Hyatt Hotels Corporation and Park Hotels & Resorts both reported a drop in revpar as a result of performance in the US.
Hyatt also bore the impact of the trade war between China and the US, but saw accelerated expansion as a result of its expanded brand stable.
Mark Hoplamazian, Hyatt president & CEO, told analysts: “We continued to expand our portfolio at a solid pace in the second quarter. Developer demand for our brands remains strong with our base of executed contracts for future openings increasing by 1,000 rooms in the quarter net of opening of nearly 4,000 rooms. Based on this development activity and an increase in conversions of hotels to our brands we now expect to grow net rooms by 7.25% to 7.75% this year as compared with our prior expectation of 7.0% to 7.5%.”
He added: “I think the network effect of having such an intense focus on high-end customer and bringing together the value proposition around the World of Hyatt through small luxury hotels and the other partnerships that we’ve got yields an ability to actually impact the results of these kinds of hotels, and that’s why I think we’re seeing some of the conversions that we’ve now signed.”
The company reported adjusted Ebitda down 2.1% to USD213m, with revpar up by 1.3% across the estate, but down by 0.3% in the US, pulled down by a 2.3% drop in select service revpar. Hyatt reduced the top end of its revpar guidance range to growth between 1% and 2% for the full-year. The company also cut its full-year 2019 guidance to a range of USD755m to USD775m, representing a reduction in the mid-point of approximately USD25m.
The group said that about two thirds of the reduction related to its Miraval operations, stemming primarily from construction -elated delays and challenges at the Austin and Lenox properties.
Hoplamazian said that he remained confident because of the group’s “outstanding” net rooms growth, which included growth in Europe, with the opening of two Hyatt Centric hotels in Italy and two Andaz openings in Munich and Vienna in the first quarter. In the second, it converted two Hesperia Properties in Spain that were signed in the first quarter.
Looking to China, Hoplamazian said that economic conditions in Greater China combined with ongoing trade tensions with the US had weighed on demand affecting both Chinese travellers and inbound travel. Hyatt forecast a “difficult” third quarter but a positive forecast in the fourth quarter as a result of economic stimulus that was initiated at the beginning of this year and hopes of a reduction in the disruptions caused by the demonstrations in Hong Kong.
The CEO added: “Our outlook would be further enhanced if a new trade deal were put into place between the US and China during the second half of the year.”
As of June 30, 2019, the company had executed management or franchise contracts for approximately 460 hotels, or approximately 92,000 rooms. Seventy per cent of the pipeline was full-service hotels.
At Park Hotels & Resorts Tom Baltimore, chairman & CEO, described “a challenging demand environment”, with revpar up 0.8% in the second quarter. The company pulled down its full-year revpar estimates by 75 basis points at the midpoint to 2% to 3.5%. It also lowered its full-year adjusted Ebitda by USD17m at the midpoint to a new range of USD735m to USD760m while adjusted FFO guidance dropped by USD0.08 per diluted share at the midpoint to a new range of USD2.86 to USD2.98 per share.
Baltimore said: “Despite our relative strong positioning, global macro concerns have weighed heavily on fundamentals across the industry with annual revpar growth forecast contracting across several of our key markets, primarily in the business transient segment.”
He added: ‘I think CEOs are pausing. That’s a little bit of caution. I think people want clarity as it relates to some of these outstanding issues and particularly on the trade battle. But we don’t see recession. Hopefully just a soft patch often we get clarity of the fundamentals of the business are still are still sound.”
The CEO was confident of the impact of its merger with Chesapeake, which was set to broaden the brands at its properties. He said: “When I rejoined Hilton four years ago, they had 53 million members in their loyalty programme. I think Chris [Nassetta, CEO] announced last week, there’s 94 million plus or minus now about 63% of their occupancies, that is really formidable. I think Marriott is north of 120 million and probably growing.
“So when you think about that engagement and that opportunity and that loyalty, the real benefit, most importantly revpar premiums, both of those brands are averaging about a 14% premiums over their competitors in particular as an owner, we want obviously the right real estate. We also want the right brands.”
At fellow Reit Host, the company said that it was planning to continue pursuing its asset disposal strategy, which has seen it pull back from Europe to focus on the US. During the quarter it disposed of three non-core assets for USD118m and has sold or expected to sell an additional eight assets in the third quarter.
Jim Risoleo, president & CEO, said: “We intend to continue to focus on advancing our long-term strategic vision of owning iconic and irreplaceable properties with high revpar and limited near-term capex needs in key markets with strong demand generators ensuring that the company is well positioned for continued growth.”
Adjusted Ebitdare decreased USD16m, or 3.4%, for the quarter, with the Reit pulling back its full-year guidance by USD47.5m in the midpoint to between USD1.5bn and USD1.54bn. Comparable hotel total revpar was up by 0.1%, with the company cutting its full-year guidance from flat to 2.0% growth to a 1% drop to flat.
HA Perspective [by Katherine Doggrell]: The analysts calls for these results took place before Donald Trump announced yet more tariffs against China because it won’t buy lots of soy beans and Oxford Economics said that this would make the Chinese “more determined to prepare itself for long-term economic tension with the US”.
The good news there is that there’s an election coming up, so the Trump camp will bring the skirmish to an end and spin the result as a triumph whatever it is, so the hope on the part of both Park and Hyatt that this will all be over by the fourth quarter is probably well placed.
In the meantime, uncertainty looks to be driving consumers and owners to the safety of the brands, to the joy of Hyatt and bonhomie of Park. The question remains for Hyatt: what will it buy next? Europe remains a focus for growth and despite the select-service slip in the US, the company is stll planning on being a broad brand church, so its acquisitions gaze is wide.