Personal Finance

Hyatt Hotels Corporation Posts Slowdown in Revenue per Available Room Growth

Inside a hotel room.

Hyatt Hotels (NYSE: H) this week posted fourth-quarter earnings numbers that kept the company squarely within management's full-year growth target. Yet the hotel chain's expansion pace has slowed down over the last few months, and the company projected only minor gains in the year ahead.

Here's how the latest headline numbers compare against the prior-year period:

Metric Q4 2016 Q4 2015 Year-Over-Year Growth
Revenue $1.1 billion $1.1 billion N/A
Net income $41 million $37 million 11%
Earnings per share $0.31 $0.26 19%

Data source: Hyatt's financial filings.

What happened this quarter?

Hyatt's core growth pace fell to 2% from 2.5% in the third quarter. That allowed the company to hit management's most recent goal of a 2%-3% improvement in revenue per available room (RevPAR) for the year, though they began the year targeting gains of closer to 4%.

Inside a hotel room.

Image source: Hyatt.

Key highlights of the quarter include:

  • The decline in RevPAR growth from 2.5% to 2% came as revenue at comparable owned and leased hotels flipped to a slight decline from the prior quarter's 1% uptick.
  • Growth in the U.S. market fell to a 2.4% pace from 3.8% last quarter. Hyatt's full-service segment grew by 2%, and its lower-margin select service expanded by 3.5%. Both of these figures represent declines from the prior quarter.
  • Profitability fell by more than 2 percentage points to 22% of sales.
  • Hyatt added 18 hotels comprised of 4,500 rooms to its portfolio, which boosted its base of rooms by 7%. For the full year, management came in just shy of its target of launching 60 new hotels, but it still managed to open 59 properties representing nearly 13,000 rooms.

What management had to say

Despite the demand slowdown, management was happy with Hyatt's broader results. "Our business continues to have good momentum," CEO Mark Hoplamazian said in a press release, "and we believe we're well positioned for continued growth in 2017."

Executives were especially pleased with the hotel base gains. "New hotel openings continue to be an important growth driver for Hyatt," Hoplamazian continued. "We added a record-level 59 new hotels to our system in 2016 and finished the year with approximately 66,000 rooms in our executed contract base, an increase of approximately 5,000 rooms compared to the end of the third quarter."

Looking forward

Most of those new rooms are in international markets, which explains why Hyatt believes those geographies will be so important to the business over the next five years. At the same time, executives hope to extend the brand beyond traditional hotel stays, and its recent purchase of wellness specialist Miraval Group is the latest step in that direction.

Hyatt issued a conservative prediction for the coming year, though. RevPAR growth should slow for the second consecutive year, stopping somewhere between 0% and 2% to mark a decline from the 2.5% pace it managed in 2016 and the 5% jump the hotel chain enjoyed in 2015.

Executives plan to spend heavily on capital projects, including redeveloping the Miraval properties and opening a new corporate headquarters. Hyatt also plans to match last year's record hotel expansion pace by adding a further 60 locations to its base. These investments will likely push net income significantly below last year's $204 million haul, but they are aimed at delivering stronger sales and profit gains in the years ahead.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Hyatt Hotels. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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