If you’re looking for a stock with long-term potential, Hyatt Hotels Corporation (H) deserves a spot on your radar. With its solid performance across several fronts, including group travel, strategic acquisitions, and global expansion, Hyatt is positioning itself as a standout in the hospitality industry. Although its share price hasn’t kept pace with the broader hotel sector in recent months, the company’s strong growth trajectory is likely to continue in the coming years. Here’s why Hyatt stock is a strong hold for investors.
1. Strong Performance in Group and Business Travel
One of the major drivers of Hyatt’s success is the continued momentum in business and group travel. As corporate travel rebounds, Hyatt has seen significant growth in both group bookings and business transient revenues.
- Solid RevPAR Growth: Revenue per available room (RevPAR) increased by 3% year-over-year, reflecting the uptick in group and business travel.
- Group Rooms Revenue: Hyatt reported a 6% year-over-year increase in group room revenues, with particularly strong results in the U.S. and Europe.
- Business Transient Growth: The business transient segment saw an impressive 16% increase in revenue compared to the previous year.
These results underscore Hyatt’s position as a leader in the corporate travel market, with ample growth potential as business travel continues its recovery.
2. Global Expansion and New Hotel Openings
Hyatt’s global expansion strategy is another key factor that will help drive future growth. With new hotel openings across key global markets, the company is effectively increasing its footprint and reaching new customer bases.
- New Openings: In the third quarter of 2024 alone, Hyatt added 16 new hotels, translating to a 4.3% increase in net room growth.
- Robust Hotel Pipeline: Hyatt anticipates an even larger increase in the number of rooms in 2025, with expected net room growth between 7.75% and 8.25%.
- Strategic Market Expansion: Hyatt’s recent ventures into the U.S. and Greater China markets, particularly with brands like Hyatt Studios and UrCove, position it well to capture a growing customer base in these regions.
This global expansion and strong pipeline of future openings ensure Hyatt remains a key player in the hospitality industry for years to come.
3. Strategic Acquisitions Fueling Growth
Hyatt’s acquisitions strategy is another important factor supporting the company’s growth. Through targeted acquisitions, Hyatt has strengthened its brand portfolio and market presence.
- Acquisition of Standard International: In October 2024, Hyatt completed its acquisition of Standard International, which added 22 hotels and approximately 2,000 rooms to its portfolio. This acquisition also brought with it several signed agreements that will contribute to Hyatt’s growth in the fourth quarter and beyond.
- Joint Venture with Grupo Piñero: Hyatt’s joint venture with Grupo Piñero will add 23 resorts and more than 12,000 rooms to its inclusive collection, further expanding its all-inclusive offerings by 30%.
These acquisitions enable Hyatt to diversify its offerings and extend its reach into high-growth segments like lifestyle and all-inclusive resorts, helping the company compete with other major players in the industry.
4. Asset-Light Strategy Enhancing Financial Flexibility
Hyatt is executing an asset-light strategy that optimizes its portfolio and improves financial flexibility. The company continues to sell non-core assets, which not only generates capital but also reduces exposure to risks associated with hotel ownership.
- Hyatt Regency Orlando Sale: In August 2024, Hyatt sold Hyatt Regency Orlando for $1.07 billion, marking a key milestone in its asset disposition strategy. This sale was the third asset disposition of its kind, generating $2.6 billion in proceeds over the past three years.
- Asset-Light Earnings Mix: Hyatt is on track to exceed an 80% asset-light earnings mix in 2025, further improving its flexibility and profitability.
By focusing on asset-light operations, Hyatt can use its capital more efficiently, reinvesting in growth initiatives and strengthening its position in the market.
5. Hyatt Stock’s Strong Earnings Outlook
The earnings outlook for Hyatt stock is also quite promising. The Zacks Consensus Estimate for Hyatt’s 2024 earnings per share (EPS) has increased from $3.87 to $3.89 in the last month, reflecting positive momentum in its business operations. The 52% year-over-year growth in earnings for 2024 highlights the company’s strong operational performance and its ability to drive value for shareholders.
This growth trajectory, driven by a combination of business travel recovery, strategic acquisitions, and global expansion, positions Hyatt for continued success.
6. Risks and Challenges for Hyatt Stock
While Hyatt’s future looks promising, there are some risks to consider:
- Leisure Transient Revenues: The company has faced challenges in the leisure segment, with leisure transient revenues declining by approximately 4% year-over-year. Weaker demand in key markets like the U.S. and Greater China has contributed to this decline.
- Greater China Market Weakness: Domestic travel in Greater China has been slower to recover, with RevPAR falling 7% year-over-year due to softer demand, particularly among higher-income travelers. While international inbound travel has increased, it hasn’t fully offset the decline in domestic travel.
Despite these challenges, Hyatt’s robust growth strategy and strong performance in business and group travel offer significant upside potential.
7. Conclusion: Retain Hyatt Stock for Long-Term Growth
In conclusion, Hyatt Hotels stock remains a solid investment despite some near-term challenges. With its strong focus on business and group travel, global expansion, strategic acquisitions, and asset-light strategy, Hyatt is well-positioned for future growth. The company’s improved earnings outlook and long-term growth potential make it an attractive option for investors looking to capitalize on the recovery of the global travel industry.
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