Global Hyatt Corporation - Company Profile, Information, Business Description, History, Background Information on Global Hyatt Corporation

71 South Wacker Drive
Chicago, Illinois 60606-4637

Company Perspectives:

Today, Hyatt Hotels & Resorts specialize in deluxe hotels with me eting facilities and special services for the business traveler, oper ates hotels in major and secondary cities, airport locations, and lea ding resort areas throughout the world. In many cities Hyatt Hotels & amp; Resorts has made a significant contribution to revitalizing the area and spurring business and population growth. With the new hotels under development, Hyatt International Corporation will be creating more than 20,000 job opportunities throughout the world. Hyatt Hotels & Resorts have a reputation not only for their physical distinct iveness, incorporating local art and design, but also for the ameniti es and services provided. These special services include Hyatt Gold P assport, Hyatt's renowned recognition and award program for the frequ ent traveler; Regency Club and Grand Club, VIP concierge floors; comp limentary morning newspaper; specialty restaurants; and custom cateri ng.

History of Global Hyatt Corporation

Global Hyatt Corporation is one of the leading luxury hotel companies in the world. Owned by the Pritzker family of Chicago, Hyatt manages or licenses the management of more than 210 hotels and resorts (with a total of more than 90,000 rooms) in 43 countries around the world. In addition to the core Hyatt Regency brand, Hyatt has also develope d other special hotel concepts, including the Grand Hyatt, the Park H yatt, and Classic Residence by Hyatt. Grand Hyatts are large-scale, h igher priced hotels located in culturally rich cities; Park Hyatts ar e modeled after small European hotels; and Classic Residence by Hyatt properties offer luxury retirement apartments for rental. Hyatt also operates six casino hotels located in Aruba; Thessaloníki, Gr eece; Mendoza, Argentina; Rising Sun, Indiana; and Henderson and Incl ine Village, Nevada. The company's U.S., Canadian, and Caribbean hote ls are organized under the Hyatt Corporation subsidiary, while Hyatt International Corporation handles the international locations. Other Global Hyatt subsidiaries include Hyatt Vacation Club, Inc., speciali zing in time-shares; Hyatt Equities, L.L.C., involved in hotel owners hip; and U.S. Franchise Systems, Inc., franchisor of the Hawthorn Sui tes, Microtel Inns & Suites, and Best Inns & Suites chains.

The Founding Family

While Hyatt's history as a corporate entity dates from 1957, the Prit zker family, who built and control Hyatt, has been active significant ly longer. In the late 19th century, the Pritzkers immigrated to the United States from Ukraine. Patriarch Nicholas Pritzker led them to C hicago, and in 1902 he founded Pritzker & Pritzker (P&P), the law firm that was to evolve into a management company and the center of the Pritzkers' many and varied investments.

P&P grew, and by the late 1920s it had become a respected local f irm. At that time, the Pritzkers' best client was Goldblatt Brothers, the low-priced Chicago department store chain. Through the Goldblatt s, Abram (A. N.) Pritzker, Nicholas Pritzker's son, met Walter M. Hey mann, then a leading Chicago commercial banker and an officer at the First National Bank of Chicago. In succeeding years A.N. Pritzker and Walter Heymann became business associates, and the powerful First Na tional Bank of Chicago became the financial cornerstone of the Pritzk er family empire.

Using a line of credit from the First National Bank, A.N. Pritzker be gan acquiring real estate, something he already knew about from P&amp ;P's concentration on real estate reorganization. As his and the fami ly's investments grew, the law practice shrank, and in 1940 P&P s topped accepting outside clients, concentrating solely on Pritzker fa mily investments. At the same time A.N. Pritzker began the family pra ctice of sheltering his holdings within a dizzying array of interrela ted family trusts.

