Hyatt Hotels forecasts 'sustained' travel demand throughout 2023, CEO says

Hyatt Hotels CEO Mark Hoplamazian joins Yahoo Finance Live to discuss the company's investor day, leisure demand, business travel, and AI's applications in travel.

Video Transcript

- Hyatt Hotels holding its investor day today. Now the company focusing on returning capital to shareholders by reinstating its quarterly dividend and raising a share buyback to 1 and 1/2 billion for 2023. Joining us now is Mark Hoplamazian, Hyatt Hotel's CEO. Mark, it's great to see you again. Here's a-- first, just give us a sense of the demand that you're seeing now and why today was the right time to reinstate our dividend?

MARK HOPLAMAZIAN: Well, Seana, it's great to be with you. And I'm joining you by the way, from the beautiful Impression by Secrets and Secrets Moxché resort in Riviera Maya, just North of--

- It does look beautiful there, Mark. I'm jealous of your backdrop, I got to say.

MARK HOPLAMAZIAN: Well, come and visit soon. But this is where we held our investor day, as you just said. And the fact is that this recovery has been primarily leisure led. But we're seeing steady demand increase in business travel and even more impressively, in group demand, that is for larger groups, especially for corporations. And we're seeing really fantastic pacing for group bookings into next year.

So things are clicking well across our key segments and across the globe. China is recovering, as well. So we feel that this is-- we're gaining more visibility further into the future with forward bookings. And we feel very confident in our cash flow generation. And so this was the right time to start returning more capital to shareholders.

- Mark, It's an interesting contrast to some other names that we have heard in the travel space. Airbnb, just a few days ago, saying that they're starting to see travelers be a little more cost conscious. As you point out, you compete on the higher end. What are you seeing on that front in terms of how they're looking at the summer travel season, even given inflation?

MARK HOPLAMAZIAN: Well, I would say that our demand has been sustained. And you're right, we do serve the higher end traveler. And so I wouldn't extrapolate what we're experiencing across the entire industry. I would also say that I'm actually sitting in one of our top tier of luxury in our inclusive portfolio, which is the Impression by Secret's brand. So we-- the all-inclusive experience is actually at the other end of the spectrum from what Airbnb provides. So I think it's a very different value proposition for and experience for travelers.

And more and more people want the certainty and the predictability with respect to what you pay for the all-inclusive holiday experience. So we're seeing great demand in the all-inclusive resort category and in our resorts, generally speaking. So yes, we see we see sustained demand into the future.

- Mark, so certainly the leisure traveler has been very, very strong. And that's been the case across the board. What about the business traveler? Because I was looking at your most recent results here. You're seeing about 85% of the levels that you saw pre-pandemic. Do you think we'll get back to 100%?

MARK HOPLAMAZIAN: I do. Business travel has changed a bit in terms of purpose of visit. So what used to be strictly transient trips, like individual travelers traveling by themselves, in some cases has turned into groups of people from a given company traveling together. So that would be treated as a group, not a transient trip. So the line between transient and group has blurred a bit. So I think of it as commercial demand. Like, demand from corporations and from associations who are holding meetings. And I think that overall, what we will see is a full return of business travel, broadly defined.

What I would also say is that the-- the quarter got better and better. So we did end the first quarter at about 85% of pre-pandemic levels, but it improved to the low 90s by April. So it continues to improve, month over month. And we're seeing that momentum ahead.

- You know, the group travel within business travelers, we've also heard from companies themselves saying that they've learned over the years that you don't necessarily need to travel as often when they're talking about business travel, specifically. To what extent are you able to make up some of that slack with those leisure travelers you alluded to earlier?

MARK HOPLAMAZIAN: Actually what you described is exactly what has happened. Leisure demand has filled in and has-- we are well overindexed, I would say, in leisure. So we've seen leisure demand grow at a much faster pace than business travel. And overall, we are running ahead of 2019 levels as a whole company. And a lot of that has to do with the fact that we are serving more leisure guests in these days than we were back in 2019.

So that substitution has occurred. It's also true that the shoulder periods in the week, which are Thursday night and Sunday night, which historically, have always been the weakest nights for occupancy have recovered much better than the midweek days of Monday night, Tuesday night, Wednesday night. And a lot of that has to do with the fact that a lot more people are taking long weekends and doing work and also taking a break and having a vacation at the same time.

- Mark, I was at Goldman's industrial conference yesterday and there was a massive topic it seemed like almost every single conversation I was having-- that I had yesterday also involved AI. How do you see or do you see AI playing into your business and what does the timeline look like for that?

MARK HOPLAMAZIAN: Well, AI is certainly playing a role in travel. First and foremost, in travel distribution. I think the opportunity to allow individual guests to customize their searches based on their desires and certain keywords is significant. And we are already experimenting. We are taking it slowly because in some of the applications that we have in mind, there's-- data that would be important to provide and to churn through and we still need to understand the environment in which that's going to happen in a protected way.

So I do think that there are many, many applications and some of that has to do with the way in which we actually go to market. I'll give you a very funny example though. We just launched a new brand called Hyatt Studios. And we just use ChatGPT. And we said, if we were-- if Hyatt were launching a new brand and we described what the brand was, what color would the logo be? What color would be featured in the logo? And what it did was evaluate all the other logos that we have in our portfolio. They recommended a very specific shade of blue. In parallel, our agency selected that same exact shade of blue as their number one recommendation, complete coincidence, but fascinating, right?

- And did you guys go with it?

MARK HOPLAMAZIAN: We did. Actually the new logo, the core dark blue color that's in that logo is the same color. that ChatGPT recommended to us. So in some ways, we were just having fun. We were just having fun to say, OK, what would it say? And-- and lo and behold, our agency came up with the same color. So I think there are going to be many fun applications as well. That's just one example.

- Certainly. And it also sounds like it could save you maybe a little bit of money on agency fees then going forward if it's able to make some of those critical decisions.

MARK HOPLAMAZIAN: Yeah, maybe. The agency does some other things for us. So I think that's not going to be a complete substitute.

- All right, Mark. Mark Hoplamazian, the CEO of Hyatt Hotels. Thanks so much for joining us, really appreciate it.