This is a much-needed optics win for Hyatt, which hadn’t seen profitability during the pandemic like most of its competitors.
Hyatt is finally back in the black.
The Chicago-based hotel company reported Thursday a $120 million third quarter profit, the company’s first profitable quarter of the pandemic and a significant gain from the $161 million loss seen during the same time last year.
Hyatt’s successful quarter hinged on leisure travel demand continuing to dominate as well as gains in business travel and the sale of two of the company’s hotels, part of the company’s greater initiative to sell off some of its real estate.
“I’m as confident as I’ve ever been we’re on a path to a full recovery,” Hyatt CEO Mark Hoplamazian said on an investor call Thursday.
One of the clearest signs Hyatt’s rebound accelerated in the quarter stemmed from company revenue per available room — the hotel industry’s key performance metric — increasing 30 percent from the second quarter to the third. The U.S. and reopening European borders significantly accounted for the performance surge.
Leisure travel revenue exceeded 2019 levels in July, dipped in August due to “seasonality” as well as the Delta variant sparking a new wave of travel restrictions in certain part of the world, but was roughly fully recovered by September.
Business travel revenue jumped more than 40 percent from the second to third quarter, but this sector remained at only 46 percent of 2019 levels in October.
Like Hilton and Marriott, Hyatt leaders are finding more success with travelers who work at smaller businesses compared to larger companies like consulting and financial firms that have contracts with negotiated rates. But Hoplamazian was encouraged by demand from these larger clients increasing by 50 percent since June.
“We continue to see stronger growth in our regional accounts as compared to our larger national accounts,” he added. “However, that gap is narrowing.”
Ramping Up Real Estate Sales
The company also made two notable real estate transactions in the quarter, selling the Hyatt Regency Lake Tahoe Resort, Spa and Casino for $350 million and the Alila Ventana Big Sur for $150 million.
Those two sales brings the company’s real estate proceeds to more than $3 billion since the company first announced an asset-light strategy in 2017 aiming for $1.5 billion in sales over three years.
The company has since expanded that mission, including an additional $2 billion asset sale commitment in August. The asset-light mission fuels Hyatt’s expansion with such acquisitions as the recently closed $2.7 billion Apple Leisure Group takeover.
“The proceeds from these future asset sales will allow us to deleverage our balance sheet on an accelerated basis as we reduce the debt incurred to fund the [Apple Leisure Group] acquisition,” Hoplamazian said. “We’ve initiated this effort with two properties currently in the market and other active discussions underway. We feel very confident in our ability to execute on this expanded asset disposition commitment.
Hyatt’s leaders enthusiastically touted the impact the Apple Leisure Group deal would have on the company, calling it a “brand-defining” moment and likening it to other historic company moments like international expansion into Hong Kong or the launch of the Park Hyatt brand.
The deal expands Hyatt’s European footprint by 60 percent and boosts its presence in the all-inclusive resort space.
But Hoplamazian was particularly bullish on Apple Leisure’s rapid rooms growth, which is expected to expand by 35 percent this year through the company’s AMR Collection of hotels.
“The timing is proving to be very auspicious, as leisure demand continues to be durable,” he said.
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Photo credit: Hyatt's strong third quarter lines up with strong leisure travel demand and real estate sales. Hyatt