Emergence of Hyatt in the 1950s

The story of Global Hyatt Corporation begins with the succeeding gene ration of Pritzkers. By the early 1950s, A.N. Pritzker's oldest son, Jay, had become active in the family business. Something of a prodigy , Jay Pritzker had graduated high school at 14. He finished college s oon thereafter and then took a law degree from Northwestern Universit y. During World War II he worked first as a flight instructor and lat er for the U.S. government agency that managed German-owned companies . In that position, he sat on corporate boards with men many years hi s senior. An accomplished deal-maker even in his earliest years, Jay would later become well known for his quickness at sizing up balance sheets and offering deals. Jay, beginning in 1957, made the initial d eals that formed the basis for what was initially called Hyatt Hotels Corporation.

Jay's youngest brother, Donald Pritzker, finished law school in 1959, whereupon he joined P&P. Meanwhile, the middle brother, Robert P ritzker, earned an industrial engineering degree at the Illinois Inst itute of Technology in Chicago, and later he and Jay would found and manage the Marmon Group.

In 1957 Jay Pritzker bought a small Los Angeles International Airport motel named Hyatt House after its original owner, Hyatt R. von Dehn. Within four years, Jay expanded the single property into a chain of six hotels and brought Donald Pritzker to California as manager of op erations, reporting to Jay. The two made a good team, with Jay's deal -making skills and Donald's managerial ability and gregarious persona lity.

Hyatt grew rapidly during its first decade, opening small motor inns on the West Coast and one outside Chicago. The fledgling company went public in 1967, but the more important event of that watershed year was the opening in Atlanta of its first hotel with an atrium tower lo bby, designed by architect John Portman. The Portman atrium was a 21- story interior courtyard, designed so that each hotel room entered of f the high-rise open space, set off with a central glass elevator lea ding to all floors, and hanging green vines growing from each floor's balcony. The overall effect was revolutionary, because the Portman i nterior eliminated the impersonal hallway with rows of doors and brou ght to the hotel interior an open-air congeniality, with the spinoff of greater safety, feeling of security, and warmth. The Portman lobby became the hotel's signature and brought Hyatt to widespread notice for the first time, as well as advancing the concept of public space in buildings.

What became the Hyatt Regency Atlanta was part of the 15-building Pea chtree Center. The developers of the large hotel property were in fin ancial trouble and both Hilton and Marriott passed up opportunities t o purchase the property before Hyatt did and finished construction. S oon after the hotel opened, its occupancy rate reached 94.6 percent.

Hyatt grew to a chain of 13 hotels by 1969. That year, the Pritzkers set up a separate company called Hyatt International Corporation to e xpand the chain overseas, with its first hotel the Hyatt Regency Hong Kong. In 1972 Donald died of a heart attack at the age of 39. Jay in stalled his brother-in-law, Hugh M. "Skip" Friend, Jr., as the new pr esident.

Growth in the 1970s

The company grew rapidly during the 1970s, aided by the signature Hya tt design and the innovations that a young staff was able to devise. Management went awry, however, when it was discovered in 1977 that Fr iend had spent $300,000 of company money on personal expenses. Af ter Jay Pritzker demoted him, Friend left the company. Jay took over the duties of president, in addition to his responsibilities as chair man and chief executive officer. He also moved corporate headquarters to Chicago, where he could more closely oversee matters. Then, Jay g radually bought back the public shares of stock, taking the company p rivate in 1979. Jay reportedly was distressed by the meager valuation Hyatt was receiving on Wall Street, and, according to a September 30 , 2002, Fortune magazine article, purchased the 25 percent pub licly traded stake for a mere $12.5 million.

The 1980s

In 1980 Thomas Jay Pritzker, Jay's son, became president, with Jay re maining chairman and CEO. The decade started promisingly with three s ignificant firsts in 1980: the openings of the first Park Hyatt, the first Grand Hyatt, and the first Hyatt resort. Park Hyatts were desig ned as smaller luxury hotels with a European style, featuring persona lized service, privacy, and elegance; the first one opened in Chicago near the Water Tower. Grand Hyatts were designed for the high-end ma rket in culturally rich destinations, and featured sophisticated leis ure, banquet, and conference facilities utilizing the latest technolo gy. Hyatt Resorts were specially designed to reflect their area of lo cation and offered numerous activities and facilities for their guest s; the first Hyatt resort was the Hyatt Regency Maui in Hawaii.

