In the recent round of fourth-quarter earnings reports, Hyatt
Hotels Corp., Starwood Hotels and Resorts and Choice Hotels International each communicated
positive outlooks for corporate and group demand, though to varying degrees.
Hyatt CEO Mark Hoplamazian told analysts the company expects
corporate negotiated rates to increase 7 percent year over year during 2016. He
said the increases reflected the expansion of the company's brand offerings,
referring in part to Hyatt's build-out of select-service brands Hyatt Place and
Hyatt House, and "increased traction with key volume accounts." He
added that the rate increase does not reflect more relaxed contract terms; instead,
they've "maybe tightened up a little bit over time."
Corporate negotiated business makes up about 10 percent of Hyatt's
volume, Hoplamazian said, and the company has seen strong demand from the
pharmaceutical and technology industries. Demand from the energy and
manufacturing industries looks to remain weak in 2016, a sentiment also
expressed by Marriott
in its earnings call.
Starwood, too, reported increases in corporate negotiated
rates, "with average rate up in the mid-single digits" for 2016 among
its North American clients, according to new CEO Thomas Mangas.
Choice, for its part, said it expects growth in revenue per
available room from business travelers in the year ahead. "We’ve done more
[requests for proposals] this year by a lot than we ever had before," said
CEO Stephen Joyce. "Our room nights were up significantly in 2015, but
we’re expecting a big increase in 2016, as well."
On the group business side, Hyatt group rates grew more than
6 percent in the fourth quarter. "Our group outlook for 2016 and 2017
remains positive," Hoplamazian said. "Group revenue pace at U.S. full-service
hotels is up in the low-single-digit percentage range for 2016. … Our group
pace for 2017 for the same set of hotels is up in the mid-single-digit-percentage
range."
Group business revenue at same-store Starwood-operated
hotels in North America increased 8 percent over the previous year during the
fourth quarter, said CFO Alan Schnaid, "which was ahead of our
expectations." The strong group performance though, was offset by a softer
1.5 percent growth for the transient segment. In 2016, group revenue pace at Starwood's
owned and managed hotels is up in the low-single digits. "We expect group
performance to be slightly below last year in the first quarter, impacted by
the weak conditions in New York and a lower number of citywide events in Chicago
and Boston," Schnaid said. Starwood provided forward-looking statements in
spite of its planned
merger with Marriott, which each company's stockholders will put to a
formal vote on March 28.
Overall Earnings
Hyatt reported a slight, 0.1 percent decrease in average
daily rate to $181.68 during the fourth quarter. Occupancy increased 0.7
percentage points to 71.4 percent. For the full year, ADR increased 0.8 percent
to $181.92 and occupancy increased 1.1 percentage points to 74.2 percent.
Hyatt's fourth-quarter revenue increased 2.8 percent to $4.3 billion, but its full-year
revenue decreased 2 percent.
ADR at Starwood properties dropped 2.7 percent during the
fourth quarter to $171.30, while occupancy increased 1.2 percentage points to
68.5 percent, the highest fourth-quarter figure Starwood has ever recorded. Full-year
ADR decreased 2.5 percent to $172.11, and occupancy increased 1.5 percentage
points to 70.6 percent. Revenue decreased 16.5 percent during the fourth
quarter to $309 million and fell 16.1 percent to $1.3 billion for the year.
Choice saw a 3.2 percent increase in ADR to
$76.81 during the fourth quarter, while year-over-year occupancy held nearly
flat at 55.7 percent. For the full year, ADR increased 3.7 percent to $79.86
and occupancy grew 1.6 percentage points to 61.1 percent. Fourth-quarter
revenue increased 14 percent year over year to $211 million, and full-year
revenue grew 13 percent to $859.9 million.