Hyatt raises RevPAR estimates but lowers full-year guidance

CHICAGO – Hyatt Hotel Corp. reported a third-quarter profit of $68 million but also reported an adjusted EBITDA of $247 million for the third quarter (compared to $252 million in 3Q22) and cut its full-year guidance despite raising its systemwide RevPAR estimates.

“Our third quarter performance contributed to a 25% improvement in total fees for the first nine months of the year compared to 2022. We expect strong fee growth to continue, fueled by our record pipeline of 123,000 rooms and higher levels of conversion opportunities combined with robust demand for travel around the globe,” Hyatt President and CEO Mark Hoplamazian said in a news release.

Hyatt said it generated a record $250 million in fees in the third quarter, driven by strong global top-line performance and net room growth. It also reported a systemwide RevPAR increase of 8.9% compared to 3Q22, driven by a  420 basis points increase in occupancy and a 2.6% jump in ADR.

Michael Bellisario, senior research analyst for RW Baird, said Hyatt’s adjusted EBITDA came in slightly below recently reduced estimates. “Hyatt’s earnings slightly missed Baird/Street forecasts, which had come down in recent weeks,” Bellisario said in his report. “The full-year adjusted EBITDA guidance cut of ~3% is not directionally surprising, in our view, and Hyatt shares could be a bit weaker as numbers reset lower (although the buy-side was likely already there based on our recent conversations).”

We expect strong fee growth to continue, fueled by our record pipeline of 123,000 rooms and higher levels of conversion opportunities combined with robust demand for travel around the globe.

Mark Hoplamazian

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The company said comparable net package RevPAR for Apple Leisure Group (ALG) properties increased by 8.7% in the quarter compared to the same period in 2022.

Truist Securities analyst C. Patrick Scholes said in his note that the full-year guidance raises questions. “Our initial impression (we have not spoken with Hyatt) is that there may be an impact assumed from the EAME region given the Middle East conflict and/or possibly some softening of owned/leased margins relative to consensus expectations. We are also curious about ALG guidance adjustments for 4Q.”

Apple Leisure Group’s performance drug down the company’s second-quarter earnings. Hyatt said ALG continues to face headwinds from unfavorable foreign currency, challenging its year-over-year comparisons.  

New hotels and pipeline

Hyatt said 20 new hotels (3,262 rooms) have joined the company’s system with notable openings, including Calistoga Motor Lodge & Spa in California, seven UrCove properties, and the Andaz Macau in China, which at 715 keys is the brand’s largest property. Net rooms growth was approximately 6.2% in the quarter.

Calistoga Motor Lodge & Spa

The company also said as of September 30, it has a pipeline of executed management or franchise contracts for approximately 600 hotels (and approximately 123,000 rooms.) 

Hyatt also said it is progressing in its plan to sell off $2 billion in owned hotels by the end of 2024 and has already realized $721 million in proceeds as part of this commitment.

The company said it has signed a definitive agreement in October for one asset, which is expected to close in 4Q23. It has also signed a letter of intent for an asset previously marketed for sale, which is expected to close in the first half of 2024.  

Other highlights

• In the owned and leased hotels segment, the results were led by group and sustained leisure travel demand as the segment’s adjusted EBITDA increased $3 million (5.5%) compared to 3Q22. The increase was $19 million (41.7%) compared to the third quarter of 2019.
• For the North and South America management and franchise segment, resilient leisure demand and continued group recovery led the way, with total fees up 6.6% compared to 3Q22. New hotels added since 2019 contributed $22 million in fee revenue in the quarter. 
• The Asia Pacific region continued its recovery, with RevPAR in Greater China up 56% compared to 3Q22.  
• For the Europe, Africa and the Middle East (EMEA) region, Hyatt said results were impacted by a significant termination fee from a pipeline hotel recognized in 3Q22. Excluding this fee, EMEA adjusted EBITDA increased 40%, led by strong international inbound seasonal demand in Western Europe.