While some hotel companies that have reported third-quarter
earnings have expressed cautious optimism on an improved fourth quarter and continued
recovery into 2021, Hyatt Hotels Corp. painted a somewhat different picture
when it reported its third-quarter results Thursday morning.
"We're mindful of the recent increase of [virus] cases
in the U.S. and Europe and the resulting increase in restrictions being put in
place that will have a negative impact on travel in the near term and could
produce flat demand in the fourth quarter," said Hyatt president and CEO
Mark Hoplamazian, adding that while leisure drive-to business is leading the
recovery, "business transient and group, however, will both be necessary
ingredients for achieving a full recovery and supporting better rate
realization. We are prepared for the first half of 2021 to be challenging."
He noted that large group business is heavily linked to
confidence around widespread vaccine availability, effective therapies and
scalable rapid testing solutions. Group business on the books for 2021 is down
40 percent from where it was last year heading into 2020, Hoplamazian said,
with the first half significantly down and the second half cancellations are
down to the mid-single digits. Still, Hoplamazian believes that with a
combination of testing regiments, therapeutics and approved vaccines, that will
change the profile and "allow us to fulfill demand on the books, and
heading into 2022, there's every expectation to see pent-up demand."
Hyatt also is having success with targeted smaller groups,
including bubble programs for customers in professional sports, entertainment,
emergency response workers and universities. The company also has had success
with certain industries like restaurant franchise groups, pharmaceutical
companies, construction and certain manufacturing businesses, Hoplamazian
added.
Regarding business transient, he said Hyatt is hearing mixed
messages from customers. A limited number are seeing increases in business
activity and expected business-related travel to increase in early 2021. Many
of Hyatt's largest customers, however, such as professional services and
consulting companies, are "suggesting a slower return to normalized travel
levels with continued limitations on travel through the first half of 2021,"
Hoplamazian said. When asked about corporate rate negotiations, he said a small
percentage are flat to last year's rates, but also customers are moving toward
a dynamic pricing model.
He added that while drive-to and resort business was strong,
a majority of owned hotels are urban and business and group oriented, and they
will continue to face headwinds, with five closing for the foreseeable future,
including the Grand Hyatt and Park Hyatt in New York City. That's not to say
they will close permanently, but that they will remain closed for some time,
Hoplamazian explained, adding that some hotels in Europe that have reopened
might begin to close again, depending on the extent of the new constraints and
restrictions being put in place there.
Q3 Results
Third-quarter comparable systemwide revenue per available room
declined 72 percent year over year, an improvement from the nearly 90 percent
decline as of June 30. The company didn't provide systemwide occupancy, but for
the Americas, third-quarter occupancy at full-service properties was 17.7
percent for the quarter, and occupancy for select-service hotels was 44.3
percent. Net income decreased 154.2 percent year over year to a loss of $161
million.
Greater China showed encouraging results, with group
business at similar levels to this period in 2019, and business transient was
off only approximately 200 basis points, Hoplamazian said. "Notably, on
the group business front, we continue to host new product launches for car
manufacturers as well as luxury goods companies. We view the China experience
as an example of the strong desire people have to travel and gather and the
type of demand you might expect to see elsewhere once travel restrictions lift
and fear around the virus ceases to be such a limiting factor to travel."
During the quarter, Hyatt doubled the number of room nights
sold compared to the second quarter, according to the company. Hyatt also
opened 27 new hotels during the quarter, for more than 4,300 new rooms, "a
record of hotel openings for any third quarter in our history,"
Hoplamazian said in a statement.
Net rooms grew 6 percent, and the pipeline included executed
management or franchise contracts for about 101,000 rooms, an increase of 9.8
percent compared to the third quarter of 2019. As of Oct. 31, 94 percent of
Hyatt's total systemwide hotels, representing 92 percent of rooms, were open.
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