Strong Net Rooms Growth Fuels Nearly 11%
Increase in Management and Franchise Fees
Hyatt Hotels Corporation ("Hyatt" or the "Company") (NYSE: H)
today reported third-quarter 2019 financial results. Net income
attributable to Hyatt was $296 million, or $2.80 per diluted share,
in the third quarter of 2019, compared to $237 million, or $2.09
per diluted share, in the third quarter of 2018. Adjusted net
income attributable to Hyatt was $39 million, or $0.37 per diluted
share, in the third quarter of 2019, compared to $37 million, or
$0.33 per diluted share, in the third quarter of 2018. Refer to the
table on page 14 of the schedules for a summary of special items
impacting Adjusted net income and Adjusted earnings per share in
the three months ended September 30, 2019.
Mark S. Hoplamazian, president and chief executive officer of
Hyatt Hotels Corporation, said, "The strength of our brands and the
consistent approach we have to operating with excellence and
efficiency are serving us very well in this period of volatile
economic conditions. In particular, our management and franchise
fee growth of nearly 11% this quarter is driven by roughly 13%
year-over-year net rooms growth. Further, we have successfully
increased productivity and operating efficiency for 23 straight
quarters which has allowed us to maintain strong hotel operating
margins even in the face of flat RevPAR growth this quarter."
Third quarter of 2019 financial highlights as compared to the
third quarter of 2018 are as follows:
- Net income increased 25.4% to $296 million.
- Adjusted EBITDA decreased 7.3% to $163 million, a decrease of
6.5% in constant currency.
- Comparable system-wide RevPAR was flat, including a decrease of
0.1% at comparable owned and leased hotels. Comparable system-wide
RevPAR growth was favorably impacted by approximately 50 basis
points from the timing of the Jewish holidays, but was offset by a
similar reduction resulting from political unrest in Hong
Kong.
- Comparable U.S. hotel RevPAR decreased 0.6%; full service hotel
RevPAR increased 0.2% and select service hotel RevPAR decreased
2.3%.
- Net rooms growth was 13.2%, or 7.9% excluding the acquisition
of Two Roads Hospitality LLC ("Two Roads") in the fourth quarter of
2018.
- Comparable owned and leased hotels operating margin decreased
20 basis points to 21.0%.
- Adjusted EBITDA margin of 26.9% decreased 280 basis points in
constant currency.
Mr. Hoplamazian continued, "We continue to execute on our
capital strategy and shift our earnings profile while maintaining
our focus on global growth. We expect to end the year with
approximately 57% of our earnings coming from our hotel management
and franchise business, an increase of roughly 400 basis points
from 2018. Our pipeline remains robust while continuing to deliver
solid organic net rooms growth of almost 8% this quarter, net of
the acquisition of Two Roads in the fourth quarter of 2018. While
the current global operating environment is challenging, we feel
confident in our ability to manage through volatility and identify
opportunities to strengthen our brands and performance."
Third quarter of 2019 financial results as compared to the third
quarter of 2018 are as follows:
Management, Franchise and Other Fees
Total management, franchise and other fees increased 11.9%
(12.5% increase in constant currency) to $148 million. Base
management fees increased 17.8% to $64 million, primarily in the
Americas management and franchising segment due to the acquisition
of Two Roads. Incentive management fees decreased 1.3% to $33
million. Franchise fees increased 11.8% to $37 million. Other fees
increased 22.0% to $14 million. Excluding other fees, management
and franchise fees increased 10.9% (11.6% increase in constant
currency) to $134 million.
