Hyatt stands tall with strong Q3 results

(Hyatt Hotels strong Q3)

Third-quarter results this year have been hit or miss for some hotel companies, but not Hyatt Hotels Corporation. The company saw its net income increase 148 percent over the same period in 2015, reaching $62 million, overshadowing last year’s $25 million it took in.

Systemwide revenue per available room also increased 2.5 percent while U.S. hotel RevPAR rose 3.8 percent; full-service and select-service hotel RevPAR increased 3.4 percent and 4.6 percent, respectively. 

In comparison, Hilton Worldwide’s global RevPAR rose 1.3 percent in Q3 2016, with its Americas region up 1.7 percent. Hilton’s net hotel and rooms growth was also up 9 percent and 7 percent, respectively, and the company’s comparable owned and leased hotels segment operating margins rose 80 basis points to 23.2 percent.

Franchising fees at Hyatt hotels increased 12.5 percent to $27 million, something Hyatt attributed to new and converted hotels and an improved performance at existing hotels in the Americas region. Outside of the Americas, Hyatt’s fee revenues remained flat at $9 million.

Mark Hoplamazian, president and CEO at Hyatt Hotels Corporation, said in an earnings call that the company’s strong numbers were the result of the quality of its business in the Americas region, which was driven mainly by groups. “Our outlook for the overall business for the remainder of 2016 is positive, and we reconfirm our expectations for comparable systemwide RevPAR growth in a range of approximately 2 percent to 3 percent for the year,” Hoplamazian said.

Faces of Growth

This marks the seventh consecutive quarter that Hyatt has grown market share as according to its RevPAR index. In New York, a market Hoplamazian referred to as “soft,” the company managed to gain market share in the single-digit range.

As for development, the company opened 11 hotels in Q3 2016, and since Sept. 30, 2015, Hyatt increased its base of open and operating hotels 9 percent, from 594 to 645 hotels, and 31 properties have been opened already through 2016, with expectations of opening more than 60 before the year is up.

According to Hoplamazian, Hyatt’s existing loyalty program, Hyatt Gold Passport, is also thriving. Part of this is due to a tier match program Hyatt launched during the Marriott/Starwood merger announcement last year, matching 30,000 customers and approximately half of them were new to Hyatt or increased their standing in Hyatt’s loyalty program. The loyalty program has also resulted in a 330 basis point increase in transient growth over the last four years for Hyatt Gold Passport members. Now, the company is launching a new global loyalty program, World of Hyatt, which offers tweaks and expansions on the company’s existing model.

When speaking about group bookings, something Hoplamazian claimed was a major driver for Hyatt in Q3, he said group room revenue in the U.S. was up roughly 6 percent and much of the company’s group bookings were made for 2017. “Total group production for the third quarter was up almost 8 percent versus last year, while total year to date production was up four percent,” he said. “The strong base of business we booked in the quarter, however, was substantially related to 2017 and beyond, which is consistent with the short-term booking trends we have experienced all year.”

Expected Dip

When asked if the benefit Hyatt received from Jewish holidays shifting from September in 2015 to October in 2016 would result in lower-than-expected performance in Q4, Hoplamazian affirmed these suspicions, among other factors. “We expect the U.S. election will have a dampening effect on Q4 results, and we expect consistent with trends so far this year lower group business [for the quarter],” he said.

A question from Goldman Sachs regarding the biggest contributor to Hyatt’s consistent RevPAR growth, beginning six quarters ago, Hoplamazian said it was a combination of factors that included the deployment of a new revenue management system. In addition, the new system has been deployed in the Americas for the longest period thus far, potentially showing a correlation between the activation of the new system and continued revenue growth there whereas other regions remained flat.

“The other thing that has been true is that we enjoyed a network effect that I think persisted and increased over time with respect to Hyatt Place and Hyatt House,” Hoplamazian said. “We have more markets covered, which serves the needs of our corporate volume accounts.”

He also pointed out that Hyatt’s strategy has been to provide the tool and data, but also provide the freedom for its properties to react to their local markets and price accordingly. “We think that’s the best way where we can care for our colleagues, as well as our owners so we can be responsive and make decisions quickly.”

In addition, Hoplamazian commented on Hyatt’s $334 million preferred stock investment in Playa Hotels & Resorts, a company that recently filed a registration statement on Form S-1 for an initial public offering. Depending on the outcome of Playa’s IPO, Hyatt may be in a position to redeem and convert stock in the months ahead, and is remaining in partnership with the company. The call came to a close with a decree from Hoplamazian that any cash that comes Hyatt’s way as a result of a potential Playa IPO will be used, first and foremost, to grow the business and to consistently provide returns to shareholders. 

“We’ve done both,” he said. “So those priorities remain in place nd they won't change depending on no matter what the outcome with respect to the Playa IPO might be.”