Why M&A will ‘calm down’ for Hyatt after busy year

CHICAGO — Hyatt Hotels Corp. has been on an extraordinary M&A run lately with notable acquisitions, including an approximately $2.6 billion deal for all-inclusive owner-operator Playa Hotels & Resorts earlier this week, a 50-50 asset-light joint venture with Grupo Piñero at the end of 2024 to add the Bahia Principe Hotels & Resorts to its portfolio, and a $150 million acquisition of Standard International and all its brands a few months before that.

So, will the M&A run continue? Hyatt President and CEO Mark Hoplamazian said things should definitely “calm down” now.

“This was a somewhat unique opportunity with respect to Playa. Otherwise, we feel really good about the brand portfolio that we currently have, and we are focusing our attention on optimization,” he said during Hyatt’s fourth-quarter earnings call.

Hyatt also expects to sell at least $2 billion in properties over the next few years and have its asset-light earnings mix exceed 90% in 2027. While Hyatt has a lot of assets that it deems “irreplaceable,” Hoplamazian said that doesn’t necessarily mean a potential sale is off limits.

“We do have a number of extremely high-value assets in our portfolio. They are basically irreplaceable,” he said. “It doesn’t mean that they’re not for sale. We don’t have any hotels that I would consider to be off-limits.”

Hyatt Hotels Corp. reported systemwide RevPAR growth of 5% in the fourth quarter and 4.6% for the full year 2024 as part of its 4Q24 earnings. It also reported net room growth of 7.8% for the full year and record-setting gross fees.

Net room growth

Net room growth will be good in 2025, Hoplamazian said, for several reasons and partially because several large hotels that were originally supposed to open in 2024 were pushed back to this year.

“The net rooms growth outlook for this year is materially better,” he said. “We’ve opened 9,000 rooms in the not-quite first six weeks of the year, and that represents about 40% of our network growth for the year. The pipeline openings are expected to be significantly higher than last year.”

Over 60% of all of our openings that we see coming out of the pipeline this year are front-loaded. They’re in the first half of the year. That’s very different than the profile we had last year.

Mark Hoplamazian

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The outlook for net room growth is also positive because Hyatt’s current number doesn’t include the various portfolio transactions it has made in the past year.

“Over 60% of all of our openings that we see coming out of the pipeline this year are front-loaded. They’re in the first half of the year,” he said. “That’s very different than the profile we had last year.”

When asked why Hyatt is getting aggressive with its acquisitions in the all-inclusive segment, Hoplamazian said the investor pool for all-inclusive resorts in North America is different from what you will find elsewhere and more traditional hotel investors.

“We are doing business with the principal, large investors in very high-end all-inclusive resorts, so we know the market very well. It’s dominated by families,” he said. “It’s a market that’s not yet institutionalized in the same volume as you see in Europe. In Europe, all-inclusive resorts are largely owned by institutions and we are at an inflection point in the Americas where institutional capital, including PE capital, is now entering the market.”

Hoplamazian said institutional investors are jumping into all-inclusive because the model is very attractive.

“It’s more predictable, has higher margins, higher free cash flow, the durability of the model is improving and the yields are higher for investors,” he said. “There has been, and continues to be, an increasing elevated level of inbound interest for institutional capital into the market.

“We’ve already had a few transactions that aggregate to maybe just under a billion dollars worth of assets that have traded hands that involved institutional capital from the United States and so we feel like the ice has been broken, so to speak, and we’re optimistic that we’ll see more and more investment in these kinds of assets going forward.”

The Grand Hyatt Deer Valley was one of the hotels to open in 2024 for Hyatt.

Q4, FY2024 results; 2025 projections

• Hyatt reported a net income loss of $56 million for Q4 but $1.296 billion for full year 2024. Its adjusted net income was $40 million in Q4 and $375 million for FY2024.
• In the fourth quarter, 81 new hotels (20,721 rooms) joined Hyatt’s portfolio, including properties acquired through the Standard International and Bahia Principe transactions.
• By the end of 2024, Hyatt had a pipeline of executed management or franchise contracts for approximately 720 hotels (and approximately 138,000 rooms), representing an expansion of approximately 9% year-over-year. It completed the acquisition of three Alua properties on November 15 for €117 million (approximately $123 million), which it intends to sell.
• For 2025, Hyatt is projected systemwide RevPAR growth from 2-4% and net rooms growth between 6-7%. Hyatt’s 2025 net income is projected between $190-$240 million, while its full-year adjusted EBITDA is projected between $1.1-1.15 billion.
• Hoplamazian said Hyatt had a record level of gross fees in Q4 ($294 million, up 15% YOY) and is projecting gross fees for the full year 2025 between $1.2-1.23 billion. 
• Hyatt’s adjusted EBITDA was $255 million in Q4 and $1.096 billion for the full year 2024.
• The company repurchased approximately 8 million shares of Class A and Class B common stock for an aggregate purchase price of $1.19 billion for the full year of 2024, returning $1.25 billion to shareholders through dividends and share repurchases.
• In Q4, 81 new hotels (and 20,721 rooms) joined Hyatt’s portfolio, inclusive of properties acquired through the Standard International and Bahia Principe transactions.
• Through the end of the year, Hyatt had total debt of $3.78 billion, pro rata share of unconsolidated hospitality venture debt of $370 million and total liquidity of approximately $2.9 billion with $1.38 billion of cash and cash equivalents and short-term investments, and borrowing availability of $1.497 billion under Hyatt’s revolving credit facility, net of letters of credit outstanding.

What the analysts said

Analyst Michael Bellisario of R.W. Baird said Hyatt’s earnings news was incrementally negative, and a Q4 earnings mix with higher adjusted selling, general, and administration expenses was the primary driver.

“Better RevPAR and slightly better gross fees plus higher owned/leased/JV earnings were offset by weaker distribution results,” he said. “Net, net – earnings missed while peers have been beating. Adjusted EBITDA guidance for 2025 is ~4% below consensus (or ~3% below adjusted for 4Q24 dispositions) and we attribute some of the shortfall to higher adjusted G&A expenses ($15 million vs. our model; potentially due to Bahia Principe). Some timing and one-time items are impacting the outlook, but still a headline miss.”

Bellisario noted that Hyatt’s net rooms growth was just above the low end of Hyatt’s most recent guidance of 7.75%-8.25% while adjusted EBITDA of $255 million fell below the guidance from Baird ($267 million) or Wall Street ($273 million).

Analyst C. Michael Scholes of Truist Securities said distribution and other revenues were light, and G&A expenses were higher than consensus while RevPAR was ahead.

“4Q24 adjusted EBITDA of $255 million was below our at-consensus estimate of $273 million,” he said. “No specific 4Q earnings guidance was provided, but implied guidance as of 3Q24 earnings was $269M-289M. Adjusted EPS of $0.42 compares with very wide consensus of $0.75 (includes high and low outliers) and our estimate of $0.85.”