Hyatt reports first quarter 2016 financial results

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CHICAGO, IL – Hyatt Hotels Corporation today reported first quarter 2016 financial results. Net income attributable to Hyatt was $34 million, or $0.25 per share, during the first quarter of 2016, compared to $22 million, or $0.15 per share, in the first quarter of 2015. Adjusted for special items, net income attributable to Hyatt was $34 million, or $0.25 per share, during the first quarter of 2016 compared to $17 million, or $0.11 per share, during the first quarter of 2015.

Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, “We are pleased with our solid start to the year and encouraged by positive trends in our business. First quarter Adjusted EBITDA grew 9%, excluding the impact of transactions and foreign currency translation, driven by broad-based market share gains, robust performance at our select service hotels and disciplined cost management. Based on current trends, we remain confident in our ability to achieve comparable systemwide RevPAR growth of 3.0% to 5.0% for the year.”


First quarter 2016 financial highlights as compared to the first quarter of 2015 are as follows:

• Adjusted EBITDA increased 4.9% to $194 million, up 7.2% in constant currency.

• Comparable systemwide RevPAR increased 2.2%, including an increase of 3.7% at comparable owned and leased hotels.

• Comparable U.S. full service and select service hotel RevPAR increased 1.7% and 6.5%, respectively.

• Net hotel and net rooms growth was 9% and 7%, respectively.

• Comparable owned and leased hotels operating margins were stable at 25.0%.

Mr. Hoplamazian continued, “Our first quarter results reflect solid progress towards our goal to become the most preferred hospitality brand, as we gained RevPAR market share in each of our segments. Despite headwinds from holiday shifts, comparable systemwide RevPAR grew 2.2% in the quarter. This included a 3.7% RevPAR increase at comparable owned and leased hotels, which also grew market share over the quarter, demonstrating the quality of our owned and leased portfolio. Operating results were also strong at our select service hotels, with RevPAR growth of 6.8% in the Americas and market share gains at nearly two-thirds of our select service properties over the quarter.

“We also made solid progress on our growth efforts, opening 21 new hotels year-to-date, and further expanding our portfolio of brands with the launch of The Unbound Collection by Hyatt. Two particularly significant additions to our portfolio are the beach-front 436-room Grand Hyatt Rio de Janeiro, which we opened in March, and our April acquisition of the 380-room Thompson Hotel in Miami Beach, which we rebranded as The Confidante and added to The Unbound Collection by Hyatt. Both hotels represent Hyatt’s expansion into key markets with significant unmet demand from our guests. Further, each of these developments reflects the strength of our balance sheet, which allows us to strategically invest in our business while continuing to return capital to our shareholders. As of April 29, 2016, we repurchased $84 million of common stock year-to-date and have $295 million remaining under our share repurchase authorization.

“Looking forward, we remain confident in our expectations for continued growth in 2016. Over the long-term, we expect to continue to create significant shareholder value, given our strong brands, high-quality portfolio and strong balance sheet.”

First quarter 2016 segment results as compared to the first quarter of 2015 are as follows:

Owned and Leased Hotels Segment

Total owned and leased hotels segment Adjusted EBITDA increased 5.6% (7.4% in constant currency) based on a 2.0% increase in owned and leased hotels Adjusted EBITDA and a 21.7% increase in pro rata share of unconsolidated hospitality ventures Adjusted EBITDA. Refer to the table on page 15 of the schedules for a detailed list of portfolio changes and the year-over-year net impact to first quarter owned and leased hotels Adjusted EBITDA. Owned and leased hotels revenue increased 1.4% and expenses increased 1.3%.

RevPAR for comparable owned and leased hotels increased 3.7%, driven by strength at owned hotels in Mexico City, Orlando and San Francisco, partially offset by softer performance in San Antonio. Occupancy increased 10 basis points and ADR increased 3.5%.

Comparable owned and leased hotels revenue increased 1.8%. Excluding expenses related to benefit programs funded through rabbi trusts and non-comparable hotel expenses, expenses increased 1.8%, reflecting increases in health insurance and labor costs. Comparable owned and leased hotels operating margins were stable at 25.0% as decreased banquet revenue offset the impact of positive sales growth. Refer to the table on page 9 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 during the first quarter:

• Grand Hyatt Rio de Janeiro, Brazil (owned, 436 rooms)

Management and Franchise Fees

Total fee revenue increased 1.9% (3.9% in constant currency) to $107 million. Base management fees increased 2.3% to $45 million and incentive management fees were flat at $30 million. Franchise fees increased 9.5% to $23 million, primarily due to new and converted hotels and improved performance at existing hotels in the Americas. Other fee revenues decreased 10.0% to $9 million.

Americas Management and Franchising Segment

Adjusted EBITDA increased 4.1%, with insignificant impact from foreign currency. RevPAR for comparable Americas full service hotels increased 2.2%, net of a 170 basis point impact of a shift in Easter holiday timing. Occupancy decreased 90 basis points and ADR increased 3.6%. RevPAR for comparable Americas select service hotels increased 6.8%. Occupancy increased 270 basis points and ADR increased 2.9%. Revenue from management, franchise and other fees increased 3.4%.

