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Hyatt (H) Gains From Solid Leisure Demand & Improving RevPAR

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  • H
  • CWH
  • HGV

Hyatt Hotels Corporation H is benefiting from solid leisure transient demand, easing of travel restrictions and reopening of borders across Europe. Thus, the company’s shares have gained 22.5% in the past three months, compared with the industry’s rally of 18.3%. However, coronavirus-induced travel restrictions and other containment efforts have negatively impacted the company’s operations. Let’s delve deeper.

Growth Drivers

As the economy is opening up, signs of improvement can be witnessed in the Europe, Africa, Middle East and Southwest Asia segments. The upside can primarily be attributed to a rise in leisure transient demand, easing of travel restrictions and reopening of borders across Europe. During third-quarter 2021, RevPAR in the regions soared 162.6% from the year-ago quarter’s level.

Hyatt witnessed improvements in China with RevPAR standing at 78% of the pre-pandemic levels. The pace of recovery in Asia Pacific (excluding Mainland China) remained sluggish due to the presence of stringent travel restrictions. The company anticipates the growth momentum to continue, backed by successful vaccination rollouts and easing of travel restrictions. Coming to hotel re-openings, approximately 99% of total system-wide hotels were open as of Jun 30, 2021 compared with 98% as on Jun 30, 2021.

Meanwhile, the company’s new signings across its brands globally have consistently outpaced openings. In 2018, 2019 and 2020, Hyatt registered net room growth of 13.6%, 7.4% and 5.2% on a year-over-year basis, respectively. During third-quarter 2021, 20 new hotels (or 4,599 rooms) joined Hyatt's system. This contributed to a 6.9% increase in net rooms from third-quarter 2020 levels. Despite the coronavirus pandemic, Hyatt anticipates net unit growth of 6% in 2021. It is optimistic about continued growth in demand for the upcoming quarter of 2021.

The Zacks Rank #3 (Hold) company is focused on strengthening its presence worldwide and has expansion plans in Asia-Pacific, Europe, Africa, Middle East and Latin America. Expansion in these markets is likely to aid the company in gaining market share in the hospitality industry, thus boosting business. Hyatt’s robust brand presence and continual expansion in higher growth and under-penetrated markets such as India and China are crucial to its growth potential.

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Concerns

The COVID-19 pandemic and related travel restrictions and other containment efforts have impacted the company significantly. In spite of sequential improvements in RevPAR, the company anticipates demand to remain uneven in the near term. Emergence of new COVID-19 variants is likely to lead to volatility in demand. The company does not expect results to return to pre-COVID-19 levels until business traveler and consumer confidence improve (associated with pandemic-related risk), and government and corporate restrictions on travel are fully lifted.

With travel restrictions and quarantines in place, the company has been witnessing dismal RevPAR worldwide. Although the company is witnessing sequential improvement in RevPAR, it is still below the pre-pandemic levels. During third-quarter 2021, the company’s system-wide RevPAR declined 31.8% compared with 2019 levels. The downside stemmed from the negative impact of the pandemic.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector include, Hilton Grand Vacations Inc. HGV, Bluegreen Vacations Holding Corporation BVH and Camping World Holdings, Inc. CWH.

Hilton Grand Vacations sport a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have jumped 38% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial year sales and earnings per share suggests growth of 41.2% and 161.4%, respectively, from the year-ago period.

Bluegreen Vacations sport a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have surged 58.5% in the past three months.

The Zacks Consensus Estimate for Bluegreen Vacations current financial year sales and earnings per share indicates growth of 25.6% and 191.5%, respectively, from the year-ago period.

Camping World carries a Zacks Rank #2 (Buy). The company has been benefiting from the launch of a fresh peer-to-peer RV rental marketplace and a mobile service marketplace. It has been investing heavily in product development.

The company has a trailing four-quarter earnings surprise of 70.9%, on average. Shares of the company have appreciated 20.4% in the past three months. The Zacks Consensus Estimate for Camping World current financial year sales and earnings per share suggests growth of 25.9% and 77.1%, respectively, from the year-ago period.


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Hyatt Hotels Corporation (H) : Free Stock Analysis Report

Camping World (CWH) : Free Stock Analysis Report

Hilton Grand Vacations Inc. (HGV) : Free Stock Analysis Report

Bluegreen Vacations Holding Corporation (BVH) : Free Stock Analysis Report

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