Hyatt Hotels Corporation ("Hyatt" or the "Company") (NYSE: H) today reported second quarter 2022 financial results. Net income attributable to Hyatt was $206 million, or $1.85 per diluted share, in the second quarter of 2022, compared to a net loss attributable to Hyatt of $9 million, or $0.08 per diluted share, in the second quarter of 2021. Adjusted net income attributable to Hyatt was $51 million, or $0.46 per diluted share, in the second quarter of 2022, compared to Adjusted net loss attributable to Hyatt of $117 million, or $1.15 per diluted share, in the second quarter of 2021. Refer to the table on page 14 of the schedules for a summary of special items impacting Adjusted net income (loss) and Adjusted earnings (losses) per diluted share for the three months ended June 30, 2022 and June 30, 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% 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 Chief Executive Officer 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."
Second quarter 2022 financial results as compared to the second quarter 2021 are as follows:
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%."
Comparable system-wide RevPAR experienced rapid improvement in the second quarter and into the third quarter. Comparable system-wide RevPAR was down 5% to 2019 in the second quarter, improving from down 9% to 2019 in April to down 1% to 2019 in June. In July, comparable system-wide RevPAR was up 5% to 2019, marking one of the strongest individual months in Hyatt's history powered by growth in luxury branded hotels, which were up 28% to 2019 in the Americas and EAME/SW Asia regions combined.
The results in July and favorable forward booking trends reflect continued strength. System-wide comparable transient revenue on the books for the remainder of the year is pacing 1% ahead of the same period in 2019 or 4% 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% above July 2019 and group pace for the remainder of the year, from August through December, is approximately 7% below 2019 reflecting steady improvement as a result of strong short-term bookings.
Our all-inclusive portfolio also continues to experience strong growth. Based on preliminary results, net package RevPAR in July for ALG resorts in the Americas is approximately 24% higher in comparison with the same properties managed by ALG in July of 2019. Additionally, total package revenue for the entire ALG portfolio is approximately 74% higher than July of 2019, reflecting the impact of net rooms growth. Looking ahead, gross package revenue for ALG resorts in the Americas is pacing more than 44% above 2019 over the months of August through December for the same set of properties.
SECOND QUARTER RESULTS
Second quarter of 2022 financial results as compared to the second quarter of 2021 are as follows:
Management, Franchise, and Other Fees
Total management, franchise, and other fee revenues increased to $204 million in the second quarter of 2022 compared to $93 million reported in the second quarter of 2021 and reflected a sequential improvement from $154 million reported in the first quarter of 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 Franchising Segment
Americas management and franchising segment Adjusted EBITDA increased to $117 million in the second quarter of 2022 compared to $54 million reported in the second quarter of 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% on a reported basis.
Americas net rooms increased 3.5% compared to the second quarter of 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 the second quarter of 2022 compared to $10 million reported in the second quarter of 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% compared to the second quarter of 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 the second quarter of 2022 compared to a loss of $1 million reported in the second quarter of 2021. In the second quarter of 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% compared to the second quarter of 2021.
Apple Leisure Group Segment
ALG segment Adjusted EBITDA was $54 million in the second quarter of 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 favorable pricing environment.
During the second quarter of 2022, ALG added 10 resorts (or 2,502 rooms).
Refer to the table on page 3 of the schedules for further details on revenue recognition, deferrals, and financed contracts relating to the Unlimited Vacation Club.
Owned and Leased Hotels Segment
Owned and leased hotels segment Adjusted EBITDA increased to $99 million in the second quarter of 2022 compared to $12 million reported in the second quarter of 2021. Owned and leased hotels segment comparable operating margins improved to 31.9% from the second quarter 2021 as reported, reflecting strong operational execution and growth in average daily rates.
Refer to the tables starting 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.
Corporate and Other
Corporate and other Adjusted EBITDA decreased to $(34) million in the second quarter of 2022 compared to $(21) million reported in the second quarter of 2021. The decrease to the second quarter of 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% 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 the second quarter of 2022 and an increase in Corporate Adjusted selling, general, and administrative expenses of $13 million compared to second quarter of 2021.
Refer to the table on page 16 of the schedules for a reconciliation of selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses.
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 / CAPITAL STRATEGY
During the second quarter, 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:
On August 3, 2022, the Company acquired the following asset:
The Company is currently marketing two hotels for sale and intends to successfully 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:
SHARE REPURCHASE / DIVIDEND
During the second quarter of 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 the second quarter of 2022. The Company ended the second quarter with 50,096,332 Class A and 59,017,749 Class B shares issued and outstanding.
The Company is providing the following information for the 2022 fiscal year:
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.
CONFERENCE CALL INFORMATION
The Company will hold an investor conference call this morning, August 9, 2022, at 8:00 a.m. CT.
