Hyatt Hotels Corporation’s (H - Free Report) Hyatt Centric brand has been swiftly gaining momentum since its launch in 2015. The brand offers full-service lifestyle hotels located in prime destinations and particularly caters to millennial-minded travelers.
Recently, the brand debuted in the Asia Pacific region, with Hyatt Centric Ginza Tokyo. It is now part of its worldwide portfolio of 18 Hyatt Centric hotels.
The move comes on the heels of the opening of Hyatt Centric Gran Via Madrid, the first Hyatt hotel in mainland Spain and Hyatt Centric La Rosière, the first Hyatt Centric brand hotel in France, last month. The latest additions indicate the strong potential of the brand.
We observe that Hyatt shares have rallied 47.4% over the past six months, outperforming the industry’s 33.2% growth.
Let us discuss the rationale behind the aggressive expansion strategy for the Hyatt Centric brand expansion and its prospects.
International Expansion to Counter Competition
The strategy underscores Hyatt’s consistent efforts to expand its presence worldwide and capitalize on the demand for hotels in lucrative but relatively untapped international markets. In fact, other than in Europe and Asia Pacific, the company has expansion plans for Africa, the Middle East and Latin America.
International expansion should help the company to increase its market share, thus boosting its business. We believe the strategy is also part of Hyatt’s plan to leapfrog competitors like Marriott (MAR - Free Report) , Wyndham and Hilton (HLT - Free Report) in the race to expand in untapped markets.
Eyeing Top-Line Growth, Leveraging on Industry Opportunities
We expect the expansion to boost revenues of Hyatt’s Owned and Leased Hotels segment since it includes the Hyatt Centric brand. The performance of the segment was particularly weak in the last quarter. Revenues were down 2.7% year over year (down 3.2% at constant currency). Comparable owned and leased hotels RevPAR declined 0.5% (down 1.1% at constant currency).
Hyatt Hotels Corporation Revenue (TTM)
Notably, with Hyatt Centric Ginza Tokyo, Hyatt seems to be gearing up to leverage on the upcoming tourism boost in Japan. The country aims to welcome around 40 million tourists annually by 2020. Tourism in the country is expected to grow around the time owing to the Olympics and Paralympics events in Tokyo.
Hyatt carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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