Hyatt's Luxury Demand Remains Resilient Despite Uncertain Economic Conditions

While economic uncertainty could affect near-term industry demand, we see Hyatt’s brand intangible asset—the primary source of its narrow moat—strengthening over the long term. Hyatt's growing brand advantage is evident in its managed and franchised unit growth that has averaged 8.8% annually over the past 10 years (2015-24), well above the long-term US industry supply increase of 2%, according to STR data. We expect Hyatt to expand room and revenue share in the hotel industry over the next decade, buoyed by newer brands like House, Place, Apple Leisure Group, Studios, and Select, supporting its intangible brand advantage. We see the company’s room growth averaging 5% annually over the next decade, above the 1%-2% supply increase we estimate for the US 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 long-term industry demand, helped by an expanding middle-income class.