Hyatt: Completion of Asset Sale Supports Its Brand and Switching Cost Advantages

Hyatt announced on Aug. 16 the sale of its 1,641-room Hyatt Regency in Orlando for $1.07 billion, taking its proceeds of sold owned hotels since 2021 to $2.6 billion, surpassing its $2 billion target. In our view, these transactions are positive for shareholders, as they increase Hyatt's asset-light rooms, which not only offer high returns on invested capital but also provide contract lengths of 20 years that are costly to terminate, supporting both its brand and switching cost advantages, sources of its narrow moat. In this vein, we estimate asset-light rooms accounting for over 80% of total EBITDA (excluding the corporate expense) in 2024, up from 57% in 2019. We have increased our fair value estimate to $147 per share from $145 to account for a higher gain of sale in our 2024 income statement. We see shares as appropriately valued.