary issues due to global penetration2. Limited market share due to tough competition from international
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and domestic players which leads to competitive services
Opportunity
1. Improvement on membership plans, customer loyalty programs2. Employee retention to ensure better services3. Set higher standards for rooms division
Threats
1. Better room facilities offered by competitors2. Loss of major business travelers to domestic group of hotels3. Security levels
(Hyatt | SWOT Analysis | BrandGuide | MBA Skool-Study.Learn.Share., n.d.).
Critical issue
The Hyatt Corporation has many threats which lead rival hotel industries to have a competitive
advantage over this corporation. This type of competition is what the Hyatt must face if they
want to be one of the top hotel chains in the world. These competitors can expose the Hyatt and
show many threats that can potentially hurt to corporation. These problems bring a certain
issue of how does the Hyatt attract more customers? The Hyatt must deal with these threats
by applying options which can bring out positive effects for its corporation.
Options Analysis
Possible solutions for this issue
1. Better use of customer service.
2. Having new or unique products in the rooms that attract customers.
3. Lower prices on rooms.
Evaluation Criteria
The criteria below are what the options are graded on:
Profit
Cost
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Competitive advantage
Ease of implementation
Profit- can be defined as how much money the Hyatt will or won’t make if an option is
implemented. This concept is important for the Hyatt because if this corporation does not make
the necessary revenue, then they cannot stay in business with their competitors.
Cost- is evaluated by how much it will cost if one of these possible solutions is put into place.
The most effective option will be one that has minimal cost but brings out major positive
outcomes for the Hyatt. This corporation has a large amount of total expenses, so it is critical that
the Hyatt chooses an option that will bring in more guests and revenue.
Competitive advantage- is defined as which one of these options brings out a better advantage
towards another competing company. The Hyatt has many competitors in their market, which is
why this corporation needs to pick an option where other corporations will have a disadvantage
in. The Hyatt has certain strengths which make their corporation successful in regards their
competition level with their rival companies.
Ease of implementation- is determined on how easy it will be to implement these options. The
Hyatt needs to pick an option where it is easy and not time consuming. This corporation does not
have the time to pick an option that takes time to implement because they are competing
everyday with competitors that are implementing options that are easy to place in their respected
businesses.
Option 1
The Hyatt could improve existing or offer new forms of customer service. This corporation
already displays forms of customer service but could expand in ways where the guests would
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feel more comfortable at their establishments. The Hyatt can place new types of customer service
where their competitors lack in or do not have this type of communication with their guests. An
example of this is the corporation can set up more buttons on phones in the rooms that display
new ways where guests can have service. One of these buttons can be the use of gift shops they
have at their locations. One click of this button could have guests shopping for gifts at this shop
without them even being at this store. This would make the guest’s stay even more enjoyable
than it already is. Another new idea for customer service is if they have an online website where
the guests can ask for service from the hotel. Instead of the guests calling the front desk, they can
ask their question or post a comment on a chat icon from a Hyatt online room service search
engine. The guests would be attracted to the new idea of customer service as well as the
employees at the hotel. The Hyatt can use these new forms of customer service to make their
image even more popular than what it is. This type of service will attract new guests and current
guests to these respect hotels in the present and for the future.
Advantages
Competitive advantage
Ease of implementation
Profit
Disadvantages
Cost
Competitive Advantage- this option would bring out a competitive advantage towards its rivals.
The new form of customer service will attract guests to stay at the Hyatt rather than their
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competition because the guests will feel more comfortable and will be receiving their money’s
worth for the services that are provided.
Ease of implementation- this option will be easy to implement because the employees could
improve or bring new forms of innovation towards customer service. The Hyatt can hire
employees based on customer service and this can lead to future employees running these hotels.
Profit- this option could bring in large amounts of profit if implemented appropriately. Guests
will be attracted to the new forms of customer service and the idea that the Hyatt is making
improvements with how they communicate with their guests. This positive activity will bring in
new guests to the hotel which leads to large profits for the future.
Cost- this option will have trouble with this concept. The Hyatt will have to pay for employees or
representatives to be in charge of these services. This brings in concerns on how many new
forms of customer service will be applied at these hotels because if guests are not attracted to
these activities, then the Hyatt will reduce services for the guests.
Option 2
The Hyatt can place more new or unique products in the guest’s rooms. Guests are attracted to
these luxuries hotels for the services, the location, and facilities that they provide. New products
in the rooms would be another reason for the guests to be attracted to the Hyatt. These new
products can be based on what their competition does not have in their rooms or new ideas that
management is thinking of that guests would like in the rooms. These products could be art
work, technology or new fabrics that will be placed in the guest’s rooms. These new products
will be differentiated from other hotels because these items will be specially made for the Hyatt
and their guests. The guests are paying for luxury and a nice place to stay in, so the Hyatt should
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have those products in the rooms for these guests. The guests will look at the Hyatt in a positive
way if management puts in new or unique products into the rooms. They will continue to be
guests at these hotels because the guests will like all the improvements or new products that they
used in the rooms while they were staying at the Hyatt. This option brings out a give and receive
method to it. If the Hyatt gives luxury and expensive products that are in the rooms, then they
will receive more guests who want to use these products and services. Guests from other hotels
will be drawn to the Hyatt because they are spending money in order for their guests to live in
luxury. This idea will bring in more guests and keep current guests satisfied that they are paying
for the right hotel.
Advantages
Competitive Advantage
Ease of implementation
Disadvantages
Profit
Cost
Competitive Advantage- this option will bring out a competitive advantage towards its rivals.
The reason is because the products that the Hyatt will have in their rooms will be based on
products that their competition does not have or is lacking in. This idea will show the Hyatt is
paying attention about their competition and is giving the guests their needs and wants unlike
their rivals.
