Hyatt (H) is trading at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 11.2x. The current valuation is lower than its average valuation of 12.2x since January 2010.
Hyatt is trading at one of the lowest multiples among its peers. Wyndham Worldwide (WYN) is trading at a multiple of 9.9x, lower than Hyatt’s multiple.
Hilton (HLT) and InterContinental Hotel Group (IHG) are each trading at a multiple of 14.6x. Marriott (MAR) has the highest valuation of 16.5x, primarily due to the market’s upbeat outlook on its Starwood acquisition.
The market expects Hilton’s EBITDA to fall 35.8%. Hyatt and Wyndham Worldwide’s EBITDA metrics are each expected to grow 4.0% in 2017. Marriott’s EBITDA is expected to grow 6.2% in 2017, and InterContinental’s EBITDA is expected to grow 7.0%.
The peak of the current cycle for the hotel sector occurred in 2015. Sales volumes fell 30% YoY from $50.0 billion in 2015 and to $35.0 billion in 2016. In 2017, there has been another modest slowdown.
Despite the slowdown, there is ample positive news for the sector. Rising economic growth bodes well for the industry. Rising consumer confidence and disposable income, as well as steady job growth data, are other positives for the sector. These factors point to increasing travel and revenue growth for the hotel sector.
However, the outlook for 2018 is more subdued. RevPAR growth is expected to slow further, and hotel room oversupply is another key concern for the sector. Uncertainty surrounding the Trump administration’s protectionist policies also overshadow the sector, putting tourism and labor numbers under the microscope.
Investors can gain exposure to Hyatt by investing in the First Trust Small Cap Value AlphaDEX ETF (FYT), which invests 0.38% of its portfolio in the company.