Hyatt Hotels Sees 2023 as Breakout Year for Europe and China

Hyatt Hotels Corp. raised its financial outlook for the year ahead, calling out expected strength in Europe and Asia Pacific as especially key factors for its hotels and resorts, which skew to premium and luxury segments.

“This is really the breakout year for Europe,” said President and CEO Mark Hoplamazian on an earnings call Thursday. “I thought 2022 was going to be the breakout year for Europe. I was off by a year. We’re seeing people come back to travel, including business travel, in a more pronounced way relative to 2019.”

The Chicago, Illinois-based hotel operator has also been expanding its footprint in Asia Pacific, where it expects to see a strong recovery this year from the pandemic as China rebounds.

The company’s room count in Asia Pacific was 46 percent larger as of March 30 than it was in March 2019.

Now that pandemic restrictions have been lifted, the main force holding back Asia Pacific’s recovery of international travel has been a lack of flight capacity. But airlines are adding flights for the rest of the year.

“When you think about the tailwind of when those when that flight capacity returns into China, there is there’s a lot of room for growth in the regions,” said chief financial officer Joan Bottarini.

But it wasn’t just in Europe and in the Asia Pacific region where the company has seen growth.

“In April, we saw 8 percent growth [worldwide] over 2019, which is similar to what we saw in March,” Bottarini said.

Business transient had the strongest relative recovery worldwide, with March especially encouraging, reaching 92 percent of March 2019 levels.

The company expected returning group reservations for its banquet halls and resilient demand for its all-inclusive resorts leading it to a strong year.

The company generated an average revenue per available room — a key industry metric — of $130.54 in the first quarter, or up 6 percent compared to the first quarter of 2019 for the same set of comparable properties.

The company raised its forecast for its revenue per available room, saying that figure would now grow between 12 percent and 16 percent this year.

The company’s pricing remained strong, especially at its luxury properties like Grand Hyatt, Park Hyatt, and Andaz.

“We continue to see extraordinary pricing for our comparable systemwide luxury brands, which increased 7 percent over the first quarter this year with an average daily rate of about $300 [$297.59] for the quarter,” Hoplamazian said. “This is particularly impressive given the strong rate realization we are lapping from last year.”

But occupancy across all its brands still hasn’t recovered to pre-pandemic levels. Hyatt’s systemwide occupancy was 64.5 percent, down significantly from the 74.1 percent it enjoyed in the first quarter of 2019.

Mr and Mrs Smith Acquisition

Executives provided some additional context for Hyatt’s decision last month to acquire Mr and Mrs Smith, an online travel booking platform, for $66 million. The platform, profitable in the first quarter, has curated about 1,500 boutique and luxury hotels with average daily rates of about $400 a night. Most of the properties are independently owned and marketed, and the Mr and Mrs Smith brand helps high-end travelers discover them.

The company will continue to operate as before. But a selection of its listing will be added to Hyatt’s channels for booking in markets where Hyatt doesn’t have competitive properties.

“We have taken great care to analyze on a market-by-market basis the sort of hotels that might end up being adjacent to, or otherwise in the same vein of, existing Hyatt properties,” Hoplamazian said. “So we will be very careful in how we integrate the hotels.”

“It has a very strong customer base, and that customer base looks a lot like ours,” he said.

Breaking Company Records

During the first quarter, Hyatt produced a net income of $58 million, compared to a net loss of $73 million a year ago. 

Hyatt produced $1.6 billion in total revenue, but after reimbursements to its managed and franchised properties under its asset-light model, it had $727 billion in revenue left.

Hyatt noted that it was a company record for total revenue. While impressive and above analyst expectations, the performance is more measured when viewed in light of inflation.

“Even though total revenues are finally recovering to nearly 2019 levels, the not-so-good news is total revenues remain well behind pre-pandemic levels when factoring inflation,” noted Truist Securities analysts Patrick Scholes and Gregory Miller in a report.

Hyatt generated $268 million in adjusted earnings before interest, taxes, depreciation, and amortization in the quarter — 58 percent higher than in the year-ago quarter. It was a record figure for the company.

Hyatt’s net rooms growth, a measure of how fast its footprint of locations is expanding, was approximately 7 percent in the quarter, higher than any of the other half-dozen largest U.S.- and Europe-based hotel groups. But as one of the smaller players, it has been growing from a smaller base. Its hotel pipeline was about 117,000 rooms as of March 30. It forecasted net rooms growth of 6 percent this year.

Resort Strength

Hyatt’s $2.7 billion acquisition of Apple Leisure Group in 2021 and its sizable all-inclusive resort business continued to yield dividends for the company.

Executives are optimistic they’ll bring all-inclusive resorts to the Middle East and Asia Pacific, based on current conversations their teams are having with developers and investors in those regions.

In its current markets, which include the Caribbean and Europe, has pace of bookings for the second quarter that is tracking 8 percentage points ahead of last year levels,” Hoplamazian said. “That’s lapping a very strong second quarter last year. So we feel really good heading into the summer.”

The company’s properties in Europe are also doing particularly well.

“I feel quite bullish on Europe and the continued strength there,” Hoplamazian said.