Americas Management and Franchising Segment
Americas management and franchising segment Adjusted EBITDA
increased 11.2% (11.4% increase in constant currency), driven by
higher management, franchise, and other fees from the Two Roads
acquisition and recently opened hotels. RevPAR for comparable
Americas full service hotels increased 1.5%, occupancy increased 70
basis points, and ADR increased 0.7%. RevPAR growth was driven by
strength in certain resort locations outside of the United States
and benefited from the timing of the Jewish holidays which had an
approximate 110 basis point favorable impact. RevPAR for comparable
Americas select service hotels decreased 2.4%, occupancy decreased
40 basis points, and ADR decreased 1.8%. Total Americas management
and franchising adjusted revenues increased 29.6% (29.9% increase
in constant currency) including revenue from the residential
management operations acquired as part of Two Roads.
Transient rooms revenue at comparable U.S. full service hotels
increased 1.0%, room nights increased 2.3%, and ADR decreased 1.3%.
Group rooms revenue at comparable U.S. full service hotels
decreased 0.2%, room nights decreased 2.3%, and ADR increased
2.2%.
Americas net rooms increased 11.5% compared to the third quarter
of 2018, or 5.2% excluding Two Roads.
Southeast Asia, Greater China, Australia, South Korea, Japan
and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA
increased 0.9% (2.5% increase in constant currency). RevPAR for
comparable ASPAC full service hotels decreased 2.0%, reflecting
weakness in Hong Kong. Excluding Hong Kong, RevPAR for comparable
ASPAC full service hotels would have increased 0.8%. Occupancy
decreased 50 basis points and ADR decreased 1.3% for ASPAC full
service hotels. Revenue from management, franchise, and other fees
increased 4.2% (5.4% increase in constant currency).
ASPAC net rooms increased 17.7% compared to the third quarter of
2018, or 13.7% excluding Two Roads.
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia)
Management and Franchising Segment
EAME/SW Asia management and franchising segment Adjusted EBITDA
increased 4.8% (7.8% increase in constant currency). RevPAR for
comparable EAME/SW Asia full service hotels increased 1.6%, driven
by strong growth in certain European markets, including France and
the United Kingdom, and Southwest Asia, offset partially by weaker
performance in Russia which lapped the FIFA World Cup in 2018.
Occupancy increased 290 basis points and ADR decreased 2.6% for
EAME/SWA full service hotels. Revenue from management, franchise,
and other fees increased 2.2% (4.3% increase in constant
currency).
EAME/SW Asia net rooms increased 15.6% compared to the third
quarter of 2018, or 14.4% excluding Two Roads.
Owned and Leased Hotels Segment
Total owned and leased hotels segment Adjusted EBITDA decreased
17.6% (16.9% decrease in constant currency), including a decrease
of 12.0% (11.4% decrease in constant currency) in pro rata share of
unconsolidated hospitality ventures Adjusted EBITDA. Refer to the
table on page 11 of the schedules for a detailed list of portfolio
changes and the year-over-year net impact to total owned and leased
hotels segment Adjusted EBITDA.
Owned and leased hotels segment revenues decreased 3.9% (3.0%
decrease in constant currency), and was negatively impacted by
non-comparable hotels. RevPAR for comparable owned and leased
hotels decreased 0.1%. Occupancy and ADR were both flat.
Corporate and Other
Corporate and other Adjusted EBITDA decreased 22.4% (22.5%
decrease in constant currency), inclusive of $6 million of expenses
from the Two Roads acquisition.
Corporate and other adjusted revenues increased 19.1%
(consistent in constant currency).
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 1.0%,
inclusive of rabbi trust impact and stock- based compensation.
Adjusted selling, general, and administrative expenses increased
13.8%, or $10 million, including $8 million of integration costs
related to the acquisition of Two Roads. Refer to the table on page
17 of the schedules for a reconciliation of selling, general, and
administrative expenses to Adjusted selling, general, and
administrative expenses.
OPENINGS AND FUTURE EXPANSION
Twenty hotels (or 4,422 rooms) opened in the third quarter of
2019, contributing to a 13.2% increase in net rooms compared to the
third quarter of 2018. Excluding the impact of the Two Roads
acquisition, net rooms increased 7.9% compared to the third quarter
of 2018.
