U.S. and Systemwide Comparable RevPAR Increased 4.2% and 2.3%, Respectively
CHICAGO (August 2, 2016) – Hyatt Hotels Corporation ("Hyatt" or the "Company") (NYSE: H) today reported second quarter 2016 financial results. Net income attributable to Hyatt was $67 million, or $0.49 per diluted share, in the second quarter of 2016, compared to $40 million, or $0.27 per diluted share, in the second quarter of 2015. Adjusted net income attributable to Hyatt was $87 million, or $0.64 per diluted share, in the second quarter of 2016 compared to $41 million, or $0.28 per diluted share, in the second quarter of 2015. Refer to the table on page 3 of the schedules for a summary of special items impacting Adjusted net income and Adjusted earnings per share in the three months ended June 30, 2016.
Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, "We reported solid second quarter results while continuing to execute our long-term growth strategy. Adjusted EBITDA grew 9.7% in the quarter, excluding the impact of foreign currency translation and transactions. Our outlook for the overall business remains positive despite some near-term challenges. In line with current trends, we are revising expectations for comparable systemwide RevPAR growth to a range of approximately 2% to 3% for the year."
Second quarter 2016 financial highlights as compared to the second quarter of 2015 are as follows:
• Net income increased 67.5% to $67 million.
• Adjusted EBITDA increased 5.6% to $227 million, up 7.1% in constant currency.
• Comparable systemwide RevPAR increased 2.3%, including an increase of 4.5% at comparable owned and leased hotels.
• Comparable U.S. hotel RevPAR increased 4.2%; full service and select service hotel RevPAR increased 3.2% and 6.9%, respectively.
• Net hotel and net rooms growth was 8% and 6%, respectively.
• Comparable owned and leased hotels segment operating margins were stable at 27.6%.
Mr. Hoplamazian continued, "We continue to deliver against our goal to become the most preferred hospitality brand. In the second quarter, we gained market share systemwide, with particular strength in the Americas. Developer demand for our brands remains strong. Our executed contract base increased to approximately 61,000 rooms, and we remain on track to open more than 60 hotels this year. We also continued to make good progress with respect to our capital recycling efforts. In late June, we sold Andaz 5th Avenue and announced the acquisition of Royal Palms Resort and Spa, which will become part of The Unbound Collection by Hyatt. With the underlying momentum in our business, we expect a solid finish to the year."
Second quarter 2016 segment results as compared to the second quarter of 2015 are as follows. Hyatt evaluates segment operating performance using segment revenue and segment Adjusted EBITDA.
Owned and Leased Hotels Segment
Total owned and leased hotels segment Adjusted EBITDA increased 6.4% (8.0% in constant currency) including a 47.4% increase in pro rata share of unconsolidated hospitality ventures Adjusted EBITDA. Refer to the table on page 16 of the schedules for a detailed list of portfolio changes and the year-over-year net impact to second quarter owned and leased hotels segment Adjusted EBITDA. Owned and leased hotels revenue increased 3.5% (4.7% in constant currency) and expenses increased 5.6%.
RevPAR for comparable owned and leased hotels increased 4.5%, driven by strength at comparable owned hotels in the Americas, partially offset by softer performance at comparable owned hotels in the EAME/SW Asia region. Occupancy increased 130 basis points and ADR increased 2.9%.
Comparable owned and leased hotels revenue increased 2.6%. Excluding expenses related to benefit programs funded through rabbi trusts and non-comparable hotel expenses, expenses increased 2.6%, reflecting increases in health insurance, labor costs and property taxes at certain properties. Comparable owned and leased hotels segment operating margins were stable at 27.6%. Refer to the table on page 10 of the schedules for a reconciliation of comparable owned and leased hotels expenses to owned and leased hotels expenses.
The following hotel was added to the portfolio in the second quarter:
• The Confidante, part of The Unbound Collection by Hyatt (owned, 363 rooms)
The following hotel was removed from the owned and leased hotels portfolio as it was sold in the second quarter:
• Andaz 5th Avenue (184 rooms). The Company entered into a long-term management agreement with the buyer and therefore the hotel remains in the Hyatt system.
Management and Franchise Fees
Total fee revenue increased 2.7% (consistent with change in constant currency) to $115 million. Base management fees and incentive management fees were flat at $49 million and $30 million, respectively. Franchise fees increased 22.7% to $27 million, primarily due to new and converted hotels and improved performance at existing hotels in the Americas. Other fee revenues decreased 18.2% to $9 million.
Americas Management and Franchising Segment
Americas management and franchising segment Adjusted EBITDA increased 8.5% (9.9% in constant currency). RevPAR for comparable Americas full service hotels increased 3.4%; occupancy was flat and ADR increased 3.4%. RevPAR for comparable Americas select service hotels increased 6.9%; occupancy increased 230 basis points and ADR increased 3.9%. Revenue from management, franchise and other fees increased 4.2% (5.3% in constant currency).
Transient rooms revenue at comparable U.S. full service hotels increased 3.9%; room nights increased 1.7% and ADR increased 2.1%. Group rooms revenue at comparable U.S. full service hotels increased 3.5%; room nights increased 0.7% and ADR increased 2.8%.
