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Hyatt U.S. and Systemwide Comparable RevPAR Increased 3.0% and 3.8% During Q4

Hyatt Reports Fourth Quarter 2017 Results

Hyatt Hotels Corporation (NYSE: H) today reported fourth quarter 2017 financial results. Net income attributable to Hyatt was $76 million, or $0.62 per diluted share, in the fourth quarter of 2017, compared to $41 million, or $0.31 per diluted share, in the fourth quarter of 2016. Net income in the fourth quarter of 2017 included a $217 million gain from the sale of Avendra, LLC, an equity method investment, and $110 million of incremental tax attributable to recent U.S. tax reform. Adjusted net income attributable to Hyatt was $29 million, or $0.23 per diluted share, in the fourth quarter of 2017, compared to $39 million, or $0.29 per diluted share, in the fourth quarter of 2016. Refer to the table on page 4 of the schedules for a summary of special items impacting Adjusted net income and Adjusted earnings per share in the three months ended December 31, 2017.

Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, “We had a strong finish to the year, delivering full-year comparable RevPAR growth of 3.3% and net hotel rooms growth of 7.0%, fueled by a record-setting 71 new hotels added to our system in 2017. Double-digit growth in management and franchising fees more than offset an earnings decline in our owned and leased segment, which reflected more than $900 million in asset dispositions.”

Fourth quarter of 2017 financial results as compared to the fourth quarter of 2016 are as follows:

Fiscal year of 2017 financial results as compared to the fiscal year of 2016 are as follows:

Mr. Hoplamazian continued, “We believe we are well-positioned to execute our long-term growth strategy of maximizing our core business focused on high-end travelers, integrating new growth platforms and optimizing capital deployment. Plans to sell roughly $1.5 billion of real estate by the end of 2020 are underway. We remain confident that these actions will support growth in our business and further unlock shareholder value, as evidenced by our initiation of a quarterly cash dividend as well as the increase in our share repurchase authorization.”

Fourth quarter of 2017 financial results as compared to the fourth quarter of 2016 are as follows:

Owned and Leased Hotels Segment

Total owned and leased hotels segment Adjusted EBITDA decreased 8.1% (8.8% in constant currency) including a 34.0% decrease in pro rata share of unconsolidated hospitality ventures Adjusted EBITDA. The decrease in total segment Adjusted EBITDA was primarily driven by transaction activity, partially offset by benefits related to the timing of the Jewish holiday. Refer to the table on page 19 of the schedules for a detailed list of portfolio changes and the year-over-year net impact to fourth quarter owned and leased hotels segment Adjusted EBITDA. Owned and leased hotels segment revenues decreased 2.5% (3.6% in constant currency).

RevPAR for comparable owned and leased hotels increased 4.1%. Occupancy increased 120 basis points and ADR increased 2.4%.

The following hotel was added to the portfolio in the fourth quarter:

The following three hotels were removed from the owned and leased hotels portfolio as they were sold in the fourth quarter:

Management and Franchise Fees

Total fee revenues increased 12.8% (11.9% in constant currency) to $131 million. Base management fees increased 9.5% to $52 million and incentive management fees increased 13.9% to $36 million, driven by new hotels and improved performance at existing hotels. Franchise fees increased 7.6% to $29 million. Other fee revenues increased 38.9% to $14 million, including $8 million of deferred gains.

Americas Management and Franchising Segment

Americas management and franchising segment Adjusted EBITDA increased 6.5% (6.3% in constant currency). RevPAR for comparable Americas full service hotels increased 3.3%; occupancy increased 110 basis points and ADR increased 1.7%. RevPAR for comparable Americas select service hotels increased 4.5%; occupancy increased 170 basis points and ADR increased 2.1%. Revenue from management, franchise and other fees increased 5.2% (5.1% in constant currency).

Group rooms revenue at comparable U.S. full service hotels increased 3.4%; room nights increased 0.8% and ADR increased 2.6%. Group demand was favorably impacted by the timing of the Jewish holiday. Transient rooms revenue at comparable U.S. full service hotels increased 2.0%; room nights increased 0.5% and ADR increased 1.5%.

The following 16 hotels were added to the portfolio during the fourth quarter:

Four hotels were removed from the portfolio during the fourth quarter.

Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia (ASPAC) Management and Franchising Segment

ASPAC management and franchising segment Adjusted EBITDA increased 17.9% (15.7% in constant currency). RevPAR for comparable ASPAC full service hotels increased 4.3%, driven by strong growth in Greater China and Southeast Asia. Occupancy increased 180 basis points and ADR increased 1.8%. Revenue from management, franchise and other fees increased 16.7% (15.0% in constant currency).

