CHICAGO—Hyatt Hotels Corporation reported Q2 2022 financial results. Net income attributable to Hyatt was $206 million, or $1.85 per diluted share, in Q2 2022 compared to a net loss attributable to Hyatt of $9 million, or $0.08 per diluted share, in Q2 2021. Adjusted net income attributable to Hyatt was $51 million, or $0.46 per diluted share, in Q2 2022, compared to adjusted net loss attributable to Hyatt of $117 million, or $1.15 per diluted share, in Q2 2021.
“Our second quarter results serve as clear evidence of the earnings power of Hyatt as we continue to transform our business. Total fee revenue exceeded $200 million and was 27 percent higher than any other quarter in the company’s history driven by a record level of leisure transient revenue and rapidly improving group and business transient demand,” said Mark S. Hoplamazian, president and CEO of Hyatt Hotels Corporation. “Demand broadened both geographically and by segment, with RevPAR in most of our key geographies exceeding the same period in 2019. Our outlook remains optimistic with strong actualized results and booking trends for future periods continuing in July.”
Net income increased to $206 million from a loss of $9 million.
- Adjusted EBITDA increased to $255 million from $55 million.
- Apple Leisure Group (ALG) contributed $54 million of adjusted EBITDA.
- Adjusted EBITDA does not include ALG’s net deferrals of $25 million and net financed contracts of $15 million.
- Comparable system-wide RevPAR increased 82 percent to $130.16 and comparable U.S. hotel RevPAR increased 85 percent to $150.52 in Q2 2022.
- Comparable owned and leased hotels RevPAR increased 140 percent to $186.34 and comparable owned and leased hotels operating margin improved to 31.9 percent in Q2 2022.
- All-inclusive net package RevPAR was $182.10 with an ADR of $255.30.
- System-wide net rooms growth was 19.0 percent in Q2 2022. Excluding ALG, net rooms growth was 4.6 percent.
- Pipeline of executed management or franchise contracts was approximately 113,000 rooms. Excluding ALG, the pipeline was approximately 106,000 rooms.
Mr. Hoplamazian continued, “We had a strong second quarter of gross rooms expansion through the opening of approximately 5,500 rooms during the quarter. While there have been delays in the timing of openings across the industry, we are particularly encouraged by the volume of conversion opportunities driven by the compelling value of our brands, and expect net rooms growth for the full year to be greater than 6 percent.”
Operational Update
Comparable system-wide RevPAR experienced improvement in Q2 and into Q3 2022. Comparable system-wide RevPAR was down 5 percent to 2019 in Q2, improving from down 9 percent to 2019 in April to down 1 percent to 2019 in June. In July, comparable system-wide RevPAR was up 5 percent to 2019, marking one of the strongest individual months in Hyatt’s history powered by growth in luxury branded hotels, which were up 28 percent to 2019 in the Americas and EAME/SW Asia regions combined.
The results in July and forward booking trends reflect strength. System-wide comparable transient revenue on the books for the remainder of the year is pacing 1 percent ahead of the same period in 2019 or 4 percent ahead when excluding Greater China. Additionally, short-term demand for group business continues to trend significantly ahead of 2019. Gross group room revenue booked in July for stay dates in 2022 for comparable Americas full service managed properties was approximately 40 percent above July 2019 and group pace for the remainder of the year, from August through December, is approximately 7 percent below 2019 reflecting steady improvement as a result of strong short-term bookings.
Hyatt’s all-inclusive portfolio also continues to experience growth. Based on preliminary results, net package RevPAR in July for ALG resorts in the Americas is approximately 24 percent higher in comparison with the same properties managed by ALG in July 2019. Additionally, total package revenue for the entire ALG portfolio is approximately 74 percent higher than July 2019, reflecting the impact of net rooms growth. Looking ahead, gross package revenue for ALG resorts in the Americas is pacing more than 44 percent above 2019 over the months of August through December for the same set of properties.
Q2 2022 Results
Total management, franchise, and other fee revenues increased to $204 million in Q2 2022 compared to $93 million reported in Q2 2021 and reflected a sequential improvement from $154 million reported in Q1 2022. Base management fees increased to $79 million, incentive management fees increased to $45 million, and franchise fees increased to $52 million during the quarter. Other fee revenues increased to $28 million during the quarter.
Americas Management and Franchise Segment
Americas management and franchising segment adjusted EBITDA increased to $117 million in Q2 2022 compared to $54 million reported in Q2 2021. Results were led by the continuation of strong leisure demand and building momentum in group and business transient, resulting in increases in base and franchise fees with total franchise fees exceeding 2019 levels by 35 percent on a reported basis.
Americas net rooms increased 3.5 percent compared to Q2 2021.
Southeast Asia, Greater China, Australia, New Zealand, South Korea, Japan, and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA decreased to $6 million in Q2 2022 compared to $10 million reported in Q2 2021. Results reflect lower demand in Greater China while the remainder of the region showed steady improvement led by the easing of travel restrictions as well as increased airlift to meet pent-up demand.
ASPAC net rooms increased 6.1 percent compared to Q2 2021.
Europe, Africa, Middle East, and Southwest Asia (EAME/SW Asia) Management and Franchising Segment
EAME/SW Asia management and franchising segment adjusted EBITDA increased to $13 million in Q2 2022 compared to a loss of $1 million reported in Q2 2021. In Q2 2022, results across the region were led by Europe and the Middle East as travel restrictions eased, cross-border travel strengthened, and airlift improved.
EAME/SW Asia net rooms increased 7.9 percent compared to Q2 2021.
Apple Leisure Group Segment
ALG segment adjusted EBITDA was $54 million in Q2 2022. Adjusted EBITDA does not include ALG’s net deferrals of $25 million and net financed contracts of $15 million. Results reflect strong demand for leisure destinations, increased airlift capacity, and a favorable pricing environment.
