Covid19 hotel development analysis: Hyatt Hotels Corporation [Infographic]

by | 06 Jun 2020 | Chains, News

Hyatt’s leadership remains optimistic that the company can grow despite the global health crisis

In an exclusive report, TOPHOTELNEWS analyses how Hyatt and its hotel development pipeline have been affected by Covid19.

When Covid19 broke out, the world’s hospitality industry was plunged into an unprecedented crisis. Lockdowns and travel restrictions made it necessary for hotel companies around the world to take drastic measures in order to survive.

We find out to what extent Hyatt Hotels Corporation has been affected by the crisis, and consider how the company has fared so far.

Hyatt’s project pipeline by numbers

An established global player in the upscale hotel industry, Hyatt has been steadily expanding its footprint over recent years. Currently, the group has 296 hotels in the pipeline across its 15 brands.

Current status of Hyatt’s hotel construction projects

It could be argued that Hyatt’s current pipeline merely highlights the determination of management to grow the company’s portfolio and extend the reach of its brands. Amid the crisis, 38 projects have been put on hold, and three were cancelled as of 13 May 2020.

While this is a substantial amount, the group’s pipeline still looks promising. During Hyatt’s Q1 2020 earnings call, moreover, CEO Mark Hoplamazian even revealed that he saw the crisis as a potential growth opportunity, since there could be a larger-than-usual number of properties looking to convert given current business conditions.

“Our brand reputation, strong owner relations and underpenetrated distribution should all serve as an advantage in capitalising on these opportunities,” Hoplamazian added.

How Covid19 has hit Hyatt’s share price

For many months before the crisis, Hyatt’s share price hovered around $89.94, the value it reached on 19 February 2020, before dropping down to $36.56 within the next month. After a brief recovery, share prices dipped in value once more, reaching the second-lowest point in the past year at $39.92 on 3 April.

Amid reports of demand ramping up in China and hotels reopening there after the outbreak had been pegged back, Hyatt’s share price started slowly picking up again. By 1 May, it reached $52.39.

However, with the majority of Hyatt’s business being based in the US, a country which is struggling to get Covid19 under control, it may take time before Hyatt’s shares reach pre-crisis levels once again.

Hyatt through the course of Covid19

When Hyatt first published its Q4 2019 results on 19 February 2020, the company stuck to its optimistic outlook for the current year, which was based on estimated net unit growth of approximately 6.5% to 7.0% (more than 80 new hotels) and capital expenditures of $250 million. At the same time it was highlighted that the figures did not consider any possible impact from Covid19 due to the difficulty in making reasonable estimates at that time.

Two weeks later, the group announced the withdrawal of its outlook and earnings for 2020, resulting in a $125 million reduction in capital expenditures to preserve liquidity. This included furloughing staff, reducing salaries for corporate office staff and cutting all non-essential travel and other expenses.

“Our ultimate goal is to emerge in a position of strength coming out of this crisis, with our world-class teams as intact as possible across the global Hyatt family. It is only by the strength of our workforce that we can be ready when the hospitality industry rebounds, and when our guests and customers once again choose Hyatt,” the company said in late March.

Looking at the group’s future growth opportunities during the company’s Q1 2020 earnings call, Hoplamazian remained positive that Hyatt could maintain the current pace of openings and net rooms growth. He added that the group realised plenty of conversions in 2019 and was looking forward to adding more in 2020.

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