Will Hyatt’s new multi-brand resort in Las Vegas threaten its partnership with MGM?
Gary Leff at 19. March 2021.
The former Rio Las Vegas is being converted into several Hyatt buildings, the first of which will be the Hyatt Regency and should open its doors in 2023.
Full-service Hyatts in Las Vegas will be a novelty, but Hyatt isn’t telling us yet what other brands they’ll have, and none of that will happen in the next few years. So for now it is of limited interest.
What I find much more interesting is what this means for participants in the Life Rewards program at Hyatt’s MGM M. There are currently several Hyatt Place locations in Las Vegas, but for the past eight years the chain has had a codeshare agreement with MGM in the city.
Hyatt says this announcement will not affect the existing strategic loyalty alliance between Hyatt and MGM, but it will be interesting to see how this develops over time.
- Hyatt could generate revenue from its members’ stays in Las Vegas, even if they were not actually in Las Vegas. It will have its own footprint in Las Vegas, although it won’t be as large and diverse as what MGM properties in Las Vegas have to offer.
- MGM has been able to generate revenue from its members who live outside of Vegas because they are so geographically concentrated. That’s what they want to see now.
Appropriation : HoppingRabbit34 via Wikimedia Commons
MGM members receive Hyatt status and earn points toward lifetime M status when they stay at Hyatt, and MGM members receive MGM status and earn points and nights on their Hyatt account when they stay at MGM hotels.
This was a great arrangement for both, although the volumes were not public in either direction. There’s no reason why Hyatt’s announcement of competition in Las Vegas would end the relationship. But what happens if the Hyatt property is developed?
The key here will be the scope of the partnership, and that will determine what happens to the Hyatt-MGM relationship.
- If Hyatt can lure MGM’s volume to their hotels and the volume goes down, then they don’t need a relationship.
- But Hyatt still doesn’t offer as diverse an experience as MGM. They want guests to stay in their own homes, but they would still rather receive revenue from a Hyatt member staying at MGM than have that Hyatt member leave the partnership. B. at the Caesars or somewhere else.
- When Hyatt properties don’t fill up at the expected rate, Hyatt World members are pressured not to stay elsewhere by earning points and adding nights. However, the Rio project is about franchises, not the ownership or management of Hyatt properties. If there was a management contract, I’d be concerned about the minimum income Hyatt could offer to put the contract on hold. Failure to achieve a minimum income results in financial penalties for the chain and can put pressure on the partnership not to divert stays. It seems much less likely that a franchise agreement would create such a problem.
Rio has about 2,500 rooms. There are 6,800 of them at the MGM Grand alone. With this project, Hyatt will not become a major competitor to MGM in Las Vegas, and it will be several years before the project is fully operational. So it’s not a threat to the World Hyatt partnership… yet.
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