CHICAGO–In a move that has raised a few eyebrows in the hospitality community, Hyatt Hotels Corp. announced last month the company filed papers for a potential $1.15 billion initial public offering.
Hyatt, based in Chicago, operates more than 400 properties on five continents under the Hyatt, Park Hyatt, Andaz, Grand Hyatt, Hyatt Regency, Hyatt Place and Hyatt Summerfield Suites flags. According to filings with the SEC, the company posted 2008 revenue of $3.8 billion and net income of $168 million. For the first six months of 2009, Hyatt saw revenue of $1.6 billion and a net loss of $36 million. As of June 30, Hyatt had total debt of $612 million and cash equivalents of $968 million. The filing stated the company has a borrowing capacity of $1.4 billion.
According to an official statement, the company intends to use the proceeds for working capital and to acquire or invest in new properties. Hyatt spokeswoman Farley Kern declined to comment on the IPO, stating legal reasons.
Plans call for Hyatt shares to list on the New York Stock Exchange under the symbol “H.” The number of shares to be offered has not been determined, nor has the IPO date. New shareholders will own Class A stock, while Hyatt’s current owners—chiefly the Pritzker family, which owns 85 percent of the company—will receive an unknown amount of Class B stock. Class B stock will have 10 votes per share, versus 1 vote per share for Class A, indicating that current ownership will have a large say in the company’s future direction.
According to Stephen Hennis, managing director, Hospitium, the timing isn’t great.
“Despite all the speculation over the past several years that Hyatt was planning an eventual IPO, I would have thought that those driving the IPO would have more patience to wait until lodging industry fundamentals look better,” Hennis said.
The timing may be related to past Pritzker family issues, which have sent several family members to court, as new generations of founder Jay Pritzker’s family waged public battles for shares. Some industry analysts have speculated the IPO is simply a way for members of the Pritzker family to cash out if they so desire.
“It appears that the IPO is being driven by members of the Pritzker family who wish to liquidate their interests in Hyatt,” Hennis said. “I doubt that the IPO will change Hyatt’s vision over the next several years, as the company management will remain intact and the Pritzkers will still maintain control of the company.”
In 1962, the company went public as a hotel management and ownership company, and by 1982, the Pritzkers had taken all aspects of the company private. In 2001, speculations arose surrounding a possible Hyatt IPO when the company formulated a plan to divide the business among Jay Pritzker’s heirs over a 10-year period.
Leslie Ng, CIO of Interstate Hotels and Resorts, said the timing will not matter much.
“In my experience with Hyatt, they have always taken a long-term view of the business, so the ups and downs of the capital markets are probably less critical to them,” Ng said. “With a long-term view, sustainability and long-term growth will drive the long-term success of the company.”
Mitesh Shah, senior managing principal and CEO of Noble Investment Group, thought the timing could be good for Hyatt.
“There is growing consensus within those in the investment management space that the public markets could in fact be the most efficient capital over the near term,” Shah said. “Based on a few recent successful IPOs, this could turn out to be the ideal time for Hyatt to enter into the public markets.”
Noble has interests in 12 Hyatt properties around the country; most of them are Hyatt Places.
Ng said he does not foresee any changes in his company’s interaction with Hyatt. Interstate currently manages four Hyatt Place properties in Texas.
Hyatt “has always had solid operating and business development teams behind their brands. I … expect an acceleration of their growth plans into emerging markets, such as China and India ... and [a focus on] emerging brands, including Hyatt Place, Summerfield and Andaz,” he said.
What’s next?
Some speculate the timing is interesting for another reason—the possibility of Hilton’s rumored breakup may allow Hyatt to buy pieces that mesh with its current stable.
“They may utilize some funds for acquisitions, perhaps some of the distressed assets coming to market or other brands,” Hennis said. “If the Hilton rumors are true, some of their brands may fit into Hyatt’s portfolio nicely.”
Shah is optimistic about the future for Hyatt as a public company.
“Hyatt has a long and established track record as a very successful lodging organization,” he said. “The organization has the unique DNA of a strong operator and the expertise of a strategic real estate investor. That combination has proven to add value in all parts of economic cycles. Given Hyatt’s large, untapped, distribution opportunities—driven by franchise growth and scalable brands—I believe the public markets will find the opportunity to invest in such a platform quite compelling.”
