Hyatt takes brunt of coronavirus

Hyatt’s relatively high concentration of full-service, urban
and resort hotels made the company particularly vulnerable to the Covid-19
pandemic, said Hyatt CEO Mark Hoplamazian during the company’s Q1 earnings call

“Within our U.S. full-service portfolio, urban and resort
account for around two-thirds of our total room count,” Hoplamazian said. “So,
we’ve got significant chain scale differences as well as some locational
differences relative to some of our competitors, which is driving some of the
differences you see in our reporting.”

For the first three months of the year, Hyatt reported that revenue
per available room (RevPAR) declined 28.1%. In the U.S., total RevPAR for the
quarter fell 24.5%, with full-service and select-service hotels posting a 25.2%
and 23% RevPAR declines, respectively.

Hyatt CFO Joan Bottarini said full-service hotels need
higher occupancy levels to break even. 

“How we think about breakeven … depends a lot on the
location and type of hotel,” said Bottarini. “When you think about a
full-service hotel in the U.S., occupancy levels at breakeven are about 40% to
45%. And a select-service hotel would be about 30% to 35%.” 

Hotels in higher-cost labor markets, she added, could need
to surpass 40% to 45% occupancy to break even.

“As we think about targeting reopening our hotels, we think
that something like 15% occupancies are about the crossover point between how
much you lose by staying closed versus how much you might lose by reopening,”
said Hoplamazian. 

As of the end of April, about 35% of Hyatt’s hotels
worldwide were not open.

In China, occupancy has steadily improved from a low of
mid-single digits to about 25% by late April. Hyatt now has only one hotel still
closed in China, versus a high of 26 earlier this year.  

The company is also seeing encouraging results in South
Korea, where bookings have doubled over the past three weeks. 

“In China, while occupancy has been building over the course
of the month, the last week was quite significantly positive,” said
Hoplamazian. “We even had a few hotels that sold out over the last weekend, due
to a holiday. The very fact that you even have a hotel that could sell out is a
notable thing.”

For the first quarter, Hyatt reported a first-quarter
revenue drop of roughly 20%, to $993 million. The company reported a net loss
of $103 million, down from net income of $63 million in last year’s first quarter.

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