Ron Barons Comments on Hyatt Hotels Corporation
Early in Mark's career, Jay Pritzker, Tom's dad and the founder of that organization, asked Mark to take part in a meeting between Sam Zell, who at the time was Itel Corporation's Chairman, and Jay. Soon after that meeting began, Mark hesitantly asked Sam a pointed question. After Sam answered, Jay asked Mark to leave the room.About an hour later, after Jay's meeting with Sam had ended, Jay called Mark and asked him to come back. When Mark returned to Jay's office, he apologized for asking what he thought was a dumb and embarrassing question. Jay responded with what Mark still considers the most valuable business advice of his career, "There is no such thing as a dumb question." Jay explained that because Sam's answer to Mark's question was so contrary to what he had expected, it enabled Jay to invest in Itel at an exceptionally attractive price. This was since Jay believed Itel needed the proceeds from a Pritzker investment to unwind a disadvantageous deal that Sam had made previously with Michael Dingman.
After working for the Pritzker family for more than seventeen years, Mark clearly understood the culture of that family's organization. It was not surprising, as a result, that in 2006 Mark was appointed Hyatt Hotel Corp.'s CEO. This was although the talented executive had no prior direct hotel operating experience. "Not growing up in the hotel business was a huge advantage," Mark explained. It enabled him to travel for almost nine months meeting the managers of the geographically diverse, 483 unit, Hyatt Hotel chain and ask them what were "ostensibly dumb questions." He obviously learned that early lesson from Jay well that "there is no such thing as a dumb question."
Hyatt Hotel's managers' answers to Mark's questions have enabled him to create competitive advantage for Hyatt by offering its guests difficult to replicate services. They have even created a sub-brand, Andaz, which in the Tibetan language means, "as you like it"…and just as clearly reflects the Hyatt culture. Hotels have become a mature and cyclical business in the United States. Hyatt, with the best balance sheet in its industry and a significantly smaller "footprint" than its competitors Hilton, Marriot and Starwood, has grown its units by about 25% since Mark was appointed CEO. About 40% of the new Hyatt hotels are managed properties located in India and China. India and China are clearly hotel growth markets since each nation has a small fraction of the hotel rooms in America. This is although both countries have about four times the population of our country. Mark's efforts are also having an impact on the company's core business customers. His efforts to train his staff to provide "as you like it" services to their guests are beginning to receive very favorable reviews from its business guests and increase their lengths of stay. This is quite important to the chain's profitability since it will cost them less to put "heads in beds."
From Ron Baron's second quarter 2013 commentary.