The following seven hotels were added to the portfolio during the fourth quarter:

Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management and Franchising Segment

EAME/SW Asia management and franchising segment Adjusted EBITDA increased 36.9% (31.7% in constant currency). RevPAR for comparable EAME/SW Asia full service hotels increased 3.8%, driven by growth in most European markets and partially offset by weak performance in the Middle East. Occupancy increased 200 basis points and ADR increased 0.7%. Revenue from management, franchise and other fees increased 15.8% (12.4% in constant currency).

The following six hotels were added to the portfolio during the fourth quarter:

Corporate and Other

Corporate and other Adjusted EBITDA increased 8.6% (consistent in constant currency). Corporate and other revenues increased 228.9% (consistent in constant currency), primarily driven by new business platforms, including Miraval and exhale in the wellness space, while also driven by increased revenues related to the Company’s co-branded credit card.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased 30.2%. Adjusted selling, general, and administrative expenses increased 21.4%, reflecting increased payroll and related costs, including severance charges, acquisitions and certain marketing initiatives in 2017. Refer to the table on page 10 of the schedules for a reconciliation of selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses.

OPENINGS AND FUTURE EXPANSION

Twenty-nine hotels (or 6,533 rooms) were added in the fourth quarter of 2017, each of which is listed above. The Company’s net rooms were 7.0% higher in the fourth quarter of 2017, compared to the fourth quarter of 2016. During the 2017 fiscal year, the Company opened a record 71 hotels, representing 13,698 rooms. Six hotels, representing 1,520 rooms, were removed from the portfolio during the 2017 fiscal year.

As of December 31, 2017, the Company had executed management or franchise contracts for approximately 330 hotels (approximately 70,000 rooms), compared to the expectation for 315 hotels and 69,000 rooms as of September 30, 2017. The pipeline of executed contracts represent important potential entry into several new countries and expansion into new markets or markets in which Hyatt is under-represented. Refer to the table on page 18 of the schedules for a breakdown of the pipeline.

DIVIDEND / SHARE REPURCHASE

As part of the Company’s commitment to return meaningful capital to shareholders, the Company is initiating a quarterly cash dividend of $0.15 per share, representing an annualized dividend of $0.60 per share. The initial dividend will be payable on March 29, 2018 to Class A and Class B shareholders on record as of March 22, 2018.

During the 2017 fiscal year, the Company repurchased a record $723 million of shares, consisting of 12,186,308 shares of common stock (9,096,871 Class A shares and 3,089,437 Class B shares), at a weighted average price of $59.34 per share. During the fourth quarter of 2017, the Company repurchased 2,693,579 shares of common stock (1,417,601 Class A shares and 1,275,978 Class B shares) for an aggregate purchase price of $188 million. The Company ended the fourth quarter with 48,231,149 Class A and 70,753,837 Class B shares issued and outstanding.

From January 1 through February 9, 2018, the Company repurchased 277,760 shares of Class A common stock for an aggregate purchase price of $23 million. This includes a final tranche of Class A shares that settled as part of a November 2017 accelerated share repurchase program. As of February 9, 2018, the Company had approximately $861 million remaining under its share repurchase authorization.

CAPITAL STRATEGY UPDATE

During the fourth quarter, the Company completed the following transactions:

The Company continues to execute plans to sell approximately $1.5 billion of real estate by the end of 2020 as part of its long-term growth strategy. The disposition of Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch and Royal Palms Resort and Spa in the fourth quarter of 2017 reflects progress towards this goal. Additional properties are being actively marketed for sale.

BALANCE SHEET / OTHER ITEMS

As of December 31, 2017, the Company reported the following:

2018 OUTLOOK

The Company is providing the following information for the 2018 fiscal year:

The above does not reflect anticipated changes resulting from the adoption of the new revenue recognition standard in 2018. The Company is in the process of finalizing the adoption impact and restatement of prior year results. As previously disclosed, the most material non-cash impact to Adjusted EBITDA relates to the change in accounting for deferred gains which would result in a reduction of $25 million in 2017 and an anticipated reduction of approximately $31 million in 2018.

The Company plans to update its 2018 Outlook in connection with its first quarter earnings release to reflect the impact of the new revenue recognition standard.

The Company’s outlook is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that Hyatt will achieve these results.

Hyatt Hotels Corporation, headquartered in Chicago, is a leading global hospitality company with a portfolio of 14 premier brands. As of December 31, 2017, the Company’s portfolio included more than 700 properties in more than 50 countries across six continents. 

Posted by on February 14, 2018.

Categories: Hotel Industry News

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