Even as officials with Hyatt Hotels Corporation reported a new record pipeline, executives say they're seeing an outsize attrition from their portfolio from hotel owners unwilling to meet brand standards.
During the company's third-quarter earnings call, Hyatt President and CEO Mark Hoplamazian said the company's year-to-date attrition rate approaches 1.5%, which he added is "significantly higher than our typical run rate" of 0.5% and 1%.
"About 40% of that difference has to do with brand standard and market-specific issues that affected our renewal or agreement to move forward with certain hotels in our portfolio," he said. "Some of it is markets that have become, I would say, more challenging or where the central business district has moved. We are looking for new representation. In a couple of cases, it's owners we didn't come to agreement with on bringing hotels to brand standards."
Because of Hyatt's strong signings and pipeline — now at a record 135,000 rooms across 690 hotels — the company has managed to maintain strong network growth, Hoplamazian said. Hyatt's network growth was 6% year over year with 4.3% net rooms growth in the quarter. But Hoplamazian's statement about owner reluctance to make renovations at their hotels reflects comments made by industry experts in recent years of growing contentiousness between brands and owners over deferred maintenance, property improvement plans and renovations.
Asked by analysts if Hyatt's attrition issues are expected to leak into 2025, Hoplamazian said he doesn't see this as a long-term trend.
"I think there was a relatively higher number of hotels that were coming to the end of life and PIP requirements that were not met," he said. "So maybe we had a blip here heading into the fourth quarter. I will say that if you look at the structure of our brand portfolio, we do not, at this point, have a brand into which we would encourage owners who want to downgrade their hotels to something that's a lower level just to maintain those rooms. That's different than our competitors. So some of this is just maintaining brand integrity across our brands as they stand today."
Hyatt opened 16 hotels with 2,589 rooms in the quarter, including Alila Shanghai, Brunfels Hotel in the Unbound Collection, Grand Hyatt Kunming and Park Hyatt Marrakech.
The company also announced multiple new planned acquisitions and partnerships to grow its overall portfolio. Hyatt closed on the acquisition of Standard International on Oct. 1, adding the Standard and Bunkhouse brands to its portfolio. Hyatt also announced plans for a 50/50 joint venture with Grupo Piñero that will own the Bahia Principe brand and operate 23 all-inclusive resorts.
Including the Bahia Principe transaction, Hyatt officials project 7.75% to 8.25% net rooms growth for full-year 2024.
Third-quarter performance
Hyatt announced systemwide revenue per available room growth of 3% year over year for the third quarter, driven by 1.2% average daily rate growth and a 1.3-percentage-point improvement in occupancy.
Hyatt achieved net income of $471 million in the quarter with full-year net income now projected to hit a range between $1.4 billion and $1.45 billion. Adjusted earnings before interest, taxes, depreciation and amortization for the quarter was $275 million.
As of press time, Hyatt stock was trading at $145.77 a share, up 12% year to date. The NYSE composite was up 14.6% for the same period.