Hyatt's Q1 underpinned by sale of three hotels

The Grand Hyatt San Francisco was one of three hotels sold by Hyatt Hotels Corporation. Photo credit: Hyatt Hotels Corporation

The sale of three hotels helped push Hyatt Hotels Corporation to a strong first quarter. Net income was $411 million in the quarter compared to $55 million at the same time last year—a 667-percent leap.

The impressive boost in income came from the sale of the 301-room Andaz Maui at Wailea Resort, the 668-room Grand Hyatt San Francisco and the 454-room Hyatt Regency Coconut Point Resort and spa for roughly $992 million to Host Hotels & Resorts. Hyatt held on to the properties' management agreements.

Hyatt’s earnings report suggests the company has plans to sell a total of $1.5 billion in real estate by 2020 as part of an ongoing capital strategy. 

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"We had a strong start to the year, highlighted by better-than-expected lodging fundamentals and a $1.0 billion sale of three hotel properties,” said Hyatt President and CEO Mark Hoplamazian. “The sale transaction clearly demonstrates the high quality of Hyatt’s asset base as well as our commitment to unlock shareholder value.”

The Andaz Andaz Maui at Wailea Resort was one of three hotels sold by Hyatt Hotels Corporation Q1 2018. Photo credit: Hyatt Hotels Corporation

Fundamentals

In addition to these transactions, Hyatt posted a comparable systemwide RevPAR increase of 4.3 percent, rising 1.6 percent at owned and leased hotels. These results were dampened somewhat by Easter holiday timing, and excluding the impact of this holiday the company’s RevPAR is expected to have increased 4.6 percent systemwide, and 2 percent at its owned and leased properties. 

On top of this, Hyatt’s net rooms growth was up 7.2 percent year-over-year, while its management, franchise and other fee revenue rose 15.7 percent to $132 million. However, Hyatt’s owned and leased hotels segment saw revenues decrease 11.9 percent, and average daily rates for the segment rose an anemic 0.9 percent. Hyatt attributes its dour performance in the owned and leased arena to transaction activity, but this is a precipitous drop compared to Hyatt’s other segments. For example, the company’s Americas management and franchising segment which saw revenue from fees increase 9.5 percent.

Like other hotel companies, Southeast Asia, China, Australia, South Korea, Japan and Micronesia remains a hot destination. Revenue from fees in this segment rose 20.1 percent, while ADR rose 1.5 percent. 

While Hyatt sold three enormous hotels last quarter, it also opened nine new properties, adding 1,896 rooms to its portfolio for a net rooms increase of 7.2 percent year-over-year. Hyatt is on pace to add a total of 60 hotels to its portfolio this year, and as of March 31 it has picked up management or franchise contracts for another 340 hotels, representing roughly 73,000 rooms.

For the rest of the year, Hyatt is forecasting net income between $495 million to $553 million, up from its previous guidance of $176 million to $215 million. Systemwide RevPAR is expected to rise anywhere from 2 percent to 3.5 percent, and it is on track to grow its net rooms between 6.5 percent and 7 percent in total.

"We remain cautiously optimistic for the balance of 2018 based on our underlying business trends and encouraging group booking patterns,” Hoplamazian said in a statement. “We expect growth in both systemwide RevPAR and hotel rooms to sustain upward momentum in our management and franchise fees as we evolve to an asset-lighter business model.”

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