As of September 30, 2019, the Company had executed management or
franchise contracts for approximately 460 hotels, or approximately
92,000 rooms. The Company is expected to open approximately 85
hotels in the 2019 fiscal year.
SHARE REPURCHASE/DIVIDEND
During the third quarter of 2019, the Company repurchased a
total of 1,776,891 (1,099,507 Class A shares and 677,384 Class B
shares) for approximately $133 million. The Company ended the third
quarter with 36,811,374 Class A and 66,438,444 Class B shares
issued and outstanding. From October 1 through October 25, 2019,
the Company repurchased 523,499 shares of Class A common stock for
an aggregate purchase price of approximately $37 million. As of
October 25, 2019, the Company had approximately $351 million
remaining under its share repurchase authorization.
The Company's board of directors has declared a cash dividend of
$0.19 per share for the fourth quarter of 2019. The dividend is
payable on December 9, 2019 to Class A and Class B stockholders of
record as of November 26, 2019.
CAPITAL STRATEGY UPDATE
In a Form 8-K filed on September 16, 2019, the Company announced
the sale of the 1,260-room Hyatt Regency Atlanta for approximately
$355 million to an unrelated third party and the entry into a
long-term management agreement for the property upon sale.
The Company is in the process of pursuing the sale of one of its
wholly-owned hotels and will provide further details as
appropriate.
BALANCE SHEET / OTHER ITEMS
As of September 30, 2019, the Company reported the
following:
- Total debt of $1,623 million.
- Pro rata share of unconsolidated hospitality venture debt of
approximately $564 million, substantially all of which is
non-recourse to Hyatt and a portion of which Hyatt guarantees
pursuant to separate agreements.
- Cash and cash equivalents, including investments in
highly-rated money market funds and similar investments, of $660
million, restricted cash of $140 million, and short-term
investments of $63 million.
- Undrawn borrowing availability of $1.5 billion under Hyatt's
revolving credit facility.
2019 OUTLOOK
The Company is revising the following expectations for the 2019
fiscal year:
- Comparable system-wide RevPAR is expected to increase
approximately 0.5%, as compared to fiscal year 2018.
- Net income is expected to be approximately $431 million to $470
million. Please refer to the table on page 13 of the schedules for
revised ranges impacting net income.
- Other income (loss), net is expected to be approximately $98
million to $103 million, reflecting increased interest income and
unrealized gains on marketable securities. The estimated $40
million negative impact related to performance guarantee expense
for the four managed hotels in France is unchanged.
- Adjusted EBITDA is expected to be approximately $730 million to
$745 million, primarily reflecting a one point reduction in
expected comparable system-wide RevPAR and the sale of Hyatt
Regency Atlanta (as previously reported in a Form 8-K filed on
September 16, 2019). Refer to the table on page 13 of the schedules
for a reconciliation of Net Income to Adjusted EBITDA.
- Depreciation and amortization expense is expected to be
approximately $329 million to $334 million.
- Interest expense is expected to be approximately $77
million.
- Adjusted selling, general, and administrative expenses are
expected to be approximately $335 million. This is inclusive of
approximately $25 million of expenses related to non-recurring
integration costs for Two Roads. Adjusted selling, general, and
administrative expenses exclude approximately $33 million of
stock-based compensation expense and any potential impact related
to benefit programs funded through rabbi trusts.
The Company is reaffirming the following information for the
2019 fiscal year:
- The Company expects to grow units, on a net rooms basis, by
approximately 7.25% to 7.75%, reflecting approximately 85 new hotel
openings.
- Capital expenditures are expected to be approximately $375
million.
- As previously reported in an 8-K filed on September 16, 2019,
the Company expects to return approximately $500 million to
shareholders through a combination of cash dividends on its common
stock and share repurchases.
- The effective tax rate is expected to be approximately 25% to
27%.
No additional disposition or acquisition activity beyond what
has been completed as of the date of this release has been included
in the outlook. The Company's 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.
