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Why Hyatt Hotels Corporation's Shares Dropped in January

By Travis Hoium - Feb 5, 2016 at 10:11AM

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Fears of an economic slowdown didn't help this hotel chain last month.

What: Shares of Hyatt Hotels Corporation (H 2.73%) fell 18% in January according to S&P Capital IQ data, as economic factors and a data breach affected the stock.

So what: Hospitality brands sold off with the market, in general, last month as fears about economic growth, both in the U.S. and abroad scared investors. China's economy is giving many signs that it's ailing, but no one quite knows how fast it will slow, or what the global impact will be. Chances of a U.S. recession are also on the rise, although the domestic economy is among the strongest globally. 

To make matters worse, management said that about 250 hotels were hit with malware that affected customer data, including credit cards. This may not present a long-term negative for Hyatt, but it's incrementally bad for customer confidence. 

Now what: When the economy is going well, hotels can be one of the best places to be because of the leverage involved in a chain like Hyatt. But with economic uncertainty facing much of the world, the stock looks expensive even after last month's drop. Shares trade for 28 times forward earnings estimates, a pretty penny in today's market. I wouldn't be surprised if there's more downside for shares if an economic slowdown occurs in 2016.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Hyatt Hotels. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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