U.S. and Systemwide Comparable RevPAR Increased 3.8% and 2.5%, Respectively
CHICAGO–Hyatt Hotels Corporation ("Hyatt" or the "Company") (NYSE: H) today reported third quarter 2016 financial results. Net income attributable to Hyatt was $62 million, or $0.47 per diluted share, in the third quarter of 2016, compared to $25 million, or $0.18 per diluted share, in the third quarter of 2015. Adjusted net income attributable to Hyatt was $61 million, or $0.47 per diluted share, in the third quarter of 2016 compared to $42 million, or $0.30 per diluted share, in the third 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 September 30, 2016.
Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, "We reported another quarter of solid growth, propelled by the strength of our brands. Adjusted EBITDA grew about 12% in the quarter, excluding the impact of transactions and foreign currency translation. Once again, we saw relative strength in the Americas region, driven primarily by group business. Our outlook for the overall business for the remainder of 2016 is positive, and we reconfirm our expectations for comparable systemwide RevPAR growth in a range of approximately 2% to 3% for the year."
Third quarter 2016 financial highlights as compared to the third quarter of 2015 are as follows:
- Net income increased 148% to $62 million.
- Adjusted EBITDA increased 12.3% to $192 million, up 12.9% in constant currency.
- Comparable systemwide RevPAR increased 2.5%, including an increase of 1.0% at comparable owned and leased hotels.
- Comparable U.S. hotel RevPAR increased 3.8%; full service and select service hotel RevPAR increased 3.4% and 4.6%, respectively.
- Net hotel and net rooms growth was 9% and 7%, respectively.
- Comparable owned and leased hotels segment operating margins increased 80 basis points to 23.2%.
Mr. Hoplamazian continued, "Looking ahead, we believe we are well positioned to deliver against our growth strategy, by serving the needs of high-end travelers. Additionally, given our executed contract base of approximately 61,000 rooms, or more than 35% of our current room base, we believe our portfolio of high-quality brands is poised for meaningful and sustainable growth. Last week, we announced an exciting new loyalty program, World of Hyatt, which we expect will drive even higher levels of guest preference once it officially launches in March of next year. With the positive momentum we see in our business, we expect another year of solid growth in 2017."
Third quarter 2016 segment results as compared to the third 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 9.1% (10.1% in constant currency) including a 9.5% increase in pro rata share of unconsolidated hospitality ventures Adjusted EBITDA. Refer to the table on page 17 of the schedules for a detailed list of portfolio changes and the year-over-year net impact to third quarter owned and leased hotels segment Adjusted EBITDA. Owned and leased hotels revenue increased 3.8% (4.6% in constant currency) and expenses increased 4.4%.
RevPAR for comparable owned and leased hotels increased 1.0%. Occupancy increased 100 basis points and ADR decreased 0.3%.
Comparable owned and leased hotels revenue increased 1.2%. Excluding expenses related to benefit programs funded through rabbi trusts and non-comparable hotel expenses, expenses increased 0.3%. Comparable owned and leased hotels segment operating margins increased 80 basis points to 23.2%, largely due to non-operational items. Refer to the table on page 11 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 third quarter:
- Royal Palms Resort and Spa in Arizona, part of The Unbound Collection by Hyatt (owned, 119 rooms)
The following hotel was removed from the owned and leased hotels portfolio due to the sale in the third quarter:
- Hyatt Regency Birmingham in the United Kingdom (319 rooms). The Company entered into a long-term management agreement with the buyer; therefore, the hotel remains in the Hyatt system.
Management and Franchise Fees
Total fee revenue increased 6.8% (consistent with change in constant currency) to $110 million. Base management fees increased 4.3% to $49 million and incentive management fees increased 8.7% to $25 million. Franchise fees increased 12.5% to $27 million, primarily due to new and converted hotels and improved performance at existing hotels in the Americas. Other fee revenues were flat at $9 million.
Americas Management and Franchising Segment
Americas management and franchising segment Adjusted EBITDA increased 4.1% (consistent with change in constant currency). RevPAR for comparable Americas full service hotels increased 3.8%; occupancy increased 70 basis points and ADR increased 2.9%. RevPAR for comparable Americas select service hotels increased 4.6%; occupancy increased 80 basis points and ADR increased 3.6%. Revenue from management, franchise and other fees increased 5.9% (consistent with change in constant currency).
Group rooms revenue at comparable U.S. full service hotels increased approximately 6%, with most of the increase coming from ADR. Group revenue in the third quarter benefited from the timing of Jewish holidays which shifted into October this year from September last year. The year-over-year comparison benefit of these holiday shifts is likely to reverse in the fourth quarter. Transient rooms revenue at comparable U.S. full service hotels increased approximately 2%, driven primarily by increased ADR.
