Skift Take

Unlike its peers, Hyatt is strategic about property sales rather than fully embracing an asset-light strategy. If it does sell properties, expect it to invest in others in a market where the real estate is not as overvalued.

Hyatt Hotels Corp., controlled by the billionaire Pritzker family of Chicago, is in talks to sell some properties as it weighs purchases in the most attractive markets for expanding its brands, Chief Executive Officer Mark Hoplamazian said Tuesday.

“We’re active in discussions on a couple different situations on the disposition side and likewise, we’re continuing to see really interesting opportunities on the acquisition side,” Hoplamazian said on Hyatt’s second-quarter earnings conference call. “Our ability to trade through the cycle and be able to recycle is alive and well.”

Hyatt in June sold the luxury Andaz 5th Avenue in Manhattan to Japan’s Takenaka Corp. for $250 million. The sale was done at a capitalization rate — a measure of investment yield calculated by dividing net operating income by purchase price — of about 3 percent to 4 percent, Hoplamazian said Tuesday. The property generated about $10 million of earnings before interest, taxes, depreciation and amortization on a trailing basis, a portion of which will be retained through Hyatt’s management agreement for the hotel, he said.

“I don’t think any other hotel company uses their balance sheet nearly as much to spread their brand,” said David Loeb, a senior analyst at Robert W. Baird & Co. “Hyatt has great name recognition globally, but a much, much smaller footprint than the other major global brands. They punch above their weight.”

Revpar Forecast

The Andaz deal and other potential Hyatt sales come as hotel companies cope with decelerating growth in revenue per available room, an industry measure of occupancy and room rates, following a six-year recovery from the financial crisis. New supply is overwhelming demand in key markets including New York and Miami Beach, Florida, while tepid economic growth and concerns about terrorist attacks are hurting other locations.

Hyatt on Tuesday cut its forecast for revpar growth this year to between 2 percent and 3 percent, from a previous range of 3 percent to 5 percent, an estimate given at the beginning of the year. The move follows similar reductions last week by the two biggest hotel operators, Hilton Worldwide Holdings Inc. and Marriott International Inc.

Hyatt fell 2.3 percent to $49.74 at 2:30 p.m. in New York.

Takenaka, which has worked with Hyatt for years, approached the company about buying the Andaz 5th Avenue, Hoplamazian said. The hotel wasn’t widely marketed, and Hyatt isn’t trying to “time” the market, he said. The company has an ongoing plan to sell some hotels while retaining management contracts or franchise agreements, then invest proceeds into new properties and other growth opportunities.

Park Hyatt

Hoplamazian didn’t say which other hotels might be sold. One property that’s been mentioned by analysts as a possible candidate for sale is the luxury Park Hyatt New York, the hotel at the base of the One57 condominium tower.

Stephanie Sheppard, a Hyatt spokeswoman, declined to comment on possible asset sales.

“I don’t think they are necessarily looking to sell the Park Hyatt in New York, but they would be open to that,” Loeb said. “They own assets around the world and really what they want to do is increase their brand presence in key markets, and if they can fund that by selling the Park Hyatt in Zurich or Chicago or Mexico City, and secure stable long-term management contracts on those,” then “that makes a lot of sense for them.”

©2016 Bloomberg L.P.

This article was written by Hui-yong Yu from Bloomberg and was legally licensed through the NewsCred publisher network.


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Tags: earnings, hyatt

Photo credit: A king room at the Andaz 5th Avenue. Hyatt is selling some properties as part of its asset recycling program. Hyatt Hotels