Hyatt Corporation

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Hyatt Corporation

200 West Madison Avenue
Chicago, Illinois 60606
U.S.A.
(312) 750-8023
Fax: (312) 750-8550

Private Company
Incorporated: 1957 as Hyatt Hotels Corporation
Employees: 50,000
Sales: $2.40 billion

Owned, operated, and privately held by the Pritzker family of Chicago, the Hyatt hotels are a worldwide chain that has made business travelers and the development of spectacular “fantasy” properties its niche. The two most important historical events associated with the Hyatt Hotel chain are the development of its trademark high-rise atrium lobbies, first pioneered at Peachtree Plaza in Atlanta in 1967, and the collapse of the sky walk at the Kansas City, Missouri, Hyatt in 1981.

The Pritzker family built the company as a result of the “favored customer” rapport between First National Bank of Chicago, which was eager to lend the fledgling company money, and father Abraham Nicholas (A.N.) Pritzker, as well as the teamwork of his sons Jay, Robert, and Donald, according to an in-depth portrait of the deliberately low-profile family in Fortune April 25, 1988. Jay graduated from Northwestern University at 18, and completed a law degree at Northwestern while concurrently serving in the navy, based at Glenview Naval Air Station, following his service as a flight instructor during World War II. After serving in Washington, D.C., with the federal agency that ran foreign-owned companies whose assets had been seized during the war, Jay went into business for himself, buying a lumber and plywood operation in Eugene, Oregon.

In 1953 Robert Pritzker, an industrial engineer, took over management of Colson Company, his brother Jay’s recently acquired small manufacturing company in Elyria, Ohio, and successfully restructured the ailing company within a short time. Their brother, Donald Pritzker, joined them in their management company Pritzker & Pritzker (P & P) when he finished law school in 1959.

In 1957 Jay Pritzker bought a small airport motel in Los Angeles named “Hyatt House” after its original owner, Hyatt von Dehn. Within four years, Jay expanded the single property into a chain of six hotels and made Donald manager of operations, reporting to Jay. According to Fortune, Don “had a captivating smile, an uproarious laugh, and a wit that would show up a stand-up comedian.” Don died in 1972 at the age of 39 of a heart attack, and Hugh M. Friend Jr., Jay’s brother-in-law, became president.

Hyatt’s great success during the years 1957–1967 was attributable to the deal-making skills of Jay, the managerial ability and personality of Don, and to its interest in innovative hotel design. In 1967, a watershed year in Hyatt’s history, the company went public and also bought an unfinished hotel in Atlanta with an unusual atrium, designed by the architect John Portman. The Portman atrium was a 21-story interior courtyard, designed so that each hotel room entered off the high-rise open space, set off with a central glass elevator leading to all floors, and hanging green vines growing from each floor’s balcony. The overall effect was revolutionary in hotel design, because the Portman interior eliminated the impersonal hallway with rows of doors and brought an open-air congeniality, with the spin-off of greater safety, feeling of security, and warmth to the hotel interior. The Portman lobby became the hotel’s signature, and advanced the concept of public space in buildings.

Peachtree Center in Atlanta, where the hotel is located, consists of 15 buildings, more than ten million square feet. John Portman’s development had begun with converting an old building into furniture showrooms, which led him to build new, bigger buildings which became the Atlanta Merchandise Mart in 1961. The mart stimulated downtown business activity, created a rebirth of the city’s center, and brought new business. Portman then built an office tower, which helped increase demand for hotel rooms. Portman’s design failed to convince financial backers. The developers of the large hotel property were in financial trouble when the Pritzkers took over. After the Hyatt Regency opened, its occupancy rate reached 94.6%. In 1977, Hugh Friend left the company, and Jay Pritzker became president, in addition to his responsibilities as chairman and chief executive officer. The family moved Hyatt’s headquarters to Chicago, where it could oversee matters more closely. They gradually bought back the public shares of stock, and took the company private in 1979. Thomas Jay Pritzker, Jay’s son, became president in 1980.

