Hyatt Hotels Misses Profit View Despite High Occupancy

(RTTNews) - Hyatt Hotels Corp. (H) reported Wednesday a profit for the third quarter that declined from last year despite revenue growth, reflecting higher expenses as the company ramped up its global expansion by opening 11 new hotels.

Both adjusted earning per share and quarterly revenues missed analysts' expectations.

"The global economic environment continues to be healthy for travel demand, particularly in the U.S. Strong rate increases led to systemwide RevPAR growth of 8% in the third quarter," President and CEO Mark Hoplamazian said in a statement.

The Chicago, Illinois-based hotel chain reported net income of $32 million or $0.21 per share for the third quarter, lower than $55 million or $0.35 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $30 million or $0.20 per share, compared to $36 million or $0.23 per share in the year-ago quarter.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter grew 7.6 percent to $1.10 billion from $1.03 billion in the same quarter last year, but missed fourteen Wall Street analysts' consensus estimate of $1.12 billion.

Owned and leased hotels revenues grew 6.5 percent to $555 million, and other revenues from managed properties increased 6.2 percent to $431 million from the year-ago quarter. Total management and franchising revenues grew 18.8 percent to $120 million from last year.

Revenue per available room or RevPAR, for comparable systemwide hotels was up 7.6 percent in the quarter, as occupancy improved 120 basis points and average daily rate or ADR increased 5.8 percent from last year.

Comparable U.S. full service hotel RevPAR increased 8.9 percent and comparable U.S. select service hotel RevPAR improved 9.7 percent.

RevPAR for comparable owned and leased hotels was up 7.6 percent as occupancy improved 130 basis points and average daily rate increased 5.8 percent from last year.

Owned and leased hotel operating margins improved 60 basis points, and comparable owned and leased hotel operating margins increased 190 basis points from last year.

During the quarter, the company opened 11 hotels. The company anticipates to open around 40 hotels in 2014. Hyatt Place continues to grow in the U.S. and internationally, with seven recent openings, reflecting the brand's appeal to guests and owners. The company said it is on track to open around 40 hotels in 2014.

"Looking ahead, group pace for 2015 is up approximately 8% providing further opportunity to grow rates and improve margins through higher rooms and food and beverage revenues. Combined with strong demand and limited new supply in many U.S. markets, the multiple earnings tools in our business model position us well for future years," Hoplamazian added.

The company noted that it recently received proceeds of more than $350 million from the sale of Hyatt Residential Group, Park Hyatt Washington and three joint venture hotels as part of its transaction and asset recycling plan. It also expects to close on the sale of 38 select service hotels for about $590 million next month.

The company added that the transaction market continues to be active and it currently has seven full service hotels and six select service hotels listed for sale.

H closed Tuesday's regular trading session at $62.00, up $0.24 on a volume of 0.63 million shares. In the past 52-week period, the stock has been trading in a range of $45.73 to $64.52.