Rising costs and overseas slowdown hurt Hyatt earnings

The Hyatt Hotels Corp. property in Chicago’s Loop is currently undergoing renovations. / megan k. rauch / MEDILL

By Megan K. Rauch

Shares of Hyatt Hotels Corp. came under pressure Wednesday, after the Chicago company, pinched by higher costs and slow international growth, released disappointing third quarter earnings.

Net income for the company dropped 42 percent to $32 million, or 21 cents per diluted share, from $55 million in income, or 35 cents per  share in the year-earlier period. The lodging corporation reported $1.1 billion in revenue for the quarter ended Sept. 30, up from $1.03 billion a year earlier.

Adjusting for special items, the company reported earnings of 20 cents per diluted share, compared with 23 cents a year earlier.  The latest quarter was six cents short of the 26 cents analysts surveyed by Yahoo Finance had expected.

“The global economic environment continues to be healthy for travel demand, particularly in the U.S.,” said Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, in a press release Wednesday.

By some measures, Hyatt’s results reflect a strengthening marketplace.  The company saw revenue per available room, or RevPar, increase by 7.6 percent worldwide. In the U.S., where the majority of Hyatt’s properties are located, RevPar increased a stronger 8.9 percent for the quarter.

The company also reported that room occupancy strengthened by 1.3 percentage points to 79.9 percent from 78.6 percent a year ago.

Hyatt reported no growth in Australian and Asian markets, and earnings fell 18.2 percent in Europe, the Middle East and Africa.

Overseas properties are a major risk for the company right now, said Adam Fleck of Morningstar Inc. in a research note. “The company’s international properties expose the company to political and currency exchange risks. Other risks for the company include risks common to all companies in the tourism industry such as adverse effects from terrorism, war, and the outbreak of epidemic diseases,” he said.

Partly triggering the low earnings was the increase in sales, general and administrative costs for the quarter, which rose 6.1 percent to $1.03 billion.

Hyatt continues to expand its brand and opened 11 new properties during the third quarter. The company has said it expects to have opened 40 new hotels by fiscal year end, with many of the properties overseas.

In doing so, Hyatt hopes to better compete with Marriott International. Unlike Hyatt, the Maryland-based company reported better-than-expected earnings for third quarter. They also have stronger presences in international markets.

Earlier this week, Hyatt announced that current chief financial officer Harmit Singh will be replaced by Gebhard Ranier, managing director for the Europe, Africa and the Middle East division.

The company believes it is on track for “a strong fourth quarter based on advanced bookings,” Hoplamazian told analysts during Wednesday’s earning conference call.

In New York Stock Exchange trading Wednesday, Hyatt shares closed down $1.40, or 2.3 percent, at $60.60; the stock has risen by more than 30 percent over the past twelve months.