CONFERENCE CALL INFORMATION
The Company will hold an investor conference call tomorrow,
October 31, 2019, at 10:30 a.m. CT. All interested persons may
listen to a simultaneous webcast of the conference call, which may
be accessed through the Company's website at investors.hyatt.com,
or by dialing 647.689.4468 or 833.238.7946, passcode #2029219,
approximately 10 minutes before the scheduled start time. For those
unable to listen to the live broadcast, a replay will be available
from 1:30 p.m. CT on October 31, 2019 through November 2, 2019 at
midnight by dialing 416.621.4642, passcode #2029219. Additionally,
an archive of the webcast will be available on the Company's
website for 90 days.
FORWARD-LOOKING STATEMENTS
Forward-Looking Statements in this press release, which are not
historical facts, are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements include statements about our plans, strategies, outlook,
occupancy, ADR and growth trends, market share, the number of
properties we expect to open in the future, our expected adjusted
SG&A expense, our estimated comparable system-wide RevPAR
growth, our estimated Adjusted EBITDA growth, our expected net
rooms growth, maintenance and enhancement to existing properties
capital expenditures, investments in new properties capital
expenditures, depreciation and amortization expense and interest
expense estimates, financial performance, prospects or future
events and involve known and unknown risks that are difficult to
predict. As a result, our actual results, performance or
achievements may differ materially from those expressed or implied
by these forward-looking statements. In some cases, you can
identify forward-looking statements by the use of words such as
"may," "could," "expect," "intend," "plan," "seek," "anticipate,"
"believe," "estimate," "predict," "potential," "continue,"
"likely," "will," "would" and variations of these terms and similar
expressions, or the negative of these terms or similar expressions.
Such forward-looking statements are necessarily based upon
estimates and assumptions that, while considered reasonable by us
and our management, are inherently uncertain. Factors that may
cause actual results to differ materially from current expectations
include, but are not limited to, general economic uncertainty in
key global markets and a worsening of global economic conditions or
low levels of economic growth; the rate and the pace of economic
recovery following economic downturns; levels of spending in
business and leisure segments as well as consumer confidence;
declines in occupancy and average daily rate; limited visibility
with respect to future bookings; loss of key personnel;
hostilities, or fear of hostilities, including future terrorist
attacks, that affect travel; travel-related accidents; natural or
man-made disasters such as earthquakes, tsunamis, tornadoes,
hurricanes, floods, wildfires, oil spills, nuclear incidents, and
global outbreaks of pandemics or contagious diseases or fear of
such outbreaks; our ability to successfully achieve certain levels
of operating profits at hotels that have performance tests or
guarantees in favor of our third-party owners; the impact of hotel
renovations and redevelopments; risks associated with our capital
allocation plans and common stock repurchase program and other
forms of shareholder capital return, including the risk that our
common stock repurchase program could increase volatility and fail
to enhance shareholder value; our intention to pay a quarterly cash
dividend and the amounts thereof, if any; the seasonal and cyclical
nature of the real estate and hospitality businesses; changes in
distribution arrangements, such as through internet travel
intermediaries; changes in the tastes and preferences of our
customers; relationships with colleagues and labor unions and
changes in labor laws; the financial condition of, and our
relationships with, third-party property owners, franchisees, and
hospitality venture partners; the possible inability of third-party
owners, franchisees, or development partners to access capital
necessary to fund current operations or implement our plans for
growth; risks associated with potential acquisitions and
dispositions and the introduction of new brand concepts; the timing
of acquisitions and dispositions, and our ability to successfully
integrate completed acquisitions with existing operations; failure
to successfully complete proposed transactions (including the
failure to satisfy closing conditions or obtain required
approvals); our ability to successfully execute on our strategy to
expand our management and franchising business while at the same
time reducing our real estate asset base within targeted timeframes
