Hyatt Invests In A Home Rental Startup Amid Changing Landscape In The Vacation Rental Industry

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Hyatt Hotels

Hyatt Hotels (NYSE:H) has invested into home rental space, according to media reports. [1] The company has backed Onefinestay, which lets people rent upscale properties in London, New York, Los Angeles and Paris. Hyatt Hotels was part of $40 million funding raised by Onefinestay in late 2014. [1] It appears to be a smart move by the company as the U.S. vacation rental industry is seeing steady growth with annual revenues of over $24 billion. Also, the vacation rental industry has been a disruption for the hotel industry, which is already very competitive with multiple brands of operators such as Hyatt, Hilton, Intercontinental, Starwood, Marriott and Four Seasons among others.

For instance, Hyatt Hotels manages, franchises, owns and develops a Hyatt portfolio of hotels, resorts, and residential and vacation ownership properties around the world and its portfolio consists of 587 properties with more than 155,000 rooms. [2] However, its investment in home rentals will be first for Hyatt and the industry could see many takers going forward given the stiff competition in hotel industry and the rise of more service focused players such as Airbnb, Homeaway and Onefinestay. Earlier, vacation rental market was massively fragmented and service standards were poor. However, now with more startups eyeing this arena, the focus on service has become an important factor and it has thus become a viable alternative to more mainstream lodging options.

Looking at Onefinestay, it enables owners of upscale residences to rent out their property and charges the owner a fee for the facilitation. The service provided to the guests is on higher end as compared to other industry players such as Airbnb. The vacation rental market now accounts for close to 15% of the lodging industry revenues and the outlook remains strong, given improved service quality, ease of booking and lower homeownership rates. However, it must be noted that the rise of vacation rentals is also a concern for hotel operators as the rental business eyes the same set of customers while the regulations and taxation is much different for both the industries.

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We currently estimate revenues of about $4.60 billion for Hyatt Hotels in 2015, with EPS of $1.27, which is in line with the market consensus of $1.07 to $1.42, compiled by Thomson Reuters. We currently have a $67 price estimate for Hyatt Hotels, which is more than 10% ahead of the current market price of $59.

See our complete analysis for Hyatt Hotels

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Notes:
  1. The Daily Startup: Hyatt Hotels Invests in Home-Rentals Startup Onefinestay, The Wall Street Journal, May 25, 2015 [] []
  2. Hyatt Hotels’ SEC Filings []