Hyatt stock has surged by almost 22% since early 2024, outpacing the S&P 500’s 10% increase over the same period. This increase can be attributed to strong demand in the travel and leisure sector, despite global economic concerns. In Q4 2023, Hyatt witnessed a 9.1% year-over-year growth in revenue per available room, with a 17% increase for the full year driven by higher occupancy levels and room rates. The company’s operations in Asia and North America were significant contributors to this growth, particularly with the easing of Covid-19 travel restrictions in China. Hyatt’s near-term outlook remains optimistic, with projected increases in systems-wide RevPAR and Adjusted EBITDA for 2024.
Hyatt generates revenue primarily through fee-based services, licensing, and other offerings, allowing third-party owners and franchisees to utilize the Hyatt brand and intellectual property. This asset-light strategy has enabled the company to expand rapidly, with 29 new hotels added in Q4 2023 and an expected net room growth of 5.5% to 6% for 2024. Hyatt has also been active in deal-making activities, such as acquiring the Mr & Mrs Smith booking platform and the Apple Leisure Group to enhance its luxury resort management services. The company aims to derive over 80% of its earnings from fees by 2025.
Over a longer period, Hyatt stock has shown impressive gains of 115% since early 2021, outperforming the S&P 500 by 75%. Despite market volatility, Hyatt has consistently outperformed the broader market in the last three years, with returns of 29%, -6%, and 44% in 2021, 2022, and 2023, respectively. Comparatively, the S&P 500 saw returns of 27%, -19%, and 24% over the same period. While many individual stocks struggle to beat the S&P 500 in both positive and negative markets, the Trefis High Quality Portfolio has consistently outperformed the index. The uncertain macroeconomic environment, marked by high oil prices and elevated interest rates, could present challenges for Hyatt’s stock performance.
Despite positive market trends, there is concern that Hyatt’s stock may be overvalued at its current price of $159 per share, trading at about 46x projected 2024 earnings, higher than industry peers. Trefis valuation analysis suggests that the stock may be slightly overvalued, with a projected value of $132 per share, approximately 16% below the current market price. Investors are advised to explore Hyatt’s business model and revenue trends through Trefis’ comprehensive analysis to make informed decisions about investment opportunities. Check out their detailed assessment on Hyatt’s valuation and how it compares to competitors for further insights.
Overall, Hyatt’s strong performance in the travel and leisure sector, strategic acquisitions, and focus on fee-based revenue streams position the company for growth. However, cautious investors may view the stock as overvalued at its current price, prompting a closer examination of Hyatt’s financials and market position. As the market continues to evolve, staying informed and assessing investment opportunities with Trefis tools and analysis can help investors make informed decisions and navigate market uncertainties effectively.