The National Bureau of Standards called the 1981 collapse of two skywalks at the Kansas City Hyatt Regency Hotel the most devastating structural collapse ever to take place in the United States. Insurance industry experts in Insurance Review compared it to the eruption of Mount St. Helen’s. Nearly five years after the collapsed sky walk killed 114 people and injured 229, insurance carriers and the judicial system had not settled all outstanding claims. More than 2,000 lawsuits for a total of $120 million were settled between 1981 and 1986. In June 1986, 900 individuals remaining in a federal class action suit against the hotel settled all claims for $1,000 each. In August 1986 the Missouri Court of Appeals ruled on the issue of insurer liability by concluding that all insurance companies with policies on the hotel would participate in payment of damages. Hyatt was managing the hotel for Hallmark Properties, its builder. “Gross negligence and misconduct” were finally attributed to engineers Daniel Duncan, Jack Gillum, and their former company, G.C.E. International Inc., whose “hurry-up” design system caused them to be pouring concrete on one part of the building while finishing the design on the rest of the building.

Design innovation continues to set Hyatt apart, along with its top-ranked, cohesive family management teams, and the cluster of separate companies that make up the Pritzker family portfolio, all located within its headquarters at 200 West Madison or within the city block; each company has a distinct job. Pritzker & Pritzker, for example, is “actually a small investment bank whose 17 professionals serve one client,” according to Fortune’s profile. One of the few partners is Penny, Donald’s daughter, and a lawyer with Pritzker & Pritzker, who is concentrating on developing retirement housing called Classic Residence by Hyatt Corporation. Another new target for the Hyatt Hotels is the “urban villages” concept, where scaled-down versions of the Regency prototype design will be built in the urban fringe area market. For the Hyatt International subsidiary, the developer Chris Hemmeter has built elaborate “fantasy” properties in Hawaii. Hemmeter’s style is to add special effects like crashing waterfalls, grotto bars, and free-roaming peacocks. The $360 million Hyatt Regency Waikokola, which develped the concept of the fantasy resort, will have 1,244 rooms in three towers on 60 acres. The atrium of one tower will have ten small islands covered with trees and tropical birds. A seven-acre lagoon will be stocked with reef fish for snorkelers, and miniature deer will roam free on the grounds.

Hyatt has conducted futures research on business travelers according to Adam Aron, the senior vice president of marketing for Hyatt Hotels, interviewed in American Demographics for January 1990, and seeks to apply new technology to guests’ complaints on things as small as the irritation of the theft-proof coathanger to a computer-controlled check-in where the guest’s credit card will serve as the door key, bypassing the front desk altogether. In research and development Hyatt has become the industry pioneer.

Every indication from the industry suggests that Hyatt hotels will continue to innovate not only in the area of building design and business travelers services such as “mini-camp weekends” where travelers can bring family along for a reduced price, but also in its joint-venture financing. The complexity of joint ventures is made far easier because the company is private. In 1989, the Chicagoans turned Yugoslavian debt into a five-star hotel venture, when First Chicago Bank invested directly in the project, continuing its “good customer” rapport with Hyatt. This first Yugoslavian debt-equity swap was a complicated transaction: Hyatt and the bank received majority ownership in return for $10.2 million in local currency that came from conversion of a three-times restructured debt held by the bank. Yugoslavia bought back its own debt, and the bank and Hyatt reinvested their profits into a new hotel project in Yugoslavia, with the bank completing another $25 million loan to the project. According to dealmakers, the involvement of First Chicago as a principal rather than as a broker for another entity persuaded the Yugoslavian government, which holds 49% interest against Hyatt’s 51% in the venture, to participate.

Much of the strength of future joint-venture financing for the so-called “trophy properties” that are the trademark of the Hyatt Hotel chain will come from the Japanese, according to Hyatt’s Laurence Geller, interviewed in the Cornell Hotel Administration Quarterly, in May 1989; Geller was executive vice president of Hyatt Development Corporation, a separate company from the hotels, and he observed in the interview that “a cadre of lenders follows Hyatt” internationally.

Hyatt Hotels, along with Hyatt International, P&P, the Hyatt Development Corporation, Marmon Group, and the rest of the Pritzker’s portfolio will undoubtedly continue to be well-managed by a harmonious family team, all of whom are also lawyers. The impressive business acumen of the Pritzker family is exemplified by the personal asset valuation of $25,000 of A.N. Pritzker’s estate when he died at 90 in 1986. It was A.N. himself who estimated that he sheltered more than $200 million in taxes alone by setting up the family trust prior to the 1985 tax laws which negated such advantages. Over nearly four decades the quiet clan has built an estimated wealth that exceeds $3.5 billion according to Fortune’s estimate. The success of the Pritzkers as managers and their properties undoubtedly will continue to use the Hyatt’s historic image as an industry pioneer as a central part of its corporate philosophy and strategy.