Is Hyatt's IPO In Trouble?

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It's been a tough month for Hyatt Hotels. Just as the Pritzker family-owned chain was prepping itself to tap into the public markets, a serious PR nightmare overwhelmed the company and its once-good name. As you all probably read, and was so eloquently summarized in PR guru Rich Robert's online story, three Hyatts in Boston decided to replace about 100 housekeepers with cheaper employees from an outsourcing firm.

That move, and subsequent crisis communications blunders, have seriously injured the company's reputation and created a giant opening for the snakes at Unite Here to make unionization inroads throughout the hotel industry. Thanks a heap, Hyatt.

Now it seems as though not every financial analyst is keen on Hyatt's IPO plans. Will Ashworth, a blogger at Investopedia, a Forbes magazine affiliate, says “you're just plain nuts” to buy shares in the Hyatt IPO. His rationale is two-fold: cash and consumer sentiment. According to his numbers, several other public hotel companies (Marriott, Starwood and Choice) do a much better job of generating cash from revenues. At Choice, for example, cash from operations represents about one-third of revenues. Hyatt, on the other hand, only generates 12 percent cash from its revenues.

In addition, Ashworth argues that consumers are increasingly shying away from upscale and luxury products, including hotel rooms. And Hyatt's $116 average rate is 63 percent higher than Choice's, not a good sign in a cheap-is-chic environment.

Ashworth may just be a lone wingnut, and Hyatt's IPO could turn out to be a runaway success. Time will tell, but it doesn't look good today.

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