System-Wide RevPAR Expanded 15% Generating Record Total Fee Revenue - Net Rooms Growth Increased to 6.9%
Hyatt Hotels Corporation (NYSE: H) today reported second quarter 2023 financial results. Highlights include:
- Net income was $68 million in the second quarter of 2023 compared to $206 million in the second quarter of 2022. Adjusted net income was $88 million in the second quarter of 2023 compared to $51 million in the second quarter of 2022. Net income in the second quarter of 2022 included $251 million of gains recognized on the sales of real estate.
- Diluted EPS was $0.63 in the second quarter of 2023 compared to $1.85 in the second quarter of 2022. Adjusted Diluted EPS was $0.82 in the second quarter of 2023 compared to $0.46 in the second quarter of 2022.
- Adjusted EBITDA was $273 million in the second quarter of 2023 compared to $255 million in the second quarter of 2022.
- Adjusted EBITDA does not include Net Deferrals of $28 million and Net Financed Contracts of $14 million in the second quarter of 2023, and Net Deferrals of $25 million and Net Financed Contracts of $15 million, in the second quarter of 2022.
- Comparable system-wide RevPAR increased 15.0% in the second quarter of 2023 compared to 2022.
- Comparable owned and leased hotels RevPAR increased 10.1% in the second quarter of 2023 compared to 2022. Comparable owned and leased hotels operating margins were 26.2% in the second quarter of 2023.
- Comparable All-inclusive Net Package RevPAR increased 9.5% in the second quarter of 2023 compared to 2022.
- Net Rooms Growth was approximately 6.9% in the second quarter of 2023.
- Pipeline of executed management or franchise contracts was approximately 119,000 rooms.
- Shares repurchased was approximately 969 thousand shares for $108 million in the second quarter of 2023.
Mark S. Hoplamazian, President and Chief Executive Officer of Hyatt, said, "For the fifth consecutive quarter we posted record results demonstrating our unique positioning and continued momentum. System-wide RevPAR expanded 15% year-over-year, generating a record level of total fee revenue in the quarter. We updated our full year RevPAR outlook, and we expanded our pipeline to 119,000 rooms, representing approximately 40% of our existing portfolio. Our outlook remains optimistic, fueled by strong group booking activity during the quarter, resulting in 2024 group pace up 10%. We believe our increasing asset-light earnings mix and free cash flow define a clear path for continued success and enhanced shareholder value into the future."
Operational Update
In the second quarter of 2023, comparable system-wide RevPAR was up 15% compared to the second quarter of 2022, and up 8% compared to the second quarter of 2019 for the same set of comparable properties. In the second quarter of 2023, average rate growth remained strong, up 5% on a constant currency basis, while occupancy improved 660 basis points, as compared to the same period in 2022. Comparable Net package RevPAR for ALG properties increased 8% in the second quarter of 2023, compared to the same period in 2022.
A record level of total management, franchise, license, and other fees of $248 million were generated in the second quarter of 2023, up 21% compared to the second quarter of 2022. Fee revenue growth was driven by continued strong global top line performance and flow-through in addition to the contribution from industry leading net rooms growth.
Segment Results and Highlights
| (in millions) |
| Three Months Ended June 30, |
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| 2023 |
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| 2022 |
|
| Change (%) | |
| Owned and leased hotels |
| $ | 84 |
|
| $ | 99 |
|
| (14.8 | )% |
| Americas management and franchising |
|
| 122 |
|
|
| 117 |
|
| 4.7 | % |
| ASPAC management and franchising (a) |
|
| 37 |
|
|
| 9 |
|
| 316.5 | % |
| EAME management and franchising (a) |
|
| 16 |
|
|
| 10 |
|
| 52.1 | % |
| Apple Leisure Group |
|
| 49 |
|
|
| 54 |
|
| (9.1 | )% |
| Corporate and other |
|
| (35 | ) |
|
| (34 | ) |
| (2.1 | )% |
| Eliminations |
|
| — |
|
|
| — |
|
| (131.7 | )% |
| Adjusted EBITDA |
| $ | 273 |
|
| $ | 255 |
|
| 6.9 | % |
|
|
|
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| Three Months Ended June 30, |
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| 2023 |
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| 2022 |
|
| Change (%) | |
| Net Deferrals |
| $ | 28 |
|
| $ | 25 |
|
| 14.9 | % |
| Net Financed Contracts |
| $ | 14 |
|
| $ | 15 |
|
| (5.4 | )% |
| (a) Effective January 1, 2023, the Company has changed the strategic and operational oversight for our properties located in the Indian subcontinent. Revenues associated with these properties are now reported in the ASPAC management and franchising segment. The segment changes have been reflected retrospectively for the three months ended June 30, 2022. | |||||||||||
- Owned and leased hotels segment: Results were led by growth in group and business transient travel, along with sustained demand in leisure transient travel. Comparable margins remained strong, up nearly 300 basis points compared to the same period in 2019. Higher occupancy and food and beverage revenue mix led to higher costs, and impacted owned and leased margins when compared to 2022. When adjusted for the net impact of transactions, owned and leased Adjusted EBITDA decreased $2 million, or 2%, compared to the second quarter of 2022 and increased $11 million, or 15%, compared to the second quarter of 2019.
