• Owners look to management

Hyatt Hotels Corporation said that it was leaning on its select service hotels for growth, while also remaining active in the hotel transactions market.

At Hyatt, the company said that more than 50% of its executed contracts were for Hyatt Place and Hyatt House hotels. The current pipeline represents nearly 38% of the group’s existing rooms, with president & CEO Mark Hoplamazian telling analysts that this made “a leader in the industry in relation to the size of our executed contract base as compared with our existing base of hotels”.

Sixty per cent of the pipeline was located outside of the Americas region, with 95% third-party owned, including about 30% which were franchised.

During the first quarter, Hyatt opened 11 new hotels representing net growth of 9% on the year. The company has seen net rooms’ growth of between 6% and 7% for eight consecutive quarters and said that, with approximately 60 new hotel additions to the Hyatt system expected, it anticipate 2017 to be another year of record openings.

Hoplamazian said that the group would continue to fund the development of new hotel properties, where Hyatt has an ownership interest whether that is full or partial, with a view to recycling the capital and taking on management or franchise agreements.

The group continues to sell hotels, with six properties currently being marketed. Hoplamazian said that negotiations were progressing well, and the group expected to close on four of the assets before the end of third quarter and the remaining two assets during the fourth quarter. Sale proceeds were expected to be around USD500m, to be used to fund share buybacks.

The CEO said that Hyatt was “cautiously optimistic. We expect our hotels will continue outperforming, relative to their peers and we are monitoring macro and industry dynamics that may put pressure on results over the remainder of the year”.

Adjusted Ebitda for the quarter was USD228m, up 19% on the year, “fuelled by the performance of our recent hotel openings and acquisitions, as well as strong increases in management and franchise fees”. Revpar rose by 4.7%.

Hyatt reiterated its previous full-year guidance, “conservatively” leaving revpar at growth of 0% to 2%, as the CEO spoke of concerns over volatility.

At Mandarin Oriental, the group said that first-quarter earnings had been lower than in 2016, primarily because of the partial closure of the London hotel for renovation, without going into further detail. The company said that the group’s results would continue to be affected by the renovation in London, which is scheduled to complete in the second quarter of 2018.

The group has continued to expand through management contract alongside ownership and announced new contracts for hotels in Honolulu and Dubai with accompanying residences. Honolulu is expected to open in 2020, and the hotel in Dubai’s commercial district, which is the group’s second hotel project in the city, is scheduled to open later that year.

 

HA Perspective [by Katherine Doggrell]: The owners have realised of late that it, yes, scale is a thing and it can only help the value of the owned hotels if there are a few more properties waving the flag and, unlike the asset-light operators (we excuse Marriott International from this) they can use their ownership knowledge to participate in part with developments.

This has been particularly effective for Hyatt, which has followed the rush of select service in the US with great enthusiasm, with the result that Hyatt Places are popping up in locations including Hyderabad and Melbourne.

At Mandarin Oriental, well, it’s Mandarin Oriental and franchising is not going to be a persuasive option. The brand does carry a certain heft, however, which means that owners will always want that iconic fan on their door. With a slightly longer build-time than the select service, the lag is something which will be felt. But it is unlikely that Mandarin Oriental will feel pressured to tie-up with Travelodge any time soon.

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