Hyatt's China Demand Recovering and Leisure Trips Endure, Despite Economic Uncertainty

We see Hyatt’s brand intangible asset—the source of its narrow moat rating—strengthening over the long term. Hyatt's growing brand advantage is evident in its managed and franchised unit growth that has averaged more than 10% annually the past five years (2018-22), well above long-term U.S. industry supply growth of 1.8%. We expect Hyatt to expand room and revenue share in the hotel industry over the next decade, driven by a favorable next-generation traveler position supported by its House, Place, and Apple Leisure Group brands, supporting its intangible brand advantage. We see the company’s room growth averaging over 5% annually over the next decade, above the 1%-2% supply increase we estimate for the U.S. industry during this time. We are favorable on Hyatt's long-term competitive advantages and think the firm's high luxury, upper upscale, and upscale exposures across the globe position it to outperform industry demand in 2023, as improving overseas and group travel augments resilient leisure trips.