Hyatt Hotels Corp. reported mostly positive 2019 systemwide performance metrics, reporting a 0.5 percentage-point year-over-year gain in occupancy and 0.7 percent growth in revenue per available room. While positive, RevPAR was negatively impacted by 40 basis points as a result of political unrest in Hong Kong, according to the company. Average daily rate remained flat.
Fourth-quarter occupancy was up 0.2 percentage points year-over-year, while ADR was down 0.9 percent, and RevPAR was down 0.5 percent, negatively impacted by approximately 110 basis points as a result of the unrest in Hong Kong and by approximately 60 basis points from the timing of the Jewish holidays.
Annual net income was down slightly, 0.4 percent, from $769 million to $766 million. The fourth quarter, however, saw comparative figures rise from $44 million to $321 million, primarily due to the sale of the Grand Hyatt Seoul for $481 million during that period.
Corp. Groups 'Strong' Amid U.S. Slowdown
Comparable fourth-quarter U.S. hotel RevPAR declined 1.3 percent year over year, with full-service and select-service U.S. hotel RevPAR down 1.1 percent and 1.8 percent, respectively, said Hyatt CFO Joan Bottarini during an earnings call on Thursday.
"Full-service group rooms revenue in the U.S. decreased 2.6 percent in the quarter driven entirely by group room nights and was impacted by the shift in the Jewish holidays," Bottarini said. Room nights decreased 2.8 percent and ADR increased 0.2 percent. "The decrease in fourth-quarter group business was driven by lower association business, partially offset by an increase in corporate business."
That corporate group business was "very strong," said Hyatt president and CEO Mark Hoplamazian. "Over the course of 2019 in terms of our actual performance of booked rooms revenue … [it was] up in the low teens."
Both Hoplamazian and Bottarini also attributed the fourth-quarter decline to higher levels of association bookings for periods three to four years out during the fourth quarter of 2018 in anticipation of a decrease in third-party sales commissions implemented in early 2019.
Looking ahead, the group pace is up approximately 4 percent for 2020. "At Dec. 31, approximately 80 percent of our group business for 2020 was already on the books, and we expect it to be a strong year for group business compared to 2019," Bottarini said.
Beyond that, 2021 appears down modestly in group business with about 50 percent of business on the books; 2022 is up in the mid-single digits, with about 35 percent booked, Hoplamazian added. "If you look at the core production in corporate, it's very encouraging," he said. "The top four areas—high-tech, banking and finance, pharma and manufacturing—are all up mid-to-high single digits across the board for the year looking forward in terms of bookings."
Development
The company reported 7.4 percent growth in 2019 net rooms compared with 2018, with 226,674 rooms across 924 properties as of Dec. 31. This growth was "fueled by a record-setting 90 new hotels opened across our system in 2019," Hoplamazian said. Hyatt also increased its presence around the globe by "adding 35 new markets in 2019 alone through both new hotel openings and conversions, and that excludes the over 140 new markets we added through a significant expansion of our collaboration with Small Luxury Hotels."
Hyatt had at year-end 500 hotels with 101,000 rooms in the pipeline, representing about a 13 percent year-over-year increase and approximately 45 percent of Hyatt's existing system.
2020 Guidance and Coronavirus Update
Hyatt expects comparable full-year 2020 RevPAR growth in the range of negative 0.5 percent to 1.5 percent, with RevPAR growth in the U.S. a bit lower than growth elsewhere. Net rooms growth is expected to be in the range of 6.5 percent to 7 percent, representing 80 planned new hotel openings. Anticipated net income is in the range of $113 million to $144 million. The company's guidance does not include the potential impact of COVID-19, the coronavirus outbreak that started in December in China.
Because of the outbreak, 26 Hyatt hotels are closed in Greater China, and those that remain open are running at very low occupancies. There will be an impact to the company's results, but "it's simply too early to reasonably quantify what the full-year impact to our business in 2020 might be," Bottarini said, who estimates that for every one point decline in Greater China RevPAR, the impact on consolidated adjusted EBITDA will be in the range of $1 million to $2 million.
It is also too early to tell what impact the virus will have on construction in the region, she added, noting that the majority of Hyatt's Greater China openings were planned for the first half of the year, "which provides some cushion." But hotels also are scheduled to open in the back half of 2020, and any construction delays of up to three months could have a negative impact of 30 to 40 basis points on full-year net rooms growth guidance.
Hoplamazian provided additional insights for the region, stating that the year had started out strong, and that "we had significant share gains in the fourth quarter in China, the top five markets, which for us in China include Shanghai, Beijing, Shenzhen, Guangzhou and Hangzhou, we were up almost six points of market share."
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