Hyatt's group business is still under pressure, and a recovery there would be key to a turnaround.
Hyatt Hotels Corp reported lower-than-expected fourth-quarter revenue and margins on weak performance in Europe and the Middle East and a slow recovery in its convention business, sending its shares down as much as 4 percent.
Management and franchise revenue fell more than 5 percent in in the company’s Europe, Africa, Middle East and Southwest Asia division. RevPAR, or revenue per available room, fell about 1 percent in the region.
“In terms of international performance, growth in revPAR is still very very weak,” FBR Capital Markets analyst Nikhil Bhalla said.
He said the international business, along with lower growth in outside-the-room spending, hurt Hyatt’s margin performance.
Hyatt said operating margins on owned and leased hotels open for a year fell 110 basis points to 21.6 percent in the fourth quarter ended December 31.
Hyatt’s results indicate that the group business, a high-margin category driven by spending on conventions and banquettes, is still under pressure.
“It seems like transient revenue was up 6.9 percent, but group revenue was up only 3.3 percent, which basically suggests that the group segment was a drag on earnings,” Bhalla said.
Transient customers refer to individual travelers, whose spending is mostly room-related.
The company, controlled by the billionaire Pritzker family, spoke of “headwinds” in its international markets, but added it was poised for solid growth in 2013 due to its large exposure to the U.S. market.
About three quarters of Hyatt’s revenue comes from the United States, where a business-led recovery has lifted hotel occupancy rates over the past year. Hyatt, which competes with Starwood Hotels & Resorts Worldwide and Marriott International, reported a 7.5 percent increase in revPAR in the quarter.
Total revenue rose 1 percent to $1.0 billion, missing analysts’ expectations of $1.03 billion, according to Thomson Reuters I/B/E/S.
Excluding items, the company earned 20 cents per share, beating analysts’ expectations of 12 cents per share, helped by one-time items and a tax benefit.
Net profit fell to $16 million, or 9 cents per share, from $52 million, or 31 cents per share, a year ago.
Shares of the company, which have gained 21 percent in the three months to Tuesday, were down 2 percent at $41.31 in midday trade.
Reporting by Bijoy Koyitty in Bangalore. Editing by Sreejiraj Eluvangal.
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Photo Credit: The exterior of the Hyatt Hotel in Washington, D.C. Hyatt