The following seven hotels were added to the portfolio in the second quarter:
• Hyatt Centric Montevideo, Uruguay (managed, 178 rooms)
• The Confidante, part of The Unbound Collection by Hyatt (owned, 363 rooms)
• Hyatt Place Chicago O'Hare Airport (franchised, 200 rooms)
• Hyatt Place Cleveland / Lyndhurst / Legacy Village (franchised, 135 rooms)
• Hyatt Place Kansas City / Lenexa City Center (franchised, 127 rooms)
• Hyatt Place Washington DC / Georgetown / West End (franchised, 168 rooms)
• Hyatt House Chicago / Evanston (franchised, 114 rooms)
Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA decreased 7.7% (consistent with change in constant currency). RevPAR for comparable ASPAC full service hotels increased 1.4%, driven by strength in Northeast Asia and offset by softer results in Greater China. Occupancy increased 250 basis points and ADR decreased 2.3%. Revenue from management, franchise and other fees decreased 4.3%, as the benefit of comparable RevPAR gains and unit growth in the second quarter of this year was offset by non-recurring revenue in the second quarter of last year.
The following five hotels were added to the portfolio in the second quarter:
• Hyatt Regency Shanghai, Wujiaochang, China (managed, 306 rooms)
• Hyatt Place Luoyang, China (managed, 248 rooms)
• Hyatt Place Phuket, Patong, Thailand (managed, 161 rooms)
• Hyatt Place Shenzhen Airport, China (managed, 167 rooms)
• Hyatt House Shenzhen Airport, China (managed, 112 rooms)
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management Segment
EAME/SW Asia management segment Adjusted EBITDA decreased 11.1% (consistent with change in constant currency). RevPAR for comparable EAME/SW Asia full service hotels decreased 9.9%, driven by weakness in parts of Western Europe, the Middle East and Turkey, and offset by relative strength in Eastern Europe and Southwest Asia. Occupancy decreased 450 basis points and ADR decreased 3.4%. Revenue from management and other fees decreased 5.9%.
The following three hotels were added to the portfolio in the second quarter:
• Park Hyatt Mallorca, Spain (managed, 142 rooms)
• Hyatt Regency Chandigarh, India (managed, 211 rooms)
• Hyatt Place London Heathrow / Hayes, England (managed, 170 rooms)
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 2.7%. Adjusted selling, general, and administrative expenses were flat. Increased payroll and related costs were offset by reductions in professional fees. Refer to the table on page 9 of the schedules for a reconciliation of Adjusted selling, general, and administrative expenses to selling, general, and administrative expenses.
OPENINGS AND FUTURE EXPANSION
Fifteen hotels (or 2,802 rooms) were added in the second quarter of 2016, each of which is listed above. The Company's net rooms increased 6%, compared to the second quarter of 2015. The Company continues to be on pace to add more than 60 hotels in the 2016 fiscal year.
As of June 30, 2016, the Company had executed management or franchise contracts for approximately 285 hotels (or approximately 61,000 rooms). This compares to approximately 260 hotels (or approximately 56,000 rooms) as of March 31, 2016. The executed contracts represent important potential entry into several new countries and expansion into new markets or markets in which the Company is under-represented.
SHARE REPURCHASE
During the second quarter of 2016, the Company repurchased 1,421,240 shares of common stock at a weighted average price of $47.79 per share, for an aggregate purchase price of $68 million. From July 1 through July 29, 2016, the Company repurchased 399,249 shares of common stock at a weighted average price of $50.09 per share, for an aggregate purchase price of $20 million. As of July 29, 2016, the Company had $228 million remaining under its share repurchase authorization.
CORPORATE FINANCE / ASSET RECYCLING
In the second quarter, the Company completed the following transactions:
- Redeemed all $250 million of Hyatt's outstanding 3.875% senior notes due 2016 for $254 million.
- Completed the acquisition of Thompson Miami Beach (363 rooms) for approximately $238 million and rebranded the hotel as The Confidante as part of The Unbound Collection by Hyatt.
- Sold Andaz 5th Avenue (184 rooms) for approximately $250 million, or approximately $240 million net of approximately $10 million of closing costs and proration adjustments. The Company continues to manage the hotel under a long-term management contract.
Subsequent to the end of the second quarter, the Company completed the following transaction:
- Completed the acquisition of Royal Palms Resort and Spa in Arizona (119 rooms) for approximately $88 million and added hotel to The Unbound Collection by Hyatt.
BALANCE SHEET / OTHER ITEMS
As of June 30, 2016, the Company reported the following:
- Total debt of $1.5 billion.
- Pro rata share of unconsolidated hospitality venture debt of $787 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 $642 million, short-term investments of $49 million and restricted cash of $77 million.
- Undrawn borrowing availability of $1.5 billion under its revolving credit facility.
2016 OUTLOOK
The Company is reaffirming the following information for the 2016 fiscal year:
- The Company expects to open more than 60 hotels in 2016.
- Interest expense is expected to be approximately $75 million.
- In addition to the capital expenditures described below, the Company intends to continue a strong level of investment spending. Investment spending includes acquisitions, equity investments in joint ventures, debt investments, contract acquisition costs or other investments.
The Company is revising the following information for the 2016 fiscal year:
- Comparable systemwide RevPAR is expected to increase approximately 2% to 3% (compared to previous expectation of approximately 3% to 5%), as compared to fiscal year 2015.
- Adjusted selling, general, and administrative expenses are expected to be approximately $280 million (compared to previous expectation of approximately $290 million). This excludes approximately $30 million of stock-based compensation expense and any potential expense impact related to benefit programs funded through rabbi trusts.
- Capital expenditures are expected to be approximately $260 million (compared to previous expectation of approximately $275 million), including approximately $80 million (compared to previous expectation of approximately $70 million) for investment in new properties under development or recently opened.
- Depreciation and amortization expense is expected to be approximately $340 million (compared to previous expectation of approximately $350 million).
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