The following eight hotels were added to the portfolio in the third quarter:
- Royal Palms Resort and Spa, part of The Unbound Collection by Hyatt (owned, 119 rooms)
- Andaz Ottawa Byward Market, Canada (managed, 200 rooms)
- Hyatt Place Arlington / Courthouse Plaza (franchised, 168 rooms)
- Hyatt Place Houston / Katy (franchised, 130 rooms)
- Hyatt Place Salt Lake City / Farmington / Station Park (franchised, 108 rooms)
- Hyatt Place St. Paul / Downtown (franchised, 149 rooms)
- Hyatt House at Anaheim Resort / Convention Center (franchised, 262 rooms)
- Hyatt House Portland / Downtown (managed, 203 rooms)
Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA increased 16.7% (consistent with change in constant currency). RevPAR for comparable ASPAC full service hotels increased 1.8%, driven by strength in Southeast Asia, Hong Kong, and the Pacific, offset by softness in Japan. RevPAR growth in China was broadly in-line with the overall segment. Occupancy increased 300 basis points and ADR decreased 2.4%. Revenue from management, franchise and other fees increased 9.5% (consistent with change in constant currency).
The following three hotels were added to the portfolio in the third quarter:
- Park Hyatt Hangzhou, China (managed, 242 rooms)
- Grand Hyatt Sanya Haitang Bay Resort and Spa, China (managed, 435 rooms)
- Hyatt Regency Xi'an, China (managed, 298 rooms)
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management Segment
EAME/SW Asia management segment Adjusted EBITDA increased 14.3% (consistent with change in constant currency). RevPAR for comparable EAME/SW Asia full service hotels decreased 7.8%, driven by softness in France, Switzerland, and Turkey, and offset by strength in Eastern Europe and India. Segment RevPAR growth was favorably impacted by approximately 300 basis points driven by the removal of the 950-room Hyatt Regency Paris Étoile from the comparable set, due to the longer-than-expected renovation period. Occupancy increased 80 basis points and ADR decreased 8.8%. Revenue from management and other fees decreased 6.3% (consistent with change in constant currency).
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 37.0%. Adjusted selling, general, and administrative expenses decreased 6.0%, due in part to a reduction in professional fees. Refer to the table on page 10 of the schedules for a reconciliation of Adjusted selling, general, and administrative expenses to selling, general, and administrative expenses.
OPENINGS AND FUTURE EXPANSION
Eleven hotels (or 2,314 rooms) were added in the third quarter of 2016, each of which is listed above. The Company's net rooms increased 7%, compared to the third quarter of 2015. Hyatt is on pace to add more than 60 hotels in the 2016 fiscal year.
As of September 30, 2016, the Company had executed management or franchise contracts for approximately 285 hotels (or approximately 61,000 rooms), consistent with Hyatt's previous expectation. 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 third quarter of 2016, the Company repurchased 2,607,434 shares of common stock (725,798 Class A, and 1,881,636 Class B) at a weighted average price of $52.54 per share, for an aggregate purchase price of approximately $137 million. As of September 30, 2016, the Company had approximately $111 million remaining under its share repurchase authorization, and 23,592,340 Class A and 107,247,326 Class B shares issued and outstanding. There have been no share repurchases to-date in the fourth quarter.
CORPORATE FINANCE / ASSET RECYCLING
In the third quarter, the Company completed the following transactions:
- Completed the acquisition of the Royal Palms Resort and Spa in Arizona (119 rooms) for approximately $88 million and added the hotel to The Unbound Collection by Hyatt.
- Sold the shares of the company that owns Hyatt Regency Birmingham in the United Kingdom (319 rooms) for approximately $51 million. The Company continues to manage the hotel under a long-term management contract.
- In separate transactions, two unconsolidated hospitality ventures in which the Company holds or held an ownership interest each sold one Hyatt Place hotel to third parties, for which Hyatt received combined proceeds of approximately $7 million. The hotels continue to be Hyatt-branded.
BALANCE SHEET / OTHER ITEMS
As of September 30, 2016, the Company reported the following:
- Total debt of $1.5 billion.
- Pro rata share of unconsolidated hospitality venture debt of $799 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 $544 million, short-term investments of $46 million and restricted cash of $66 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:
- Comparable systemwide RevPAR is expected to increase approximately 2% to 3%, as compared to fiscal year 2015.
- Adjusted selling, general, and administrative expenses are expected to be approximately $280 million. This excludes approximately $30 million of stock-based compensation expense and any potential expense impact related to benefit programs funded through rabbi trusts.
- Depreciation and amortization expense is expected to be approximately $340 million.
- 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 unconsolidated hospitality ventures, investments in debt securities, management and franchise agreement intangibles or other investments.
- The Company expects to open more than 60 hotels in 2016.
The Company is revising the following information for the 2016 fiscal year:
- Capital expenditures are expected to be approximately $250 million (compared to previous expectation of approximately $260 million), including approximately $75 million (compared to previous expectation of approximately $80 million) for investment in new properties under development or recently opened.
To view full financial release and corresponding tables please click the PDF icon or visit: http://s2.q4cdn.com/278413729/files/doc_financials/q3_2016/Q3-2016-Earnings-Release.pdf
