- System-wide RevPAR Growth: 4.7%
- Leisure Transient Revenue: Decreased approximately 2% in the quarter, up 2% excluding Easter impact
- Group Revenue: Increased approximately 8% in the quarter
- Business Transient Revenue: Increased approximately 14%
- Luxury RevPAR: Increased 6.9%
- Upper Upscale Brands RevPAR: Increased 4.2%
- World of Hyatt Membership: Reached approximately 48 million members, a 21% increase year-over-year
- Pipeline Rooms: Approximately 130,000 rooms, a 9% increase year-over-year
- Net Rooms Growth: 4.6%
- Asset Sales Proceeds: $1.5 billion towards $2 billion commitment
- Gross Fees: $275 million, up 12%
- Franchise and Other Fees: Increased 32%
- Management and Franchising Segment Adjusted EBITDA: Increased approximately 11%
- Owned and Leased Segment Adjusted EBITDA: Increased by 9%
- Total Liquidity: Approximately $3.5 billion
- Total Debt Outstanding: Approximately $3.9 billion
- Share Repurchases: $134 million of Class A common shares
- System-wide RevPAR Growth Outlook for 2024: 3% to 4%
- Net Rooms Growth Outlook for 2024: 5.5% to 6%
- Gross Fees Outlook for 2024: $1.085 billion to $1.115 billion
- Adjusted G&A Outlook for 2024: $425 million to $435 million
- Adjusted EBITDA Outlook for 2024: $1.135 billion to $1.175 billion
- Free Cash Flow Outlook for 2024: $560 million to $610 million
- Capital Returns to Shareholders Outlook for 2024: $800 million to $850 million
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hyatt Hotels Corp (H, Financial) reported system-wide RevPAR growth of 4.7%, driven by strong group and business transient segments.
- Group revenue increased approximately 8% in the quarter, with strong results in major U.S. urban markets.
- World of Hyatt membership reached a new record of approximately 48 million members, a 21% increase over the past year.
- The company achieved net rooms growth of 4.6% in the quarter, with notable openings including Park Hyatt Zurich and Hyatt Grand Island in Cancun.
- Hyatt Hotels Corp (H) completed asset sales totaling $1.5 billion, nearing their $2 billion disposition commitment.
Negative Points
- Leisure transient revenue decreased approximately 2% in the quarter, impacted by Easter, renovations, and wildfires in Maui.
- RevPAR in Greater China decreased by approximately 3%, affected by unfavorable macro conditions and increased outbound Chinese travel.
- The company expects third-quarter adjusted EBITDA for ALG Vacations to decline by approximately $5 million due to cancellations and system disruptions.
- Hyatt Hotels Corp (H) revised its full-year system-wide RevPAR growth outlook to 3-4%, reflecting lower incentive fee contributions from Greater China and the U.S.
- The company faces headwinds from significant renovations at key U.S. resorts and weaker demand in secondary and tertiary markets in China.
Q & A Highlights
Q: Can you elaborate on the trends in the leisure transient area in the US and the outlook for the Caribbean and Mexico?
A: Mark Hoplamazian, President and CEO: We are seeing an evening out of demand over time, with disruptions in airline traffic causing short-lived impacts. Despite headwinds from renovations and issues in Maui, demand remains high, significantly above pre-pandemic levels. We expect a tougher third quarter but a more robust fourth quarter based on airline schedules and booking trends. Joan Bottarini, CFO: In the Caribbean, we had strong first-quarter growth and a 2% increase in the second quarter. We expect mid-single-digit growth for the full year, with strong pacing into the festive season.
Q: What are the recent trends in China development and pipeline signings, and how dependent is your rooms growth on China?
A: Mark Hoplamazian, President and CEO: Greater China and Asia Pacific have been major contributors to our pipeline and room openings. We are seeing high-quality openings and strong network effects among our high-end brands. The impact of China on our overall growth is significant, but we are encouraged by the continued strength and platform for future growth. The disruptions are more impactful at lower chain scales, although some luxury hotels have also been affected by increased outbound travel from high-end Chinese consumers.
Q: How do you plan to use the proceeds from the upcoming asset sale, given your strong liquidity position?
A: Joan Bottarini, CFO: We will announce any transactions when they close and update our outlook accordingly, including shareholder returns. We remain committed to our capital allocation strategy, which includes investing in growth, maintaining an investment-grade profile, and returning capital to shareholders.
Q: Can you discuss the pacing of group bookings for the second half of this year and 2025?
A: Mark Hoplamazian, President and CEO: Group bookings are pacing up 7% for the second half of this year, with strong ADR growth. For 2025, we have about 60% of our total business on the books, with tentative bookings running ahead of anything we've seen before. The strength is widespread across various segments, including pharma, tech, and financial services.
Q: What should we expect for incentive management fees in the second half of the year?
A: Joan Bottarini, CFO: We expect to perform better relative to last year in the second half regarding incentive fees. The change in our outlook reflects a 13% growth year-over-year, with about 50% of the change driven by incentive management fees and the other 50% by base and franchise fees. The impact is concentrated in China and the US.
Q: Were there any outsized deletions in the first half of the year affecting net unit growth, and what are the expectations for the second half?
A: Mark Hoplamazian, President and CEO: There were some terminations, but they were not particularly outsized. We have a robust opening schedule for Q3 and Q4, with a significant portion expected to be conversions. We are working on several portfolio deals and strategic partnerships, which we expect to close by year-end or early next year.
Q: How should investors think about the cyclicality of lease-oriented management fees in Europe?
A: Mark Hoplamazian, President and CEO: Lease-oriented management fees are not particularly cyclical but depend on prevailing rates. We have a limited number of leases in our portfolio and prefer not to be lessees. However, working with lessees as managers or franchisors presents significant growth opportunities, especially in Europe.
Q: What is your confidence in hitting the 2025 targets set during the Investor Day, given the revised 2024 outlook?
A: Mark Hoplamazian, President and CEO: Our outlook depends on the overall economic environment and capital market conditions. We are on track with our CapEx reduction and asset-light trajectory, which will support our free cash flow growth. While we may not fully recover to the 6-7% net rooms growth by next year, the general direction is consistent with our Investor Day targets.
Q: What was the rationale behind changing the definition of adjusted EBITDA to exclude transaction and integration costs?
A: Joan Bottarini, CFO: These are one-time costs related to integration and transaction activities, and excluding them provides a better representation of our core earnings. The change reflects the variable nature of these costs and aligns with how we evaluate operating performance.
Q: What percentage of your incentive management fees currently come from China, and what is the booking window for your Chinese business?
A: Joan Bottarini, CFO: Greater China represents about high single digits of our total fees, with over 90% of our hotels earning incentive fees. The booking window in China is very short, often days, due to the lower proportion of group business compared to other regions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
