Thursday, February 16, 2023

Hyatt Hotels and Wyndham Hotels & Resorts both filed their annual reports for 2022 this week, which allows us to revisit two of our favorite macro-economic issues: recovery from the pandemic and inflation. Both companies offer glimpses into both issues.

Let’s begin with Hyatt Hotels ($H). The company’s income statement is a mixed bag. Total revenue nearly doubled, from $3.03 billion one year ago to $5.89 billion this year; pre-tax income and net income were also up sharply, too.

Except, how useful is it to compare a hotel chain’s 2022 numbers to 2021, while the pandemic was still very much a disruptive force? So we compared 2022 to Hyatt’s 2019 performance, and a rather different picture emerged. See Figure 1, below.

That performance is less glamorous. Revenue is 17.3 percent higher than the pre-pandemic numbers from 2019, which is nice; and expenses rose only 13.9 percent, so operating income increased too.

But Hyatt also had a collection of losses in 2022 that led to pretax income of only $363 million, 64 percent lower than the $1 billion Hyatt reported three years ago. Plus, notice the line item for interest expense: it doubled, from $75 million in 2019 to $150 million today. That’s higher interest rates, and they aren’t going away any time soon.

We see almost the opposite configuration at Wyndham Hotels & Resorts ($WH). There, the company’s 2022 revenue was down considerably from 2019 totals — but expenses were down even more, leading to pretax and net income lines that both more than doubled. See Figure 2, below.

Two hotel chains, two very different long-term strategies. Just goes to show how attention to specific line items and disclosures over time matter so much to helping you understand what’s really going on with a company.

Down to Room Rate Detail

We next started digging into the footnotes, to see whether hotel prices have risen in cost like so much else in the world these days, especially since travel, leisure, and hospitality are supposedly one sector where consumers want to keep spending, inflation be damned.

The data told a somewhat confusing story. We looked up RevPAR (revenue per available room), ADR (average daily rate), and occupancy levels, comparing 2022 to 2019. Table 1, below, shows the results for Hyatt.

Occupancy rates are down across all Hyatt brands (and kudos to management for breaking down the data by brand, by the way), but average daily rate was up. RevPAR is calculated by multiplying a hotel's average daily room rate by its occupancy rate. So fewer people are booking rooms, but paying more when they do. (It’s also true that Hyatt has more rooms today than it did in 2019.

Alas, Wyndham doesn’t report occupancy and ADRs, so we can’t whip up a comparable table; and we’re still waiting for other peers such as International Hotel Group ($IHG) to file their 2022 reports in the next few weeks.

Food for thought while you book that next business trip.

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