Hyatt Hotels Corp. reported net income of $120 million for the third quarter of 2021, compared to a net loss of $161 million in the third quarter of 2020. Adjusted net income attributable to Hyatt was $241 million in the quarter compared to adjusted net loss of $150 million in Q3 2020.
Comparable systemwide revenue per available room increased 29 percent to $93.70 in the third quarter of 2021 and decreased 31.8 percent compared to the third quarter 2019. Adjusted earnings before interest, taxes, depreciation and amortization for the third quarter approached 70 percent of 2019 levels and more than doubled from the prior quarter.
The quarterly report came just days after Hyatt completed the acquisition of Apple Leisure Group, and Mark S. Hoplamazian, president and CEO of Hyatt Hotels Corp., acknowledged the deal as he kicked off an earnings call with investors. “I'm energized and really excited about the bright future for ALG as a part of Hyatt,” he said. “The cultural fit between our two companies with a joint focus of care could not be better, and the timing is proving to be very auspicious as leisure demand continues to be durable, and a growing proportion of our segment mix.”
Related: Hyatt completes acquisition of Apple Leisure Group
Hyatt also advanced its capital strategy through the completion of the $1.5 billion asset disposition commitment during the quarter and announced a new $2 billion commitment for additional asset sales by the end of 2024. Through the acquisition of Apple Leisure Group's asset-light platform and the expansion of the disposition commitment, Hyatt expects to transform earnings to approximately 80 percent fee-based by the end of 2024.
Transactions and Capital Strategy Update
During the third quarter, a Hyatt affiliate also sold the 59-room Alila Ventana Big Sur in Big Sur, Calif., for approximately $150 million (approximately $148 million, net of closing costs and proration adjustments) to Host Hotels & Resorts, and entered into a long-term management agreement. A Hyatt affiliate acquired the property for approximately $148 million on June 3 this year, and at the time planned to evaluate the sale of the asset while retaining a long-term management agreement.
“We're not a long-term holder,” Hoplamazian said of the deal during the call. Instead, during the time that Hyatt owned the asset, the company mapped out “a number of projects” for the property that would require some high-return investments. “We have built a really compelling plan for the hotel, including some enhancements with respect to how we're going to market with the hotel,” he said. The team learned that Host, one of Hyatt’s biggest ownership partners, was interested in the property and saw similar opportunities as Hyatt did. “They have experience executing on these kinds of property improvements and we have confidence that they'll be able to do that,” Hoplamazian said. “So we bought the asset, we earned a mid-teens return while we owned it and we sold it for a profit despite keeping a very long-term management agreement.”
From Hyatt’s perspective, he added, the company has secured a long-term presence in an in-demand market with a valuable asset and a partner that can put money in, enhance the proposition of the asset and enhance the returns going forward: “So it felt like a triple win to us.”
Related: Hyatt sells, acquires properties as part of capital strategy
Also during the quarter, a Hyatt affiliate sold the 422-room Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nev., for approximately $350 million (or approximately $343 million, net of closing costs and proration adjustments), and entered into a long-term management agreement.
The two transactions in the quarter led to the completion of the asset sale commitment announced at the company's 2019 Investor Day to realize $1.5 billion of asset sales proceeds by March 2022. The company completed the commitment ahead of schedule and above the committed amount. As of Sept. 30, Hyatt achieved net proceeds of approximately $1.6 billion.
Operations
Hyatt’s leisure transient revenue exceeded 2019 levels in July, and after a seasonal and sequential decline in August, returned to nearly fully recovered levels in September. “Absolute RevPAR in October was nearly as strong as July at $98,” Hoplamazian said. “What is encouraging is that the recovery has broadened. Whereas our strength in July was primarily driven by resort locations, the improvement more recently has been from urban locations, which experienced RevPAR growth of 10 percent in October as compared to July.” Business transient and group revenue improved more than 40 percent in Q3 from the previous quarter. The company credited demand in the U.S. and recovery in Europe for the improved performance.
Comparable owned and leased hotels RevPAR improved 39 percent in Q3 from Q2, benefiting from strong leisure demand in the United States and the easing of travel restrictions in Europe. Comparable owned and leased operating margins were 20 percent for the quarter reflecting strong operational execution and an improved demand environment.
As of Sept. 30, 99 percent of Hyatt’s total systemwide hotels and 99 percent of rooms were open, as were 99 percent of the company’s Americas full- and select-service hotels, accounting for 99 percent of its rooms in the market.
Openings and Future Expansion
Twenty new hotels with 4,599 rooms opened in the third quarter of 2021, contributing to a 6.9 percent year-over-year increase in net rooms. Americas net rooms increased 5.2 percent compared to Q3 2020.
As of Sept. 30, the company had executed management or franchise contracts for approximately 505 hotels with approximately 103,000 rooms. This compares to approximately 495 hotels with approximately 101,000 rooms as of June 30.
Looking Ahead
Hoplamazian noted that leisure transient demand is proving to be “far more than a summer surge” and that leisure transient revenue booked in October for all periods was more than 20 percent ahead of 2019 levels. “Further, total transit revenue at our Americas resorts is pacing 25 percent ahead of 2019 levels for the last week of December,” he said. “At this pace, we anticipate the festive season could be one of the strongest we've ever experienced.”
For the 2021 fiscal year, Hyatt expects net rooms growth to be greater than 6 percent. The company also expects capital expenditures to be approximately $110 million.