Hyatt Hotels

Hyatt's second-quarter revenue per available room, or revPAR, increased 5.9%. Room growth was up 3.9% and adjusted EBITDA rose 8.8%. RevPAR guidance for the year increased to 4% from 3% at the midpoint, and unit growth decreased to 6% from 6%-7%. Shares fell about 8% in July 30 trading.

Why it matters: We aren't concerned with lower unit growth in 2026, which is due to some openings potentially being pushed into 2027, or temporary demand headwinds in Mexico and the Middle East. Rather, we see the company's brands resonating with travelers and third-party owners. Pipeline growth of 10% illustrates strong owner interest, supporting our 6%-7% average unit growth estimate during 2027-29. We see the 1% package revPAR decrease, which includes resorts in Mexico, rebounding to mid-single-digit growth in 2027, as regional security concerns subside. Travelers continue to gravitate to Hyatt, as shown in loyalty membership growing 17% to 69 million, as well as the company's luxury and lifestyle brands increasing revPAR share 3 percentage points. Also, revPAR in the US was up a healthy 6.7%, while China's revPAR was up 7%.

The bottom line: We don't plan to materially change our $167 per share fair value estimate for narrow-moat Hyatt. Shares are now fairly valued after the pullback on the print. We don't require much discount to our valuation to recommend shares. Hyatt is extending its high-end brand advantage into more markets worldwide. The hotelier's 1,559 units are on average just 30% its wide-moat peers Hilton, Marriott, and InterContinental. Hyatt sees more than 14,000 hotel opportunities it could add to its brand. Hyatt's leading luxury/upscale brands (70% of rooms) are benefiting from strong high-income demand, with 75% of US travel spending coming from the top two income quintiles, recently helped by record investment asset prices.

After reviewing Hyatt's second-quarter results, we have increased our fair value estimate to $168 per share from $167 for the time value of money. Our fair value estimate represents a 15 times 2027 enterprise value/adjusted EBITDA multiple, excluding net deferrals and finance contracts. The key drivers of our financial model are revPAR, managed and franchised room growth, owned room growth, and margins.

We see Hyatt extending its high-end brand advantage into many more markets worldwide, supported by a favorable position with the growing next-generation traveler and driven by new brand launches, which we think will result in industry-leading high-single-digit unit growth through the rest of this decade. Hyatt's 1,500 hotels currently are on average just 30% of its wide-moat peers Hilton, Marriott, and InterContinental combined. With Hyatt's leading luxury and upper-scale brands, we see plenty of white space to penetrate the more than 14,000 hotel opportunity the company has identified. We forecast total rooms to average 5%-6% annual organic growth over the next decade, driven by managed and franchised relationships.

Hyatt's second-quarter revenue per available room, or revPAR, increased 5.9%. Room growth was up 3.9% and adjusted EBITDA rose 8.8%. RevPAR guidance for the year increased to 4% from 3% at the midpoint and unit growth decreased to 6% from 6%-7%. Hyatt's leading luxury/upscale brands (70% of rooms) are benefiting from strong high-income demand, aided by record asset prices. We see Hyatt's revPAR growth accelerating to 6% in both 2027 and 2028 from 3% in 2026, aided by secular AI, onshoring manufacturing, and infrastructure investments. We model Hyatt's 2026-35 average annual revPAR growth at 4%. The result is average annual revenue growth of 8% over the next 10 years.

We expect travel demand to help drive 2030 total operating margins to 12% from about 4% in 2019, as Hyatt continues to leverage the top line and sees operational improvement in a higher-quality recycled owned-asset portfolio.

When evaluating hotel operator moats, we review several key factors, including management expertise, room scale, ability to spend behind marketing and technology, the strength of loyalty programs, success in extending the brand into new verticals and regions, and revenue share. We see Hyatt exhibiting brand and switching cost advantages, which we believe will endure for at least the next 10 years, leading to our Morningstar Economic Moat Rating of narrow.

