Global Hyatt Corporation

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Global Hyatt Corporation

71 South Wacker Drive
Chicago, Illinois 60606-4637
U.S.A.
Telephone: (312) 750-1234
Fax: (312) 750-8550
Web site: http://www.hyatt.com

Private Company
Incorporated: 1957 as Hyatt Hotels Corporation
Employees: 41,000
Sales: $3.7 billion (2004 est.)
NAIC: 721110 Hotels (Except Casino) and Motels; 721120 Casino Hotels

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 developed other special hotel concepts, including the Grand Hyatt, the Park Hyatt, and Classic Residence by Hyatt. Grand Hyatts are large-scale, higher priced hotels located in culturally rich cities; Park Hyatts are 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, Greece; Mendoza, Argentina; Rising Sun, Indiana; and Henderson and Incline Village, Nevada. The company's U.S., Canadian, and Caribbean hotels are organized under the Hyatt Corporation subsidiary, while Hyatt International Corporation handles the international locations. Other Global Hyatt subsidiaries include Hyatt Vacation Club, Inc., specializing in time-shares; Hyatt Equities, L.L.C., involved in hotel ownership; and U.S. Franchise Systems, Inc., franchisor of the Hawthorn Suites, Microtel Inns & Suites, and Best Inns & Suites chains.

The Founding Family

While Hyatt's history as a corporate entity dates from 1957, the Pritzker family, who built and control Hyatt, has been active significantly longer. In the late 19th century, the Pritzkers immigrated to the United States from Ukraine. Patriarch Nicholas Pritzker led them to Chicago, 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 firm. At that time, the Pritzkers' best client was Goldblatt Brothers, the low-priced Chicago department store chain. Through the Goldblatts, Abram (A. N.) Pritzker, Nicholas Pritzker's son, met Walter M. Heymann, 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 National Bank of Chicago became the financial cornerstone of the Pritzker family empire.

Using a line of credit from the First National Bank, A.N. Pritzker began acquiring real estate, something he already knew about from P&P's concentration on real estate reorganization. As his and the family's investments grew, the law practice shrank, and in 1940 P&P stopped accepting outside clients, concentrating solely on Pritzker family investments. At the same time A.N. Pritzker began the family practice of sheltering his holdings within a dizzying array of interrelated family trusts.

Emergence of Hyatt in the 1950s

The story of Global Hyatt Corporation begins with the succeeding generation 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 soon thereafter and then took a law degree from Northwestern University. During World War II he worked first as a flight instructor and later for the U.S. government agency that managed German-owned companies. In that position, he sat on corporate boards with men many years his 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 deals 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 Pritzker, earned an industrial engineering degree at the Illinois Institute 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 operations, reporting to Jay. The two made a good team, with Jay's deal-making skills and Donald's managerial ability and gregarious personality.

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 lobby, designed by architect John Portman. The Portman atrium was a 21-story interior courtyard, designed so that each hotel room entered off the high-rise open space, set off with a central glass elevator leading to all floors, and hanging green vines growing from each floor's balcony. The overall effect was revolutionary, because the Portman interior eliminated the impersonal hallway with rows of doors and brought 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 Peachtree Center. The developers of the large hotel property were in financial trouble and both Hilton and Marriott passed up opportunities to purchase the property before Hyatt did and finished construction. Soon 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 expand 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 installed his brother-in-law, Hugh M. "Skip" Friend, Jr., as the new president.

Growth in the 1970s

The company grew rapidly during the 1970s, aided by the signature Hyatt design and the innovations that a young staff was able to devise. Management went awry, however, when it was discovered in 1977 that Friend had spent $300,000 of company money on personal expenses. After Jay Pritzker demoted him, Friend left the company. Jay took over the duties of president, in addition to his responsibilities as chairman and chief executive officer. He also moved corporate headquarters to Chicago, where he could more closely oversee matters. Then, Jay gradually bought back the public shares of stock, taking the company private 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 publicly traded stake for a mere $12.5 million.

The 1980s

In 1980 Thomas Jay Pritzker, Jay's son, became president, with Jay remaining chairman and CEO. The decade started promisingly with three significant firsts in 1980: the openings of the first Park Hyatt, the first Grand Hyatt, and the first Hyatt resort. Park Hyatts were designed as smaller luxury hotels with a European style, featuring personalized service, privacy, and elegance; the first one opened in Chicago near the Water Tower. Grand Hyatts were designed for the high-end market in culturally rich destinations, and featured sophisticated leisure, banquet, and conference facilities utilizing the latest technology. Hyatt Resorts were specially designed to reflect their area of location and offered numerous activities and facilities for their guests; the first Hyatt resort was the Hyatt Regency Maui in Hawaii.