and at expected values; declines in the value of our real estate
assets; unforeseen terminations of our management or franchise
agreements; changes in federal, state, local, or foreign tax law;
the impact of changes in the tax code as a result of the Tax Cuts
and Jobs Act of 2017 and uncertainty as to how some of those
changes may be applied; increases in interest rates and operating
costs; foreign exchange rate fluctuations or currency
restructurings; lack of acceptance of new brands or innovation;
general volatility of the capital markets and our ability to access
such markets; changes in the competitive environment in our
industry, including as a result of industry consolidation, and the
markets where we operate; our ability to successfully grow the
World of Hyatt loyalty program; cyber incidents and information
technology failures; outcomes of legal or administrative
proceedings; violations of regulations or laws related to our
franchising business; and other risks discussed in the Company's
filings with the SEC, including our annual report on Form 10-K,
which filings are available from the SEC. All forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements
set forth above. We caution you not to place undue reliance on any
forward-looking statements, which are made only as of the date of
this press release. We do not undertake or assume any obligation to
update publicly any of these forward-looking statements to reflect
actual results, new information or future events, changes in
assumptions or changes in other factors affecting forward-looking
statements, except to the extent required by applicable law. If we
update one or more forward-looking statements, no inference should
be drawn that we will make additional updates with respect to those
or other forward-looking statements.
NON-GAAP FINANCIAL MEASURES
The Company refers to certain financial measures that are not
recognized under U.S. generally accepted accounting principles
(GAAP) in this press release, including: net income, adjusted for
special items; diluted EPS, adjusted for special items; Adjusted
EBITDA; Adjusted EBITDA margin; and Adjusted SG&A. See the
schedules to this earnings release, including the "Definitions"
section, for additional information and reconciliations of such
non-GAAP financial measures.
AVAILABILITY OF INFORMATION ON HYATT'S
WEBSITE
Investors and others should note that Hyatt routinely announces
material information to investors and the marketplace using U.S.
Securities and Exchange Commission (SEC) filings, press releases,
public conference calls, webcasts and the Hyatt Investor Relations
website. While not all of the information that the Company posts to
the Hyatt Investor Relations website is of a material nature, some
information could be deemed to be material. Accordingly, the
Company encourages investors, the media, and others interested in
Hyatt to review the information that it shares at the Investor
Relations link located at the bottom of the page on hyatt.com.
Users may automatically receive email alerts and other information
about the Company when enrolling an email address by visiting "Sign
up for Email Alerts" in the "Investor Resources" section of Hyatt's
website at investors.hyatt.com.
ABOUT HYATT HOTELS CORPORATION
Hyatt Hotels Corporation, headquartered in Chicago, is a leading
global hospitality company with a portfolio of 20 premier brands.
As of September 30, 2019, the Company's portfolio included more
than 875 properties in over 60 countries across six continents. The
Company's purpose to care for people so they can be their best
informs its business decisions and growth strategy and is intended
to attract and retain top colleagues, build relationships with
guests and create value for shareholders. The Company's
subsidiaries develop, own, operate, manage, franchise, license or
provide services to hotels, resorts, branded residences, vacation
ownership properties, and fitness and spa locations, including
under the Park Hyatt®, Miraval®, Grand Hyatt®,
Alila®, Andaz®, The Unbound Collection by
Hyatt®, Destination®, Hyatt Regency®,
Hyatt®, Hyatt Ziva™, Hyatt
Zilara™, Thompson Hotels®, Hyatt Centric®,
Caption by Hyatt, Joie de Vivre®, Hyatt House®,
Hyatt Place®, tommie™, Hyatt Residence Club®
and Exhale® brand names, and operates the World of Hyatt®
loyalty program that provides distinct benefits and exclusive
experiences to its valued members. For more information, please
visit www.hyatt.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20191030005896/en/
Investor Contact: Amanda Bryant, 312.780.5539
amanda.bryant@hyatt.com Media Contact: Franziska Weber,
312.780.6106 franziska.weber@hyatt.com
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