Up 14% This Year As Travel Demand Holds Up, Will Hyatt Stock See Further Gains?

Hyatt stock has gained close to 14% since early 2024, roughly in line with the S&P 500. In comparison, rival Hilton stock is up about 17% over the same period. There are a couple of trends driving the recent price appreciation. Travel and leisure demand has remained robust, despite concerns about the global economy. Over Q1 2024, Hyatt saw its comparable system-wide revenue per available room increase by 5.5% year-over-year, driven by slightly higher occupancy levels and average room rates. The company’s operations in Asia remain the biggest drivers of growth, as greater outbound travel from Greater China to markets including Japan, Thailand, and South Korea drives growth. Moreover, the Americas business has also remained strong, driven by leisure travel to Mexico and the Caribbean. Demand for Hyatt’s all-inclusive properties has also been on the rise. The company is projecting that its systems-wide RevPAR could increase by 3% to 5% in 2024, while its net income for the full year is projected to come in at between $1.135 billion and $1.195 billion, up from just about $276 million in 2023.

Looking over a slightly longer period, H stock has seen extremely strong gains of 100% from levels of $75 in early January 2021 to around $150 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. Admirably, H stock has outperformed the broader market in each of the last 3 years. Returns for the stock were 29% in 2021, -6% in 2022, and 44% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the mega-cap stars GOOG, MSFT, and AAPL.

In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could H see a strong jump?

Hyatt primarily makes money from fee-based revenue, licensing, and other services, allowing third-party owners and franchisees to use Hyatt’s brand and intellectual property. This asset-light strategy is helping the company expand quickly. In Q1 2024, Hyatt added 12 new hotels with a total of 2,425 rooms and the company expects net room growth of 5.5% to 6% in 2024. Hyatt has also been increasingly focused on deal-making activity, with deals in recent years including the Mr & Mrs Smith booking platform, offering direct booking access to a select collection of boutique and luxury properties, and its 2021 deal for Apple Leisure Group, a luxury resort-management services, travel, and hospitality company. Hyatt had previously estimated that it would derive over 80% of its earnings via fees by 2025. For this year, the company is guiding for fee-based revenues of $1.1 billion to $1.13 billion.

While the increasing pivot to fee-based businesses, a focus on more premium properties, and a strong and growing travel market should help Hyatt, we think the stock is slightly overvalued at current levels. At the current market price of about $149 per share, Hyatt trades at roughly 40x projected 2024 earnings, which is high versus peers. We value H stock at about $132 per share, which is about 11% below the current market price. See our analysis on Hyatt Valuation: Is H Stock Expensive Or Cheap? for more details on Hyatt’s valuation and how it compares with peers. For more information on Hyatt’s business model and revenue trends, check out our dashboard on Hyatt Revenue: How H Makes Money.

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