Hyatt Hotels Corp. reported solid numbers for the third quarter of 2023, which president and CEO Mark Hoplamazian credited in part to the strength of travel in and from Asia.
“There's a clear uptick in travel demand in Asia,” he said during an earnings call with investors, noting that revenue per available room in the Greater China market in Q3 was up 56 percent compared to the third quarter of 2022. “This momentum, combined with the continued growth and excellence of our food-and-beverage operations in the region, are leading to strong margins for owners and fees for Hyatt.”
By the Numbers
Hyatt’s net income was $68 million in the third quarter of 2023 compared to $28 million in the same quarter of 2022. Adjusted net income was $75 million in Q3 2023 compared to $72 million in Q3 of 2022. Adjusted earnings before interest, taxes, depreciation and amortization was $247 million in Q3 2023 compared to $252 million in Q3 2022. When adjusted for the net impact of transactions, owned and leased adjusted EBITDA increased $3 million, or 5.5 percent, compared to the third quarter of 2022 and increased $19 million, or 41.7 percent, compared to the third quarter of 2019.
Comparable systemwide revenue per available room increased 8.9 percent in the quarter compared to 2022, driven by occupancy up 420 basis points and average daily rate up 2.6 percent. “We continue to see occupancy levels recover, and the month of September underscores this positive momentum, with occupancy down only 260 basis points compared to 2019,” Hoplamazian added. Comparable owned and leased hotels RevPAR increased 6.3 percent in Q3 2023 compared to 2022, and comparable owned and leased hotels operating margins were 23.5 percent in the third quarter of 2023.
Demand for all customer segments remains “solid,” Hoplamazian continued, with leisure transient revenue up 4 percent over “an exceptionally strong third quarter” last year and remaining at elevated levels, 22 percent above the third quarter of 2019 including a 30 percent increase over 2019 in the month of September alone. Business transient revenue increased 19 percent and recovered to approximately 90 percent compared to the third quarter of 2019. “Although most of our corporate negotiated accounts are on a dynamic pricing model, we are about halfway through discussions for our fixed-rate accounts and expect rates to increase in the high single digit range in 2024 compared to 2023,” Hoplamazian added.
Hyatt generated a “record level” of total management, franchise, license, and other fees of $250 million in the quarter, which it credited to continued strong global top-line performance and net rooms growth.
Comparable net package RevPAR for Apple Leisure Group properties increased 8.7 percent in the Q3 2023 compared to the same period in 2022. Booking pace for luxury all-inclusive ALG resorts in Cancun is up 8 percent for the festive period and up 12 percent for the first quarter of 2024.
Results for the Americas management and franchising segment were led by “resilient leisure demand” and the continued recovery of group travel. Total fees were up 6.6 percent compared to the third quarter of 2022, offset by an increase in certain expenses. New hotels added to the system since the start of 2019 contributed $22 million in fee revenue in the quarter.
Results for Hyatt’s Apple Leisure Group segment faced “headwinds” from “unfavorable foreign currency,” challenging ALG Vacations year-over-year comparisons, and higher travel credits from the third quarter of 2022, the company said in its earnings release. Additionally, the Unlimited Vacation Club realized certain incremental costs in part driven by strong engagement from members.
Openings and Development
“Overall, we've expanded our portfolio of properties by 70 percent over the past six years, which has enabled a 300 percent increase in the World of Hyatt Loyalty Program members,” Hoplamazian said during the call.
Net rooms growth was approximately 6.2 percent in the quarter with a pipeline of executed management or franchise contracts covering approximately 123,000 rooms.
During the third quarter, 20 new hotels (or 3,262 rooms) joined Hyatt's system. Notable openings included Calistoga Motor Lodge & Spa, seven UrCove properties, and Andaz Macau, the largest Andaz-branded property globally with 715 rooms.
Hyatt is positioned to double its brand footprint in Canada by the end of 2026, with more than 20 executed managed and franchised agreements. The company expects to have an additional 23 hotels open and operating by the end of that year.
As of Sept. 30, the company had a pipeline of executed management or franchise contracts for approximately 600 hotels (approximately 123,000 rooms).
Transactions and Capital Strategy
On Sept. 28, the company sold its interests in the entities which own the Destination Residential Management business to an unrelated third party for $2 million of base consideration and up to an additional $48 million of contingent consideration to be earned within two years following the sale upon the achievement of certain performance-based metrics and contract extensions.
The company has signed a definitive purchase and sale agreement in October for one asset, expected to close in the fourth quarter of 2023, and has signed a letter of intent for an asset previously marketed for sale, expected to close in the first half of 2024. The company has a signed letter of intent for one additional asset and expects the transaction to close in the first half of 2024. The company launched the marketing process for an additional asset and separately, the company has been advancing discussions for off-market transactions related to other properties in the portfolio.
The company remains committed to successfully executing plans to realize $2 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 Sept. 30, the company has realized $721 million of proceeds from the net disposition of real estate as part of this commitment.
Looking Ahead
For the full year 2023, Hyatt is predicting systemwide RevPAR to increase 15 to 16 percent, net income of approximately $210, adjusted EBITDA of $1 billion to $1.02 billion and net rooms growth of 6 percent.
Farther out, Hoplamazian said the company expects an 8 percent increase in its pipeline, reaching a new record of 123,000 rooms representing approximately 40 percent of its current portfolio.