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Hyatt Hotels: Further Upside Potential After 15% YTD Growth?
HHyatt(H) Forbes·2024-10-08 09:00

Company Performance and Growth - Hyatt Hotels Corporation stock has gained close to 15% since the beginning of 2024, while Hilton stock is up about 27% over the same period [1] - Comparable system-wide revenue per available room increased by 4.7% year-over-year in Q2 2024, down from 5.5% y-o-y growth in Q1 2024 [1] - Asia remains the biggest driver of growth, with greater outbound travel from Greater China to markets including Japan, Thailand, and South Korea [1] - The U.S. business also increased from group and business travel [1] - Hyatt expects system-wide revenue per available room growth of 3.0% to 4.0% y-o-y in FY 2024 and a 5.5% to 6.0% increase in net room growth [1] - Adjusted EBITDA is expected to be in the range of 1.10billionto1.10 billion to 1.14 billion in FY 2024, compared to 1.03billioninFY2023[1]FinancialStrategyandAcquisitions−Hyattadded18newhotelsand3,251roomstoitsportfolioinQ22024,withapipelinegrowthof91.03 billion in FY 2023 [1] Financial Strategy and Acquisitions - Hyatt added 18 new hotels and 3,251 rooms to its portfolio in Q2 2024, with a pipeline growth of 9% y-o-y to a record 130K rooms [2] - The company aims to derive over 80% of its earnings via fees by 2025, with fee-based revenues expected to be 1.1 billion to 1.13billionin2024[2]−Hyattcompletedthesaleofits1,641−roomHyattRegencyOrlandoandadjacent45acresoflandforapproximately1.13 billion in 2024 [2] - Hyatt completed the sale of its 1,641-room Hyatt Regency Orlando and adjacent 45 acres of land for approximately 1.07 billion, retaining a long-term management agreement [3] - The company entered into an agreement to pay 150millionfor21StandardInternationalpropertiesandanother150 million for 21 Standard International properties and another 185 million to acquire an additional 30 new projects in the Standard International pipeline, totaling 335million[3]−ThesetransactionsarepartofHyatt′scapitalallocationstrategytosellownedhotelsandreinvestinasset−lightplatformstoaccelerategrowth[3]MarketPositionandValuation−Hyattprimarilymakesmoneyfromfee−basedrevenue,licensing,andotherservices,allowingthird−partyownersandfranchiseestouseitsbrandandintellectualproperty[2]−Thestockisconsideredfairlypricedatcurrentlevels,tradingatroughly33xprojected2024earnings,aligningwithpeers[4]−Hyatt′svaluationisapproximately335 million [3] - These transactions are part of Hyatt's capital allocation strategy to sell owned hotels and reinvest in asset-light platforms to accelerate growth [3] Market Position and Valuation - Hyatt primarily makes money from fee-based revenue, licensing, and other services, allowing third-party owners and franchisees to use its brand and intellectual property [2] - The stock is considered fairly priced at current levels, trading at roughly 33x projected 2024 earnings, aligning with peers [4] - Hyatt's valuation is approximately 144 per share, almost in line with the current market price of about $150 per share [4] Industry Trends and Competitive Landscape - Travel demand has remained robust despite concerns about the global economy, driving recent price appreciation for hotel stocks [1] - Hyatt's focus on premium properties and a strong travel market should support long-term growth [4] - The company's peers are also performing well, with comparisons available on key metrics [4]