Hyatt Hotels Corp. executives touted a strong second quarter — their fifth consecutive with record earnings performance — but an unwillingness to raise full-year expectations had Wall Street analysts raising their eyebrows.
C. Patrick Scholes, managing director of lodging and leisure equity research at Truist, said in a note to investors that could be a sign that the company faces threats from increasing costs.
"We suspect there is cost growth that is a factor in the unchanged EBITDA guidance," Scholes wrote.
Hyatt CEO Mark Hoplamazian said his company is growing more profitable, and is likely to finish the year with a close to 300-basis-point increase in profit margins.
"We feel good about our progression of earnings and margin expansion," he told analysts.
Michael Bellisario, director of equity research and senior analyst at Baird, said Hyatt's reluctance to raise full-year earnings guidance is "a relative negative" given the higher levels of optimism among its brand peers.
This earnings season, publicly listed hotel companies have been regularly increasing full-year 2023 expectations.
Marriott International, for example, significantly increased both its revenue per available room and earnings before interest, taxes, depreciation and amortization expectations. The new guidance puts full-year RevPAR in a range of 12% to 14%, compared to previous guidance of 10% to 14%. Adjusted EBITDA for 2023 is now expected to be $4.535 billion to to $4.65 billion, compared to previous guidance of $4.36 billion to $4.54 billion.
Similarly, Hilton increased RevPAR outlook from a range of 8% to 11% to a range of 10% to 12%, and EBITDA is now expected to exceed $3 billion, an improvement over previous guidance of $2.875 billion to $2.95 billion.
Hyatt, however, only adjusted the low end of its RevPAR guidance, from 12% to 14%, and the high end remained at 16%. It did not raise EBITDA expectations, reaffirming a range of $1.02 billion to $1.07 billion.
Chief Financial Officer Joan Bottarini said factors in keeping expectations stable include some currency exchange issues, with the weakness of the Mexican peso eating into earnings from Hyatt's resorts in that country.
"That's one area impacting us relative to expectations that puts us in line with what we've said previously," she said.
Hoplamazian said the company's caution in the second half of the year is partly due to "normalization" of travel patterns with the company's Apple Leisure Group, which has been a primary growth driver for earnings.
He ascribed at least part of that to a shift in where U.S. travelers are flowing.
"U.S. visitations to Cancun and Riviera Maya are coming down," he said. "They're actually negative year over year. That has been picked up in three other ways. We've seen a 16% increase in visitation to the Dominican Republic, and an 11% increase to Jamaica. We also have seen a 600-basis-point increase in U.S. outbound travel to Europe."
Hoplamazian said there are some positive signs for markets such as Cancun, though, as declining airfares give hotels and resorts better pricing capabilities. He added profit margins for the Apple Leisure Group portion of the business remains "stratospheric," and are expected to end the year with profit margins near 18%.
He also said an increase in integration expenses will have a negative impact on earnings. Hyatt closed on its $72 million acquisition of the Mr. & Mrs. Smith travel platform in the second quarter, which will add more than 1,500 boutique and luxury properties in 20 countries to its World of Hyatt loyalty platform.
Hoplamazian said Hyatt's net unit growth has remained strong despite financing issues hurting new-construction starts in the U.S. The company opened 24 new properties in the quarter, highlighted by Andaz Nanjing Hexi, Grand Hyatt La Manga Club Golf & Spa, Hyatt Regency Mexico City Insurgentes, Impression Isla Mujeres by Secrets, and The Pell, part of JdV by Hyatt.
Transactions Update
Hoplamazian said Hyatt is still actively marketing two of its owned assets with plans to sell off a total of $2 billion in owned assets by the end of 2024.
Hyatt has already sold $721 million of its owned hotel portfolio.
Hoplamazian said there are currently no other plans to market assets, in part because of the strong operating performance of the owned assets and a weak financing environment hurting transactions, but he added there has been unsolicited interest in some of the company's "larger, more unique" properties.
"There is constant dialogue, but not in the context of an active marketing initiative," he said.
As of press time, Hyatt's stock was $112.01 up 23.8% year to date. The NYSE Composite was up 5.9% for the same period.