Hyatt Hotels Corp. (H:US) fell the most in almost six months after the chain controlled by the Pritzker family reported first-quarter earnings that missed analysts’ estimates as expenses jumped.
The company, which late yesterday announced a new chief financial officer as part of a reorganization, said selling, general and administrative expenses climbed 33 percent in the quarter. Hyatt attributed part of the increase to the cost of introducing brands, bad debts and legal fees.
“Usually, general expenses climb about 3 to 4 percent, so this jump is unusual,” said Nikhil Bhalla, senior lodging analyst at FBR & Co. in Arlington, Virginia. “This company is going through a sort of restructuring right now. Chances are we’re going to see these types of expenses for the next couple of quarters.”
Hyatt, based in Chicago, said yesterday that it is realigning its business to create three operating regions that will report to a “global operations center.” Chief Financial Officer Harmit Singh will step down from that post in August and leave the hotelier in December, the company said. Gebhard F. Rainer, currently managing director of Europe, Africa and the Middle East, will replace Singh as CFO.
The company has “added a lot of resources, and we recognize our business mix will shift as we open hotels,” Chief Executive Officer Mark Hoplamazian said during a conference call with analysts. The new organizational structure will “push decision making to the regions and hotels themselves,” he said.
Hyatt fell 5.2 percent to $41.55 at the close in New York, the most since Nov. 9.
Also yesterday, Hyatt said it acquired a 756-room hotel in Mexico City for about $190 million. The company plans to invest about $40 million to renovate the property over the next three years and eventually sell it while retaining the management contract. The property, which will be re-branded as Hyatt Regency Mexico City, was purchased from Japan-Mexico Hotel Investment Co. Ltd. The transaction is scheduled to be completed this month.
Hyatt’s net income in the first quarter was $10 million, or 6 cents a share, unchanged from a year earlier, the company said today in a statement. Adjusted earnings, which exclude a gain on investments, were 3 cents a share. The average estimate (H:US) of 11 analysts surveyed by Bloomberg was 9 cents a share.
Revenue rose to $958 million from $875 million a year earlier. Revenue per available room, an industry measure of occupancies and rates, increased 8.1 percent for full-service hotels in North America that have been owned or leased for at least a year. Overseas, revpar gained 5.7 percent.
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