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Bear of the Day: Hyatt Hotels (H)

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Hyatt Hotels Corp. (H - Free Report) has seen a rebound in its leisure segment but business travel continues to lag. This Zacks Rank #5 (Strong Sell) is still not expected to be earnings positive in 2022.

Hyatt Hotels is a hospitality company with a portfolio that includes more than 1,150 hotel and all-inclusive properties in 70 countries across 6 continents. In 2021, Hyatt acquired the Apple Leisure Group, and its resort and hotel brands under the AMR Collection, including Secrets Resorts & Spas, Dreams, Breathless, Zoetry Wellness Spa Resorts, Alua, and Sunscape Resorts, in its largest acquisition in company history.

The company's offerings also includes the Park Hyatt, Miraval, Grand Hyatt, Alila, Andaz, The Unbound Collection by Hyatt, Destination by Hyatt, Hyatt Regency, Hyatt, Hyatt Ziva, Hyatt Zilara, Thompson HOtels, Hyatt Centric, Caption by Hyatt, JdV by Hyatt, Hyatt House, Hyatt Place, UrCove and Hyatt Residence Club brands.

Subsidiaries of the company also operate the World of Hyatt loyalty program, ALG Vacations, Unlimited Vacation Club, Amstar DMC destination management services and Trisept Solutions technology services.

A Miss in the Fourth Quarter

On Feb 16, Hyatt reported its fourth quarter earnings and missed badly. It reported a loss of $2.78 versus the consensus of a loss of just $0.12.

It has missed 3 out of the last 4 quarters.

There were some positives out of the quarter, however. Business continued to improve, as it had throughout the year.

Leisure Transient reached a record level in the fourth quarter at 102% of the 2019 level. But Business Transient was at just 44% of 2019 and Group was at 60%. However, both gained momentum throughout the year.

In 2021, systemwide RevPAR moved in the right direction. It was up 109% from Q1 to Q4. It rose to $97 from $46 during that time. RevPAR for the year rose 67% compared to 2020, which was hammered by the pandemic, to $77.80.

In the fourth quarter, Hyatt acquired Apple Leisure Group, which many know from its collection of all-inclusive resorts in Mexico and the Caribbean. The acquisition significantly expanded Hyatt's Leisure Transient business, adding 700 basis points.

Apple's AMR Collection hotels are expected to be fully bookable through Hyatt channels for the Americas in the summer of 2022, with Europe soon to follow.

Analysts Cut Full Year Estimates

The analysts got too bullish on Hyatt, however. Over the last 60 days, 6 estimates have been cut for 2022.

It has pushed the Zacks Consensus down to a loss of $0.06 from positive earnings of $0.73.

This is still a significant improvement compared to 2021 when Hyatt lost $5.24 per share.

A Pandemic Winner

The pandemic hit America 2 years ago this month. The hospitality industry was among those hardest hit by the shutdowns and other restrictions but investors quickly tagged the hotel chains as "winners" on the reopening.

Shares of Hyatt have rallied 76% over the last 2 years, but are still trailing the S&P 500 during that time, which gained 93%.

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It still isn't even seeing positive earnings, despite the optimism about travel. Continued COVID outbreaks and restrictions globally continue to impact the travel industry.

Shares of Hyatt are down about 1% year-to-date.

Is the rebound in travel that is expected in 2022 already priced in?

Investors looking for a hotel stock may want to wait for a larger pullback in Hyatt and the return of positive earnings before diving in.

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