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MarketScreener Homepage  >  Equities  >  Nyse  >  Hyatt Hotels Corporation    H

HYATT HOTELS CORPORATION

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Hotels Warn of Hit From Epidemic -- WSJ

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03/04/2020 | 02:48am EDT

By Keiko Morris and Craig Karmin

The hotel industry's decadelong run of growth and rising revenue looked vulnerable at the start of the year. Now the spread of the coronavirus threatens to make it the worst-performing year since the recession.

The biggest hotel brands have already warned about how tough last month was, and how challenged the first quarter is going to be. Marriott International Inc. said during an earnings call last week that revenue per available room for Greater China, which represents about 9% of the company's total room count, plunged nearly 90% in February compared with a year earlier.

Hilton had estimated that the coronavirus epidemic will hurt its full-year adjusted earnings by $25 million to $50 million, assuming the epidemic lasts around three to six months. Hyatt Hotels Corp. President Mark Hoplamazian said hotels in Singapore, Japan, and the Indonesian island of Bali also reported declines in recent bookings, driven by a sharp pullback in Chinese travel.

"So I would say we've seen it radiate across the globe," Mr. Hoplamazian said on an earnings call on Feb. 20.

On Monday, Hyatt said in a release it was withdrawing its previously announced 2020 outlook following corporate travel restrictions in North America and Europe and cancellations outside of Greater China. "This is an evolving situation, and our ability to assess the financial impact of [coronavirus] on our business continues to be limited due to quickly changing circumstances and uncertain consumer demand for travel," Mr. Hoplamazian said in a statement.

Hotel share prices reflected that gloomy outlook. Marriott shares dropped 22.6% from Feb. 19 through Tuesday, compared with the S&P 500's 11.3% decline. Hilton and Hyatt shares slid more than 17%. Lodging real-estate investment trusts, which have little overseas exposure, sold off anyway. The Dow Jones US Hotel & Lodging REIT Index fell 19%.

By the weekend, the travel outlook seemed to be deteriorating further. "Over the past 72 hours we have been hearing rapidly increasing chatter from our private hotel owner, property manager, and corporate travel contacts of travel restrictions, meeting cancellations and/or poor meeting attendance," C. Patrick Scholes, a senior lodging analyst at the bank SunTrust Robinson Humphrey Inc., wrote in a Sunday client note.

While most of the events that have been canceled or postponed were scheduled abroad, some U.S. groups recently have called off events, too. Organizers of a cargo-shipping trade conference -- expected to attract more than 2,000 participants to Long Beach, Calif., during the first week of March -- canceled and cited the virus, according to a Saturday notice on the organizer's website.

Even if coronavirus is contained soon, the damage to the hospitality business could reverberate for a while, analysts said. After events like SARS and the Sept. 11 terrorist attacks, companies tend to take at least two to three years to make up for the losses, Mr. Scholes said.

The U.S. lodging industry has enjoyed a powerful rebound over the past 10 years, with both occupancy levels and daily room rates reaching all-time highs last year, according to hotel data tracker STR. But in January, STR forecast growth in revenue per available room, or RevPAR, a crucial industry metric, as flat for the year. That was the first time since 2009 that STR predicted a year without RevPAR growth.

Weaker U.S. economic growth and heightened competition from short-term rental companies are hurting hotel pricing power and keeping room rates in check, said Ryan Meliker, president of Lodging Analytics Research & Consulting, a hotel data and forecasting firm. In a number of major markets, including New York City, Nashville, Tenn., and Miami, new supply growth is also an issue.

Analysts warn corporate travel restrictions and group event cancellations are going to get worse before they get better. But the real fear is that the coronavirus spreads in the U.S., cutting deeper into economic growth and disrupting leisure and business travel domestically.

Jan Freitag, a senior vice president at STR, said some travel bookings lost in the first quarter may be gone for good, like group events that recently canceled. Corporate travel also looks challenging for the moment. "I would not be surprised to see some companies cut travel to zero," he said.

If there is a bright spot, it is that leisure travel tends to snap back once a global virus or other threat comes under control. "Leisure demand will decline sharply, but we have seen it always comes back rather quickly," Mr. Freitag said.

Write to Keiko Morris at Keiko.Morris@wsj.com and Craig Karmin at craig.karmin@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BYD COMPANY LIMITED 2.58% 47.7 End-of-day quote.22.78%
DJ INDUSTRIAL 1.05% 25742.65 Delayed Quote.-10.73%
HYATT HOTELS CORPORATION 2.14% 57.39 Delayed Quote.-36.03%
MARRIOTT INTERNATIONAL., INC. 0.61% 95.61 Delayed Quote.-36.86%
NASDAQ 100 0.61% 9657.307077 Delayed Quote.9.91%
NASDAQ COMP. 0.59% 9608.374705 Delayed Quote.6.46%
S&P 500 0.82% 3080.82 Delayed Quote.-4.64%
SUNTRUST BANKS 1.26% 70.13 Delayed Quote.0.00%
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Financials (USD)
Sales 2020 2 958 M - -
Net income 2020 -320 M - -
Net Debt 2020 749 M - -
P/E ratio 2020 -17,6x
Yield 2020 0,35%
Capitalization 5 805 M 5 805 M -
EV / Sales 2019
EV / Sales 2020 2,22x
Nbr of Employees 55 000
Free-Float 33,6%
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Technical analysis trends HYATT HOTELS CORPORATION
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Income Statement Evolution
Consensus
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Mean consensus HOLD
Number of Analysts 21
Average target price 56,34 $
Last Close Price 57,39 $
Spread / Highest target 27,2%
Spread / Average Target -1,83%
Spread / Lowest Target -19,8%
EPS Revisions
Managers
NameTitle
Mark Samuel Hoplamazian President, Chief Executive Officer & Director
Thomas J. Pritzker Executive Chairman
H. Charles Floyd Global President-Operations & Executive VP
Joan Bottarini Chief Financial Officer & Executive Vice President
Alex D. Zoghlin EVP & Global Head-Technology & Strategy
Sector and Competitors
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HYATT HOTELS CORPORATION-36.03%5 805
MARRIOTT INTERNATIONAL., INC.-36.86%30 814
HILTON WORLDWIDE HOLDINGS INC.-26.15%22 710
HUAZHU GROUP LIMITED-5.72%10 073
INTERCONTINENTAL HOTELS GROUP PLC-22.64%8 972
ACCOR-36.17%7 769