Hyatt’s luxury hotels boost the company back to profitability

At Hyatt, July was a time to party like it’s 2019 — and then some.

The Chicago-based hotel company reached an important milestone last month: Hyatt’s global revenue per available room — the hotel industry’s key performance metric — was 5% above 2019 levels. This is an impressive feat, as lingering pandemic-related travel restrictions in China made performance in the Asia Pacific region a drag on the broader hotel industry.

Leisure travel remains a durable line of business for Hyatt. However, the company’s growing emphasis on luxury hotels, as well as the revival of business and group travel, also helped the company return to profitability.

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Hyatt's earnings

It’s about time, some could argue. Hyatt lagged its fellow U.S.-based competitors Hilton and Marriott in returning to profitability amid the pandemic. This is largely because Hyatt owns more of its hotels than the other two; Hilton and Marriott focus more on an asset-light model and mainly license out branding rights and offer management services.

Still, even Hyatt posted a $206 million profit over the second quarter — not as strong as Hilton's or Marriott’s but a hefty improvement over the $9 million loss seen in the second quarter of 2021.

This improvement was most evident in the Americas region, where performance for the entire second quarter exceeded 2019 levels by 3%. Hyatt’s luxury brands led the way here, with performance up 20% and daily rates up by 27% compared to three years ago.

“This is particularly meaningful given that we've doubled the number of luxury rooms in our system over the past five years,” Hyatt CEO Mark Hoplamazian said on an investor call Tuesday.

Thanks to Hyatt’s $2.7 billion acquisition of Apple Leisure Group — which included roughly 100 properties across brands such as Secrets Resorts & Spas, Dreams Resorts & Spas and Zoetry Wellness & Spa Resorts — the company has the highest concentration of luxury, lifestyle and resort hotels, Hoplamazian later claimed.

He also highlighted the Park Hyatt Zurich, the Park Hyatt Paris and the entire Miraval portfolio of wellness retreats as particularly strong performers during the quarter. Additionally, the company makes more than half its revenue off leisure travelers, giving the Hyatt leadership team confidence the company will continue its recovery momentum into next year.

Leaders at Hyatt, like their competitors at Hilton and Marriott, see booking patterns that give them confidence business and group travel are also coming back.

“Conversations with [our] customers along with strong forward-looking data provide confidence that occupancy will recover more fully in the months ahead,” Hoplamazian said.

Regional rebounds

Business at Hyatt’s hotels in U.S. cities, which had lagged in the hotel recovery across the entire industry, showed signs of improvement over the second quarter. While performance in major U.S. cities was down 8% from 2019 levels from April through June, it was only down 2% in July.

One of the biggest regional winners was Europe, the Middle East and Southwest Asia. Hyatt's performance across the region was 12% above 2019 levels, likely boosted by border openings; plus, U.S. travelers started to feel more confident about international travel since U.S. entry testing requirements were dropped in early June.

The share of room revenue made off North American travelers returned to pre-pandemic levels in the second quarter.

“The overall strength of the recovery in the region can be attributed to solid growth in leisure [travel], an increase in business transient [and] large events — all contributing to stronger rates,” Hoplamazian said.

Apple Leisure Group update

The bulk of questions Hoplamazian took on the investor call regarded the ongoing integration of the Apple Leisure portfolio into the broader Hyatt ecosystem. Travelers have been able to earn World of Hyatt points at Apple Leisure properties since early May, and the full integration of Apple Leisure Group’s European properties is expected to be complete by the end of 2022.

Hyatt’s acquisition vaulted it ahead of its direct competitors in the traditional hotel space amid the industry’s ongoing push into all-inclusive resorts. Hotel companies increasingly see value in adding their brand affiliation to this lodging sector, especially as leisure travel remained the only reliable revenue stream during the pandemic.

Both Hoplamazian and Joan Bottarini, Hyatt’s chief financial officer, repeatedly indicated the Apple Leisure portfolio has “significantly exceeded expectations” since the takeover. The Americas division exceeded 2019 performance levels by 17% for the second quarter.

“It's worth acknowledging the strong results were achieved when travel alternatives such as European destinations and cruise lines had significantly more availability than in prior periods,” Hoplamazian added.