- Americas management and franchising segment: Results were led by sustained strength of leisure travel demand and improved business travel demand. Large convention hotels demonstrated strong performance. New hotels added to the system since the start of 2019 contributed $21 million in fee revenue in the quarter.
- ASPAC management and franchising segment: Results were led by broad recovery across the region. Notably, RevPAR in Greater China exceeded 2019 levels by 6% during the quarter.
- EAME management and franchising segment: Results were led by Western Europe which benefited from strong international inbound demand and increased airlifts into the region.
- Apple Leisure Group segment: Results reflect sustained strength in leisure travel and favorable pricing. Foreign currency exchange rates and one-time strategic investments negatively impacted ALG’s Adjusted EBITDA.
Openings and Development
During the second quarter, 24 new hotels (or 5,927 rooms) joined Hyatt's system. Notable openings in the quarter included Andaz Nanjing Hexi, Grand Hyatt La Manga Club Golf & Spa, Hyatt Regency Mexico City Insurgentes, Impression Isla Mujeres by Secrets, and The Pell, part of JdV by Hyatt.
As of June 30, 2023, the Company had a pipeline of executed management or franchise contracts for approximately 585 hotels (approximately 119,000 rooms).
Transactions and Capital Strategy
On June 2, 2023, the Company completed the acquisition of Smith Global Limited ("Mr & Mrs Smith") and paid cash of £58 million (approximately $72 million, or $50 million net of cash acquired, using exchange rates as of the acquisition date). The acquisition adds more than 1,500 boutique and luxury properties in more than 20 new countries to World of Hyatt.
The Company is making progress on the two previously announced assets marketed for sale. The Company remains committed to successfully executing plans to realize $2.0 billion of gross proceeds from the sale of real estate, net of acquisitions, by the end of 2024 as part of its expanded asset-disposition commitment announced in August 2021. As of June 30, 2023, the Company has realized $721 million of proceeds from the net disposition of real estate as part of this commitment.
Balance Sheet and Liquidity
As of June 30, 2023, the Company reported the following:
- Total debt of $3,099 million.
- Pro rata share of unconsolidated hospitality venture debt of $542 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 $2.4 billion with $906 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.
On July 6, 2023, the Company issued $600 million of 5.750% senior notes due 2027 at an issue price of 99.975%. The Company intends to use the net proceeds from the issuance of the 2027 Notes, together with cash on hand, to repay all of the 1.300% notes due 2023 at or prior to their maturity on October 1, 2023.
During the second quarter, the Company repurchased a total of 968,629 Class A common shares for approximately $108 million. The Company ended the second quarter with 45,902,599 Class A and 58,917,749 Class B shares issued and outstanding. Through the first six months of the year, the Company has repurchased a total of 1,987,560 Class A common shares for approximately $214 million. As of June 30, 2023, the Company had approximately $1.4 billion remaining under its share repurchase authorization.
The Company's board of directors has declared a cash dividend of $0.15 per share for the third quarter of 2023. The dividend is payable on September 8, 2023 to Class A and Class B stockholders of record as of August 25, 2023.
2023 Outlook
The Company is providing the following guidance for full year 2023:
|
|
| Full Year 2023 vs. 2022 |
| System-Wide RevPAR1 |
| 14% to 16% |
| Net Rooms Growth |
| Approx. 6.0% |
| (in millions) |
| Full Year 2023 |
| Net Income |
| Approx. $215 |
| Adjusted EBITDA2 |
| $1,020 - $1,070 |
| Net Deferrals |
| Approx. $120 |
| Net Financed Contracts |
| Approx. $60 |
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| Total Adjusted SG&A2 |
| $485 - $495 |
| One-Time Integration Costs3 |
| Approx. $20 |
| Capital Expenditures |
| Approx. $200 |
| Free Cash Flow2 |
| Approx. $550 |
| Capital Returns to Shareholders4 |
| Approx. $500 |
| 1 RevPAR is based on constant currency whereby previous periods are translated based on the current period exchange rate. RevPAR percentage for 2023 vs. 2022 is based on comparable hotels. | ||
| 2 Refer to the tables beginning on page A-14 of the schedules for a reconciliation of estimated net income attributable to Hyatt Hotels Corporation to EBITDA and EBITDA to Adjusted EBITDA, selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses, and net cash provided by operating activities to Free Cash Flow. | ||
| 3 One-time integration costs are related to acquisition activity and are included within Adjusted selling, general, and administrative expenses. | ||
| 4 The Company expects to return capital to shareholders through a combination of cash dividends on its common stock and share repurchases. | ||
| No disposition or acquisition activity beyond what has been completed as of the date of this release has been included in the 2023 Outlook. The Company's 2023 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. | ||