Hyatt Hotels Corporation H finds itself cruising on the fast lane, thanks to a surge in leisure and business transient demand, strategic expansion plans, and an innovative loyalty program. The company’s robust performance in the United States, marked by strengthening group demand, only adds more fuel to the fire.
Over the last six months, shares of this Zacks Rank #2 (Buy) company have skyrocketed by a staggering 52.4%, leaving the Zacks Hotels and Motels industry’s 29.7% growth in the dust. This meteoric rise can be attributed to the surging global travel demand, particularly the significant uptick in Greater China, leading to a boost in both occupancy rates and average daily rates (ADR).
An upwards trajectory awaits Hyatt, with earnings estimates for the first quarter of 2024 revised upwards from 72 cents to 74 cents per share in the past 30 days, signifying an eye-popping 80.5% year-over-year growth rate. Furthermore, with a remarkable trailing four-quarter earnings surprise averaging at 17.8%, the company is not just maintaining pace but sprinting ahead, reflecting positive sentiments from bullish analysts and a strong fundamental backbone.
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The Driving Forces Behind Hyatt’s Unstoppable Growth
Robust Travel Demand as the Wind Beneath Its Wings: Hyatt is riding high on the back of a significant surge in its system-wide revenue per available room, fueled by increased occupancy rates and ADR. This crescendo is primarily the byproduct of robust global travel demand, particularly in the leisure and business segments, coupled with a rise in group customers. The burgeoning travel demand in Greater China is playing a crucial role in this upswing, alongside a marked increase in group travel demand in the US.
Diving into the specifics of the fourth quarter of 2023, the company recorded a robust demand across all customer segments, with a notable year-over-year surge of 6% in transient revenues and resort market revenues, especially in the Americas. Business transient customer revenues also saw a 14% uptick compared to the previous year, soaring to 93% of 2019 levels globally. As workplaces see a return to normalcy, eased travel restrictions, and a revival in cross-border travel, Hyatt holds an optimistic outlook towards the resurgence of business transient travel, maintaining its momentum throughout the year.
An Ambitious Expansion Journey: Hyatt is on a relentless quest to expand its global footprint, with strategic expansion plans lined up in Asia-Pacific, Europe, Africa, the Middle East, and Latin America. These expansion initiatives are set to bolster the company’s market presence and solidify its position in the hospitality industry.
In a milestone announcement during the fourth quarter of 2023, the company unveiled a strategic collaboration with the Hangzhou Trade and Tourism Group and Dragon Group to develop over 60 hotels in China under select service and independent collection brands in the coming years.
Adding another feather to its cap, in 2023, Hyatt welcomed 101 new hotels (equivalent to 23,965 rooms) into its portfolio, including 43 hotels (13,223 rooms) from hotel conversions. The company is poised for a robust portfolio expansion in 2024, fuelled by organic growth prospects and lucrative conversion opportunities, with an expected unit growth surge ranging between 5.5% and 6% on a net-room basis.
The Power of Loyalty: Hyatt remains at the vanguard of enhancing guest experiences and driving up occupancy rates, courtesy of its premier loyalty program, World of Hyatt. Since its inception in 2017, this loyalty program has significantly contributed to the company’s revenue growth by amplifying guest engagements. The 2021 collaboration with Built Rewards program also stands as a testament to Hyatt’s innovation.
In the year 2023, the company witnessed a remarkable 22% year-over-year surge in membership levels, crossing the 44 million-member mark. Additionally, it reported record-high spending levels via the co-branded credit card portfolio.
Hyatt remains resolute in its commitment to broadening its horizons into new markets and diverse price brackets to augment the network effect, foster loyalty membership growth, allure potential hotel developers and owners, all while efficiently managing distribution costs.
Spotlight on Other Top Gems
Shining brightly on the horizon are some other top-ranking stocks from the Consumer Discretionary sector.
Stride, Inc. LRN, currently flaunts a Zacks Rank #1 (Strong Buy). Diving into the performance metrics, LRN boasts a remarkable trailing four-quarter earnings surprise averaging at 45.2%. Moreover, the stock has seen a solid 40.2% rise in the past six months, with Zacks Consensus Estimates predicting a significant sales and EPS surge for fiscal 2024.
Adtalem Global Education Inc. ATGE, also donning the Zacks Rank of 1, has consistently outperformed with a four-quarter earnings surprise averaging 16.9%, propelling the stock to a commendable 17.8% growth in the past six months. The Zacks Consensus Estimate anticipates a substantial sales and EPS upswing for fiscal 2024.
Completing the trio of stars is Ralph Lauren Corporation RL, currently bedecked with a Zacks Rank of 1. RL dazzles with a trailing four-quarter earnings surprise averaging at 18.7% along with an impressive 64.2% surge in the stock value over the past six months. The Zacks Consensus Estimate paints a promising picture, showcasing a healthy sales and EPS growth trajectory for fiscal 2025.
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The perspectives shared herein represent the viewpoints of the author and do not necessarily align with those of Nasdaq, Inc.
