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Hyatt Hotels Launches a Dividend Following a Record Growth Year

By Demitri Kalogeropoulos - Feb 15, 2018 at 8:53AM

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The hotel chain is flush with cash these days.

With its fourth-quarter report delivered this week, Hyatt Hotels (H 7.16%) closed out a surprisingly strong 2017 highlighted by accelerating growth and an improving cash position. The hotel chain cited those stronger finances when it initiated a new dividend policy on Wednesday as the management team projected moderating sales gains in fiscal 2018.

More on that outlook in a moment. First, here's how the latest headline numbers compare to the prior-year period:

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$1.18 billion

$1.09 billion

8%

Net income

$76 million

$41 million

85%

Earnings per share

$0.63

$0.31

103%

Data source: Hyatt financial filings.

What happened this quarter?

Hyatt's core hotel room sales growth shot up to its fastest pace of the year. That success, plus a double-digit spike in management and franchise fees, allowed sales and adjusted earnings to both increase during the period.

A couple checking in at the front desk of a hotel.

Image source: Getty Images.

Key highlights of the quarter include:

  • Revenue per average room night (RevPAR) rose 3.8% in the quarter to lift the full-year result to 3.3%. That exceeded the top end of the guidance range management issued in early November. It also marked a significant acceleration over the prior year's 2.5% uptick.
  • Occupancy rates improved to 75% from 73% and the company managed healthy increases in average daily revenue across its portfolio, including a 4% boost in the company-owned segment as guests spent $235 each day, compared to $226 in the year-ago period.
  • Management and franchise fees continued to expand quickly, rising 12% to $131 million thanks to the expanding base and improved results at existing locations.
  • Hyatt opened 29 hotels, comprising 6,533 rooms, for a 7% increase in the room portfolio. That put total launches at 71 for the year, a new record for the company.
  • Management continued shifting its portfolio away from company-owned locations by selling two large properties and raising nearly $400 million in the process.

What management had to say

Executives were happy with the overall results. "We had a strong finish to the year," CEO Mark Hoplamazian said in a press release, "delivering full-year comparable RevPAR growth of 3.3% and net hotel rooms growth of 7%, fueled by a record-setting 71 new hotels added to our system in 2017."

Management took the opportunity to highlight how the asset sales are funding increasing cash returns to shareholders. "Plans to sell roughly $1.5 billion of real estate by the end of 2020 are under way," Hoplamazian said. "We remain confident that these actions will support growth in our business and further unlock shareholder value, as evidenced by our initiation of a quarterly cash dividend."

Looking forward

Hyatt's first regular dividend to date, of $0.15 per share, will hit shareholders' accounts in late March. That dividend would produce an annual yield of less than 1% at Wednesday's closing price. The new cash return channel will run alongside an aggressive stock repurchase initiative that last year reached a record $723 million of spending at an average share price of $59.34.

As for the current year, Hoplamazian and his team predict RevPAR will rise between 1% and 3% in 2018, which, along with asset sales and management fees, should translate into net income of between $176 million and $215 million.

These figures would both represent slightly weaker results than the company managed in 2017. Hyatt is also expecting to scale back on its expansion pace a bit, while still adding about 60 hotels, or roughly 6.5%, to its portfolio this year.

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