- Hyatt’s fundamentals continue to be weighed down by COVID in 3Q.
- Expect more of the same in FY21, though management is “cautiously optimistic” on a 2H21 recovery.
- The liquidity runway is extensive, which should mitigate funding risks.
- At ~11x fwd EBITDA, the market appears to be assigning little credit to the long-term asset-light transformation.
Hyatt’s (H) 3Q20 results reflected the clear divergence currently at play between owned hotel and asset-light fundamentals – while the company is in the midst of an asset-light transformation, its remaining exposure to owned assets in urban locations remain a drag on the RevPAR performance. That said, the valuation here at ~11x FY22 EBITDA screens very reasonably, reflecting the market’s view of H as more in-line with a full-service REIT than an asset-light franchise like Hilton (HLT). Further progress on the asset-light transformation, as well as accelerated asset sales and the resumption of buybacks, should drive a re-rating.
Revenue Growth Misses the Mark in 3Q, But There is Cause for Optimism
H fell short with 3Q20 revenues of ~$399m, well below consensus at $424m, as comparable system-wide RevPAR fell ~72% YoY. On the bright side, RevPAR did still improve ~17% from 2Q levels, led by occupancy gains in Greater China as domestic demand recovers, as well as stronger demand in drive-to and coastal markets in US select-service hotels. Further, ~94% of H’s rooms have been reopened as of 3Q, which is certainly a step in the right direction.
Source: Earnings Release
Also positive was net unit growth, which was ~6.0% YoY higher, led by Asia-Pacific (ASPAC) and Europe, Africa, and Middle East (EAME)/South-West Asia, which had the strongest net room growth of +8.2% YoY and 8.6% YoY, respectively. This compares to the Americas with a +4.9% YoY gain. The pipeline is also getting back on track, with gains of ~101k rooms (+9.8% YoY), a trend surprisingly consistent with other operators in results thus far.
