Is Hyatt Stock A Buy?

Is Hyatt Stock A Buy? Hyatt Hotels Corporation (NYSE:H) had a rough 2020 alongside the entire hotel industry.

Occupancy rates and reservations plummeted as travel restrictions and social distancing regulations spread across the globe. This bottlenecked revenues and created a ceiling on possible growth potential, but the economic recovery is well on its way these days.

That begs the question – is Hyatt stock a Buy?

The pandemic caused over a million job losses from 2020-2021 alone, and Hyatt’s market cap suffered in tandem. Bargain hunters are sniffing around the company now wondering if it could be a value opportunity over the long term, but the price is already nearly double what it was at the onset of COVID-19.

Hyatt stands to gain substantially once tourism returns to normal. The industry had already been on a growth trajectory before the pandemic, and while it was significantly hampered by the outbreak, it also created a pent-up demand for travel. That has the potential to translate into booming revenues for Hyatt, especially when year over year comparables are factored in.

Hyatt Operates In 68 Countries Under 20 Brands

Hyatt Hotels Corp is a Chicago, Illinois-based hospitality company with over 1,000 properties under 20 brands in 68 countries. This global footprint makes it one of the largest hotel chains in the world and a well-recognized brand. Its properties include everything from luxury and business hotel franchises to resorts and vacation properties.

Each is designed to service a different customer demographic for a different type and length of stay. This means the hotelier caters to higher-end customers who are willing to spend more but have higher expectations. It also puts the company at greater risk of problems caused by business travel slowdowns.

The company’s 2019 annual revenue was over $5.0 billion, which sharply decreased 59 percent to $2.07 billion in 2020. The pandemic is entirely to blame because of travel restrictions, and the company had to take a lot of expensive measures to ensure guest safety.

Still, President and CEO Mark Hoplamazian sees a clear path to recovery and is bullish on the hotel industry’s ability to capitalize on leisure travel. If he’s correct, investors could possibly see significant gains.

How High Will Hyatt Stock Go?

Out of the 15 analysts who have done public forecasts on Hyatt, the median price target is $77.00 with a high estimate of $95.00. This is the most bullish outlook for the year, which pretty much makes it a hold or sell in most analysts’ books.

Earnings forecasts project the company will remain in the red for some time but increasingly less so. Indeed it appears that by 2022 the company could be back on track posting positive EPS figures.

What will ultimately determine that is the return of hotel bookings and the ability to regain pre-coronavirus occupancy rates. It’s a lot harder than it sounds, and there are obstacles in the way that need to be addressed.

Virtualization Has Hurt Hyatt

What was a boon for Zoom (ZM) stock was a bust for Hyatt – the trend toward virtualization. Specifically, business travel is a major force in all travel, and the pandemic shut much of it down, sending communications online instead.

Major trade shows like CES, NAB, Outdoor Retailer, and more went digital, while E3 – the biggest video game expo in the world – completely shut down in 2020. It’s returning in 2021, but a lot of major events like SXSW won’t come back until 2022 at the earliest – and that’s bad news for Hyatt and hotels in general.

It’s possible that after surviving virtually for over a year, some businesses will choose to forego many of these events even when they do return. They’re not cheap – running a booth can cost millions of dollars, while sponsorship, promotional materials, and even ticketing and lodging costs are pricey.

And that’s not even factoring in cost commoditization from competitors looking to win business.

Hyatt Is Not A Top 5 Hotel Chain

Although Hyatt is one of the largest hotel chains in the world, it’s not among the top five. Companies like Hilton, Marriott, and Wyndham have much larger brick-and-mortar footprints. And many of them spend a lot of money on technology.

Marriott (MAR), for example, is long known for incorporating tech-enhanced services like mobile check-in, in-room VR, and more. It’s a brutally competitive landscape, and any of these rivals would have no issues butting heads with Hyatt.

With business travel stunted, there’s even a possibility luxury travel changes due to economic conditions. There’s no time for Hyatt to rest on its laurels. It needs to find ways to set itself apart from the competition, or there’s a chance it could lose.

Is Hyatt Stock a Buy? The Bottom Line

The hotel industry took a heavy hit from the pandemic, and Hyatt Hotel Corp is no exception. Its market capitalization was crushed as revenue streams slowed to a trickle. Widespread travel restrictions led to high vacancy rates, and staff had to be cut to control expenses.

But travel is picking up, and as the initial epidemic falls further behind in the rearview mirror, Hyatt investors could be on the cusp of handsome gains. Still, most analysts have tepid outlooks and recommend holding Hyatt stock. For the adventurous investor, there are likely better investments to buy on the market for growth, dividends, and other perks.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.