Hyatt's Transformation Into Asset-Lite Model: Analyst On Growth Potential Amidst Optimistic Group Bookings

Stifel analyst Simon Yarmak reiterated a Hold rating on Hyatt Hotels Corporation H, lowering the price target to $115 from $119.

H has transformed itself over the last few years into an asset-lite company and hopes to reduce owned and leased real estate to 20.0% by late 2024, notes the analyst.

The company has multiple levers of growth with a quality portfolio of brands and the largest relative pipeline, which should result in some of the highest unit growth in the sector, according to the analyst.

During their previous quarter's discussion, the Hyatt team expressed optimism about the group environment, highlighting that it was their most productive quarter for group bookings since 1Q19, notes the analyst. Similarly to their peers, they've observed an extension in the group booking window, with approximately two-thirds of group reservations scheduled for dates beyond 2023, the analyst adds. 

Group revenue for the second quarter rose by around 14% year-over-year, aligning closely with 2Q19 figures.

Moreover, the group's booking pace for the second half of 2023 is up by 8% compared to the same periods in 2022, and there's a 10% increase projected for 2024.

However, net debt to EV of 19.8% is slightly above the industry average of 19.2%, the analyst cautioned.

For FY23, the analyst lowered the estimate to $2.45 from $2.50.

For FY24, the analyst reduced the EPS estimate to $3.31 from $3.40.

For FY25, Yarmak reduced the EPS estimate to $3.93 from $4.07.

Price Action: H shares are trading higher by 0.02% to $103.10 on the last check Friday.