Hyatt’s second-quarter performance was another step in the right direction for the brand. But were it not for a slowdown in its U.S. and Chinese markets, it would have been better.
Hyatt’s second-quarter earnings performance had its share of ups and downs.
The company reported total revenue-per-available-room (RevPAR) growth of 1.3 percent, along with revenue of $1.2 billion. Profits also jumped 10 percent to $86 million.
Yet a slowdown in the chain’s U.S. group business and select-service hotel segment undermined results, Hyatt said on its earnings call Wednesday.
U.S. RevPAR dropped 0.3 percent year-over-year led by a 2.4 decline in select-service chain demand, Hyatt Chief Financial Officer Joan Bottarini told analysts.
CEO Mark Hoplamazian also said group revenues, encompassing both corporate and leisure business, plummeted 15 percent in the first half of 2019 in the U.S. due to fewer bookings. In particular, Chicago, Hyatt’s base of operations and largest market for meetings and events, has had a very weak year, according to the company.
The good news for Chicago is that 2020 looks to be a strong year based on significant business already on its books. Bookings are already up almost 9 percent in the market for next year.
“We expect group business in the second half, most of which is on the books at this point, to be approximately flat versus last year and then strengthen into 2020,” Hoplamazian added.
Hyatt’s corporate travel group business, separate from leisure, did rebound in the second quarter to about 2 percent. However, overall group business is still down in the high single digits, according to the company.
Greater China Struggles
Hyatt also notably became the latest hospitality chain to reveal it’s feeling the brunt of the ongoing U.S. China trade war, joining Accor and Hilton in the past week. RevPAR in the country fell 2.8 percent for full-service hotels, it said.
The hotel group currently has 74 operating hotels in the greater China area, with more than 100 hotels in the pipeline. It’s also due to create a new homegrown Chinese brand, UrCove, in partnership with BTG Homeinns Hotels Group, Skift reported last month.
“Economic conditions in greater China, combined with ongoing trade tensions with the U.S., have weighed on demand affecting both the Chinese travelers and inbound travel,” said Hoplamazian, adding that ongoing political protests in Hong Kong were another key factor.
“Based on recent indicators, we expect a difficult third quarter in Greater China with some RevPAR recovery in the fourth quarter,” he continued. “Our positive RevPAR forecast for the fourth quarter assumes that economic conditions improve and that we see a reduction in the disruptions caused with the demonstrations in Hong Kong.”
Room Growth soothes losses
Hyatt’s continued net room growth in the second quarter largely offset troubles in the U.S. and China, the company said.
A near 13 percent increase in available rooms globally in the quarter, including the additions of Two Roads Hospitality hotels, also led to a 10 percent rise in base, incentive, and franchise fees for property owners.
Hyatt ended the period with 881 hotels, or 216,000 rooms, in more than 50 countries. As of the end of 2018, the company now has 445 hotels, or 89,000 rooms, in its pipeline, according to its website.
“We are expecting not only a record level of openings this year, but assuming our present pace of deal activity holds, we also expect to realize a record level of signings as well,” said Hoplamazian.
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Photo Credit: The exterior of the Hyatt Place in downtown Chicago. RevPAR in the U.S. dropped 0.3 percent in the second quarter. Hyatt