H - Embedded Expectations Analysis - 2020 12 17
Hyatt Hotels Corporation (H:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.7x Uniform P/B. At these levels, the market has modestly positive expectations for the firm. Although management's concerns about newly opened hotels, revenue, and demand suggest the potential for near-term headwinds, market expectations may still be too limited. As such, longer-term outperformance remains warrantedSpecifically, management may have concerns about the performance of newly opened hotels, particularly in Boston, Nashville, and China. Furthermore, they may lack confidence in their ability to sustain their revenue per available room (RevPAR), cost savings and operational efficiencies, and liquidity position. Additionally, they may have concerns about continued weakness in activity levels in the Asia-Pacific region and pressure in overall demand, particularly in large group business demand. Moreover, they may lack confidence in their ability to maintain their booking activity, retain their occupancy levels, and support their realization rates. Finally, they may be overstating the capabilities of their UrCove brand and their asset disposition position
Despite management's concerns about newly opened hotels, revenue, and demand, given the firm's shift towards a franchising model and market position, market expectations may still be too limited. As such, longer-term outperformance remains warranted
Hyatt Hotels is a hospitality company engaged in the development, ownership, operation, management, franchising, licensing or provision of services to a portfolio of properties, consisting of full service hotels, select service hotels, resorts, and other properties, including spas and fitness studios, timeshare, fractional, and other forms of residential and vacation properties. The company also manages, provides services to, or licenses its trademarks with respect to residential ownership units that are often adjacent to a Hyatt-branded hotel. Additionally, for condominium ownership units, the company provides services and/or manage the rental programs or homeowner associations associated with such units.
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