How Will A Strong RevPAR Guidance Impact Hyatt Hotels’ Revenues In 2020?

January 28th, 2020 by Trefis Team
-12.81%
Downside
151
Market
132
Trefis
H: Hyatt Hotels logo
H
Hyatt Hotels

After Marriott International reported growth of 1.5% in RevPAR (revenue per available room) for the third quarter, shares of Hyatt Hotels (NYSE: H) gained more than 10% as investors boosted their growth expectations for the sector. Hyatt has been going through a transformation phase to focus on its Management & Franchise (M&F) business, and its growing M&F portfolio of hotels is likely to drive the company’s top line in 2020. Trefis details how growth in RevPAR helps the average daily rate (ADR) for Hyatt’s Americas M&F segment – in turn impacting the company’s top line in an interactive dashboard, Hyatt Hotels Revenues: How Does Hyatt Make Money?

A Quick Look at Hyatt Hotels’ Revenues

We expect Hyatt Hotels to report $4.72 billion in Total Revenues for full-year 2019. The company generates its revenues from three segments:

  • Owned & Leased Hotel Revenues: $1.84 billion in FY2019 (39% of Total Revenues). These represent revenues from hotel operations such as room rentals and food & beverage sales from properties that are owned or leased by Hyatt.
  • Management & Franchise Hotel Revenues: $2.73 billion in FY2019 (58% of Total Revenues). These represent fees from properties where Hyatt has a long-term management agreement or has franchised one of its brands. (Note: The figure includes costs incurred by Hyatt on behalf of owners of the properties such as payroll, marketing, loyalty program, etc.)
  • Corporate & Other Revenues: $137 million in FY2019 (3% of Total Revenues). These represent revenues from co-branded credit cards, Exhale, and other corporate functions.
Relevant Articles
  1. Up 50% Over The Last 12 Months, Is Hyatt Stock Still Attractive?
  2. What’s Happening With Hyatt Stock?
  3. What’s New With Hyatt Stock?
  4. Is Hyatt Stock Still A Buy Following Its Recent Rally?
  5. Will Strong Results And Dealmaking Activity Drive Hyatt Stock Higher?
  6. What’s Happening With Hyatt Stock?

(Note: The revenues above are different from those reported on the Income Statement as we have taken the values from the segment summary after eliminating intersegment revenues)

Hyatt generates nearly 90% of its total revenues from Americas region

  • Hyatt’s worldwide portfolio consists of 843 properties, with 208,207 rooms.
  • The Americas M&F segment alone operates 128,645 rooms, comprising of 62% of Hyatt’s total room portfolio.
  • Also, the owned & leased segment operates 17,235 rooms, of which 85% are from the Americas region.
  • As outlined in our interactive dashboard, Americas region contributes nearly 85% of Hyatt’s Revenues and 70% of the company’s total room portfolio.

Despite strong growth in ADR, total revenues are likely to grow by a low-single-digit rate in 2020

  • In our base-case scenario, we expect Hyatt Hotels’ O&L segment to achieve a 0.5% growth in the average daily rate for 2020.
  • On increasing the O&L segment’s average daily rate by 2%, the segment’s revenues contract by 1.2% for 2020.
  • Similarly, the Americas M&F segment revenues grow by 8%, considering a 2% average daily rate growth for the segment.
  • Overall, the higher growth expectations raise our Hyatt Hotels’ Revenue forecast for 2020 by just 1.2% from the base case of 3.9%.
  • Thus, Trefis maintains Hyatt Hotels’ valuation at $77 per share, which is roughly 10% below the current market price.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams