Hyatt Hotels Corporation’s CEO said that the group would continue to look for “fee-based or non-real estate intensive acquisitions”.
The comments came as the group reported a 2.9% fall in full-year adjusted Ebitda to $754m, as a result of asset disposals, while forecasting net rooms growth of 6.5% to 7% this year.
Mark Hoplamazian, president & CEO, told analysts: “We are always looking for opportunities to expand what we're doing. In many cases, brands don't get started or don't evolve and expand and scale without capital put into real estate.”
Over the last two years the company has sold approximately $2.4bn of real estate at an average multiple of more than 17.5 times estimated annualised adjusted Ebitda and retained a long-term management contract for each hotel sold.
Hoplamazian said that Hyatt had no specific plans for further disposals, but that “given the nature and in some cases very unique nature of our assets, we do get approached on an unsolicited basis. And so we are in discussions, on a couple of assets right now. It's too early to say, whether and when we would execute something”. The group planned to return $400m to shareholders this year.
Hyatt reported a 13% increase in pipeline growth, taking it to approximately 45% of the current system. The existing portfolio added 90 hotels and over 19,000 rooms on a gross basis during 2019.
Hoplamazian said: “Most importantly, we continue to materially increase our presence around the world having added 35 new markets in 2019 alone through both new hotel openings and conversions and that excludes the over 140 new markets we added through a significant expansion of our collaboration with Small Luxury Hotels.”
Hyatt reported revpar up 0.7% for the year and down 0.5% for the fourth quarter, as a result of the shift in timing of the Jewish holidays. Looking to the full year, adjusted Ebitda was expected to be approximately $760m to $780m, with system-wide revpar growth expected to be in the range between a drop of 0.5% and growth of 1.5%.
CFO Joan Bottarini said: “We continue to expect revpar growth in the US to be a bit lower than revpar growth internationally. And expect select-service revpar growth in the US to lag full-service growth.”
Commenting on the impact of the coronavirus outbreak, the company has closed 26 of its hotels in Greater China and said that many others remained open but running at “very low occupancies”. Bottarini said: “There is no question there will be an impact to our results, but it's simply too early to reasonably quantify what the full year impact to our business in 2020 might be.”
In Asia Pacific overall, excluding Greater China, month-to-date February occupancy was down 32% given the outbound travel and the general restrictions that were in place.
The proportion of Hyatt’s consolidated base incentive and franchise fees coming from Asia Pacific was approximately 22% for the full year, with 11% in Greater China.
The group estimated that for every one point of decline in Greater China revpar, the impact to consolidated adjusted Ebitda would be in the range of $1m to $2m. With respect to net room’s growth guidance, it was, the CFO said, too early to assess the full impact the outbreak may have on construction progress in Greater China this year.
She added: “What I can tell you is that the majority of our Greater China openings were originally planned for the first half of the year, which provides some cushion but we do have a few hotels scheduled to open later in the year, which could have a negative impact of 30 to 40 basis points on our full year net rooms growth guidance should construction delays of up to three months occur in those markets.”
Hoplamazian concluded: “We’ve operated in Asia Pacific for over 50 years, and we're confident that our brand strength which allowed us to expand our presence and pipeline in Greater China over the past five decades.”
Insight: Hyatt is that curious beast which makes lots of comments about how it just loves to sell properties and take on management contracts, but at the same time reserves cash so that it can give its brands a prod in the right direction, should it need to. In this climate of hotels having to choose asset light or asset heavy, this hybrid smacks of sanity, particularly given the current weakness in the US and the select service business.
But, given the company’s efforts to buy NH Hotel Group back in 2018, do we really think that it wouldn’t wade in to a pile of bricks and mortar if something tasty came along? No. At the time Hoplamazian wrote to the NH, describing a deal which it said would “powerfully shape the European hotel landscape” and no doubt would have. We hear rumours that a slice of NH may yet come to the market, but with Minor still in place it’s not so tempting.
So one suspects that Hyatt may yet involve itself in something European and there’s plenty out there to tempt it. A dash of Radisson, perhaps? Or maybe a cluster of smaller European companies? Hoplamazian no doubt has a list and is checking it twice.