Hyatt pushes Asia expansion, cautious in short term

Friday, 14 October 2011 03:46 - - {{hitsCtrl.values.hits}}

HONG KONG (Reuters): Hyatt Hotels Corp is bullish on China’s long-term growth prospects after signing 11 management deals for new hotels to open in the next two years, but remains cautious in the near term because of the risk of oversupply and fluctuations in the country’s capital market, an executive said on Wednesday.

Stephen Haggerty, Global Head of Real Estate and Development, said Hyatt’s newly announced deals would not be delayed despite global economic headwinds and tight credit availability in China, but added that future projects may slow or be delayed.

“Short term, there are fluctuations. The government is certainly mindful of the real estate bubble and pricing and will take action to alleviate that,” Haggerty told Reuters in an interview.

Hyatt, whose brands include Park Hyatt, Grand Hyatt and Andaz, is working with partners including China Resources Land Ltd and Sun Hung Kai Properties Ltd to roll out its new China hotels.

The Chicago-based company said it would not put up any capital for the new properties, leaving its real estate partners to front the China investment.

“It is really our partners that are affected. Their access to capital may be limited so maybe the number of new hotels, new projects isn’t as robust as it was the prior year,” Haggerty said.

Hyatt competes with U.S. rivals Marriott International Inc , Starwood Hotels & Resorts Worldwide Inc and family-owned Carlson, which through its Rezidor Hotel Group AB subsidiary owns brands including Radisson and Park Plaza, in the increasingly competitive Asian hospitality sector.

As expectations of Asian growth remain strong, major hotel chains have stepped up expansion plans in the region, trying to capture brand loyalty in some of the world’s fastest growing economies.

Short-term risks of oversupply are an issue when building new hotels in China, where average room rates are lower than in other countries, but this would be mitigated by China’s underlying growth, said Haggerty.

“If there is an abrupt halt to access of development capital you can see a much shorter recovery in rate or pricing power,” he said, adding that short-term shocks and fluctuations in capital markets and the ability of developers to access capital and build were not likely to persist.

“If it does, operating fundamentals will improve. That kind of correction isn’t a bad thing in markets such as Shanghai and Beijing.”

Hubert Joly, Chief Executive of Hotel, Restaurant and Travel Group Carlson said on Tuesday that the company would use some of its own equity, partnering with local investors and developers to expand in key markets China and India over the next few years.

The rapid emergence of China’s travelling middle class has also led major operators such as InterContinental Hotels Group Plc and Accor SA into the market.

“It is not our goal to be the biggest hotel company, because with excessive growth how do you maintain that delivery of service and engagement with the customer?” said Haggerty, adding that Hyatt was comfortable being the smallest of the major hotel operators.

Hyatt’s new China properties include two Hyatt Place hotels, one Hyatt House in Shanghai and eight service hotels in destinations ranging from Lijiang in Yunnan province to Hefei in eastern China.