Yahoo Finance Here's Why You Should Retain Hyatt (H) Stock in Your Portfolio
Hyatt Hotels Corporation H is likely to benefit from solid leisure transient demand, Apple Leisure Group integration and asset-light deals. Also, the emphasis on expansion initiatives bodes well. However, supply chain challenges are a headwind.
Let us delve into the factors that highlight why investors should retain the stock for the time being.
Growth Catalysts
Shares of Hyatt have gained 20.6% in the past year compared with the industry’s 3% growth. The upside can be attributed to a rise in leisure transient demand, easing of travel restrictions and ramped-up airline capacity. During the fourth quarter of 2022, leisure transient revenues reached 14% above 2019 levels on a comparable system-wide basis. Given the continued strength of leisure travel demand, favorable pricing environment and airlift activities, the company is optimistic about continued growth in demand throughout 2023.
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During the fourth quarter of 2022, system-wide comparable revenue per available room (RevPAR) increased 34.8% year over year, owing to an increase in occupancy and average daily rate (ADR). Also, RevPAR was up 2.4% from 2019 levels. The upside was primarily backed by strong leisure transient trends and improving business activity. The company witnessed solid RevPAR gains in Europe, South Asia, Latin America and the Caribbean markets region owing to strong leisure demand. The company anticipates system-wide 2023 RevPAR to increase 10-15% from 2022 levels.
Increased focus on the integration of Apple Leisure Group bodes well. During the fourth quarter, the company reported solid segmental performance owing to strength in net package RevPAR, increased membership contracts for ALG’s Unlimited Vacation Club (approximately 8,300), guest departures (approximately 563,000) and strong unit pricing. During the quarter, total net package revenue was up 42% from 2019 levels. The upside was backed by significant net rooms growth, courtesy of ALG’s expansion in Europe and organic growth in the Americas. Given the emphasis on distribution capabilities with an end-to-end booking process and strong operational execution, an integrated experience (with AMR and UVC program) and destination management services, the company is optimistic about ALG’s performance in 2023.
Emphasis on asset-light deals to broaden presence in key markets and service platforms bode well. On Feb 2, 2023, the company acquired Dream Hotel Group. Valued at approximately $125 million, the acquisition adds 12 lifestyle hotels (or approximately 1,700 rooms) to the Hyatt portfolio. The agreement also includes an additional 24 signed long-term management agreements for hotels expected to open in the future. The initiative paves a path to boost Hyatt's lifestyle room count (by more than 10%) and expand its presence in New York City by 30%. Given the easing of travel restrictions in the Asia Pacific region and a strong leisure travel demand, the company unveiled a robust pipeline of landmark luxury and lifestyle hotels, the company anticipates unit growth in 2023 to increase at approximately 6% on a net-room basis.
Concerns
The Hotel and Motels industry is grappling with the coronavirus pandemic and Hyatt isn’t immune to the trend. During the fourth quarter of 2022, the company reported reduced demand in Greater China owing to the crisis. Although the company commenced its recovery process, we believe the emergence of the new COVID-19 variant is likely to create volatility in demand. It also remains cautious of supply chain challenges and increases in costs (due to inflation).
Zacks Rank & Key Picks
Hyatt currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Las Vegas Sands Corp. LVS, Hilton Grand Vacations Inc. HGV and Crocs, Inc. CROX.
Las Vegas Sands sports a Zacks Rank #1. LVS has a long-term earnings growth rate of 2.5%. The stock has increased 74.3% in the past year.
The Zacks Consensus Estimate for LVS’ 2023 sales and EPS indicates a rise of 107.7% and 217.5%, respectively, from the year-ago period’s estimated levels.
Hilton Grand Vacations currently sports a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 12.1%, on average. Shares of HGV have declined 10.7% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 7.1% and 10.8%, respectively, from the year-ago period’s levels.
Crocs carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have increased 64.8% in the past year.
The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 12.5% and 2.5%, respectively, from the year-ago period’s levels.
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Hyatt Hotels Corporation (H) : Free Stock Analysis Report
Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
Hilton Grand Vacations Inc. (HGV) : Free Stock Analysis Report
