• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

OVERALL

  • WORSE:  While Hyatt obviously missed expectations, a lot of the noise and choppiness in the quarter was not a complete surprise except for the magnitude.  The impact from government austerity may have  impacted the quarter, but at 2% of business the future impact is limited. Group was weak but much of that was Easter timing and for the balance of the year it looks on trend with prior guidance. Renovation impact was higher but easing. Other things like non-comparable termination fees are frustrating because we can't model them. 

2013 OUTLOOK

  • WORSE:  1Q was indeed choppy, more choppy than anyone expected.  The company did chalk it up to a lot of one time factors including the seasonal holiday shift.  Results should improve for the balance of the year
  • PREVIOUSLY: "We expect 2013 to be a year of stable growth. While we believe that the first half of the year has the potential be somewhat choppy, we're optimistic for the whole year based really on four primary indicators."

M&A STRATEGY

  • SAME:  Deal activity generally has increased.  Hyatt continues to focus on gateway cities mostly in the Amercias and Europe. 
  • PREVIOUSLY: 
    • "What some of the leading brokerage houses and others are saying, they expect transaction activity in the U.S. for instance to be up at least 25% this year versus last year. So you're seeing more transaction activity and therefore there will be higher ability for us to participate.  On a net basis, we've been an acquirer. Going forward, we'll take a balanced approach."
    • "On the buy side, we're looking at a number of potential new investments, including acquisitions and investments in joint venture hotels, both existing JV properties and new properties in the U.S., Latin America and in Europe. Deal flow is higher than it's been over the last few years and we are actively looking at investments in excess of $100 million in these types of projects."

GROUP BUSINESS

  • SAME:  Performance divergence between long and short term bookings continued.  In the Q, for the Q bookings was down 12%.  In the Q for the year bookings were 8% lower.  Bookings for 2014 and beyond were up 13%.
  • PREVIOUSLY: "If you think about our business in North America particularly of full service hotels, 45% to 50% of that mix is group-oriented.  The two main segments of group business are corporate group and association group. On the corporate side, what you're seeing is low levels of visibility…  a lot of bookings for forward 90-day period. So short-term bookings and the bookings are tending to be a little bit smaller, both in terms of number of room nights as well as duration of meetings and I think some of that speaks to uncertainty on the part of corporations to make long-term forward commitments... With regard to associations that have more visibility into the future are making those longer-term commitments. So, you're seeing strength on the association side for future periods."

TRANSIENT BUSINESS

  • SAME:  Transient revenues grew 8% (ADR/occupancy equal impact).  Hyatt still expects transient business to be a strong driver of results in 2013.
  • PREVIOUSLY: "Markets and hotels that have been more transient oriented have outperformed. So, on the transient side, of course visibility is lower, generally folks don't make their transient room commitments until a few weeks before the travel dates. So, we have less visibility on that piece of the business, but strength continues to be positive.... Transient demand continues to bolster results."

GROUP PACE

  • SAME:  Overall group level production was up 3% in 1Q.  Group pace for the rest of 2013 is trending up in the mid-single digits.
  • PREVIOUSLY: "2013 group pace for full-serviced managed hotels in the U.S. is up about 4%. We're seeing significant levels of group production. December was our busiest group production month since late 2007, and January was good as well."

BOOKING WINDOW

  • SAME:  Booking window is widening
  • PREVIOUSLY: "While the booking window is lengthening in certain cases, we're still seeing high levels of activity for close-in dates. For example, 40% of the group production in January was for the following 90 days."

OTHER COSTS/RENOVATIONS

  • SAME: The negative impact of renovations, Easter shift and other things had a negative impact on the quarter. Hyatt expects that for the next 2 quarters the impact from the factors discussed below will be at the low end of the $3-6MM range
  • PREVIOUSLY: "We expect certain specific items may negatively impact us in the first part of this year and the impact will lessen as the year progresses. These items would include: the ongoing renovations of several large managed hotels, both in the U.S. and the ASPAC region, market conditions in several international markets with significant new supply growth such as Baku and some cities in India, lower levels of government demand in some markets, specific areas of expense pressure, such as insurance costs and real estate taxes for owned and leased hotels, and a continued lag in the recovery of F&B spending as groups and banquet customers limit their spending. We expect these items to negatively impact us by $3 million to $6 million per quarter over the next several quarters, primarily due to lower fees as a result of renovations of managed properties. We expect that this level of quarterly impact will start at the higher end of the range, exacerbated a bit by the timing of Easter this year, and will trend down as the year progresses."

COSTPAR

  • SAME:  Wages and food costs were managed well but as mentioned on last earnings call, Hyatt sees expectations for higher property taxes in 2013 as well as healthcare costs rising above inflation
  • PREVIOUSLY: "We remain very focused on and disciplined around how we're actually managing costs at our properties. And if you look at cost per occupied room, which is not the only measure that's relevant, but it is one metric, it's been flat basically since 2007. For our select service hotels, partly by virtue of some shared services initiatives, we've actually seen a decline over that period of time in cost per occupied room."