Violence in Mexico in late February suppressed demand at Hyatt's all-inclusives in the country during the first quarter, though the company's all-inclusive portfolio still posted net package RevPAR growth of 7.4%.
Hyatt CFO Joan Bottarini told analysts during the company's Q1 earnings call on Thursday that the company views the situation as "isolated," with Mexico demand improving week over week into March. She added that Hyatt expects all-inclusive pace in the Americas to be up in the low single digits in the second quarter, though growth for the remainder of the year isn't expected to match Q1 levels.
Hyatt CEO Mark Hoplamazian credited ALG Vacations with helping cushion the impact by redirecting travelers to other destinations, including the Dominican Republic. This effect was most pronounced in March, when Mexico net package RevPAR fell 5% while the Dominican Republic surged 16%.
"That is a direct reflection of the channel shift that we actually played a big role in, because we have the largest tour operator in North America to actually cascade business that wasn't going to Mexico into the Dominican Republic," he explained, adding that the figures illustrate "the strategic value that ALGV provides to the business itself."
Hoplamazian estimated that ALG Vacations purchases more than a billion airline seats annually, giving the company close relationships with carriers and strong visibility into demand trends across markets.
"We're looking at it as a real business, with real opportunity in the future," he said.
How the Iran war is affecting demand
Meanwhile, the Iran war presented a separate headwind in the Middle East, dragging system-wide RevPAR growth down by about half a percentage point in the quarter, according to Bottarini. She added that Hyatt expects Middle East demand to be more significantly impacted in the second quarter, with gradual improvement likely in the second half of the year.
Europe, however, emerged as a bright spot, with RevPAR growing 7.5% in the region, ahead of expectations.
"Europe has actually been, at least for our portfolio, very resilient," said Hoplamazian. "Counting Europe out is a mistake."
Still, Hoplamazian acknowledged growing concerns of "economic fragility in Europe, especially around energy prices," but said that Hyatt's full-service and luxury positioning is likely to insulate it from any budget and midscale softness.
Luxury continued to demonstrate strength globally, with leisure transient demand from Hyatt's premium customers up approximately 7% in the quarter.
"If there's any sign of weakness in terms of the high-end customer, we have not seen it," said Hoplamazian.
Hyatt's systemwide RevPAR grew 5.4% for the quarter. For the full year, Hyatt raised its systemwide RevPAR growth outlook to between 2% and 4%.
For the quarter, Hyatt reported total revenues of nearly $1.75 billion, up from $1.72 billion in the same quarter last year, while adjusted Ebitda grew to $266 million, up from $261 million.