Hyatt Earnings: China, Group, and Business Travel Demand Augmenting Resilient Leisure Trips

Hyatt’s H first-quarter revenue per available room, or revPAR, remained strong, up 43% year over year and measuring in at 106% of 2019′s level versus 102% in the fourth quarter. Demand was broad-based, with enduring leisure travel (where revenue was at 124% of prepandemic marks and up 20% year over year) and improving group (sales up 70% and ahead of 2019′s level) and business (revenue up more than 100% and at 85% of prepandemic amounts) trips. The standout geographically was Greater China, where revPAR was 96% of 2019′s level versus 56% three months prior, aided by travel restriction removals Jan. 8, 2023. Hyatt lifted its 2023 revPAR growth guidance to 12%-16% from 10%-15% as it expects further group, business, and Greater China improvement. We expect China to remain a key source of overall travel demand recovery in 2023, as flight capacity increases during the coming months. Also, the outlook for group travel is encouraging, as Hyatt’s revenue in the segment is pacing 24% ahead of last year for its Americas region, a 300-basis-points improvement from the fourth quarter. We don’t expect to meaningfully change our 2023 revPAR growth estimate of 12% or our $117 per share fair value estimate.

Adjusted EBITDA grew 59%, benefiting from a streamlined cost structure and increasing mix of higher margin group and business clientele. We continue to expect Hyatt to largely maintain its 2022 15.4% EBITDA margin in 2023. Hyatt’s brand intangible asset (the source of its narrow moat) remains intact, as evidenced by its room pipeline of 117,000, which represents 38% of its existing base and supports our forecast for more than 6% unit growth annually during the next five years. We plan to maintain this forecast, despite financing concerns fueled by the simmering banking system in the U.S., as we expect strong conversion activity (30% of openings in the first quarter) and China’s reopening to offset any potential dropout in the domestic pipeline, which has not occurred thus far.