During Q2 2022, ALG added 10 resorts (or 2,502 rooms).
Owned and Leased Hotels Segment
Owned and leased hotels segment adjusted EBITDA increased to $99 million in Q2 of 2022 compared to $12 million reported in Q2 2021. Owned and leased hotels segment comparable operating margins improved to 31.9 percent from Q2 2021 as reported, reflecting strong operational execution and growth in average daily rates.
Corporate and Other
Corporate and other adjusted EBITDA decreased to $34 million in Q2 2022 compared to $21 million reported in Q2 2021. The decrease to Q2 2021 is driven by increases in certain selling, general, and administrative expenses, including $4 million of integration-related costs associated with the acquisition of ALG, and increases in payroll and related costs.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses decreased 11.4 percent inclusive of rabbi trust impacts and stock-based compensation. Adjusted selling, general, and administrative expenses increased $48 million, primarily due to the addition of ALG’s adjusted selling, general, and administrative expenses which were $28 million in Q2 2022, and an increase in corporate adjusted selling, general, and administrative expenses of $13 million compared to Q2 2021.
Openings and Future Expansion
In the second quarter of 2022, 28 new hotels (or 5,510 rooms) joined Hyatt’s system.
As of June 30, 2022, the company had a pipeline of executed management or franchise contracts for approximately 550 hotels (approximately 113,000 rooms), inclusive of ALG’s pipeline contribution of approximately 20 hotels (or approximately 7,000 rooms).
Transaction/Captial Strategy
During Q2 2022, the company completed the following asset sales related to its owned and leased portfolio, resulting in gross proceeds of $812 million at an aggregate multiple of 15.7x 2019 EBITDA:
- Hyatt Regency Indian Wells Resort & Spa—The company sold the 530-room Hyatt Regency Indian Wells Resort & Spa, located in Palm Springs, California, for approximately $145 million (approximately $136 million, net of closing costs, and proration adjustments) to an unrelated third party and entered into a long-term management agreement.
- Grand Hyatt San Antonio River Walk—The company sold the 1,003-room Grand Hyatt San Antonio River Walk, located in San Antonio, Texas, for approximately $310 million (approximately $127 million, net of closing costs, proration adjustments, restricted cash returned, and after legal defeasance of $166 million of bonds) to an unrelated third party and entered into a long-term management agreement.
- The Driskill—The company sold the 189-room The Driskill, located in Austin, Texas, for approximately $125 million (approximately $119 million, net of closing costs, and proration adjustments) to an unrelated third party and entered into a long-term management agreement.
- The Confidante Miami Beach—The company sold the 339-room The Confidante Miami Beach, located in Miami Beach, Florida, for approximately $232 million (approximately $227 million, net of closing costs, and proration adjustments) to an unrelated third party and entered into a long-term management agreement.
On August 3, 2022, the company acquired the following asset:
- Hotel Irvine—The company acquired the 541-room Hotel Irvine, located in Irvine, California, for approximately $135 million from an unrelated third party.
The company is currently marketing two hotels for sale and intends to execute plans to realize approximately $2 billion of gross proceeds from the sales of real estate, net of acquisitions, by the end of 2024 as part of its expanded asset-disposition commitment announced in August 2021.
Balance Sheet/Liquidity
As of June 30, 2022, the company reported the following:
- Total debt of $3,804 million, reflecting a reduction of approximately $180 million during the quarter through the repurchase of senior notes and the legal defeasance of bonds related to Grand Hyatt San Antonio River Walk.
- Pro rata share of unconsolidated hospitality venture debt of $589 million, substantially all of which is non-recourse to Hyatt and a portion of which Hyatt guarantees pursuant to separate agreements.
- Total liquidity of approximately $3.5 billion with $1,955 million of cash and cash equivalents and short-term investments, and borrowing availability of $1,496 million under Hyatt’s revolving credit facility, net of letters of credit outstanding.
Share Repurchase/Dividend
During Q2 2022, the company repurchased Class A common shares for approximately $101 million. There were no Class B shares repurchases or any Class A or Class B quarterly dividend payments during Q2 2022. The company ended the quarter with 50,096,332 Class A and 59,017,749 Class B shares issued and outstanding.
2022 Outlook
The company is providing the following information for the 2022 fiscal year:
- Comparable system-wide constant dollar RevPAR is expected to be greater than 2021 by a range of 55 percent to 60 percent, and system-wide constant dollar RevPAR is expected to be less than 2019 by a range of 4 percent to 9 percent for hotels that were comparable in both years.
- Capital expenditures are expected to be approximately $210 million.
- Hyatt capital expenditures, excluding ALG, are expected to be approximately $185 million.
- ALG capital expenditures are expected to be approximately $25 million.
- Adjusted selling, general, and administrative expenses are expected to be approximately $460 million to $465 million. This includes selling, general, and administrative expenses associated with the acquisition of ALG, of which $25 million to $30 million is related to one-time integration costs in 2022.
- Excluding ALG, adjusted selling, general, and administrative expenses are expected to be approximately $300 million to $305 million and include $25 million to $30 million related to one-time integration costs in 2022.
- ALG adjusted selling, general, and administrative expenses are expected to be approximately $160 million.
- The company expects to grow net rooms by greater than 6.0 percent.
No disposition or acquisition activity beyond what has been completed as of the date of this release has been included in the 2022 outlook. The company’s 2022 outlook is based on a number of assumptions that are subject to change and many of which are outside the control of the company. If actual results vary from these assumptions, the company’s expectations may change. There can be no assurance that Hyatt will achieve these results.