Transient rooms revenue at comparable U.S. full service hotels increased 9.8%. Transient room nights increased 6.5% and transient ADR increased 3.1%. Group rooms revenue at comparable U.S. full service hotels decreased 3.5%. Group room nights decreased 4.8% and group ADR increased 1.4%.

The following 13 hotels were added to the portfolio during the first quarter:

• Grand Hyatt Rio de Janeiro, Brazil (owned, 436 rooms)
• Hyatt Regency Aurora – Denver Conference Center (franchised, 249 rooms)
• Hyatt Regency Bloomington – Minneapolis (franchised, 303 rooms)
• Hyatt Place Asheville / Downtown (franchised, 140 rooms)
• Hyatt Place DFW (managed, 137 rooms)
• Hyatt Place Houston / Galleria (franchised, 157 rooms)
• Hyatt Place Lubbock (franchised, 125 rooms)
• Hyatt Place Managua, Nicaragua (franchised, 140 rooms)
• Hyatt Place Park City (managed, 122 rooms)
• Hyatt Place San Juan / City Center, Puerto Rico (managed, 149 rooms)
• Hyatt House Dallas / Frisco (franchised, 132 rooms)
• Hyatt House Denver / Lakewood at Belmar (franchised, 135 rooms)
• Hyatt House Naples / 5th Avenue (franchised, 183 rooms)

One hotel was removed from the portfolio.

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

Adjusted EBITDA was flat (increased 9.1% in constant currency). RevPAR for comparable ASPAC full service hotels increased 1.9%, with relative strength in China and South Korea, partially offset by relative weakness in Hong Kong. Occupancy increased 190 basis points and ADR decreased 1.0%. Revenue from management, franchise and other fees increased 4.8%.

The following two hotels were added to the portfolio during the first quarter:

• Grand Hyatt Chengdu, China (managed, 390 rooms)
• Hyatt Regency Changchun, China (managed, 427 rooms)

One hotel was removed from the portfolio.

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

Adjusted EBITDA increased 14.3% (33.3% in constant currency). RevPAR for comparable EAME/SW Asia full service hotels decreased 5.9%, reflecting mixed results across the sub-regions. Occupancy decreased 170 basis points, reflecting lower occupancy in the Middle East, Africa, France and Turkey, partially mitigated by relative strength in India. ADR decreased 3.3% and revenue from management and other fees was flat.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses decreased 6.4%. Adjusted selling, general, and administrative expenses were flat. Increased payroll and related costs were partially offset by reductions in professional fees. Refer to the table on page 8 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 3,225 rooms) were added in the first quarter of 2016, each of which is listed above. The Company’s net rooms increased 7%, compared to the first quarter of 2015. The company is on pace to open more than 60 hotels during the 2016 fiscal year.

As of March 31, 2016, the Company had executed management or franchise contracts for approximately 260 hotels (or approximately 56,000 rooms). 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 first quarter of 2016, the Company repurchased 1,527,750 shares of common stock at a weighted average price of $41.37 per share, for an aggregate purchase price of $63 million. From April 1 through April 29, 2016, the Company repurchased 440,139 shares of common stock at a weighted average price of $47.71 per share, for an aggregate purchase price of $21 million. As of April 29, 2016, the Company had $295 million remaining under its share repurchase authorization.

CORPORATE FINANCE / ASSET RECYCLING

During the first quarter, the Company completed the following transaction:

• Issued $400 million of 4.850% senior notes due 2026.

Subsequent to the end of the first 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 the 380-room Thompson Miami Beach hotel for approximately $238 million and rebranded the hotel as The Confidante as part of The Unbound Collection by Hyatt.

BALANCE SHEET / OTHER ITEMS

As of March 31, 2016, the Company reported the following:

• Total debt of $1.7 billion.

• Pro rata share of non-recourse unconsolidated hospitality venture debt of $744 million, 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 $771 million, short-term investments of $55 million and restricted cash of $73 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 3.0% to 5.0%, as compared to fiscal year 2015.

• Adjusted selling, general, and administrative expenses are expected to be approximately $290 million. This excludes approximately $30 million of stock-based compensation expense. As previously announced, effective January 1, 2016, the Company’s definition of Adjusted EBITDA has been updated to exclude stock-based compensation expense.

• The Company expects to open more than 60 hotels in 2016.

• 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:

• Capital expenditures are expected to be approximately $275 million (consistent with previous expectation), including approximately $70 million (compared to previous expectation of approximately $90 million) for investment in new properties.

• Depreciation and amortization expense is expected to be approximately $350 million (compared to previous expectation of approximately $325 million).

• Interest expense is expected to be approximately $75 million (compared to previous expectation of approximately $70 million).