Hyatt leverages deals for global growth in Q3

It’s been a year since Hyatt Hotels Corp. completed its acquisition of Apple Leisure Group, and as President and CEO Mark Hoplamazian told investors, the addition and the growth in the company’s core business is fueling “record” results. 

“Through the first nine months of this year, we have already generated $676 million of adjusted [earnings before interest, taxes, depreciation and amortization] plus $66 million of net deferrals and $48 million of net finance contracts,” Hoplamazian said on the company’s quarterly earnings call. “To put the magnitude of our growth into perspective, the sum of these three numbers is more than 40 percent above the $563 million of adjusted EBITDA we generated during the first nine months of 2019.” 

In addition to ALG performing “well ahead of expectations,” Hoplamazian said the legacy Hyatt business is also generating adjusted EBITDA at record levels when adjusted for the net impact of asset dispositions. “And it's notable that these strong results have been achieved while group, business transient and cross-border travel were in a state of limited recovery during the first half of this year with system-wide RevPAR 14 percent below 2019 levels over that time frame,”  he added. “However, as the third quarter demonstrates, all segments are rapidly improving.” 

Three Strategic Deals

Since Hyatt’s last earnings call, the company announced three notable strategic deals. In early October, the company signed a "collaboration agreement" with Germany’s Lindner Hotels that will add more than 30 hotels and 5,500 room across seven European countries to its portfolio, most under the JdV by Hyatt brand.

The company also formed a joint venture with Kiraku to launch Atona, a new hospitality brand of hot springs ryokans in Japan. “This joint venture increases Hyatt's luxury footprint and fills a unique opportunity to be the first international company to enter the ryokan space,” Hoplamazian said. Hyatt expects to open the first Atona-branded ryokans by 2025. 

The third deal is the addition of five all-inclusive resorts in Bulgaria, developed with a pre-existing Hyatt property owner. This will bring Hyatt’s all-inclusive resorts under ALG brands into a third European country, joining locations in Spain and Greece. The company expects the majority of the resorts to open in 2023.

“As a result of these announcements and with special reference to Lindner hotels, we are raising our full year 2022 net rooms growth guidance to approximately 6.5 percent,” Hoplamazian told the investors

Transactions and Capital Strategy

Hoplamazian said Hyatt is pursuing other asset-light platform opportunities beyond its ongoing organic growth through individual development deals. On October 1, the company sold the entity that was the operating lessee of the Hyatt Regency Mainz in Germany for a nominal amount to an unrelated third party and entered into a long-term franchise agreement. On October 5, the company sold the Hyatt Regency Greenwich in Connecticut for approximately $40 million to an unrelated third party and entered into a long-term management agreement.

The company intends to sell $2 billion 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 November 3, the company has realized $721 million of proceeds from the net disposition of owned assets as part of this commitment.

By the Numbers

Hyatt’s net income was $28 million in the third quarter of 2022 compared to net income of $120 million in the third quarter of 2021. Adjusted net income was $72 million in the third quarter of 2022 compared to adjusted net income of $241 million in the third quarter of 2021.

Comparable system-wide revenue per available room increased 45.9 percent to $133.31 and comparable U.S. hotel RevPAR increased 35.6 percent to $147.70 in the third quarter of 2022 compared to the third quarter of 2021. Comparable owned and leased hotels RevPAR increased 47.4 percent to $177.24 in the third quarter of 2022 compared to the third quarter of 2021. Comparable owned and leased hotels operating margin improved to 24.1 percent in the third quarter of 2022.

Adjusted EBITDA was $252 million in the third quarter of 2022 compared to $110 million in the third quarter of 2021. Apple Leisure Group contributed $78 million of adjusted EBITDA in the third quarter of 2022. 

Net rooms growth was 18.7 percent, or 4.5 percent when excluding ALG, in the third quarter of 2022.

The pipeline of executed management or franchise contracts was approximately 114,000 rooms, inclusive of ALG's pipeline contribution of 8,000 rooms.

Comparable system-wide RevPAR increased 2.0 percent in the third quarter compared to the same period in 2019 driven by an increase in average rate of 13.6 percent. In the month of September, comparable system-wide RevPAR increased 3.1 percent compared to 2019 reflecting an improved contribution from group and business transient revenue.

The ALG all-inclusive portfolio continues to experience favorable trends. Net package RevPAR for the same set of properties managed by ALG in the Americas increased 29 percent in the third quarter compared to the same period in 2019. Total Net Package Revenue for all ALG properties increased 91 percent in the third quarter compared to 2019 reflecting the impact of net rooms growth fueled by ALG's organic growth in the Americas and significant expansion into Europe.

Comparable operating margins for owned and leased hotels improved to 24.1 percent, reflecting strong operational execution and growth in average daily rates. Owned and leased hotels Adjusted EBITDA increased $21 million, or 41 percent, when adjusted for currency and net impact of transactions, in the third quarter compared to the same period in 2019.

Rooms Growth

During the third quarter, 22 new hotels (or 4,243 rooms) joined Hyatt's system. Notable openings included Dreams Cozumel, Hyatt Regency Lisbon, Park Hyatt Jakarta, Thompson Madrid, and Unbound Magma Resort Santorini.

As of September 30, the company had a pipeline of executed management or franchise contracts for approximately 550 hotels (approximately 114,000 rooms), inclusive of ALG's pipeline contribution of approximately 20 hotels (or approximately 8,000 rooms).