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Hyatt (H) Rides on Pent-Up Demand Amid Low China Contributions
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Hyatt Hotels Corporation (H - Free Report) is benefiting from initiatives to expand its footprint internationally and increase in pent-up demand.
Shares of H have increased 31% over the past six months compared with the Zacks Hotels and Motels industry’s growth of 16.2%. Earnings estimates for 2023 have moved north to $2.61 per share from $2.51 over the past 60 days, depicting analysts' optimism over the company’s growth prospects.
However, the global hospitality company’s growth is being hurt by lower contributions from China as coronavirus-related woes and economic volatility persist.
Image Source: Zacks Investment Research
Let’s delve deeper and analyze the factors.
Tailwinds
Hyatt has been continuously expanding its global presence to drive growth. During the fourth quarter of 2022, 57 new hotels (or 10,784 rooms) joined Hyatt's system. As of Dec 31, 2022, Hyatt executed management or franchise contracts for approximately 580 hotels (or 117,000 rooms). The company also recently announced its plan to expand Independent Collection brands’ footprint by 2025. By the said time, the company’s Independent Collection brands will have 11 new hotels. Given the easing of travel restrictions in the Asia Pacific region and a strong leisure travel demand, the company unveiled a robust pipeline of landmark luxury and lifestyle hotels. The company anticipates unit growth in 2023 to increase at approximately 6% on a net-room basis.
Demand increased in Europe, South Asia, Latin America and the Caribbean markets. The upside can be primarily attributed to a rise in leisure transient demand, easing of travel restrictions and heightened airline capacity. During the fourth quarter of 2022, leisure transient revenues reached 14% above 2019 levels on a comparable system-wide basis. The company is optimistic that demand will remain robust for the remainder of 2023. Also, in the mentioned quarter, system-wide comparable revenue per available room increased 34.8% year over year, owing to an increase in occupancy and average daily rate.
Hyatt is strongly investing in various acquisitions and divestitures that can drive growth for the company. In 2021, the company realized nearly $630 million of gross proceeds from owned hotel dispositions. The company continues to make significant progress with respect to its $2.0 billion asset disposition commitment and anticipates to fulfill a $2-billion disposition commitment by 2024-end. With an increased focus on enhancing the guest experience, the initiatives and a strong customer base are likely to pave the path for strong management fee streams in the upcoming periods.
Headwinds
Hyatt continues to grapple with coronavirus, primarily in China. During the fourth quarter of 2022, the company reported reduced demand in Greater China owing to the crisis. Although most properties have lifted or eased restrictions, uncertainty related to pandemic-induced implications is a concern. The company anticipates demand to remain uneven in the near term.
Hyatt has a considerable international presence, which makes it vulnerable to the economic conditions in the region. In the Middle East, political unrest, lower government spending, new hotel supply and a tough oil market continue to hurt tourism. Also, the slowdown in the Chinese economy might continue to hurt discretionary spending as well as travel.
Wynn Resorts, Limited (WYNN - Free Report) currently has a Zacks Rank #2 (Buy). WYNN has a trailing four-quarter earnings surprise of 0.6%, on average. Shares of the company have gained 92.4% in the past six months.
The Zacks Consensus Estimate for WYNN’s 2023 sales and EPS suggests growth of 45.2% and 122.8%, respectively, from the year-ago levels.
Ralph Lauren Corporation (RL - Free Report) currently carries a Zacks Rank #2. RL delivered a trailing four-quarter earnings surprise of 23.6% on average. Its shares have rallied 26.4% in the past six months.
The Zacks Consensus Estimate for RL’s fiscal 2024 sales and EPS suggests growth of 5.5% and 14%, respectively, from the year-ago levels.
InterContinental Hotels Group PLC (IHG - Free Report) currently carries a Zacks Rank #2. Shares of IHG have gained 33% in the past six months. The long-term earnings growth rate of the company is 13.6%.
The Zacks Consensus Estimate for IHG’s 2023 sales and EPS suggests growth of 9.8% and 16%, respectively, from the year-ago period’s reported levels.
