Several factors have aligned to give Hyatt Hotels Corp. executives greater confidence in net rooms growth, which Hyatt President and CEO Mark Hoplamazian said should exceed 6% for 2021 and hover around 7% in the longer term. However, persistent supply chain issues could push several hotel openings planned for this year into early 2022.
Speaking during the company's second quarter earnings call, Hoplamazian said higher conversion activity and lower-than-usual terminations are driving rooms growth, while supply chain delays are slowing it down.
"We're paying close attention to that because the supply chain is not moving fluidly yet, so we are wary of any other negative developments that might push some openings into the following year," he said, noting the company is keeping a close eye on projects with openings that could get pushed into January and February.
Hyatt reported 7.1% net rooms growth for the quarter, which is stronger than expected and gives executives more confidence in full-year growth projections, Hoplamazian said.
Beyond supply chain issues, rooms growth hasn't been even across the various segments the company operates within, he said.
"It's been a tale of a few different cities, a few different narratives," he said. "The first is select-service is still under pressure primarily because of financing constraints in the United States, but that's been more than made up for by select-service and full-service signings across the globe. And full-service and resorts in the Americas [signings have been strong], so our overall pipeline is maintained. We do expect to see some real progression and positive developments in the select-service area between now and the end of the year."
In June, Hyatt acquired the 59-room Ventana Big Sur, which is part of its Alila brand, for $148 million. Executives said the deal was driven in part by a desire to keep the property within the company. Hoplamazian explained there was no easy path back into the Big Sur, California, market if Hyatt lost that asset.
"Big Sur is highly constrained in terms of new development," he said. "There is literally no opportunity to develop anything else in Big Sur and, frankly, up and down the Pacific Coast Highway for 20 or 30 miles in both directions."
Hyatt has been focused on selling off assets in recent years to adopt a more asset-light model, and Hoplamazian reiterated that remains the company's overall strategy. However, he said, the Big Sur property is a unique asset with strong earnings potential that consistently achieves rates exceeding $2,000 a night while maintaining "very high occupancy levels."
"We've identified a number of ways in which we can enhance the programming and also expand the property because right now we're operating with about 50 keys, and it's entitled to 59 keys," he said. "And the way we add those remaining keys will matter a lot because we think the demand level for high-end suites in that location is very high."
Hoplamazian said the company is still on track to meet its target of $1.5 billion in net asset sales, which was announced in early 2019.
Second Quarter Performance
Hyatt reported a $9 million net loss for the second quarter, according to the company's latest earnings release, with adjusted earnings before interest, taxes, depreciation and amortization of $55 million.
Comparable systemwide revenue per available room was $72.47 for the quarter, down 49.8% compared to the second quarter of 2019.
As of press time, Hyatt's stock was trading at $72.65 a share, up 2.3% year to date. The New York Stock Exchange composite was up 15.6% for the same period.