Then in 1981, two skywalks at the Kansas City Hyatt Regency Hotel col lapsed, killing 114 people and injuring 229 in what the National Bure au of Standards called the most devastating structural collapse ever to take place in the United States. Between 1981 and 1986, more than 2,000 resulting lawsuits were settled for a total of $120 million . In June 1986, 900 individuals remaining in a federal class-action s uit against the hotel settled all claims for $1,000 each. Ultimat ely, "gross negligence and misconduct" were attributed to engineers D aniel Duncan, Jack Gillum, and their former company, G.C.E. Internati onal Inc., whose "hurry-up" design system caused them to be pouring c oncrete on one part of the building while finishing the design on the rest of the building. As was the case with most Hyatt hotels at this time, Hyatt was managing the hotel for its owner and builder, Hallma rk Properties, so Hyatt was not held liable. Still it did not help to have the Hyatt name associated with such a disaster.

Hyatt's growth slowed somewhat as the 1980s progressed, in part becau se hotel property owners began to object to the high fees Hyatt (and other hotel managers) received for managing the hotels without taking on any ownership risks. In order to keep the company growing, the Pr itzkers launched a separate company to develop and build hotels and r esorts, with Jay's cousin Nick in charge.

During the decade, Hyatt Corporation also became involved in an indir ect way in some of the Pritzkers' nonlodging activities. Most notable was the 1983 purchase of the troubled Braniff airline through Dalfor t, a Hyatt subsidiary. Under Dalfort, and with Jay Pritzker taking th e lead, Braniff's losses were cut. But after a proposed merger with t he also troubled Pan Am Corp. failed in 1987, Braniff was sold the fo llowing year.

During this time, Darryl Hartley-Leonard was named president of Hyatt Hotels Corporation, which had been reorganized as a subsidiary of th e parent Hyatt Corporation. Another subsidiary was launched in 1987 u nder the name Classic Residence by Hyatt, with Donald Pritzker's daug hter Penny Pritzker as president. The Classic Residence properties we re designed as luxury retirement centers with large rental apartments , housekeeping and gourmet meal service, and such activities as lectu res by university professors. Aimed at the growing population of seni or citizens, many of whom were looking for alternatives to institutio nal settings, Classic Residence centers opened initially in Reno, Dal las, and Teaneck, New Jersey. They were somewhat slow to fill, howeve r, and the properties were typically half empty six months after open ing.

In 1989 Hyatt introduced the Camp Hyatt program to attempt to attract more families to its somewhat business-oriented facilities. Under th e program, Hyatt hotels began to offer numerous activities geared tow ard the toddler to preteen set, gave parents the option of taking a h alf-priced second room for their kids, and added menus and room servi ce tailored for children.

Innovations and Growth Opportunities in the 1990s

As the 1990s began, Hyatt's growth was somewhat challenged by what an alysts regarded as the reluctance of some owners of new hotels to hir e Hyatt as managers, given the relatively high cost of running a glit zy Hyatt hotel. In fact, Hyatt was beginning to run the risk of losin g existing contracts. Seeking to streamline operations, the company l aid off more than 1,000 employees from its workforce and then embarke d on a detailed appraisal of the services it was offering at its hote ls. Major cost savings were realized in several ways, such as moving to a centralized purchasing system, changing the turning down of beds from an automatic service to one that a guest had to request, cuttin g down on the number of choices offered on restaurant and room servic e menus, and outsourcing housekeeping and valet parking. The company also sought ways to attract frequent business travelers by augmenting its Gold Passport frequent stayer program and by offering additional business-oriented amenities such as in-room fax machines. By 1994, H yatt's gross operating profits had increased 45 percent from 1990 and the company was hearing fewer complaints from hotel owners about cos ts.