Then in 1981, two skywalks at the Kansas City Hyatt Regency Hotel collapsed, killing 114 people and injuring 229 in what the National Bureau 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 suit against the hotel settled all claims for $1,000 each. Ultimately, "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 caused them to be pouring concrete 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, Hallmark Properties, so Hyatt was not held liable. Still it did not help to have the Hyatt name associated with such a disaster.

Company Perspectives:

Today, Hyatt Hotels & Resorts specialize in deluxe hotels with meeting facilities and special services for the business traveler, operates hotels in major and secondary cities, airport locations, and leading resort areas throughout the world. In many cities Hyatt Hotels & 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 distinctiveness, incorporating local art and design, but also for the amenities and services provided. These special services include Hyatt Gold Passport, Hyatt's renowned recognition and award program for the frequent traveler; Regency Club and Grand Club, VIP concierge floors; complimentary morning newspaper; specialty restaurants; and custom catering.

Hyatt's growth slowed somewhat as the 1980s progressed, in part because 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 Pritzkers launched a separate company to develop and build hotels and resorts, with Jay's cousin Nick in charge.

During the decade, Hyatt Corporation also became involved in an indirect way in some of the Pritzkers' nonlodging activities. Most notable was the 1983 purchase of the troubled Braniff airline through Dalfort, a Hyatt subsidiary. Under Dalfort, and with Jay Pritzker taking the lead, Braniff's losses were cut. But after a proposed merger with the also troubled Pan Am Corp. failed in 1987, Braniff was sold the following year.

During this time, Darryl Hartley-Leonard was named president of Hyatt Hotels Corporation, which had been reorganized as a subsidiary of the parent Hyatt Corporation. Another subsidiary was launched in 1987 under the name Classic Residence by Hyatt, with Donald Pritzker's daughter Penny Pritzker as president. The Classic Residence properties were designed as luxury retirement centers with large rental apartments, housekeeping and gourmet meal service, and such activities as lectures by university professors. Aimed at the growing population of senior citizens, many of whom were looking for alternatives to institutional settings, Classic Residence centers opened initially in Reno, Dallas, and Teaneck, New Jersey. They were somewhat slow to fill, however, and the properties were typically half empty six months after opening.

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

Innovations and Growth Opportunities in the 1990s

As the 1990s began, Hyatt's growth was somewhat challenged by what analysts regarded as the reluctance of some owners of new hotels to hire Hyatt as managers, given the relatively high cost of running a glitzy Hyatt hotel. In fact, Hyatt was beginning to run the risk of losing existing contracts. Seeking to streamline operations, the company laid off more than 1,000 employees from its workforce and then embarked on a detailed appraisal of the services it was offering at its hotels. 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, cutting down on the number of choices offered on restaurant and room service 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, Hyatt's gross operating profits had increased 45 percent from 1990 and the company was hearing fewer complaints from hotel owners about costs.

In 1994 Douglas G. Geoga, a lawyer who had served as head of development, was named president and CEO of Hyatt Hotels, with Hartley-Leonard remaining chairman. At about the same time, Hyatt began to pursue several new opportunities for growth, as competition from other chains grew fierce. Starting in 1994, the company moved cautiously into franchising for the first time. The first two franchised Hyatts were older 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 in 1997. Hyatt also entered, again cautiously, the crowded time-share property market with the opening in June 1995 of a resort known as Hyatt'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, Hyatt also intended to manage existing golf courses near its hotels. Already involved in gaming through casinos it operated at some of its resorts, Hyatt moved into the riverboat gambling industry in 1994 with 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 themselves in—in less than one minute—and even dispensed room keys, proved a success and were subsequently expanded to other Hyatts. The company also successfully introduced a telephone check-in system.

Key Dates:

1957:: Hyatt Hotels Corporation has its start when Jay Pritzker buys the Hyatt House motel at Los Angeles International Airport.
1961:: Pritzker has expanded Hyatt into a chain of six hotels.
1967:: Company goes public and opens its first hotel with an atrium tower lobby, the Hyatt Regency Atlanta.
1969:: To expand the chain overseas, the Pritzker family sets up a separate company called Hyatt International Corporation, which opens its first hotel, the Hyatt Regency Hong Kong.
1979:: The Pritzker family takes the company private.
1980:: The first Park Hyatt, the first Grand Hyatt, and the first Hyatt resort open.
1981:: Two skywalks collapse at the Kansas City Hyatt Regency Hotel, killing 114 people.
1987:: Classic Residence by Hyatt is launched.
2000:: A group led by the Pritzker family acquires U.S. Franchise Systems, Inc. (USFS).
2004:: All of the Pritzkers' lodging operations, including Hyatt Hotels, Hyatt International, and USFS, are amalgamated under a new holding company, Global Hyatt Corporation.
2005:: Global Hyatt acquires the AmeriSuites hotel chain, which is later rebranded Hyatt Place.

