Hong Kong, select service represent hurdles for Hyatt
 
Hong Kong, select service represent hurdles for Hyatt
01 NOVEMBER 2019 8:20 AM

On its third-quarter earnings call with analysts, Hyatt Hotels Corporation lowered its full-year RevPAR guidance due to U.S. select-service pressures and political unrest in Hong Kong, but President and CEO Mark Hoplamazian said he has “great confidence in the long-term prospects in Greater China.”

CHICAGO—As a result of select-service pressures in the U.S. and political unrest in Hong Kong, Hyatt Hotels Corporation lowered its full-year 2019 revenue-per-available-room guidance, officials said on the company’s third-quarter earnings call with analysts.

Last quarter, Hyatt expected RevPAR growth of 1% to 2% for the full year, but now expects it to increase approximately 0.5%, according to the company’s earnings release.

RevPAR in Hong Kong was down 36% in the third quarter, “and conditions have worsened in October with RevPAR down over 50% for the month,” Hyatt President and CEO Mark Hoplamazian said on the call.

Excluding Hong Kong, Macau and Taiwan, he said RevPAR in Greater China was up half a point and occupancy was up approximately 200 basis points.

“We see resilient demand for our brands in the face of the recent challenges, and our full-service hotel market share in Greater China was (up) approximately 110 basis points in the quarter,” he said. “While there is uncertainty as to when the disruption in Hong Kong may end or when the trade concerns will dissipate, we continue to have great confidence in the long-term prospects in Greater China, and we are excited about our growth plans there.”

“The pipeline and pace of new signings in Greater China remain strong,” Hoplamazian added.

RevPAR contracted for select-service hotels, primarily Hyatt Place properties, and had a “meaningful impact” on system wide RevPAR results, he said. Hyatt Place programming changes are being made to benefit owners and World of Hyatt members, and while it’s taking longer than expected, Hoplamazian said the company does “expect improvement in results after we lap the programming changes we made in our Hyatt Place hotels during the fourth quarter of last year.”

“We remain focused on maximizing this area of our core business, and we continue to see exceptional growth in these brands globally and expect over 10% growth in the number of Hyatt Place hotels in 2019 alone to approximately 370 hotels,” he said. “There remains significant potential to further expand the Hyatt Place footprint globally, where the brand is underrepresented or not yet represented.”

2020 tailwinds
Hyatt does expect to see a few tailwinds in 2020, one of which will be from the integration of Two Roads Hospitality, a $25 million significant non-recurring item affecting 2019, CFO Joan Bottarini said.

The company’s Miraval brand should be ramping up next year, she said. Hyatt should also see a boost from the Olympics in Tokyo “where we have significant presence in Japan,” she said.

Caption by Hyatt
Hyatt recently unveiled a new select-service lifestyle brand, Caption by Hyatt, at the 2019 Lodging Conference, which Hoplamazian said will target “high foot traffic, urban centers” around the world.

“We believe this brand fills in a gap not only for us, but across the competitive landscape with the ability to cater to different stay occasions than our current offerings, while also driving enhanced non-guest revenue through the public social space anchored by a unique food-and-beverage concept,” he said.

He added that “the development costs for Caption by Hyatt hotels will be competitive with other lifestyle select-service hotels, and the operating model will drive strong and competitive operating margins.”

As of press time, Hyatt stock was trading at $74.78, up 10.6% year over year. The Baird/STR Hotel Stock Index was up 9.6% for the same period of time.

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