Will Hyatt hotels continue to operate in Russia?

Will Hyatt hotels continue to operate in Russia?

Hyatt issued a humanitarian statement on the situation on its website late last week, noting that the company is “heartbroken by the devastation unfolding in Ukraine and the growing tragedies resulting from military actions, casualties of life and the dislocation of hundreds of thousands of people”. . Our immediate focus is the safety and well-being of our colleagues and guests in Ukraine and neighboring countries who are facing these unconscionable challenges.”

Responding to questions from Crain’s this week about whether the company would continue to have a presence in Russia, a Hyatt spokesperson did not address the issue, instead reiterating the sentiment of the initial statement and confirming its imprint. relatively weak in the country: Hyatt operates… and does not own five hotels in Russia, including the luxury hotel Ararat Park Hyatt in Moscow.

But with every well-known American brand moving away from Russia, the pressure is mounting on Hyatt and its competitors to weigh the implications of following suit and cutting business there against the backlash they could face if they weren’t doing it.

It’s a tricky calculation for Hyatt, says Scott Antel, a hotel industry lawyer who lived in Russia for 22 years until 2015 and continues to consult with Russian hotel investors in the country. On the one hand, no hotel company wants the optics of being affiliated with the aggressor in an unprovoked war, the same reason why other major brands have closed their Russian operations, even at the expense of big lines of income. Hyatt could walk away sacrificing only the fees it receives from hotel owners, at least in the short term.

But the removal of a name and management department from a hotel also impacts hundreds of employees Hyatt has helped train, who could then find themselves without jobs. They and future guests may have ill will towards the brand, which could make it difficult for Hyatt to resume operations in the country.

“People remember these things. It’s just not good,” said Antel, who now lives in Dubai and is a member of the International Society of Hospitality Consultants. “Customer goodwill takes a long time to rebuild.”

It is unclear who owns Hyatt hotels in Russia, although Antel said the vast majority of hotels in the country are owned by various Russian investors and entities. If any of the owners are hit with U.S. sanctions, Hyatt will abruptly pull out of the country to avoid home sanctions, he said.

Hotel analyst Michael Bellisario of Robert W. Baird said he was surprised that major hotel brands have said little publicly about the Russian-Ukrainian situation, while other major global brands have taken bolder steps. One possible explanation is that Hyatt and other hotel brands may not be able to terminate or breach management contracts without substantial financial penalties and may negotiate with their owner partners on next steps.

“How can you, the franchisor (like Hyatt), appease an owner who might not want to close the hotel? There’s a profit impact there,” Bellisario said.

For now, the Hyatt (backed by the Pritzker family) and its competitors are minimizing the impact of the Russian invasion on their business.

Speaking at the Raymond James Institutional Investors Conference in Orlando today, Hyatt Chief Financial Officer Joan Bottarini said the company was monitoring the Russian-Ukrainian situation “very closely” but “we haven’t seen any significant impact”.

Marriott International CEO Tony Capuano said yesterday at the JPMorgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas that the company has 28 managed and franchised hotels in Russia, which collectively account for less than 1% of total revenue. she shoots fresh. Russian travellers, he said, also make up less than 1% of all hotel room bookings per night globally.

“We are very focused on the safety of our associates and the safety of our guests in these markets. But from a materiality perspective in terms of the company’s financial performance, (it’s) not particularly significant,” Capuano said of Russia.

As to whether the invasion will impact the hospitality industry in Europe as a whole, Capuano said it was too early to tell. “The recovery around the world has been largely driven by traveler confidence. And depending on how the situation in Ukraine develops, could that have an impact on traveler confidence in Europe? Of course.”

Shares of Hyatt closed today at just under $85 apiece, about the same level as the company’s stock price a year ago but down 11% since the start of the year.