August 9, 2022

Springswines

The Tour And Travel Enthusiasts

Hyatt Expects Luxury Travel Rebound to Stay Strong Despite Market Turmoil

3 min read
Hyatt Expects Luxury Travel Rebound to Stay Strong Despite Market Turmoil

Skift Take

Pity Hyatt. Just as the pandemic’s dark clouds are lifting, market turmoil overshadows its optimism. Yet that isn’t dimming Hyatt executives’ outlook.

Hyatt Hotels Corp said on Tuesday that its average daily rates in April hit a best-ever record for the company. Travelers showed a willingness to pay for travel as they returned to the road with the pandemic easing in many countries.

Yet Hyatt’s optimism during an earnings call was overshadowed by broader financial market turmoil. Many investors appeared confused by rising U.S. interest rates, slowing Chinese growth, the uncertain impact of the Ukraine war on European economies, and talk of possibly more virulent forms of Covid-19.

“We don’t see any evidence of a slowdown in booking pace,” said president and CEO Mark Hoplamazian. “In fact, booking pace itself is increasing really across all of our segments in business transient.”

In the first quarter, the Omicron wave dealt Hyatt a net loss of $73 million, one of the remaining large hotel brands not to cross over to profits. But performance has been improving since January, executives said. They said that an emerging rebound in business and premium leisure travel would swing the company into the black later this year.

Hyatt Sees Growth Despite Dark Clouds

Some analysts worry that market turmoil and rising inflation might sap a pent-up demand for travel. Yet Hyatt executives were bullish on their company’s prospects.

Hoplamazian cited an AlphaWise survey of about 2,000 U.S. consumers between April 29 and May 2 released on Tuesday by Morgan Stanley Research. Households with income above $150,000 told pollsters that they were still planning to spend significantly more than average on domestic leisure, work-related, and international travel during the next six months.

Hyatt will benefit from the spending splurge, Hoplamazian said, because 42 percent of its properties fit the descriptions of luxury, lifestyle, or resort stays. About 30 percent are luxury.

The company drew a record level of leisure travelers — who drove nearly 60 percent of Hyatt’s room revenue in the first quarter.

The company’s rebound has gathered pace month after month. If you subtract China, which faces tight pandemic-related travel restrictions, Hyatt’s revenue-per-available room — a key industry metric — was up 3 percent from pre-pandemic levels. Gross transient revenue booked for stays this year was 6 percent above April 2019.

The company, with a market value of $9.2 billion, reported strengthening in its 2022 bookings in April. For instance, gross group room revenue booked for stays this year at the company’s full-service properties reached 42 percent above April 2019 levels.

Hyatt executives also reaffirmed their forecast that the company would have 6 percent net room growth this year despite some uncertainty around supply chain issues.

Resorts Prove Popular

Hyatt’s acquisition of Apple Leisure Group six months ago proved well-timed. Consumers were paying top dollar for the subsidiary’s vacation packages in recent months.

“Everything is pacing at a higher level and at a better flow-through across all dimensions of the business than we had underwritten,” Hoplamazian said.

On Monday, Hyatt integrated its loyalty program with Apple Leisure Group inventory, which will market its 30 million rewards members to these resorts and bring redemption opportunities for members with loyalty points. The resorts are now bookable on Hyatt’s direct channels, which will reduce customer acquisition costs as a cheaper alternative to third-party distribution.

“It’s going to be difficult for me to moderate my enthusiasm because the data is quite clear,” Hoplamazian said, noting that the company’s resorts were showing strong demand at high prices.