Hyatt portfolio among worst hit for hotel brands
 
Hyatt portfolio among worst hit for hotel brands
08 MAY 2020 7:53 AM

Focusing on urban markets and full-service properties, Hyatt Hotels Corporation’s brand portfolio has been hit harder than its peers by the ongoing crisis.

CHICAGO—Hyatt Hotels Corporation executives know that among the publicly listed hotel brand companies, they are disproportionately affected by the ongoing COVID-19 crisis. While others have been able to hang their hats on lingering demand for economy, midscale and extended-stay hotels, Hyatt doesn’t operate in those spaces.

The company has built its core offering around the types of hotels that have seen demand crater.

“We have clearly a more significant representation in full service than some of our large public peers and also a higher representation in urban and resort markets,” said Hyatt President and CEO Mark Hoplamazian. “We’ve got some significant chain-scale differences, as well as some locational differences, relative to some of our competitors, which is really driving a lot of the differences that you might see in our reporting.”

Hyatt’s first-quarter results featured some stark performance drops, including a 262.8% decrease in net income—resulting in a net loss of $103 million for the quarter—and a 54.3% drop in adjusted earnings before interest, taxes, depreciation and amortization to $86 million.

The company also saw a greater portion of its properties close due to the ongoing coronavirus pandemic. Roughly 35% of the company’s hotels had operations suspended as of 30 April, including 62% of full-service properties in the Americas and 82% of the company’s owned and leased portfolio.

But Hyatt officials stressed they should have enough cash to maintain operations through a prolonged crisis.

“Our total available liquidity today is just over $3.1 billion, and that includes $1.6 billion of cash and equivalents and $1.5 billion of available capacity on a revolver,” said CFO Joan Bottarini. “And we estimate that in our current levels of demand and spending levels, we have at least 30 months of liquidity under that total amount of liquidity that we have available.”

But Hoplamazian noted that while he can’t know what’s going to happen with certainty, there are reasons for optimism globally. In China and South Korea, demand is beginning to bounce back as infection rates drop.

“The thing that was striking to us is that in China, while occupancy has been building over the course of the month, the last week was quite significantly positive,” he said. “We even had a few hotels that sold out over the last weekend, due to a holiday weekend. But the very fact that you could even have a hotel that could sell out is kind of a notable thing at this point.”

Crisis opportunities
While the company has been going through a difficult time, Hoplamazian said executives still believe the company will have an “exceptionally strong” pipeline, even as some construction projects are closed.

In fact, he believes the crisis will open up new opportunities, saying properties looking to convert will be “available on higher-than-normal volumes given business conditions.”

“Our brand reputation, strong owner relations and underpenetrated distribution should all serve as an advantage in capitalizing on these opportunities,” he said, noting the company would be interested in using key money to lure owners in some circumstances.

When asked by an analyst if he viewed the current environment as an opportunity for possible acquisitions of other hotel brands, Hoplamazian said that hasn’t entered the discussion yet.

“I think most of our time and attention has been spent on managing through the initial phase of this crisis and making sure that we are positioning ourselves to take care of our various constituents, not so much time spent on imagining what the environment might bring in terms of the M&A opportunities,” he said.

He said most groups are taking “a step back from making any major decisions with respect to buying and selling” at the moment and the marketplace isn’t seeing a lot of distress yet that would compel sales.

Q1 metrics
Hyatt saw systemwide revenue per available room fall 28.1% across the global and 24.5% in the U.S., according to its first-quarter earnings release.

Bottarini noted those revenue declines came exclusively in March.

“We began the year with solid performance coming off of a strong year in 2019,” she said. “Excluding our Asia/Pacific region, global system-wide RevPAR increased 1.6% through February and 2.6% in our owned and leased hotels.”

One of the bright spots for the company was Hyatt managed 6.3% net rooms growth in the first quarter.

As of press time, Hyatt’s stock was trading at $50.40 a share, a 43.8% drop year to date. The Baird/STR Hotel Stock Index was down 42.3% for the same period.

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