Ease of Implementation- this option will be easy to implement because the employees and
management just need to brainstorm and find out all the new or unique products that can attract
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guests to their hotel. They can ask for guests to give their honest opinions on what new products
should be in the rooms. The Hyatt can act on these opinions and this can lead to better
relationships with the guests and the employees of the hotel.
Profit- this option will bring in less money to the hotels. Management will have to spend money
on these new products and this will cut out of the hotel’s profits. If profits are small, then other
products or facilities will have to be raised in order to balance out the costs.
Cost- this option will bring a question on how much these products will cost the hotel. If the
products are cheap, then the Hyatt will not have worry as much as if the products are more
expensive. The more expensive the product is, and then the hotel will have to raise prices on
other things so they will be able to afford these products in the long run.
Option 3
The Hyatt can lower prices on rooms. This action will attract guests to stay at the Hyatt rather
than another hotel. The Hyatt can reduce the price of all the rooms and this will bring in an
increase of demand for their hotel. An example of this concept is if the original rate of a king size
room is $250 and they decide to lower the rate to $200. Once the rate of this room is lowered,
then the demand will raise. The Hyatt already makes huge numbers of profits with the original
rates that they already have, but this number can increase due to the number of guests that will
come stay at the hotel due to the low rates on the rooms. The low rates will attract lower and
middle class individuals as well as higher class guests too. High priced rooms will only separate
the market to individuals that can afford or who want to afford these rooms. The Hyatt will only
attract a small amount of the market while the rest of those consumers will go to their rival
competitors because those hotels will charge less for their rooms. If the prices were lowered,
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then guests from Inns, motels, and other high ended hotels will be drawn to stay at the Hyatt.
This will bring in more revenue and sustainability for these chain hotels.
Advantages
Competitive Advantage
Ease of Implementation
Cost
Disadvantages
Profit
Competitive Advantage- this option will bring in a competitive advantage against the rivals of
the Hyatt. The reason is because if the Hyatt can lower its prices to attract all types of guests,
then their rivals will have think of new ways to attract guests from this location. The Hyatt is
already a popular hotel which gives them a competitive advantage, but this option will lead this
corporation to dominate the market.
Ease of Implementation- this option is easy to implement because management just has to lower
the prices on the rooms. Once the prices are lowered, the demand for these rooms will sky
rocket. The reason is because all different types of classes of people will rent these rooms and
there will never have to be a worry of the Hyatt not attracting guests.
Cost- this option will bring very minimal costs to the hotel. This method will lower prices on the
rooms, but it will not lower the cost on any other product or service that is being used at the
Hyatt. This hotel will lose cost on what the rooms were originally placed at, but the demand for
the lower priced rooms will balance out the cost of what the original rates used to be.
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Profit- this option will be the only disadvantage for the Hyatt. Lower rates on the rooms will
bring in demand, but it may not bring in the same or more amount of profits that the Hyatt was
receiving. These hotels will bring in many guests to stay in their rooms, but the profits may not
match up to what the rates were originally.
Option Matrix
OptionAnalysis
Profit Cost Ease of Implementation
CompetitiveAdvantage
Total
Option 1 X XX X 4
Option 2 X X 3
Option 3 X XX XX 5
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Recommendation
The option that would be best for the Hyatt’s future is lowering prices on rooms. The two options
above would help attract consumers to the Hyatt, but lowering prices on rooms brought in the
best total on the option matrix. If this option was implemented, it would bring out advantages in
competitive advantage, profit, and ease of implementation. The disadvantage to this option is that
it could lead to smaller forms of profit for the corporation. Lowering prices on rooms would
attract more customers into the Hyatt and solve this critical issue that this corporation is having.
This option would bring in positive affects for the Hyatt and for everyone associated with the
corporation as well.
Conclusion
The Hyatt Corporation has been around since the 1950s. The Pritzker household made this
organization and it has flourished to what guests see today. This family started off with one hotel
and has made a chain of hotels in no longer than 30 years. They have made one of the most
popular hotel chains in the United States. This household has led this hotel chain to have many
strengths and weaknesses as well. The Hyatt also has threats coming from their competitors and
must implement an option where it leads them to attract more guests into their establishments.
Lowering costs on their rooms would solve this threat and bring a competitive advantage, ease of
implementation, and low costs for this company. This option would bring in positive outcomes
for the corporation and attract more guests to their hotels.
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References
Hyatt | SWOT Analysis | BrandGuide | MBA Skool-Study.Learn.Share.. (n.d.). Hyatt | SWOT
Analysis | BrandGuide | MBA Skool-Study.Learn.Share.. Retrieved March 30, 2014,
from http://www.mbaskool.com/brandguide/tourism-and-hospitality/2900-hyatt.html
HYATT. (n.d.). ABOUT HYATT. Retrieved April 7, 2014, from
http://www.hyatt.com/hyatt/about/index.jsp?type=clear
Hyatt Corporation History. (n.d.). History of Hyatt Corporation – FundingUniverse. Retrieved
April 9, 2014, from http://www.fundinguniverse.com/company-histories/hyatt-
corporation-history/
LexisNexis® Academic & Library Solutions. (n.d.). LexisNexis® Academic & Library
Solutions. Retrieved April 9, 2014, from
http://www.lexisnexis.com/hottopics/lnacademic/
Our Company: Company History. (n.d.). Our Company: Company History. Retrieved April 7,
2014, from http://www.hyatt.com/hyatt/about/our-company/company-history.jsp
Reservations. (n.d.). Reservations. Retrieved April 11, 2014, from
http://www.hyatt.com/hyatt/reservations/roomsAndRates.jsp?
xactionid=145527eca62&_requestid=307691