Hyatt: Quite A Housecleaning

Are the Pritzkers getting set to take their sprawling empire public?

With his family racked by dissension for the past five years, Hyatt hotels Chief Thomas J. Pritzker hasn't always found it easy to focus on running his Chicago-based hotel empire. While rivals such as Hilton Hotels Corp. (HLT ) and Marriott International Inc. (MAR ) haverushed into fast-growing markets, such as modestly priced suites hotels, Pritzker stayed on the sidelines. Instead, he insisted on sticking with the slower-growth upscale and luxury-resort market. Much of his energy also went into trying to placate a dozen restless relatives, some of whom are unhappy with Pritzker's management of the $15 billion family empire.

Now, however, the 54-year-old dealmaker -- the fourth-generation Pritzker to oversee the privately held business -- may be regaining his stride. For starters, he's taking the tony $6-billion-a-year Hyatt chain in a new direction. On Dec. 9, he was expected to announce an acquisition of the $300 million-a-year, 143-hotel AmeriSuites chain. Just as important, he's reorganizing the company and renaming it Global Hyatt. The move could ease the way toward taking Hyatt public -- probably the key to resolving the family feud.

NOT QUITE SO SPIFFY

The deal for AmeriSuites, which industry insiders believe will cost Hyatt some $600 million to $700 million, will move the full-service, 214-hotel chain into the so-called limited-service arena, where hotels are generally cheaper and lack such amenities as fancy restaurants. AmeriSuites will soon sport the Hyatt name, much as Courtyard by Marriott uses its parent company's name. As part of the deal, Hyatt will also pick up management contracts for a dozen more hotels -- operating under the Prime Hotels name -- which have about $55 million in sales every year.

Certainly, it's a move in the right direction. AmeriSuites' real estate alone was valued in 2002 at $556 million by a CIBC analyst. Although some of its hotel properties are in need of upgrading, for the most part they are relatively young hostelries. Nevertheless, Hyatt, which is buying AmeriSuites from the Blackstone Group, is coming late to the all-suites market, a vein that has already been well mined by competitors.

The bigger news may well be that Pritzker says Hyatt's reorganization "is consistent with" going public. Although no decisions have been made, he and his fractious relatives appear to be moving toward that eventual option. For two years, Pritzker has worked to shift non-hotel businesses out from under the Hyatt management umbrella. Now he's uniting his once-separate international and domestic Hyatt management teams in a gleaming new 49-story tower, the Hyatt Center, developed in Chicago's financial district by Pritzker's cousin, Penny S. Pritzker.

Clearly, the changes are designed to please Wall Street. "What we have ended up with is a platform from which we can drive growth and shareholder value," says Pritzker. Execs say consolidated financial reporting will make the activities of Global Hyatt more understandable to the financial community. That will give the company access to "cost-effective financing" for current business and future deals, they say.

Just how a publicly traded Hyatt would fare, though, is difficult to say. It would be only the 10th-largest hotel chain in terms of the number of rooms owned. Although the brand would be a big asset, the company would be under intense pressure to grow. Pritzker may invest over $1 billion in Global Hyatt to realize his lofty ambitions. Already, Hyatt has 27 new hotels under development in 15 countries, ranging from Vietnam to Dubai. Pritzker has recently been busy with new hotel projects in nine Chinese locales, ranging from Beijing and Macau to Nanjing and Shanghai. He wants to make Hyatt one of the biggest hotel chains in China.

Nor is Pritzker out of the woods with his family yet. His cousins, Liesel and Matthew, are pressing ahead with a lawsuit against the Hyatt chief and other Pritzkers -- including their own father, Robert A. Pritzker -- for a bigger share of the family fortune. And resentments still linger among some relatives, stemming from late patriarch Jay Pritzker's decision to give Thomas, his son, leadership of the family fortune. While the Hyatt chief may yet make his quarrelsome family happier, that's likely only if his new moves fatten their inheritance even more.

By Joseph Weber in Chicago

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