That’s the clear signal being sent by Chicago-based global hotel giant Hyatt, which on Aug. 16 unveiled plans to buy KKR-backed resort operator Apple Leisure Group for $2.7 billion in cash—an amount that Crain’s Danny Ecker notes this week is equivalent to more than a third of Hyatt’s current market cap.
You might know Apple Leisure Group from its splashy ads touting budget-friendly Funjet and last-minute Apple Vacations packages to sunny beach destinations like Acapulco, Nassau and Honolulu, though the company also has operations in Europe, Asia, Australia, Africa and the Middle East and partners with airlines including United and Southwest to offer vacation packages. Apple Leisure’s colorful world is one populated by images of smiling families holding hands while jumping into aqua-blue swimming pools, teenagers slipping down water slides, swimsuit-clad lovers strolling the beach at sunset and offers of “instant savings,” “limited-time deals,” “kids stay FREE” discounts and “hot Hot HOT” exclusive perks.
In other words, a far cry from the “put it on the corporate AmEx” scene at the traditional Hyatt hotel.
Hyatt could hardly be blamed for wanting to diversify at a time like this. Its high-end, midweek travel-heavy portfolio “is suffering probably the worst” from the pandemic among various hotel types, as one hotel-industry analyst tells Crain’s this week. Sluggish corporate demand contributed to Hyatt’s $9 million net loss in the second quarter. As Ecker notes, that was a significant improvement from the pandemic-gutted second quarter of 2020, when its net loss was $236 million, but it’s still far behind the $86 million of net income the company generated during the same period in 2019.
Hyatt’s decision to put a huge pile of its chips on the realm of flip-flops, zip lines and all-you-can-eat shrimp buffets means one of the most savvy players in the hospitality sector believes the pandemic may have permanently altered the travel industry landscape. That insight has profound implications for Chicago—and not just for those who happen to hold Hyatt stock.
Chicago is one of the key convention and trade show hubs of the nation, a distinction that fuels a diverse hospitality economy spanning from our airports to cabbies and Uber drivers to the restaurants, museums, nightclubs and theatrical venues that entertain attendees while they’re here.
Everyone even remotely connected to the hospitality industry has been looking for clues of a business travel rebound. Even if the delta variant hadn’t spoiled what once promised to be a relatively COVID-free summer and reignited qualms about in-person meetings, there’s reason to believe workers and managers alike have discovered and appreciate the convenience and economy of remote meetings via Zoom. Why pay for staffers to fly to the home office in Wahoo, Nebraska, when Wahoo is now only a click away?
If Hyatt’s read of the situation is right, Americans won’t be traveling to do business with anything like the frequency we once did even after COVID is only a memory. As a result, Hyatt is pivoting. And that means the rest of Chicago is likely to have to pivot, too. Everyone with a stake in the travel economy here—including the mayor, the governor and their tourism teams—is going to have to think creatively about ways to replace business-travel dollars with leisure-travel dollars.
That may mean rethinking certain investments in infrastructure. Mayor Lori Lightfoot, in particular, has her work cut out for her on this front. McCormick Place, for one, presents a challenge. What is the plan for getting the most out of this gigantic convention space in a future where business travel is significantly off? Adjusting to the coming reality most certainly also means getting a grip on the city’s crime problem, one that plagues people who live here year-round but also chills interest in visiting this otherwise alluring city. It’s one thing to book a trip to Chicago if the boss is sending you; it’s another to choose to come here if you’re looking for an enjoyable vacation in a lively, engaging—and safe—place.
Take a cue from Hyatt, Chicago. The time to start preparing for the post-COVID future is now.