Hyatt Hotels Corp. released its third-quarter results for 2015, discussing everything from the growth of transient business and the importance of fees to addressing recent speculation that the company may be entering a deal to acquire Starwood Hotels & Resorts Worldwide. Hyatt's Q3 2015 was characterized by strong revenue per available room growth due to what Mark S. Hoplamazian, president and CEO, called "greater transient business and increased market share."
The company's RevPAR for owned and leased hotels increased 2.5 percent in Q3 2015 when compared to the previous year, but the real gains were in the Americas. U.S. full-service hotel RevPAR increased 5.2 percent during the third quarter, while select-service hotel RevPAR increased 7.1 percent. Additionally, groups room revenue increased 1.4 percent, while group roomnights decreased 3.2 percent and group average daily rates rose 4.7 percent. The company's transient rooms revenue increased 9.2 percent, while transient roomnights bumped up 4.6 percent and transient ADR rose 4.4 percent.
This increase in transient travel occurred despite weak numbers in New York City as a result of lower inbound international travel and the city's constant growing supply. Strong markets that covered for New York included San Francisco, Hawaii and Orlando.
Outside of the Americas, RevPAR for the Asia/Pacific region decreased 5.6 percent in Q3 2015 (though it increased 3.1 percent excluding the effect of currency). The EMEA region's RevPAR decreased 7.5 percent (though it also increased 6.2 percent excluding the effect of currency), and revenue from management and other fees in the region decreased 11.1 percent during the period, primarily due to impute from the strong U.S. dollar and decreased Middle East hotel performance.
So far this year, Hyatt opened 37 new hotels, nine of them during Q3 2015. Hoplamazian said the company is on track to open a total of 50 hotels in 2015, in line with the goal it set last year.
More than half of Hyatt's planned hotels this year will be select service. On an earnings call earlier today, Hoplamazian said that management and franchise fees are a key component of Hyatt's growth strategy, as evidenced by a 9.6-percent growth in fees during Q3 2015, with base management fees on the rise as well.
"Franchising is essential as we expand our brand footprint," Hoplamazian said during the call. "Fees have more than quadrupled since Hyatt's IPO, growing from expansions and hotel growth. This strategy helps lend stability throughout the full loading cycle, and we expect select service hotels to be an increasingly important fee generator going forward.
As for Hyatt's owned and leased hotels, Atish Shah, SVP and interim CFO for Hyatt Hotels Corp., said on the earnings call that the company's owned and leased hotels are up 5.9 percent in RevPAR for Q3 2015. Orlando, Mexico City and Berlin saw growth of more than 10 percent during the period.
According to Shah, Hyatt's performance for October is meeting expectations. "We are seeing strength in transient rate progression," Shah said. "While early, negotiated corporate rates will be in the mid-to-high single-digit range for next year."
Hoplamazian also addressed Airbnb, saying that hotels and related groups should not be looking to battle with the company on an idealistic front in defining what is and isn't a hotel, but rather go after illegal hotel operations.
"With respect to the regulatory aspect of [Airbnb], there has been a lot of activity, and in any jurisdiction where you see the sharing economy it is all headed in the direction of creating a tax regime that makes sense," Hoplamazian said. "We want to crack down on illegal hotel operations, those are all healthy things."
Though Hoplamazian was quick to address the recent news of a possible deal for Hyatt to acquire Starwood, news that tantalized the industry last week, he was quick to dismiss any possible discussion.
"As in the past, we don't comment on rumors and speculations," Hoplamazian said.
Despite this, he ended the call discussing Hyatt's drive for "purposeful growth," mentioning that the company is as of yet underrepresented or not present in many markets. In 2014, Hyatt's net growth was up 6.5 percent, and in the past 12 months the company's growth is up more than 8 percent.
"We've gone to market and started focusing on increasing the reach of our brands," Hoplamazian said. "Not just adding a bunch of hotels deep into our representation, in many cases these new hotels are our first or second representation. We are thinking about where guests are traveling and where we need to be."