H - Embedded Expectations Analysis - 2021 09 02
Hyatt Hotels Corporation (H:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.1x Uniform P/B. At these levels, the market is pricing in modestly positive expectations for the firm. Although management may have concerns about the sustainability of demand, revenue growth, and bookings, market expectations may still be too pessimistic. As such, longer-term outperformance remains warranted.Specifically, management may have concerns about the sustainability and uneven pace of the global recovery in travel demand, the lagging recovery of dense urban markets in the U.S., and the progress of their transition to a leisure-driven portfolio. In addition, they may be overstating growth opportunities from the Ventana acquisition, their leadership position in the luxury lifestyle space, and the sustainability of heightened booking levels. Furthermore, they may lack confidence in their ability to meet room growth targets, sustain improvement in the business transient and group segments, and maintain base incentive and franchise fees in Mainland China. Moreover, management may have concerns about the pace of the RevPAR recovery in Europe, Southeast Asia and the Middle East markets, EBITDA declines in markets with prevalent travel restrictions, and earnings sensitivity.
Although management may have concerns about the sustainability of demand, revenue growth, and bookings, market expectations may still be too pessimistic given the firm's leading market position and efforts to shift towards a franchising model. 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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