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HHC

Hyatt Hotels Corporation “HHC” (NYSE: H) Simple Analysis, Parsimonious Forecasting Meghan Shevlin February 3, 2014 . HHC. Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences

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HHC

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  1. Hyatt Hotels Corporation“HHC” (NYSE: H)Simple Analysis, Parsimonious Forecasting Meghan ShevlinFebruary 3, 2014

  2. HHC • Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences • Highly competitive industry with 21M rooms available • Hyatt owns 500 properties (135,144 rooms) • Much of revenue comes from franchising fees and hotel revenues (i.e. food sales)

  3. Overview • Disaggregate Return on Net Enterprise Assets • Enterprise Profit Margin • Enterprise Asset Turnover • Parsimonious Forecasts • Revenue Forecast • EPM from Sales • EATO from Sales

  4. Return on Net Enterprise Assets

  5. Breaking down RNEA • EPM measures the operating profit generated by each dollar of sales • EATO measures the sales generated by each dollar of NEA. Shows productivity of enterprise assets

  6. Breaking apart RNEA • EATO is unlikely to fluctuate because assets are usually constant • EPM is volatile because earnings are volatile

  7. Revenue Forecast • Assumption : Growth rate at 6.10% • Not comparable to industry • Increased average of 2011 & 2012 rates because of forecasted potential growth into new markets

  8. EPAT & EPM from Sales

  9. EPM (from Sales) Forecast • Assumption: 4.32% • Averaged years 2010-2012

  10. EATO (from Sales) Forecast • Assumption: 0.92 • Averaged years 2010-2012

  11. Parsimonious Assumptions • Sales growth rate: 6.10% • Enterprise profit margin: 4.32% • EPM = EPAT / Sales • Enterprise asset turnover: 0.92 • EATO = Sales / NEA

  12. Industry Analysis • MAR, HOT and IHG are not appropriate comparisons for Hyatt in terms of size. But all reach same markets (luxury to lower scale). • H: 135,000 rooms • MAR: 660,000 • ICG: 675,000 • HOT: 345,000 • Macro forces driving the hotel industry: • “Uncertainty” & recession • Climate change • “Aging” of Western countries • Globalization

  13. Questions?

  14. Sources • Hyatt Hotel Corporation Annual Report 2012 • Hyatt Hotel Corporation Investor Fact Book 2012 • Valuation for Financial and Accounting Professionals: A Guide to Valuation and Financial Statement Analysis, Easton, Sommers

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