In 1994 Douglas G. Geoga, a lawyer who had served as head of developm ent, was named president and CEO of Hyatt Hotels, with Hartley-Leonar d remaining chairman. At about the same time, Hyatt began to pursue s everal new opportunities for growth, as competition from other chains grew fierce. Starting in 1994, the company moved cautiously into fra nchising for the first time. The first two franchised Hyatts were old er hotels--the Hyatt Sainte Claire in downtown San Jose and the Hyatt Regency Pier Sixty Six in Fort Lauderdale. A third franchised Hyatt, the Hyatt Regency Wichita, a new downtown convention hotel, opened i n 1997. Hyatt also entered, again cautiously, the crowded time-share property market with the opening in June 1995 of a resort known as Hy att's Sunset Harbor Key West.

Freestanding golf courses and casinos were additional ventures Hyatt entered in the mid-1990s. In January 1995 it opened on the island of Aruba its first freestanding golf course, which was also the island's first golf course. In addition to developing freestanding courses, H yatt also intended to manage existing golf courses near its hotels. A lready involved in gaming through casinos it operated at some of its resorts, Hyatt moved into the riverboat gambling industry in 1994 wit h the opening of the Grand Victoria Casino in Elgin, Illinois, which generated revenues of $37 million during the last three months of that year.

In addition to its pursuit of these growth opportunities, Hyatt also strived through innovation to retain its role at the forefront of the industry. In 1994 the company tested automated check-in kiosks in a number of its hotels. The kiosks, which allowed guests to check thems elves in--in less than one minute--and even dispensed room keys, prov ed a success and were subsequently expanded to other Hyatts. The comp any also successfully introduced a telephone check-in system.

In 1995 and 1996, Hyatt spent $200 million in renovating more tha n 30 of its hotels in North America. Among the enhancements were the replacement of worn-out furnishings, the improvement of access for pe oples with disabilities, the addition of coffee kiosks and convenienc e stores to hotel lobbies, and the installation of modem ports, large r desks, and better lighting in guest rooms. Also in 1996 Hartley-Leo nard left the company in order to continue running a Hyatt affiliate that he had founded, Regency Productions, which specialized in sports events production. Hyatt elected to sell Regency to narrow its focus to its hotel and franchising operations. Thomas Pritzker reassumed t he chairmanship.

In 1997 Hyatt Hotels launched an aggressive expansion program, earmar king $1 billion to acquire 20 to 30 hotels by the end of the deca de. Serving as a vehicle for this expansion was the newly established Hyatt Equities, L.L.C., a real estate acquisition company headed by Nicholas Pritzker, a cousin of Thomas Pritzker. Hyatt Equities also a ssumed the ownership interests of those properties already owned by H yatt. In addition to buying non-Hyatt hotels, such as Nikko Hotel in Atlanta's Buckhead section, which was converted to the Grand Hyatt At lanta, Hyatt Equities was also charged with buying existing Hyatt pro perties. By mid-1998 Hyatt had already purchased the Grand Hyatts in New York and San Francisco as well as the Hyatts in Deerfield, Illino is, and Miami. By this time, Hyatt owned about one-third of the rooms in the various Hyatt properties. At the end of 1999 Geoga left Hyatt Hotels to take charge of a new financing venture for the Pritzker fa mily. Scott D. Miller took the presidency of Hyatt Hotels.

Early 2000s: Diversifying and Consolidating Under Global Hyatt Cor p.

Jay Pritzker died in early 1999 at age 76, having suffered a stroke t wo years earlier, after which his son Thomas gained increasing influe nce over the family's various businesses. For Hyatt, the post-Jay Pri tzker era ushered in many changes, starting with what many industry o bservers felt was a long-overdue diversification into the faster-grow ing lower end of the lodging business. In 2000 a group led by the Pri tzker family acquired U.S. Franchise Systems, Inc. (USFS), the franch isor of three chains: Microtel Inns & Suites, budget-priced, limi ted-service hotels; Hawthorn Suites, upscale, extended-stay hotels; a nd America's Best Inns & Suites, mid-market economy hotels. Initi ally at least, USFS was independent from Hyatt Hotels, just as Hyatt International continued to be. The timing for this diversification, h owever overdue, turned out to be quite auspicious as Hyatt and the en tire luxury lodging market, already feeling the effects of the econom ic slowdown, was further depressed by the travel downturn that follow ed the terrorist attacks of September 11, 2001. In this environment H yatt Hotels curtailed expansion in the United States, opening just tw o new properties in 2002.

