Skift Take

Something not mentioned much during Hyatt's first quarter earnings call that we wish were discussed more? Reaction to the new World of Hyatt loyalty program.

Chicago-based Hyatt Hotels Corporation reported strong first quarter earnings on May 4, beating Wall Street estimates.

Net income rose 10.48 percent to $70 million compared to the same period last year, and system-wide revenue per available room (RevPAR) was up 4.7 percent.

That revenue, CEO Mark Hoplamazian noted, was driven in large part by the company’s asset recycling program whereby, as he described, Hyatt “liquidates existing assets to make new growth investments to generate new incremental earning streams and position us to return capital to shareholders over time.”

Hoplamazian said, “Looking ahead to the rest of the year, we feel cautiously optimistic. We expect our hotels will continue outperforming, relative to their peers and we are monitoring macro and industry dynamics that may put pressure on results over the remainder of the year.”

In addition to remaining focused on its asset recycling strategy, Hyatt also revealed updates on its investment in Miraval, new openings, and observations on corporate group and transient travel trends.

Full-Service Hotels Performed Well in Q1

Although there’s a general trend in the hospitality industry for more limited-service models, in the first quarter of 2017, Hyatt’s market share gains for full-service hotels in the top 10 U.S. markets were double the company’s overall increase, with nearly 60 percent of hotels in the top 10 U.S. markets gaining market share.

That being said, more than 50 percent of Hyatt’s executed management contracts are for its two limited-service brands: Hyatt Place and Hyatt House. “Any way you slice it, we believe our brands are preferred by owners. As evidenced by the capital they are putting behind the growth of our system, allowing us to drive predictable, less capital intensive fee growth and create shareholder value,” Hoplamazan said.

The Beleaguered Grand Hyatt Baha Mar Will Finally Open This Year

After a few years of waiting, the long-awaited and often challenged Baha Mar resort complex in the Bahamas is finally opening, and with it, the Grand Hyatt Baha Mar and all of its 1,800 rooms and convention center.

Hyatt Has Big Plans for Miraval

Hoplamazian also revealed Hyatt’s plans for the newly acquired wellness group, Miraval, which Hyatt purchased earlier this year. Currently, Hyatt is redeveloping and expanding three of its resorts in Tucson, Austin, and Lenox and the company is also planning to design Miraval-based programming, which “we will integrate into our offerings to Hyatt guests,” he said. The company is also looking at a strategy for adding third-party funded Miraval resorts and spas worldwide.

The decision to buy Miraval, Hoplamazian noted, was motivated by a desire “to develop a platform that extends the Hyatt brand into a rapidly growing space, namely wellness, which resonates well with the high-end travelers we serve. We’re still in the early days of realizing the potential of the Miraval brand. And even though earnings from our Miraval resort in Tucson are very solid, we don’t expect the Miraval operations to contribute meaningfully to Hyatt’s overall earnings until 2019, given the redevelopment of the new resorts in Austin and Lenox, and the expansion of the resort in Tucson.”

Corporate Travel Seems Stable

Hoplamazian said the first quarter was “very strong” in terms of group business, especially in the banking, finance, consulting, and even retail industries. Technology and pharmaceutical group travel, he noted, was “on the weaker side.” And in terms of group demand, it was stronger among associations than it was for corporations.

In terms of corporate transient travel, Hoplamazian noted “that demand level has been sustained into the first quarter of this year.”

He added, “So a lot of what we saw happening in the first quarter was actually a shift into group business and especially in resorts, for example, where we had significant increases in group bookings into our resorts, like mid-teens increases, even as we saw transient revenue decline mid-single digits in the first quarter. The net result by the way is resorts were up, so a lot of that wasn’t, in our opinion, in our assessment a decline in demand. It was really a displacement issue.”

“Overall, we believe that the corporate picture is pretty solid from everything that we can gather, and it’s also true that the in the quarter, for the quarter, and in the quarter for the year dynamics make it a bit tough to really make a call on this at this point. What I would say is it’s too early for us to know whether this change in dynamic in the first quarter will be sustained. It’s possible, for example, that corporations are holding on to their spend and that there is a compression, tightening of the window between the time they make their decision to have meeting and the date of the meeting. I think that more of that will unfold as we see what comes through in the second quarter. So overall, I think, the demand picture is pretty stable and the exact profile remains a question as we head into the second and third quarters.”

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Tags: earnings, hyatt

Photo credit: The Park Hyatt Tokyo. Hyatt Hotels Corp. reported a fairly strong first quarter in 2017. Jun Seita / Flickr

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