During the company’s first-quarter earnings call, officials with Hyatt Hotels Corporation discussed why they’re optimistic for future growth in China.
CHICAGO—Hyatt Hotels Corporation President and CEO Mark Hoplamazian is bullish on the growth prospects in China, a country his company has been active in for almost 50 years.
During Hyatt’s first-quarter 2018 earnings call with investors and analysts, Hoplamazian said he views growth in China as one of the top drivers of future growth as there are significant opportunities there to grow the company’s franchise business, along with establishing a firm foothold for select-service brands Hyatt House and Hyatt Place.
“We now have 58 hotels or approximately 19,000 rooms in Greater China, which represent approximately 10% of our systemwide base of hotel rooms today,” he said. “While growing our presence in China, we've built a reputation for excellence in the experience we provide high-end travelers, including unique strength in our food and beverage offerings.”
CFO Pat Grismer noted Hyatt’s hotels in China saw an 11% year-over-year increase in revenue per available room during Q1.
“We have outstanding business momentum in this fast-growing part of the world, and … we believe we are positioned to drive strong earnings expansion in this region well into the future,” he said.
Hoplamazian said there is significant reason to be bullish on China.
“The number of domestic Chinese travelers in 2017 grew almost 13% from the prior year, whereas outbound Chinese travelers in 2017, of which there were over 130 million, grew 7% from 2016,” he said. “Remarkably, this number is expected to nearly double to 250 million by 2025.”
Hoplamazian noted the company’s Grand Hyatt and Park Hyatt brands already have a significant presence in cities like Shanghai, Beijing and Guangzhou, but a new development deal with Tianfu Minyoun Hospitality will help grow the company’s select-service brands in various locations in the country.
“Minyoun will also become our first approved third-party owner/operator for our select-service brands in China, allowing us to establish a model for quality operators as we move into franchising in China,” he said.
The partnership will include a “potential integration of World of Hyatt (the company’s loyalty platform) into Minyoun’s larger suite of hotel brands,” he said.
He said the company’s current development pipeline accounts for three hotels under the agreement, but development with Minyoun could ramp up to as many as 50 over the next five years.
Hoplamazian also noted that the company is putting more emphasis on China and the Asia/Pacific region through the establishment of a new regional team headed by Stephen Ho, president – Greater China, global operations. Ho previously worked in the region for Marriott International and Starwood Hotels & Resorts Worldwide.
Other efforts to grow in the region including expanding Hyatt’s presence on major Chinese e-commerce platforms and adopting more programs and platforms that would appeal to Chinese travelers. Those include tailored room types and F&B, along with adopting “payment options and mobile offerings.”
Hyatt saw a strong Q1, with systemwide RevPAR growth of 4.3% year over year. Grismer noted that number even accounts for the Easter holiday shift. Excluding Easter, RevPAR would have been up 4.6%.
Due to the stronger-than-expected performance, Hyatt officials revised several areas of guidance upward. The company is now projecting RevPAR for full-year 2018 between 2% and 3.5% (compared to a previous projection of 1% to 3%) along with net income between $495 million and $553 million (compared to a previous range of $176 million to $215 million).
As of press time, Hyatt’s stock was trading at $78.01 per share, a year-to-date increase of 5.7%. The Baird/STR Hotel Stock Index was down 3.4% for the same period.