Behind the scenes, meantime, the Pritzker family was reshuffling its assets following the death of Jay Pritzker. Amid a great deal of acri mony--and a couple of lawsuits--the Pritzkers eventually worked out a deal to split up the family fortune (by some estimates as large as & #36;15 billion) into 11 equal pieces by 2011. In order to facilitate this division of the Pritzker empire, the family in March 2003 announ ced plans to consolidate all of its lodging operations within one com pany called Global Hyatt Corporation. Under this umbrella company wer e placed not only Hyatt Hotels (renamed simply Hyatt Corporation) and Hyatt International but also Classic Residence by Hyatt, Hyatt Vacat ion Club, Inc. (specializing in time-shares), Hyatt Equities, and USF S. Once this major restructuring was completed and Global Hyatt forme d in 2004, all 200 Hyatts around the world--120 in North America and the Caribbean and 80 elsewhere--were brought together for the first t ime. By consolidating all the lodging assets under one balance sheet, Global Hyatt was now better positioned to raise financing for potent ial mergers and acquisitions and for organic growth as well, and bett er positioned to take the long-rumored step of returning to public ow nership. Thomas Pritzker remained in charge as chairman and CEO of Gl obal Hyatt, Nicholas Pritzker was named vice-chairman, and Geoga was brought back into the fold as president. Global Hyatt soon moved its headquarters into a new 49-story tower, the Hyatt Center, located in Chicago's financial district and developed by Penny Pritzker.

Many observers viewed a public offering of Global Hyatt stock as a ne cessity for the Pritzkers to complete their planned breakup of the fa mily assets. But the Pritzkers felt that before any such offering Glo bal Hyatt had to get much larger. The company thus embarked on a huge hotel-building spree. In the fall of 2005 Global Hyatt had no fewer than 35 Hyatt hotels and resorts under development and scheduled to o pen by mid-2008. The vast majority of these were international locati ons, but two of the five planned for the United States were particula rly large properties: the 1,100-room Hyatt Denver Convention Center H otel, slated to open in late 2005, and the 2,700-room Grand Hyatt Las Vegas casino resort, with a planned early 2008 opening. Internationa lly, in addition to new Hyatts in such far-flung locales as Ankara, T urkey; Quito, Ecuador; Kabul, Afghanistan (that nation's first luxury hotel); Cairo, Egypt; and Colombo, Sri Lanka, Global Hyatt was makin g a major push into the burgeoning Chinese market, with 12 new hotels under development. Similarly ambitious plans for expanding the USFS chains were also in place, and Global Hyatt set aside $237 millio n to renovate 13 company-owned Hyatts in the United States in 2005 an d 2006, aiming to make each property reflect its city.

At the same time, Global Hyatt filled in a major gap in its lodging p ortfolio in early 2005 when it acquired the AmeriSuites hotel chain f rom the Blackstone Group for a price estimated at more than $600 million. This propelled the company into a fast-growing sector of the industry--limited-service, all-suites hotels where the entrenched co mpetition included the Courtyard by Marriott and Hilton Garden Inn ch ains. At the time of the deal, there were more than 140 AmeriSuites p roperties. Late in 2005 Hyatt launched a plan to take AmeriSuites ups cale under the name Hyatt Place, earmarking $175 million for the makeover, and to open 50 to 60 new Hyatt Places per year.

Principal Subsidiaries: Hyatt Corporation; Hyatt International Corporation; Classic Residence by Hyatt; Hyatt Vacation Club, Inc.; Hyatt Equities, L.L.C.; U.S. Franchise Systems, Inc.


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