Hyatt Hotels Corporation‘s H shares rose 13.5% in the past month. The stock surpassed the Zacks Hotels and Motels industry's 9.4% rise and outperformed the broader Zacks Consumer Discretionary sector's 9.3% rise in the same period. Hyatt's impressive stock performance reflects the company's strong position in the industry, driven by robust demand and strategic initiatives aimed at expanding its global footprint.
H also outpaced competitors like Choice Hotels International CHH, up 2.1%, and Marriott International MAR, up 11.4% in the past one month. The upside also highlights investors’ confidence in the company’s ability to navigate evolving market dynamics effectively.
Price Performance
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H Stock Trades Above 50 and 200-Day Moving Averages
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Technical indicators suggest continued strong performance for H. Notably, the 50-day SMA continues to read higher than the 200-day SMA, signaling the bullish trend. This technical strength underscores positive market sentiment and confidence in Hyatt’s financial health and prospects.
Factors Driving Hyatt’s Stock Surge
Strong RevPAR Growth Driven by Business and Group Travel: Hyatt is benefiting from a steady rise in demand across its customer segments. The company is seeing favorable trends in business and group travel, which are driving revenue growth. Despite some challenges, such as renovations and external impacts, Hyatt’s performance remains strong.
During second-quarter 2024, business transient revenues showed steady improvement, with system-wide comparable revenue per available room (RevPAR) rising 4.7% year over year. In the United States, RevPAR moved up more than 2%, supported by strong group business and corporate accounts, particularly in major cities like New York, Seattle, San Diego and Washington, DC. The business transient segment registered a 14% revenue increase, with a 12% rise in the United States.
The company is optimistic about business travel, expecting it to drive RevPAR growth for the rest of 2024. Its focus on enhancing business and group travel, alongside improvements in luxury and high-end markets, supports its growth trajectory. The momentum in travel demand is expected to continue boosting Hyatt’s revenues and overall performance.
Expanding Global Presence: Hyatt continues to expand its global footprint, contributing to its growth strategy. In second-quarter 2024, the company added 18 new hotels, which included more than 3,200 rooms, marking a 4.6% increase in net room growth. This ongoing expansion is expected to boost growth through the remainder of 2024, supported by a robust pipeline of future hotel openings and conversions. Hyatt anticipates net room growth to increase in the range of 5.5- 6% year over year in 2024.
Strategic Acquisitions Fuel Growth: Hyatt is leveraging acquisitions and divestitures to drive its growth strategy. On Aug. 20, 2024, Hyatt announced its plan to acquire Standard International, marking its entry into the lifestyle sector and the formation of a new lifestyle group.
On June. 30, 2024, the company acquired the me and all hotels brand from Lindner Hotels Group. This move aims to boost Hyatt’s presence in the upscale European market. By focusing on strategic acquisitions, the company aims to strengthen its market position, increase operational flexibility and drive long-term growth.
Hyatt's Estimate Movement & Valuation
The Zacks Consensus Estimate for H’s 2024 earnings per share (EPS) has moved up to $3.97 from $3.42 over the past 30 days. This depicts that there is solid upside potential for the stock. The estimated figure indicates 55.1% year-over-year growth for 2024.
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Hyatt is currently trading at a discount compared to its industry peers. Its forward 12-month price-to-sales ratio stands at 2.21, which is lower than the industry average of 2.50. The company is also trading currently at a discount compared to other industry players like Hilton Worldwide Holdings Inc. HLT. Despite Hyatt's strong stock performance relative to its industry, its current valuation suggests that the market might not have fully acknowledged or priced in the company's growth potential and earnings prospects.
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What May Hinder Hyatt’s Stock Performance
Challenges in the Greater China market hurt the company. Hyatt is currently earning incentive fees from more than 90% of its Greater China hotels, with a consistent fee structure based on the first dollar of gross operating profit (GOP). However, RevPAR in Greater China was negative during the quarter. Demand expectations suggest a continuation of this trend into the second half of the year.
This negative RevPAR and a decline in domestic travel are expected to affect total revenues and GOP margins, leading to lower fees than previously anticipated. The revised outlook reflects these challenges and projects continued negative RevPAR growth in Greater China for the remaining quarters of the year.
Conclusion
The Zacks Rank #3 (Hold) demonstrated strong performance through its strategic expansions and robust demand for business and group travel. The company’s growth is driven by a solid RevPAR increase and an ongoing global footprint expansion.
However, the company faces major challenges. The recent decline in revenues, stemming from various external factors, coupled with persistent issues in the Greater China market, could impact its overall performance. Investors should gauge these factors carefully as they assess Hyatt's future potential.
While H’s strategic moves bolster its growth potential, investors should carefully consider these risks when evaluating their investment decisions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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