Hyatt told analysts that there was a very limited transactions market, as it maintained its commitment to a $1.5bn sell-down by March 2022.
The comments came as the company hailed strong performance in China in the third quarter, with select service brands leading the recovery.
Mark Hoplamazian, president & CEO, said: “As I look at the [deals] market right now, there is no market. There's not a lot of price discovery going on. There are individual transactions that have occurred. The discounts that I've seen at least range sort of from maybe 10% to 30% off of where values might have been back in 2019.”
The group said that two thirds of its room nights had come from leisure transient business, up from less than 50% a year ago, with Hoplamazian commenting this had led the group to seek demand through OTAs to “maximise short-term demand”.
He added: “Overall, our internal channels are relatively stable, basically about flat year-over-year. And our loyalty penetration or activity is off a bit, and that's primarily because a lot of our loyalty members are core business travellers, and their business travel has really been reduced to very little.”
The company reported adjusted Ebitda falling by 129.9% to $(48)m, with revpar dropping by 72%. As of 30 September, 92% the portfolio was open. Total management and franchise fee revenues decreased 69.8% to $40m, reflecting a sequential improvement from $12m reported in the second quarter.
The group said that the pace of recovery had varied by region, and was led by occupancy gains in Greater China and US select service hotels. On average, Hyatt’s open Hyatt Place and Hyatt House hotels ran occupancy levels of approximately 46%, ahead of the roughly 30% occupancy levels at the open full-service hotels.
Hoplamazian said: “We experienced continued strength through September and October, with modest increases in average occupancy levels over the period driven heavily by weekend business where occupancy percentages were running in the low 40s, while mid-week occupancy percentages were running in the high 20s.”
Occupancies in most areas of Greater China, excluding Hong Kong, Macao and Taiwan, reached pre-Covid levels as the rebound in domestic travel has fully replaced inbound travellers.
The group has historical hotel Ebitda breakeven levels of 40% to 45% for full-service hotels and about 10 points lower for select service hotels.
Hyatt saw net rooms growth of 6.0%, with the pipeline up 9.8% on the year. The CEO said: “While there has been disruption in the development cycle with likely implications for future periods, I'm pleased to say that we've overcome a number of challenges to drive two straight quarters of strong growth. Consistent with my comments last quarter, we expect our full year net rooms' growth to be above 4%.
“We continue to see full-service growth opportunities globally, including both newbuilds and conversions. As I mentioned last quarter, we've seen very limited new development activity for select service hotels in the Americas due largely to financing limitations and underwriting challenges. We are, however, starting to see an uptick in discussions in this space and believe significant demand for these development opportunities will return once capital availability improves for new development.”
At the end of the quarter the company had cash and cash equivalents of $1.78bn and total debt of $3.24bn.
Hoplamazian concluded: “We are mindful of the recent increases in Covid-19 cases in the US and Europe, and the resulting increase in restrictions being put into place in many jurisdictions. We expect these enhanced restrictions to have a negative impact on travel in the near term, and this could result in flat or perhaps reduced fourth quarter demand compared to the third quarter.”
Insight: A few years back Hyatt did, if not a u-turn, then a considered swivel towards hotels which were less heavy on the gold and marble and this has served them well in what are now tricky times. While Hyatt’s version of select service is not what leaps to mind with, say, a Choice or a Wyndham, it is enough to keep the home fires burning and, as the group has noted, attract investment.
It has not, as Hoplamazian admitted, attracted the loyalty members, who are spending their cash converting their garages to home offices. Hyatt has instead been spending its distribution cash with the OTAs.
It hopes to see a change in this as business travel comes back, with Hoplamazian admitting that it was likely to look a tad different, with more demand for meetings space as offices downsized. It took hope from such trends in China and hey, at least unspent loyalty points aren’t racking up in the meantime.