Hyatt braces for coronavirus impact

Despite downplaying its exposure in China, Hyatt Hotels
Corp. acknowledged the company is bracing for negative impact from the Covid-19
coronavirus outbreak in Asia Pacific and beyond. 

During the company’s full-year 2019 earnings call on
Thursday, Hyatt CFO Joan Bottarini said Hyatt has closed 26 hotels in Greater China
(mainland China, Macau, Hong Kong and Taiwan) with “many others that remain
open running at very low occupancies.”

“There’s no question there will be an impact to our results,
but it’s simply too early to reasonably quantify what the full-year impact to
our business in 2020 might be,” said Bottarini. “We expect [every] 1% of
Greater China RevPAR decline to equal $1 to $2 million in EBITDA on an annual
basis, and that includes impact on outbound travel. For example, if full-year
China RevPAR is down 10%, the full-year impact would be about $10-$20 million.”

Bottarini estimated that the Asia Pacific region accounts
for approximately 22% of Hyatt’s annual consolidated base, incentive and
franchise fees, with Greater China accounting for a total of 11%. She
emphasized that outbound Chinese travel to destinations beyond the Asia Pacific
region makes up “a very small percentage” of Hyatt’s total room revenue.

“The biggest impact is in Greater China, including Hong
Kong, Macao and Taiwan,” said Hyatt CEO Mark Hoplamazian. “And then as you go
further out to the countries that are then impacted, you include Thailand,
South Korea, Vietnam, Singapore, Japan and Indonesia, and also ultimately
Australia. The impact is greatest in the epicenter of the mainland, but then it

Hoplamazian added that Hyatt has seen some
coronavirus-related cancellations occurring outside of Asia Pacific, including
in Dubai, India and the U.S. He attributed the activity to the cancellation of
small meetings, primarily within the technology and consulting sectors.

“That group business, we’re paying special attention to
that, but we don’t think it’s going to be significant in these markets outside
of Asia Pacific,” said Hoplamazian.

Hyatt reported that RevPAR for Southeast Asia, Greater
China, Australia, South Korea, Japan and Micronesia declined 3.5% for
full-service hotels in the fourth quarter, due primarily to unrest in Hong
Kong, while RevPAR increase 4.2% for select-service hotel in the region. 

In the U.S., RevPAR decreased 1.3%, with full-service and
select-service RevPAR falling 1.1% and 1.8%, respectively. Hyatt partly blamed
a supply and demand imbalance, with select-service performance expected to
continue to lag behind full-service hotels throughout the year. 

Systemwide, Hyatt posted a 0.5% decrease RevPAR for the
fourth quarter and a 0.7% increase for 2019. Net income for the quarter surged
621.5% to $321 million, while net income for 2019 was down 0.4% to $766

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