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Hyatt (H) Raises 2021 Net Rooms Growth Guidance, Stock Up

·4 min read

Hyatt H recently raised its guidance of net room growth for fiscal 2021. Also, as part of its ongoing capital strategy, the company announced the completion of two transactions. Following the news, the company’s shares rallied 4.5% on Jun 8.

On Jun 3, 2021, a Hyatt affiliate acquired the 59-room Ventana Big Sur, an Alila Resort, in the regions of Big Sur, CA, for roughly $148 million. This helped Hyatt enhance its long-term brand presence in a very popular travel destination. This world-class Alila resorts operating in California is located on 162 acres of land, including 63 distinctive camping areas and 15 tent cabins.

On Jun 4, 2021, one of the Hyatt subsidiaries, Hyatt affiliate and Service Properties Trust, or SVC, came into an agreement to supervise 17 of the 22 Hyatt Place hotels owned by subsidiaries of SVC for a period of 10 years. Following this agreement, Hyatt raised its net room growth guidance for fiscal 2021 to 6% from the previous assumption of 5%.

Moreover, one of the Hyatt affiliate sold the 490-room Hyatt Regency Lost Pines Resort and Spa, located at Austin, TX, for near about $275 million to an independent party. Consequently, both the parities entered into a long-term agreement for the property upon sale.

As a result of these asset transactions, Hyatt will be in a position to realize nearly $1.5 billion as net proceeds from the sale of real estate by March 2022. The company has already realised $1.1 billion from the expansion of its franchising business. Encouragingly, Hyatt had increased its property base by 150 hotels or by 18% in May 2021 from March 2019.

Expansion Drive & Price Performance

Hyatt Hotels is benefiting from expansion efforts, reopening of economy and gradual increase in occupancy rate. The Hyatt Place and Hyatt House brands are helping expand Hyatt’s presence globally in a bid to strengthen its fast-growing select service category. The company strongly believes that the opportunity for properties that offer selected services at a lower price than full-service hotels is particularly compelling in certain markets, including India, China and the Middle East.

Notably, the company intends to grow its select service presence via third-party construction of new franchised properties, conversion and renovation of existing non-Hyatt properties, and in certain cases, participation in the development of new managed properties.

During the first quarter of 2021, the company opened 23 new hotels (or 3,919 rooms), contributing to strong net rooms growth of 6.5%. This marked the opening of the 1,000th hotel in the quarter. During the last three quarters, the pace of new openings has been high.

Coming to share performance, Hyatt has surged 11.5% so far this year compared with the Zacks Hotels and Motels industry’s 10.8% rally.

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Zacks Rank

Hyatt — which shares space with Marriott International, Inc. MAR, Extended Stay America, Inc. STAY and Choice Hotels International, Inc. CHH in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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