Higher Guest Spending Powers Growth in Hyatt Hotels Corporation's Earnings

By Demitrios KalogeropoulosFool.com

More guests are checking into Hyatt Hotels locations, and they're spending more money while they're on its properties. The hotel operator this week posted third-quarter earnings results that benefited from rising prices and higher occupancy rates across its global portfolio.

Here's how the headline results stacked up against the prior-year period:

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Hyatt's results: The raw numbers

Data source: Hyatt's financial filings.

What happened with Hyatt this quarter?Despite the drop in reported revenue, Hyatt logged steady business improvements in its existing group of hotels. That, combined with a quickly growing base of locations, is giving a solid lift to its operating results. Here are the key highlights from the quarter:

  • Revenue per available room (RevPAR) increased 2.5%, or 5.9% after adjusting for foreign currency swings. Guests are now spending an average of $167 per night across Hyatt's global footprint, up from $163 last year.
  • Average daily revenue, which includes room cost along with ancillary purchases like food and beverage and parking, rose 4.6% to $213.
  • Occupancy rates improved by 1 percentage point to 78.4%.
  • Within the U.S. market, the upscale full-service segment's RevPAR rose 5.2% while the select service group's RevPAR jumped by 7.1%.
  • Management and franchise fees jumped 14% higher.
  • Nine new hotels were opened. Year to date, Hyatt has opened new locations at a 28% faster pace than last year.

What management had to sayCEO Mark Hoplamazian cited an uptick in demand from individual guests, what the company calls "transient" travelers, along with better performance against its competitors as key wins this quarter. "Our RevPAR growth was strong due to greater transient business and increased market share. These positive results drove solid fee growth across our system," he said in a press release.

Hyatt did manage to grow faster than competitors this quarter, including InterContinental Hotels . That chain last month posted 4.2% RevPAR gains in the U.S., compared to Hyatt's 5.1% uptick. Globally, Hyatt's 5.9% improvement also beat InterContinental's 4.8% increase.

Management stressed how the business was able to turn that steady demand growth into double-digit adjusted profit gains. "This level of growth is a testament to the strength of our business model and reflects strong ongoing performance in our existing hotels and the positive effects of significant net growth in our hotel and rooms base around the world," Hoplamazian said.

Looking forwardHyatt executives still aim to add a total of 50 new hotels to the store base this year, including 17 more in the fourth quarter. This growth should give a boost to management fees, in addition to the steady gains the business has seen in RevPAR and average daily guest spending. Longer term, Hyatt has contracts in place for the development of 260 new hotels over time, adding about 56,000 rooms to its current 162,000-room managed and franchised portfolio.

The company is particularly optimistic about its prospects in the U.S. market, which is responsible for more than three-quarters of its business. "Looking ahead, we expect overall operating performance at our hotels in the U.S. to remain strong, based on continued economic growth and positive group and transient trends," Hoplamazian said.

The article Higher Guest Spending Powers Growth in Hyatt Hotels Corporation's Earnings originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Hyatt Hotels. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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