Participants are encouraged to listen to a simultaneous webcast of the conference call, which may be accessed through the Company's website at investors.hyatt.com. Alternatively, participants may access the live call by dialing: 888-412-4131 (U.S. Toll-Free) or 646-960-0134 (International Toll Number) using conference ID# 9019679 approximately 15 minutes prior to the scheduled start time.
A replay of the call will be available for one week beginning on Tuesday, August 9, 2022 at 11:00 a.m. CT by dialing: 800-770-2030 (U.S. Toll-Free) or 647-362-9199 (International Toll Number) using conference ID# 9019679. An archive of the webcast will be available on the Company's website for 90 days.
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, the impact of the COVID-19 pandemic and pace of recovery, the amount by which the Company intends to reduce its real estate asset base and the anticipated timeframe for such asset dispositions, the number of properties we expect to open in the future, booking trends, RevPAR trends, our expected Adjusted SG&A expense, our expected capital expenditures, our expected net rooms growth, 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: risks associated with the acquisition of ALG; our ability to realize the anticipated benefits of the acquisition of ALG as rapidly or to the extent anticipated, including successful integration of the ALG business; the duration and severity of the COVID-19 pandemic and the pace of recovery following the pandemic, any additional resurgence, or COVID-19 variants; the short and long-term effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; the impact of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants, and the impact of actions that governments, businesses, and individuals take in response, on global and regional economies, travel limitations or bans, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the broad distribution and efficacy of COVID-19 vaccines and treatments, wide acceptance by the general population of such vaccines, and the availability, use, and effectiveness of COVID-19 testing, including at-home testing kits; the ability of third-party owners, franchisees, or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants; 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; global supply chain constraints and interruptions, rising costs of construction-related labor and materials, and increases in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business; risks affecting the luxury, resort, and all-inclusive lodging segments; levels of spending in business, leisure, and group segments as well as consumer confidence; declines in occupancy and average daily rate; limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geo-political conditions, including political or civil unrest or changes in trade policy; 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, share repurchase program, and dividend payments, including a reduction in, or elimination or suspension of, repurchase activity or dividend payments; 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; increases in interest rates, wages, and other 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 the COVID-19 pandemic, industry consolidation, and the markets where we operate; our ability to successfully grow the World of Hyatt loyalty program and Unlimited Vacation Club paid membership 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 (loss), adjusted for special items; diluted earnings (losses) per share, 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 AND SOCIAL MEDIA CHANNELS
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. The Company uses these channels as well as social media channels (e.g., the Hyatt Facebook account (facebook.com/hyatt); the Hyatt Instagram account (instagram.com/hyatt/); the Hyatt Twitter account (twitter.com/hyatt); the Hyatt LinkedIn account (linkedin.com/company/hyatt/); and the Hyatt YouTube account (youtube.com/user/hyatt)) as a means of disclosing information about the Company's business to our guests, customers, colleagues, investors, and the public. While not all of the information that the Company posts to the Hyatt Investor Relations website or on the Company's social media channels 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 and on the Company's social media channels. 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 guided by its purpose ? to care for people so they can be their best. As of June 30, 2022, the Company's portfolio included more than 1,150 hotels and all-inclusive properties in 72 countries across six continents. The Company's offering includes brands in the Timeless Collection, including Park Hyatt®, Grand Hyatt®, Hyatt Regency®, Hyatt®, Hyatt Residence Club®, Hyatt Place®, Hyatt House®, and UrCove; the Boundless Collection, including Miraval®, Alila®, Andaz®, Thompson Hotels®, Hyatt Centric®, and Caption by Hyatt; the Independent Collection, including The Unbound Collection by Hyatt®, Destination by Hyatttm, and JdV by Hyatttm; and the Inclusive Collection, including Hyatt Ziva®, Hyatt Zilara®, Zoëtry® Wellness & Spa Resorts, Secrets® Resorts & Spas, Breathless Resorts & Spas®, Dreams® Resorts & Spas, Vivid Hotels & Resorts®, Alua Hotels & Resorts®, and Sunscape® Resorts & Spas. Subsidiaries of the Company operate the World of Hyatt® loyalty program, ALG Vacations®, Unlimited Vacation Club®, Amstar DMC destination management services, and Trisept Solutions® technology services. For more information, please visit www.hyatt.com.
The financial section of this release, including a reconciliation of the Company's presented non-GAAP measures to the most directly comparable GAAP measures, is provided on the Company's website at investors.hyatt.com.
Note: All RevPAR and ADR percentage changes are in constant dollars. This release includes references to non-GAAP financial measures. Refer to the non-GAAP reconciliations included in the schedules and the definitions of the non-GAAP measures presented beginning on page 12.
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