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Hyatt (H) Rides on Pent-Up Demand Amid Low China Contributions
Hyatt Hotels Corporation (H - Free Report) is benefiting from initiatives to expand its footprint internationally and increase in pent-up demand.
Shares of H have increased 31% over the past six months compared with the Zacks Hotels and Motels industry’s growth of 16.2%. Earnings estimates for 2023 have moved north to $2.61 per share from $2.51 over the past 60 days, depicting analysts' optimism over the company’s growth prospects.
However, the global hospitality company’s growth is being hurt by lower contributions from China as coronavirus-related woes and economic volatility persist.
Image Source: Zacks Investment Research
Let’s delve deeper and analyze the factors.
Tailwinds
Hyatt has been continuously expanding its global presence to drive growth. During the fourth quarter of 2022, 57 new hotels (or 10,784 rooms) joined Hyatt's system. As of Dec 31, 2022, Hyatt executed management or franchise contracts for approximately 580 hotels (or 117,000 rooms). The company also recently announced its plan to expand Independent Collection brands’ footprint by 2025. By the said time, the company’s Independent Collection brands will have 11 new hotels. Given the easing of travel restrictions in the Asia Pacific region and a strong leisure travel demand, the company unveiled a robust pipeline of landmark luxury and lifestyle hotels. The company anticipates unit growth in 2023 to increase at approximately 6% on a net-room basis.
Demand increased in Europe, South Asia, Latin America and the Caribbean markets. The upside can be primarily attributed to a rise in leisure transient demand, easing of travel restrictions and heightened airline capacity. During the fourth quarter of 2022, leisure transient revenues reached 14% above 2019 levels on a comparable system-wide basis. The company is optimistic that demand will remain robust for the remainder of 2023. Also, in the mentioned quarter, system-wide comparable revenue per available room increased 34.8% year over year, owing to an increase in occupancy and average daily rate.
Hyatt is strongly investing in various acquisitions and divestitures that can drive growth for the company. In 2021, the company realized nearly $630 million of gross proceeds from owned hotel dispositions. The company continues to make significant progress with respect to its $2.0 billion asset disposition commitment and anticipates to fulfill a $2-billion disposition commitment by 2024-end. With an increased focus on enhancing the guest experience, the initiatives and a strong customer base are likely to pave the path for strong management fee streams in the upcoming periods.
Headwinds
Hyatt continues to grapple with coronavirus, primarily in China. During the fourth quarter of 2022, the company reported reduced demand in Greater China owing to the crisis. Although most properties have lifted or eased restrictions, uncertainty related to pandemic-induced implications is a concern. The company anticipates demand to remain uneven in the near term.
Hyatt has a considerable international presence, which makes it vulnerable to the economic conditions in the region. In the Middle East, political unrest, lower government spending, new hotel supply and a tough oil market continue to hurt tourism. Also, the slowdown in the Chinese economy might continue to hurt discretionary spending as well as travel.
Zacks Rank & Key Picks
H currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector.
Wynn Resorts, Limited (WYNN - Free Report) currently has a Zacks Rank #2 (Buy). WYNN has a trailing four-quarter earnings surprise of 0.6%, on average. Shares of the company have gained 92.4% in the past six months.
The Zacks Consensus Estimate for WYNN’s 2023 sales and EPS suggests growth of 45.2% and 122.8%, respectively, from the year-ago levels.
Ralph Lauren Corporation (RL - Free Report) currently carries a Zacks Rank #2. RL delivered a trailing four-quarter earnings surprise of 23.6% on average. Its shares have rallied 26.4% in the past six months.
The Zacks Consensus Estimate for RL’s fiscal 2024 sales and EPS suggests growth of 5.5% and 14%, respectively, from the year-ago levels.
InterContinental Hotels Group PLC (IHG - Free Report) currently carries a Zacks Rank #2. Shares of IHG have gained 33% in the past six months. The long-term earnings growth rate of the company is 13.6%.
The Zacks Consensus Estimate for IHG’s 2023 sales and EPS suggests growth of 9.8% and 16%, respectively, from the year-ago period’s reported levels.