Hyatt’s Franchise Business To Drive Revenues In The Near Future

Hyatt Hotels (NYSE:H) released its first quarter results earlier this month with total revenues growing by 12% to $1.2 billion thanks to a strong showing by its Managed and Franchise business. The earnings came comfortably ahead of analyst estimates despite the impact of a one-time expense of $5 million associated with Hyatt’s acquisition of Two Roads. Per Trefis estimates, Hyatt’s shares have a fair value of $77, which is slightly ahead of the current market price. You can view our interactive dashboard on How Has Hyatt Fared In Recent Quarters? to observe quarterly revenue trends and modify yearly projections to gauge the impact on the share price. You can also find more of our Consumer Discretionary sector data here.

Management and Franchising Business Continues to Grow the Top Line

• For the most recent quarter, Management and Franchising fees came in at $136 million – representing a growth of 7% year-on-year. These gains were primarily driven by the Americas segment which added 86 managed properties – many of them being hotels that have transitioned from company-owned to managed status as a part of Hyatt’s long-term strategy to have a smaller balance sheet.
• ASPAC Management and Franchising revenues increased by 6.2% thanks to a 17% increase in rooms and strong demand in Japan and Southeast Asia. EAME/SW segment observed a decline due to weak economic conditions in the Middle East.
• Hyatt Owned and Leased Hotels segment revenues contracted by 9% to $470 million over the prior year period. This segment reported a sharp 12%-decline in 2018 due to the sale of numerous properties in the last two years, even as the company transitioned many properties to managed status.

Hyatt’s management has revised its net income guidance higher for the year to $144-183 million due to lower expected losses from hospitality ventures. The full year EBITDA is reaffirmed to be in the range of $780-800 million from a reduction in depreciation and amortization costs. Nearly 50% of Hyatt’s assets are comprised of company-owned properties, and as the strategic shift continues, we expect the company’s top line to be driven by management and franchise fees in the near term.

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