Hyatt Hotels Corp. reported first-quarter 2020 financial results today, saying that moves it has made over the past few months have set it up to operate for an extended period of time as the COVID-19 situation stands today.
"As COVID-19 became a global pandemic, we took prompt and meaningful actions to manage the first phase of the impact of the virus. We obtained substantial additional cash, reduced investment and corporate spending to preserve cash, and we reduced third-party hotel owners' direct costs through this period,” said Mark S. Hoplamazian, Hyatt’s president/CEO. “While we continue to operate in an environment of suppressed demand and great uncertainty, we believe our existing liquidity provides sufficient capacity to cover at least 30 months of operations under current conditions."
Hyatt’s earnings report showed that net loss attributable to the company was $103 million, or $1.02 per diluted share, in the first quarter of 2020, compared to net income attributable to Hyatt of $63 million, or 59 cents per diluted share, in the first quarter of 2019. Adjusted net loss attributable to Hyatt was $35 million, or 35 cents per diluted share, in the first quarter of 2020, compared to adjusted net income attributable to Hyatt of $48 million, or 45 cents per diluted share, in the first quarter of 2019.
"All of the actions we have taken are informed by our purpose of care, which includes protecting the health and safety of our colleagues and guests, the financial health of our hotel owners as well as the long-term health of our business,” Hoplamazian said. “We have taken many steps designed to demonstrate care and to help us to emerge from this crisis in a position of strength. We are well-positioned to continuously adapt our business so that we may play an important role in providing employment opportunities to members of the Hyatt family over time while caring for our guests, customers and owners so that they can be their best."
Occupancy in Greater China, where the impacts of the COVID-19 pandemic were first reported, have shown gradual improvement over the past few weeks, with occupancy approaching 25 percent at the end of April. Other parts of the world remain under quarantines and travel restrictions, which have resulted in significant declines in occupancy with uncertainty surrounding near-term improvement. Systemwide occupancy rates as of April 30, 2020, are averaging approximately 15 percent for hotels that remain operational.
As of April 30, 2020, operations were suspended at approximately 35 percent of Hyatt’s systemwide hotels. Operations were suspended at 62 percent of its full-service hotels and 19 percent of its select-service hotels in the Americas, at 17 percent of its hotels in the Asia Pacific region, and at 58 percent of its hotels in the Europe Africa and Middle East/Southwest Asia region. Operations were suspended at 82 percent of Hyatt’s owned and leased hotels.
First quarter of 2020 financial results as compared to the first quarter of 2019 are as follows:
Management, Franchise and Other Fees
Total fee revenues decreased 23.6 percent (23 percent in constant currency) to $108 million. Base management fees decreased 24.4 percent to $47 million, and incentive management fees decreased 78.1 percent to $8 million. Franchise fees decreased 14.8 percent to $27 million. Other fee revenues increased 105.8 percent to $26 million. The increase in other fees was primarily driven by license fees in the Americas and ASPAC management and franchising segments.
Americas Management and Franchising Segment
Americas management and franchising segment adjusted earnings before interest, taxes, depreciation and amortization decreased 26.6 percent (26.3 percent decrease in constant currency). Revenue per availableroom for comparable Americas systemwide hotels increased 2 percent for the month of January and increased 0.3 percent for the month of February, offset by significant declines in March as a result of the COVID-19 pandemic. RevPAR for comparable Americas full-service hotels decreased 24.2 percent, occupancy decreased 1,650 basis points to 54.3 percent occupancy, and average daily rate decreased 1.2 percent. RevPAR for comparable Americas select-service hotels decreased 22.9 percent, occupancy decreased 1,380 basis points to 56.7 percent occupancy, and ADR decreased 4 percent. Revenue from management, franchise and other fees decreased 20 percent (19.7 percent decrease in constant currency).
Transient rooms revenue at comparable U.S. full-service hotels decreased 26.1 percent, roomnights decreased 24 percent and ADR decreased 2.7 percent. Group rooms revenue at comparable U.S. full-service hotels decreased 23.4 percent, roomnights decreased 23.5 percent and ADR increased 0.2 percent.
Americas net rooms increased 3.8 percent compared to the first quarter of 2019, or 4.8 percent when excluding the large hotel that left the system and which Hyatt previously reported.
Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia Management and Franchising Segment
Asia Pacific management and franchising segment adjusted EBITDA decreased 58.5 percent (57.6 percent decrease in constant currency). RevPAR for comparable ASPAC full-service hotels decreased 48 percent, reflecting the increase in COVID-19 pandemic cases beginning in late January 2020, primarily in Greater China, and extending to other countries in the region throughout February 2020, as hotels were operating with reduced occupancy rates or suspended operations due to lock downs, travel restrictions and quarantine measures.
Occupancy decreased 3,150 basis points to 36.3 percent occupancy and ADR decreased 3.1 percent for ASPAC full-service hotels. RevPAR for comparable ASPAC select-service hotels decreased 47.5 percent; occupancy decreased 2,640 basis points to 30.6 percent and ADR decreased 2.3 percent. Revenue from management, franchise and other fees decreased 40.6 percent (39.6 percent decrease in constant currency).
ASPAC net rooms increased 10.5 percent compared to the first quarter of 2019.
