Hyatt Hotels gains profit, rebuys $200 million in stock

by Donna M. Marbury/MEDILL
Aug 01, 2012

hyattchicago

Hyatt Hotels/ Hyatt Regency Hotel in Chicago

Hyatt Hotels Corporation reported a 5 percent net income increase in 2012 second quarter profits on Wednesday over 2011 second quarter earnings. Hyatt also announced that the board of directors would repurchase up to $200 million of common stock, “in the best interests of all shareholders in the context of our strategy, financial position, business results and macro-economic factors,” said Mark S. Hoplamazian, president and chief executive officer of Hyatt. The announcement caused Hyatt shares to increase 3.5 percent by the close of market on Wednesday.

Standard & Poor’s Rating Services stated that the common stock repurchases did not impact its rating for the hotel chain, but mentioned concern over future strategies. “If Hyatt pursues additional share repurchase authorizations or material additional debt-financed acquisitions over the next 12 to 24 months in a manner that we believe would drive leverage above 3x [times] on a sustained basis, we may consider a lower rating,” S&P stated in a press release.

“We view the operating results and the authorization favorably and [it] should improve investor sentiment from here, which has been awful since it reported [first-quarter] results,” said J.P. Morgan in a report.

The international hotel chain, based in Chicago, earned $39 million in the quarter ending June 30, 2012, compared to $37 million during the same period last year.

During a conference call Wednesday morning, Mark S. Hoplamazian, president and CEO of Hyatt, said that worldwide and domestic increases in short-stay travelers boosted the hotel’s profits. Hyatt’s revenue per available room (RevPAR), an indicator of occupancy and cost per room in the industry, increased both in North America and overseas.

“RevPAR increased over eight percent in North America as we experienced strong transient demand,” Hoplamazian said. “Most of our hotels in China continued to show solid results, with a sequential increase in year-over-year RevPAR growth for comparable hotels in the second quarter. In addition, results from our hotels in Europe, which are primarily located in gateway cities such as Paris and London, remained good, despite the economic uncertainty in the wider region.”

Hyatt opened five properties in the second quarter: one internationally in Mexico City; and four others in New Orleans’s French Quarter, Chicago’s Magnificent Mile, in Boston suburb Braintree and in downtown Riverside, California. “The company is well positioned to take advantage of growth opportunities, as our balance sheet remains strong. Our organizational realignment is progressing well and slated for completion during the fourth quarter of 2012,” Hoplamazian said, adding that that the company plans to open more than 20 new hotels this year.

As of the end of the afternoon Wednesday, the company’s shares increased slightly to $36.79 from $36.65 on Tuesday.

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