In 1995 and 1996, Hyatt spent $200 million in renovating more than 30 of its hotels in North America. Among the enhancements were the replacement of worn-out furnishings, the improvement of access for peoples with disabilities, the addition of coffee kiosks and convenience stores to hotel lob-bies, and the installation of modem ports, larger desks, and better lighting in guest rooms. Also in 1996 Hartley-Leonard 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 the chairmanship.

In 1997 Hyatt Hotels launched an aggressive expansion program, earmarking $1 billion to acquire 20 to 30 hotels by the end of the decade. 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 assumed the ownership interests of those properties already owned by Hyatt. In addition to buying non-Hyatt hotels, such as Nikko Hotel in Atlanta's Buckhead section, which was converted to the Grand Hyatt Atlanta, Hyatt Equities was also charged with buying existing Hyatt properties. By mid-1998 Hyatt had already purchased the Grand Hyatts in New York and San Francisco as well as the Hyatts in Deerfield, Illinois, 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 family. Scott D. Miller took the presidency of Hyatt Hotels.

Early 2000s: Diversifying and Consolidating Under Global Hyatt Corp.

Jay Pritzker died in early 1999 at age 76, having suffered a stroke two years earlier, after which his son Thomas gained increasing influence over the family's various businesses. For Hyatt, the post-Jay Pritzker era ushered in many changes, starting with what many industry observers felt was a long-overdue diversification into the faster-growing lower end of the lodging business. In 2000 a group led by the Pritzker family acquired U.S. Franchise Systems, Inc. (USFS), the franchisor of three chains: Microtel Inns & Suites, budget-priced, limited-service hotels; Hawthorn Suites, upscale, extended-stay hotels; and America's Best Inns & Suites, mid-market economy hotels. Initially at least, USFS was independent from Hyatt Hotels, just as Hyatt International continued to be. The timing for this diversification, however overdue, turned out to be quite auspicious as Hyatt and the entire luxury lodging market, already feeling the effects of the economic slowdown, was further depressed by the travel downturn that followed the terrorist attacks of September 11, 2001. In this environment Hyatt Hotels curtailed expansion in the United States, opening just two 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 acrimony—and a couple of lawsuits—the Pritzkers eventually worked out a deal to split up the family fortune (by some estimates as large as $15 billion) into 11 equal pieces by 2011. In order to facilitate this division of the Pritzker empire, the family in March 2003 announced plans to consolidate all of its lodging operations within one company called Global Hyatt Corporation. Under this umbrella company were placed not only Hyatt Hotels (renamed simply Hyatt Corporation) and Hyatt International but also Classic Residence by Hyatt, Hyatt Vacation Club, Inc. (specializing in time-shares), Hyatt Equities, and USFS. Once this major restructuring was completed and Global Hyatt formed in 2004, all 200 Hyatts around the world—120 in North America and the Caribbean and 80 elsewhere—were brought together for the first time. By consolidating all the lodging assets under one balance sheet, Global Hyatt was now better positioned to raise financing for potential mergers and acquisitions and for organic growth as well, and better positioned to take the long-rumored step of returning to public ownership. Thomas Pritzker remained in charge as chairman and CEO of Global 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 necessity for the Pritzkers to complete their planned breakup of the family assets. But the Pritzkers felt that before any such offering Global 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 open by mid-2008. The vast majority of these were international locations, but two of the five planned for the United States were particularly large properties: the 1,100-room Hyatt Denver Convention Center Hotel, slated to open in late 2005, and the 2,700-room Grand Hyatt Las Vegas casino resort, with a planned early 2008 opening. Internationally, in addition to new Hyatts in such farflung locales as Ankara, Turkey; Quito, Ecuador; Kabul, Afghanistan (that nation's first luxury hotel); Cairo, Egypt; and Colombo, Sri Lanka, Global Hyatt was making 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 million to renovate 13 company-owned Hyatts in the United States in 2005 and 2006, aiming to make each property reflect its city.

At the same time, Global Hyatt filled in a major gap in its lodging portfolio in early 2005 when it acquired the AmeriSuites hotel chain from 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 competition included the Courtyard by Marriott and Hilton Garden Inn chains. At the time of the deal, there were more than 140 AmeriSuites properties. Late in 2005 Hyatt launched a plan to take AmeriSuites upscale 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.