Europe, Africa, Middle East and Southwest Asia Management and Franchising Segment
EAME/SW Asia management and franchising segment adjusted EBITDA decreased 91.2 percent (90.8 percent decrease in constant currency). RevPAR for comparable EAME/SW Asia full-service hotels decreased 22.5 percent, driven by the impact of the COVID-19 pandemic beginning in March 2020 as hotels suspended operations and travel restrictions and lock downs resulted in cancellations and decreased demand.
Occupancy decreased 1,350 basis points to 51.3 percent occupancy and ADR decreased 2 percent for EAME/SWA full-service hotels. RevPAR for comparable EAME/SW Asia select-service hotels decreased 12.7 percent; occupancy decreased 800 basis points to 58.2 percent and ADR decreased 0.7 percent. Revenue from management, franchise and other fees decreased 43 percent (42.0 percent decrease in constant currency).
EAME/SW Asia net rooms increased 13.4 percent compared to the first quarter of 2019.
Owned and Leased Hotels Segment
Total owned and leased hotels segment adjusted EBITDA decreased 66.9 percent (66.8 percent decrease in constant currency), including a decrease of 47.4 percent (45.6 percent decrease in constant currency) in pro rata share of unconsolidated hospitality ventures adjusted EBITDA.
Owned and leased hotels segment revenues decreased 30.7 percent (30.3 percent decrease in constant currency), primarily due to the impact of the COVID-19 pandemic on comparable owned and leased hotels and dispositions. RevPAR for comparable owned and leased hotels decreased 25.8 percent. Occupancy decreased 1,880 basis points to 55.3 percent occupancy and ADR decreased 0.5 percent for owned and leased hotels.
Corporate and Other
Corporate and other adjusted EBITDA increased 30.6 percent (consistent in constant currency), primarily due to $5 million of integration related costs in 2019 associated with the acquisition of Two Roads Hospitality; a $4 million decrease of expenses related to Hyatt’s co-branded credit card program; and a $4 million reduction in selling, general and administrative expenses as a result of decreased payroll and related costs.
Corporate and other adjusted revenues decreased 4.1 percent (consistent in constant currency).
Selling, General, and Administrative Expenses
Selling, general and administrative expenses decreased 63.2 percent, inclusive of rabbi trust impact and stock- based compensation. Adjusted selling, general and administrative expenses decreased 11.4 percent, reflecting a decrease of $8 million of payroll and related expenses as a result of the COVID-19 pandemic and $5 million of integration costs in 2019 related to the acquisition of Two Roads Hospitality.
Openings and Future Expansion
Twelve hotels (or 1,820 rooms) opened in the first quarter of 2020, contributing to a 6.3 percent increase in net rooms compared to the first quarter of 2019.
As of March 31, 2020, Hyatt had executed management or franchise contracts for approximately 500 hotels (approximately 101,000 rooms), compared to approximately 455 hotels (approximately 91,000 rooms) at March 31, 2019.
The company repurchased $69 million shares of its Class A common stock year to date through March 2, 2020. It ended the first quarter with 35,570,053 Class A and 65,463,274 Class B shares issued and outstanding.
Hyatt has discontinued all share repurchase activity effective March 3, 2020, and has suspended its quarterly dividend through the first quarter of 2021.
As of March 31, 2020, the company reported the following:
Total debt of $1,962 million.
Pro rata share of unconsolidated hospitality venture debt of approximately $596 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 $1,194 million, restricted cash of $18 million, and short-term investments of $68 million.
Undrawn borrowing availability of $1,149 million under Hyatt's revolving credit facility, net of letters of credit outstanding.
On April 21, 2020, the company issued $450 million 5.375 percent senior notes due in 2025, and $450 million 5.750 percent senior notes due in 2030. In connection with the offering, the company terminated a new undrawn $500 million bridge credit facility and paid down $350 million, which is the full amount of previously drawn funds from its revolving credit facility. Hyatt’s $1.5 billion credit facility is undrawn, and as previously reported, fully available to the company under certain covenant waivers through the first quarter of 2021. The company's next debt maturity is in the third quarter of 2021.
Capital Strategy Update
The company has realized proceeds of over $950 million from the disposition of owned assets since it announced plans to sell an additional $1.5 billion of real estate in March 2019. It expects to successfully realize approximately $1.5 billion of gross proceeds from the sale of real estate by March 2022. There are currently no assets actively being marketed for sale.
Segment Reporting Updates
Effective Jan. 1, 2020, Hyatt changed the strategic and operational oversight for its Miraval properties, which were previously evaluated as a distinct business. The management fees from Miraval properties are now reported in the Americas management and franchising segment, and the operating results and financial position of underlying hotel results are now reported in the owned and leased hotels segment; the results of Miraval properties were previously reported in corporate and other. In addition, the license fees from Hyatt Residence Club are now reported within the Americas management and franchising segment due to changes in the strategic oversight for these license agreements. The segment changes have been reflected retrospectively to the three months ended March 31, 2019.
In addition, effective Jan. 1, 2020, Hyatt classified Miraval wellness resorts as full-service hotels. All schedules have been updated to reflect this change to our properties and statistics retrospectively to the three months ended March 31, 2019.