Hyatt’s prowess in managing hotels on behalf of its third-party owners signals an intangible brand advantage. Given decades of high-quality service, travelers and third-party owners view Hyatt as a brand they can trust to deliver a consistently high-level experience. To this point, Hyatt is one of the industry’s leaders of managed properties, with more than 700 hotels, one of just a few operators managing more than 100 units. Owners choose to outsource management responsibilities to Hyatt because of its strong brand and management team, with scale and expertise in reservations, advertising, marketing, and labor management, which lead to strong revenue per available room, occupancy, and profitability.

Hyatt’s industry-leading unit growth showcases that its brand is resonating with third-party owners. Its unit room growth even remained positive during the downturn in 2008 and 2009, up 4.2% and 3.7%, respectively. Additionally, over 2008-19, Hyatt saw net unit growth averaging 6% annually, well above the roughly 1.5% mark of the US hotel industry during that time and the low-single-digit percentage of its narrow-moat peers. We forecast Hyatt’s unit growth to average 5%-6% annually in 2026-35. Third-party hoteliers are drawn to Hyatt’s portfolio because its scale allows owners to pool resources to spend $3.7 billion on labor, marketing, reservations, distribution, and loyalty, which far exceeds what any boutique or independent hotel owner can afford and supports its intangible-brand edge.

Hyatt’s brand is also hitting home with travelers, as illustrated by its solid loyalty program, which provides an immediate channel for demand for third-party owners, further validating the company’s intangible brand advantage. As of June 30, 2026, its loyalty program hosted 69 million members, up from 20 million at the end of 2019. Hyatt’s loyalty program allows members to use and accumulate points across more than 377,000 hotel rooms. Additionally, Hyatt’s members are engaging more with the company’s brands, representing about 50% of total room nights, up from around 40% in 2019. This is roughly in line with narrow-moat peers Accor, Choice, and Wyndham.

Hyatt’s brand drives third-party owners to sign contracts that are typically 20 years long with 10-year renewal options, providing a switching-cost advantage. Termination of these contracts could require significant expenditures to renovate and rebrand a property to meet the specifications of a new brand, resulting in revenue loss for the owner and leading to cessation fees payable by the owner.

Hyatt’s solid relationship with both owners and travelers has kept its global revenue share at 1%-2% since 2018, making it the eighth-largest globally yet behind six others in our hotel operator coverage, highlighting its relatively lower scale and established brand. Despite this still-emerging presence, Hyatt shines in the luxury segment, where it has held a 6% share over the last several years, trailing only wide-moat peer Marriott’s 10% share. It also controls the number-four revenue position in the upscale segment, with 3% share in 2025, up from 2% in 2018, trailing only wide-moat companies Marriott and Hilton.

One reason we don’t ascribe a wide moat or a network advantage to Hyatt is that the company has no notable presence in the midscale category, and wide-moat peers with a broad price point offering could entice these travelers into their ecosystems, where they could remain as they graduate to higher price points, hindering share for Hyatt. Further, Hyatt’s geographical presence is behind that of Marriott, Hilton, and InterContinental in all key regions. For instance, in the industry’s most important region, the US, Hyatt holds the number-six revenue position, while the top three are held by wide-moat hoteliers. Meanwhile, Hyatt is the 17th- and ninth-largest hotelier by revenue in Western Europe and Asia-Pacific, respectively, trailing the wide-moat peers that rank among the top in each region. As a result, Hyatt’s contract lengths with third parties average around 20 years versus 20-30 years for its wide-moat competitors.

Hyatt is positioned to benefit from the rising presence of the next-generation traveler through emerging brands Hyatt Place, Hyatt House, Andaz, Centric, Studios, Select, Unbound, Miraval, Two Roads, and Apple Leisure Group.

Hyatt is positioned to see its adjusted ROIC expand over the next several years as it reaches a critical mass of rooms, leading to higher third-party capital commitment.

Hyatt's 1,500 hotels are only about 30% of the number of hotels of Marriott, Hilton, and InterContinetal on average and there is opportunity to expand with 14,000 hotel locations identified.

Independent hotels and home and vacation rentals present an increasing competitive threat, and the advancement of technology and its use by next-generation travelers increases the access to and awareness of these properties.

The extent and duration of an economic growth slowdown can materially affect demand for Hyatt's product and increase near-term credit risk for the company.

The Pritzker family controls a majority voting interest of the shares outstanding, making it nearly impossible for minority shareholders to dictate change at the company.