Hyatt Hotels Corp (H) said it will need to lay off 1,300 workers globally as it struggles with the “historic” plunge in travel demand induced by the coronavirus pandemic and expects a slow recovery of the industry.
Shares in Hyatt have almost halved this year and were trading little changed at $49.94 in morning U.S. trading.
Four-star analyst Carlo Santarelli at Deutsche Bank slashed the stock’s price target to $54 from $86, while maintaining a Hold rating.
“While we see H in a strong liquidity position, with plenty of cash on hand and revolver capacity plentiful, concerns around the volatility of the Owned and Leased Hotels (O&L) segment and the potential for stunted progress towards H’s shift towards a more asset light model keep us at Hold”, Santarelli wrote in a note to investors.
The rest of Wall Street analysts is also more on the fence when it comes to Hyatt’s stock. The Hold consensus rating consists of 10 Holds and 2 Buys. The $56.31 average price target means investors could be bracing for 13% upside in the shares in the coming 12 months. (See Hyatt stock analysis on TipRanks)
Since the start of the COVID-19 pandemic, Hyatt has taken numerous actions in an effort to meet the challenges the industry is facing including reductions of company-wide expenditures.
“COVID-19 has thrown our industry into unknown territory,” said Hyatt’s President and CEO Mark Hoplamazian. “While parting ways with our colleagues is excruciating, we must be sensitive to commercial realities so we can continue to fulfill our purpose of care over the long term – through this pandemic and for what lies beyond.”
The hotel chain said that it will also restructure roles across its global corporate functions, beginning June 1. As part of the effort, it will lower salaries for senior management, board members and all employees, while the staff who are being laid off will be eligible to get severance pay.
“Unfortunately, with increased visibility into the effect that the pandemic is having on the hospitality industry, it has become apparent that additional measures are necessary to meet this unprecedented challenge,” the company said.
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