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Hyatt Strong on Expansion & Miraval Buyout Amid Macro Woes

Zacks

Hyatt Hotels Corporation’s H strong developmental pipeline, consistent expansion plans, extensive international exposure and attempt toward expanding beyond traditional hotel are major growth drivers.

However, lingering political uncertainties in international markets pose a threat to profits.

Recently, this leading global hospitality company announced third-quarter 2017 results. Adjusted earnings per share of 26 cents beat the Zacks Consensus Estimate of 17 cents by 52.9%. However, earnings were down 44.7% year over year from 47 cents due to natural disasters and the Jewish Holiday timing.

Net revenues of $1.12 billion rose 2.8% year over year on the back of higher management and franchise fees, increased other revenues as well as a rise in other revenues from managed properties, partially offset by lower contribution from owned and leased hotels. The top line also surpassed the Zacks Consensus Estimate of $1.09 billion by more than 2%.


Key Growth Drivers

Hyatt’s strong differentiated brand portfolio and exceptional personalized service have helped the company gain traction globally through both its managed and franchised hotels.As of Sep 30, 2017, the company's portfolio included 739 properties in 57 countries under 13 premier brands.

In addition to domestic lands, Hyatt is consistently trying to expand its presence in the Asia-Pacific, Europe, Africa, Middle East and Latin America regions.

Interestingly, the company has experienced net rooms' growth between 6% and 7% for ten consecutive quarters. With plans of opening at least 60 hotels, 2017 is set be another year of record openings.

Also, the company continues to rapidly expand the Hyatt Place and Hyatt House brands globally, reflecting its robust momentum in the fast-growing select service category.

Meanwhile, the acquisition of Miraval in January has helped Hyatt expand beyond traditional hotel stays into the swiftly growing space of wellness, which goes well with high-end travelers. Though Miraval’s operations are likely to contribute meaningfully to Hyatt's overall earnings starting 2019, the initial response has been positive as well.

In fact, post the Miraval acquisition, the company’s shares have rallied 28.9% to date compared with the industry’s growth of 19.6%.



Moreover, Hyatt is continuously devising new plans to enhance guest experience and drive occupancy in order to survive in a tough economic environment. In first-quarter 2017, Hyatt launched a loyalty program World of Hyatt — a platform for guest engagement. The company is witnessing higher level of guest satisfaction owing to the enhancement of its loyalty program which is helping the company gain market share and add customers.

Concerns

Macroeconomic concerns in several international markets might spell trouble for the company. In the Middle East, political unrest, lower government spending, new hotels and a tough oil market continue to hurt tourism.

Moreover, given a substantial exposure in the international markets, the company is vulnerable to fluctuations in exchange rates like other hotel companies including Marriott International, Inc. MAR, Hilton Worldwide Holdings HLT and Wyndham Worldwide Corporation WYN. Notably, Hyatt has been witnessing a decline in international inbound travel owing to a stronger dollar.

Hyatt currently 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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