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Business travel is taking flight again: Hyatt CEO

Business people are hitting the road again, as companies are back to sponsoring retreats for top performers, and ambitious professionals flock to trade-group conventions.

So says Mark Hoplamazian, chief executive of Hyatt Hotels Corp. (H), where demand from business groups has picked up nicely in recent months, packing the banquet halls and conference rooms at many of the chain’s 554 hotels across the world.

Lodging has recovered strongly from the depths of the Great Recession, when a nasty business retrenchment and collapse in consumer travel meant high vacancy rates and aggressive price-cutting by hotel owners.

The first wave of the recovery was driven by “transient” guests – defined as those traveling for leisure or for short individual stays. Now the so-called “group” business, an important element of Hyatt’s financial performance, is beginning to strengthen.

In the attached video, Hoplamazian says: “Over the last four quarters, that business has started to show acceleration.” He added that room demand in its China properties has stabilized in recent months, after a tough 2013, when a severe curtailment of travel by government workers and state-related companies hit hard.

The business-group business usually lags behind individual-travel demand in an economic recovery, but this cycle the rebound was even more subdued thanks to an abiding conservatism by corporate management teams and generally slow global growth.

Investors haven’t fretted over this, though, crowding into hotel stocks in general and Hyatt with particular eagerness. Shares of the Chicago-based company are up 70% over the past two years, slightly more than peers Marriott International Inc. (MAR) and Starwood Hotels & Resorts Worldwide Inc. (HOT).

Wall Street likes Hyatt’s ample exposure to upscale urban and resort hotels, measured expansion program and Hoplamazian’s clearly articulated strategy of recycling capital among owned, leased and managed properties.

He has opportunistically sold some long-held properties and then continued to manage them, while acquiring others for the purpose of renovating and managing them better to augment profitability. Profit margins are up nicely in the past few years, and last year company cash flow was up 68% over trough 2009 levels.

Hyatt for decades was part of the sprawling business empire of Chicago’s Pritzker family, which Hoplamazian served in a variety of financial-management capacities dating to the 1990s. As the Pritzker Organization prepared Hyatt for an initial public offering, Hoplamazian was selected to run it.

Hyatt went public in November 2009, and the stock is up 118% since then, compared to an 80% gain for the Standard & Poor’s 500 index.

While more than half of Hyatt’s hotels are in the U.S., it has valuable exposure across what Hoplamazian calls “global gateway cities” – marquee urban accommodations for affluent travelers and international business executives. They tend to become adherents to and ambassadors for the Hyatt brand, which spans the luxury Park Hyatt, Andaz and Grand Hyatt lines; the "upper upscale" Hyatt Regency; and "select service" Hyatt Place and Hyatt House chains.

The interview with Hoplamazian took place in a model guest suite at the Park Hyatt New York, a high-end hotel that will occupy 25 floors of the ballyhooed One57, a 90-story luxury condominium tower now nearing completion. Apartments located above the hotel floors in the building, with extraordinary views of Central Park, have sold for more than $30 million each, and the residential units are 75% sold out.

“We’ve built what we planned to be the best luxury hotel in the segment that we’re serving in New York,” Hoplamazian says. “That seems like a very broad claim to make or a broad aspirational goal to set, but that’s really what we set out to do.”

The first guests will check in late this summer to test whether Hyatt’s ambition has been realized.

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