The EG Interview: Hyatt’s Felicity Black-Roberts on European expansion ambitions

The odds seem to be stacked against US hotel group Hyatt’s far-reaching plans for rapid international expansion. Beset by travel restrictions and pandemic-driven disruption, the company is only just starting to close the gap on its quarterly net losses to $9m (£6.5m) in Q2 this year, from a $304m loss in Q1. But its top team believes that demand will bounce back and it intends to spend on “more and more” growth initiatives, with a focus on franchising. President and chief executive Mark Hoplamazian told analysts last month that although deals have been slow to materialise, “we are tracking a number of potential opportunities in the hopes that we’ll see some things free up over the coming year”. In the UK and Europe, much of the task of grasping that potential will fall to Felicity Black-Roberts, vice-president of acquisitions and development for Europe and North Africa. Since joining from Starwood Hotels & Resorts five years ago, Black-Roberts has led the company’s expansion in Europe, and last December unveiled an ambitious strategy to scale up further on the continent. On a video call from her home in the Netherlands, Black-Roberts says Hyatt will push ahead with European expansion even as a disposal strategy is mapped out in other regions. In the UK, she says the company’s network of sites is only set to grow. Doubling down on Europe Hyatt’s European business is regaining its footing after the disruption of the pandemic. In the Europe, Africa, Middle East and South West Asia segment, the quarterly loss narrowed to $1m in Q2 2021, compared with $11m during the second quarter of 2020. Capital expenditure for the 2021 fiscal year is expected to come to $110m. The group aims to sell $1.5bn of hotel real estate this year and to generate a further $2bn from disposals by the end of 2024. But Black-Roberts maintains that this will not apply to the European business. “We’re quite pragmatic about how we sell real estate,” she says. “The only reason we would sell is if [it involves] a partner that we’ve got a great deal of confidence in; somebody who wants to partner with us on a management contract for the long term. So we don’t really have a disposal strategy as such, and we’re not in a position whereby we absolutely have to sell down any European assets.” Indeed, Hyatt plans to take an even bigger slice of the European market following its a $2.7bn deal to buy KKR-backed US resort company Apple Leisure Group. The proposed takeover will double its resort count to 204 and boost its portfolio in Europe by more than 60%, extending across 11 new markets in Spain and Greece. Biting into the apple At the core of the deal is a greater focus on luxury leisure, with Hyatt bullish on a rebound in demand for leisure travel against the backdrop of the pandemic. For Black-Roberts, the all-inclusive resort sector has been a missing piece of the puzzle for Hyatt, which runs more than 1,000 hotels and has traditionally relied more heavily on business travellers in cities. “With the pandemic particularly, we had been starting to think a lot more about resorts and our leisure business in an area where Hyatt hadn’t got representation,” she says. “For me, it’s great from a Western European perspective, because we’ve suddenly [got a] presence in the resort scene that we didn’t have previously. It’s given me a leg up with being able to grow Hyatt’s resort presence in a meaningful way. “We will carry [out] our location strategy for Western Europe exactly as we’ve done previously, but with a greater confidence for growing that leisure segment.” The deal plays into Hyatt’s long-held “asset light” strategy, with the ALG acquisition bringing it significantly closer to its goal of collecting 80% of its earnings from fee-based income by 2024. ALG’s portfolio consists of more than 33,000 rooms across 10 countries. While the deal continues a marked shift away from the ownership model and towards being an operator, Black-Roberts says there are still certain instances where the group is “looking at real estate plays”. “We still own a significant number of hotels,” she says. “I think they bring something to us, in that it’s good to be an owner and understand where ownership sits, and I don’t think we’ll move away from that in its entirety.” The importance of kissing frogs Since Black-Roberts joined Hyatt in 2016, when she was tasked with growing its footprint in western Europe and leading its London team, the group has established a presence in several capital cities. Its European hotel count has doubled to 70 during that period. The group now wants to ramp up its presence in Switzerland, Germany, Italy, Spain and France, where it aims to grow its “independent collection” brand portfolio and leisure-focused offerings. And a handful of core markets remain elusive, namely Copenhagen, Oslo, Rome and Geneva. “It takes time to find the opportunities,” says Black-Roberts. “All of these processes are competitive, especially when you add in a lease, then you’ve got to find a tenant who wants to take that lease and then take the franchise from you. Then you’ve got to back the guy who’s going to offer the best lease proposal. There’s quite a lot of things that can go wrong with the process that will mean you’re not the successful bidder. “We kiss a lot of frogs. I wish they would all turn into princes, but they don’t.” As part of a goal to open more than 20 managed and franchised hotels across Europe by 2023, Black-Roberts pinpoints the UK as an important area for growth, describing the company as “still super-committed” to the market. In the past six months the company has launched Hyatt Place London City East, E1, and Hyatt Centric Cambridge, while a management agreement has been signed for a new 203-room, luxury Park Hyatt London River Thames hotel at R&F’s Nine Elms development, SW8. Black-Roberts believes there is a wealth of untapped opportunity for hoteliers in residential clusters, stemming from the broader shift towards remote working. “There is a real opportunity post-pandemic for hotels in residential neighbourhoods, to really alter their appeal and offer in a way that either hadn’t been possible or profitable previously,” she says. “The ability for hotels to become part of a residential neighbourhood is much stronger than it was.” A deal has been inked for a Hyatt Regency in Edinburgh, and there are plans for another launch in London – a 193-room hotel that will trade as Hyatt Regency London Olympia, W1. Beyond these schemes, Black-Roberts has set her sights on Leeds, Glasgow and Oxford. She cites Leeds’s standing as a Northern Powerhouse location as a major driver, while Oxford’s strong leisure, science and tech markets are compelling, even if supply remains constrained. “Now that we’re getting that regional presence, it will be a good move for us to take something that’s a lot more leisure-driven,” she says. “We have to take opportunities where they come, but the UK is good for us.” The only way is upscale As part of the UK strategy, which is skewed towards the group’s luxury and “upper upscale” brands, Black-Roberts seeks to “really grow” Hyatt’s upscale Hyatt Place and Hyatt House offerings. This includes “significantly advanced” plans for a dual-branded Hyatt Place and Hyatt House project, which she aims to have in place before the end of the year. She also points to Edinburgh as a city that could support the Park Hyatt format. In the meantime, the group’s premium Hyatt Regency brand will continue to underpin its UK growth. There is also scope for growing its leisure focus through its soft brands, Unbound Collection and JDV by Hyatt, the latter having launched in April. Black-Roberts is sanguine about some of the specifically UK-focused challenges that Hyatt and the hotel industry will face. Brexit has not changed how the company views the country, she says, and although the staycation boom is rippling across the UK’s hospitality industry, she sees it reaffirming rather than driving her own acquisition strategy. “I’m not convinced it’s a long-term impact,” she says. “I do think it has made people reconnect with different parts of the UK. Would it make us more confident about moving out of some of the big centres? Yes, but I think we’re also getting that confidence because we’re building our network in the UK now anyway.”   To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews Image courtesy of Hyatt