Hyatt CEO Mark Hoplamazian on travel's trendiest buzzword: 'experiences'

Hyatt is expanding. In the traditional sense, yes, as the Chicago-based hotel chain recently announced plans to open 200 more locations in the Americas by 2022, for a total of roughly 775 properties in the region. But the chain is also trying to expand customers’ perception of its scope, by getting guests to see it as a company that does more than just provide a place to stay.

Hyatt and other hotel companies are increasingly offering experiences for guests that stretch beyond dinners in the lobby restaurants. How about, instead, a local culinary history walking tour? Or an espresso-making workshop from an Italian barista? Or, in Hyatt CEO Mark Hoplamazian’s case, a bonsai-trimming class from a professional horticulture expert.

Hoplamazian and I took this class together in New York last fall, when I interviewed him for a story about Airbnb and its push into travel activities and excursions. Hoplamazian offered the lowdown on Hyatt’s take on the same product, which is organized under the banner of “Find Experiences,” of which the bonsai class was an example. In contrast to Airbnb’s marketplace, which is open to anyone and covers a wide variety of activities, Hyatt’s experiences are offered only to members of the World of Hyatt loyalty program, and are centered on health and wellness.

The tours and activities market is expected to generate $183 billion in revenue in 2020, according to estimates by travel research firm Phocuswright, and remains a fractured and largely offline business. Travel companies like Airbnb, Expedia, and Booking.com are trying to capitalize on the opportunity, but hotels like Hyatt are pursuing the strategy as well.

On Wednesday, Hyatt reported better-than-expected earnings in its fourth quarter, but still posted only modest revenue growth in 2019. As a relatively new segment, Experiences could help the company achieve bigger growth going forward.

The following Q&A is from an October interview in New York City, and it has been edited and condensed for clarity.

FORTUNE: Where did the initial idea for centering your offered experiences around wellbeing come from?

Hoplamazian: It started several years ago. It was an insight that more and more of our customers, which tend to be higher-end customers, they’re spending more time and money and focus on their own holistic wellbeing. It’s not merely focused any longer in the fitness element of it, which when you say wellness to someone, they immediate think fitness.

So, we thought, we’ve got to get our own game into a much higher creative expertise. When we developed our digital platform, which we call Find, it was all derived through that lens, which was it has to be real and authentic. A lot of our offerings are actually our own colleagues in our hotels who are doing things. Which is super cool, I love that because that’s a way for them to express themselves and to be living out loud so to speak and impacting and connecting with more guests. And we thought that we should not limit this to things that we own. So we bought [spa companies] Miraval and Exhale to learn and to really have the opportunity to deliver very impactful experiences.

How does Hyatt view its experiences program? Is it something that is an essential part of the business, or arguably its own business entirely?

It’s another dimension in which we can fulfill our purpose, and also create a greater sense of fulfillment and loyalty from our guest base. And it’s loyalty derived from meaningfulness of the experiences that people have, not from being a prisoner of the points program of World of Hyatt. Two really different things.

When we launched World of Hyatt, we said we want to design this so that of course we’ll have a points program, because that’s sort of the currency base. But the intent of the program was really to engage the platform, to elevate the frequency and the relevancy of the things that our guests were finding through Hyatt so that they would have more connections to the brand. And that is what leads to loyalty, that is in turn what leads to frankly a much better customer base for our hotels, and elevates our performance in our hotels. So there’s a direct and clear linkage between fulfilling purpose and performance. And I think that connectivity is really important, because we are a business, and we need to pay attention to the outcomes.

What were your thoughts when you first saw Airbnb getting into the business of experiences?

I had two different thoughts. One was in the same way when Airbnb first launched. I thought the idea of connecting with a couple whose house you were going to stay in or a person whose house you were staying in and make a human connection was so powerful. At a human level, I think unfortunately over time that dissipated, because in many instances you’re not actually renting a house from a person anymore, it’s a corporation that owns tens or hundreds of apartments that are on the platform.

The experiences platform likewise initially I thought, that’s kind of cool, like you’ve got hosts that you’re enlisting to go and practice what they do. I can’t say how that’s evolved and whether that lends a level of authenticity and whether the host community’s actually still the primary provider. I doubt it because when you look at the number of experiences that they’re now offering which is vast, it’s hard to imagine that it’s all host driven. So I looked at it and I said okay, I like the ethos of it, the concept of it. Can you execute it and scale it the way they’re talking about?

In the vein of Airbnb’s open experiences marketplace, would you ever consider opening up Hyatt’s experiences to everyday people who do not have a World of Hyatt membership?

At this point we really have framed it in the context of World of Hyatt and believe that there are great benefits to membership and there’s no downside. So I guess what I would say is we would encourage people to sign up and leave it to them to explore other things. But that would be their vehicle to be able to have those experiences.

I think it’s something that we probably should consider over time as we grow the platform. So far it’s really been really focused on making sure that we are driving the areas that we focus on from what our own members are telling us and what our guests are telling us.

There are all sorts of competitors in the experiences space—Airbnb, Expedia, Booking.com, other hotels. Where does everyone fit into that? Is there a point where this has to consolidate, or do you see the industry remaining fragmented?

I think there’s a good reason for it to remain fragmented, and that is that there’s diversity in different types of things that people are practicing and different desires that different types of people have when they go traveling. So I would say that there’s probably a good rationale for it to remain distributed in terms of the providers. Now, how do you maintain relevancy and your value delivery as a brand? That’s the key issue.

We’ve got to make sure that thematically and quality-wise and authenticity-wise, we’re delivering something that’s got real value for those who are experiencing the things that we offer. And that’s going to I think define the brand over time. And I think that the proliferation and the seal of approval by seeing the Hyatt brand name associated with something matters. Because we’ve got a lot at stake. If you’re assuring that it will stand for quality and authenticity, I think that’s going to actually be one way to differentiate.

Hyatt CEO Mark Hoplamazian on travel’s trendiest buzzword: ‘experiences’

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