After a difficult first quarter of the year that saw the company still in the red, Hyatt Hotels Corp. reported a profitable Q2. Net income attributable to Hyatt was $206 million in the second quarter of 2022, compared to a net loss of $9 million in the same quarter last year and a net loss of $73 million for Q1 this year. Adjusted net income was $51 million in Q2 2022 compared to adjusted net loss of $117 million in the second quarter of 2021.
Comparable systemwide revenue per available room improved in the second quarter and into the third quarter. Comparable systemwide RevPAR was down 5 percent to 2019 in the second quarter, improving from down 9 percent to 2019 in April to down 1 percent to 2019 in June. In July, comparable systemwide 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 Europe, Africa, Middle East/Southwest Asia regions combined.
“While we are encouraged by the RevPAR recovery thus far, it's important to highlight the significant gap that exists when comparing RevPAR growth to the broader economic expansion that has occurred over the past three years,” Hyatt President and CEO Mark Hoplamazian told investors on the earnings call. Traditional drivers like consumer discretionary spend and nonresidential fixed investment have expanded in the mid-teen percentage range or higher, he noted. “While our RevPAR in the United States only just surpassed 2019 levels in June and on a systemwide basis in July, the RevPAR recovery still significantly lagged the broader economic measures and only with further recovery will travel spend regain prepandemic share of wallet.” Still, Hoplamazian said he expects the gaps to narrow as consumers pivot back to prioritizing spending on services and business travel inches back to normal.
Systemwide 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 the Greater China region. 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 full-service managed properties in the Americas 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.
The company’s all-inclusive portfolio also performed well during the quarter. Based on preliminary results, net package RevPAR in July for the Apple Leisure Group resorts in the Americas is approximately 24 percent 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 percent 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 percent above 2019 over the months of August through December for the same set of properties.
Openings and Expansion
During the quarter, Hyatt added more than 5,500 rooms, contributing approximately 4,600 net rooms to its system, Hoplamazian said. More than half of these openings were in resorts. The company added 28 new hotels with 5,510 rooms to its system. As of June 30, the company had a pipeline of executed management or franchise contracts for approximately 550 hotels (approximately 113,000 rooms), including ALG's pipeline contribution of approximately 20 hotels (or approximately 7,000 rooms).
Since Hyatt committed to reducing its owned asset portfolio in 2017, the company has sold $3.7 billion worth of real estate at over 17 times earnings, Hoplamazian said. At the same time, the company also spent about $3.5 billion dollars on acquiring the Miraval, Two Roads and ALG platforms, which Hoplamazian said have “significant prospective growth.”
Hyatt is looking at other potential acquisitions that fall into similar categories, Hoplamazian continued—“Growth platforms that we can execute on that would fit into our portfolio that strengthen our position [for] the high-end traveler.” Hyatt has a strong concentration of luxury and lifestyle properties in addition to resorts, he said, and with more than 50 percent of the company’s revenues coming from leisure travelers, he sees Hyatt as “exceedingly well positioned” for next year.
Transactions and Capital Strategy
During the second quarter, Hyatt 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 earnings before interest, taxes, depreciation and amortization:
The company sold the 530-room Hyatt Regency Indian Wells Resort & Spa in Palm Springs, Calif., 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.
Hyatt sold the 1,003-room Grand Hyatt San Antonio River Walk 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 company sold the 189-room The Driskill 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.
Hyatt sold the 339-room The Confidante Miami Beach (Fla.), 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 Aug. 3, the company acquired the 541-room Hotel Irvine in Irvine, Calif., for approximately $135 million from an unrelated third party.
Hyatt 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.
CFO Joan Bottarini said bookings for the 2022 holiday season are “up significantly” and the company is “seeing some strong momentum into the first quarter of 2023.”
For the 2022 fiscal year, Hyatt expects comparable systemwide constant dollar RevPAR to be greater than 2021 by a range of 55 percent to 60 percent and expects systemwide constant dollar RevPAR 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.
Hoplamazian said Hyatt has “exciting hotel openings” scheduled over the second half of 2022, as well as “compelling conversion opportunities” currently under negotiation. The company expects to grow net rooms by more than 6 percent by the end of the year.