Is Hyatt Hotels (NYSE:H) a Buy After Strong Q2 Earnings But Mixed Guidance?

Hyatt Hotels (NYSE:H) delivered a mixed performance in Q2 2025, with a revenue beat and margin stability contrasting against weak EBITDA guidance and slowing RevPAR growth. For investors, the question is whether the company's near-term outperformance in high-end travel demand justifies a buy, or if long-term risks like debt load and sector-wide challenges warrant caution.

Near-Term Outperformance: A Tale of Luxury and Margin Discipline

Hyatt's Q2 results highlighted its dominance in the luxury and upscale segments. Total revenue rose 6.2% year-over-year to $1.81 billion, exceeding estimates by 4.8%. Adjusted EBITDA of $303 million (16.8% margin) beat expectations by 4%, driven by strong RevPAR of $150.97—a 1.1% year-over-year increase. CEO Mark Hoplamazian credited this to “sustained high-end consumer demand,” particularly in markets like Asia-Pacific and the Middle East, where Hyatt's luxury brands (e.g., Park Hyatt, Andaz) outperformed.

The company's asset-light model also shone. Despite selling $2 billion in real estate assets from its Playa Hotels acquisition, Hyatt maintained stable operating margins, demonstrating disciplined cost management. Strategic moves like the launch of Unscripted by Hyatt, a new brand targeting urban millennials, further underscore its agility in capturing emerging demand.

Long-Term Risks: Slowing RevPAR, Weak Guidance, and Leverage

However, cracks in the foundation are emerging. U.S. select-service hotels saw RevPAR decline year-over-year, attributed to the Easter holiday shift. While CEO Hoplamazian expressed optimism for Q4, analysts note that RevPAR growth has slowed to 1.1% in 2025, down from a 5% CAGR in 2023. This raises concerns about the sustainability of Hyatt's luxury-driven growth in a sector where price sensitivity is rising.

The company's full-year EBITDA guidance (midpoint of $1.11 billion) fell short of analyst estimates ($1.12 billion), signaling caution. Meanwhile, Hyatt's net debt/EBITDA ratio stands at 3.2, above the industry average of 2.5, despite $3.3 billion in liquidity. The recent $1 billion in senior notes (5.05% and 5.75% coupons) to fund the Playa acquisition adds to leverage, though the asset sale provides a buffer.

Valuation: Cheap on Trailing Metrics, Expensive on Forward Outlook

Hyatt's trailing P/E of 17.20 appears undervalued compared to peers like Marriott (29.22) and Hilton (39.54). However, its forward P/E of 52.63—a 300% premium to the 10-year average—reflects high expectations for future growth. Analysts project 23.3% EPS growth in 2025, but this hinges on RevPAR rebounding and EBITDA exceeding guidance.

The lack of a PEG ratio (due to missing growth data) complicates valuation analysis. If we assume a 5% EBITDA growth rate, the PEG would be 10.5, suggesting overvaluation. Yet, if Hyatt's luxury brands outperform, the PEG could normalize to 1.5, making it a compelling buy.

Strategic Moves: Playa Acquisition and Unscripted Brand

Hyatt's acquisition of Playa Hotels and the launch of Unscripted by Hyatt are pivotal. The Playa deal, now partially monetized, positions Hyatt as a leader in the luxury all-inclusive segment, a $15 billion market. Meanwhile, Unscripted targets urban, budget-conscious travelers, diversifying Hyatt's revenue streams. These moves could offset U.S. select-service weakness but require time to bear fruit.

Investment Thesis: Buy for Growth, Hold for Caution

Hyatt's Q2 results validate its near-term strength in luxury travel, supported by margin discipline and strategic agility. However, long-term risks—slowing RevPAR, elevated leverage, and a high forward P/E—demand caution.

Buy Case:
- Strong RevPAR growth in luxury segments.
- Asset-light model with $3.3 billion in liquidity.
- Strategic diversification via Unscripted and Playa.
- Historical performance shows a 71.43% 3-day win rate and 85.71% 10-day win rate following earnings beats, with a maximum return of 9.84% recorded on July 55.

Hold Case:
- EBITDA guidance below estimates.
- Net debt/EBITDA at 3.2, above peers.
- Forward P/E of 52.63 implies aggressive growth assumptions.

For investors with a 3–5 year horizon, Hyatt's current valuation offers entry at a discount to its luxury-driven potential. However, those prioritizing stability may prefer to wait for clearer momentum in RevPAR and EBITDA.

In conclusion, Hyatt is a conditional buy. Its near-term outperformance in luxury travel is compelling, but long-term success hinges on executing its asset-light strategy and navigating sector-wide headwinds. For now, the stock balances promise and risk—a classic case of “buy the stock, not the hype.”