Hyatt Hotels Corporation (NYSE: H) yesterday reported first-quarter 2021 financial results. Net loss attributable to Hyatt was $304 million, or $2.99 per diluted share, in the first quarter of 2021, compared to net loss attributable to Hyatt of $103 million, or $1.02 per diluted share, in the first quarter of 2020. Adjusted net loss attributable to Hyatt was $363 million, or $3.57 per diluted share, in the first quarter of 2021, compared to Adjusted net loss attributable to Hyatt of $35 million, or $0.35 per diluted share, in the first quarter of 2020. Refer to the table on page 11 of the schedules for a summary of special items impacting Adjusted net loss and Adjusted losses per diluted share for the three months ended March 31, 2021 and March 31, 2020.
Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, “First quarter results exceeded expectations as demand improved meaningfully over the course of the quarter. The expansion of vaccine distribution and the easing of travel restrictions in certain markets fueled improved confidence in travel in many of the markets in which we operate. We also reported strong net rooms growth of 6.5%, reaching an important milestone with the opening of our 1,000th hotel in the quarter.”
First quarter of 2021 highlights are as follows:
- Net losses increased compared to the first quarter of 2020 to a net loss of $304 million. The net loss included a $193 million non-cash full valuation allowance on U.S. deferred income tax assets.
- Adjusted EBITDA decreased 123.3% compared to the first quarter of 2020, to $(20) million.
- Comparable system-wide RevPAR decreased 48.9% compared to the first quarter of 2020, and decreased 65.4% compared to the first quarter 2019 on a reported basis.1
- Comparable owned and leased hotels RevPAR decreased 64.4% compared to the first quarter of 2020, and decreased 72.5% compared to the first quarter 2019 on a reported basis.1
- Net rooms growth of 6.5%.
- Pipeline of executed management or franchise contracts for approximately 100,000 rooms.
- As of March 31, 2021, the Company had cash, cash equivalents and short-term investments of $1,628 million.
Mr. Hoplamazian continued, “While risks do remain in the management of the pandemic, we are optimistic about continued growth of demand in the coming months and the balance of 2021. The demand levels we saw in March have continued through April. While leisure travel continues to lead the recovery, we are encouraged by positive indicators across other travel segments as well.”
Comparable system-wide RevPAR and comparable owned and leased hotel RevPAR improved in the first quarter of 2021 compared to the fourth quarter of 2020. The pace of recovery varied by region and was favorably impacted by the easing of travel restrictions in certain markets and strengthening demand for leisure-oriented destinations. Consistent with trends in each of the last two quarters, the recovery was led by relative strength in Greater China and United States select service hotels. Additionally, certain resort hotels experienced a notable sequential improvement in demand.
Comparable system-wide RevPAR strengthened through the first quarter, increasing over 50% from January to March 2021, and reaching the highest level since the onset of the COVID-19 pandemic. Results were driven by strong leisure transient demand, particularly on weekends and holidays. Group and business transient demand also gained momentum through the quarter, but at a more modest pace. The Company’s overall Adjusted EBITDA for March 2021 was positive.
As of March 31, 2021, 96% of total system-wide hotels (94% of rooms) were open.
FIRST QUARTER RESULTS
First quarter of 2021 financial results as compared to the first quarter of 2020 are as follows:
Management, Franchise and Other Fees
Total management and franchise fee revenues decreased 40.6% (40.7% decrease in constant currency) to $49 million, reflecting a sequential improvement from $47 million reported in the fourth quarter of 2020. Base management fees decreased 48.8% to $24 million, incentive management fees increased 2.2% to $8 million, and franchise fees decreased 38.0% to $17 million during the quarter. Other fee revenues decreased 46.7% to $14 million.
Americas Management and Franchising Segment
Americas management and franchising segment Adjusted EBITDA decreased 59.3% (59.2% decrease in constant currency) to $28 million, reflecting a sequential improvement over the three months of the quarter and lapping the impact of the COVID-19 pandemic that began in March of 2020. At March 31, 2021, 93% of Hyatt’s Americas full service hotels (92% of rooms) and 99% of Americas select service hotels (99% of rooms) were open.
Americas net rooms increased 5.2% compared to the first quarter of 2020.
Southeast Asia, Greater China, Australia, New Zealand, South Korea, Japan and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA decreased 39.7% (40.8% decrease in constant currency) to $5 million. Results across the region were led by Greater China. At March 31, 2021, 97% of Hyatt’s ASPAC full and select service hotels (96% of rooms) were open.
ASPAC net rooms increased 13.6% compared to the first quarter of 2020.
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management and Franchising Segment
EAME/SW Asia management and franchising segment Adjusted EBITDA decreased 102.5% (103.8% decrease in constant currency), reflecting the impact of the COVID-19 pandemic and travel restrictions across parts of the region. At March 31, 2021, 89% of Hyatt’s EAME/SW Asia full and select service hotels (89% of rooms) were open.
EAME/SW Asia net rooms increased 3.3% compared to the first quarter of 2020.
Owned and Leased Hotels Segment
Total owned and leased hotels segment Adjusted EBITDA decreased 183.5% (184.7% decrease in constant currency) to $(29) million. Owned and leased hotels segment results were heavily impacted by the COVID-19 pandemic, but improved meaningfully over the three months of the quarter driven by stronger demand. Refer to the table on page 9 of the schedules for a detailed list of portfolio changes and the year-over-year net impact to total owned and leased hotels segment Adjusted EBITDA. At March 31, 2021, 85% of Hyatt’s owned and leased hotels (83% of rooms) were open.
Corporate and Other
Corporate and other Adjusted EBITDA increased 13.3% (13.7% increase in constant currency) to $(24) million, reflecting a $3 million improvement as compared to the first quarter of 2020. This increase was primarily due to cost containment initiatives that reduced expenses, predominantly payroll and related costs.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 102.0%, inclusive of rabbi trust impact and stock-based compensation. Adjusted selling, general, and administrative expenses decreased 22.5%, or $16 million, as a result of cost containment initiatives that drove decreases in payroll and related costs. Refer to the table on page 12 of the schedules for a reconciliation of selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses.
Net loss in the quarter included a $193 million non-cash full valuation allowance on U.S. deferred income tax assets. This valuation allowance was based on an accounting assessment, as required by U.S. GAAP, which places significant weight on the Company’s recent pre-tax book losses resulting from the impact of COVID-19 on our business. This valuation allowance does not impact cash flows, and does not limit the ability to benefit from current period losses and deferred tax assets on future tax filings.
The Company filed a 2020 U.S. tax refund claim in the quarter and expects to receive a tax refund of approximately $250 million in the second half of 2021 in connection with 2020 net operating losses carried back to prior years under the CARES Act.
OPENINGS AND FUTURE EXPANSION
Twenty-three new hotels (or 3,919 rooms) opened in the first quarter of 2021, contributing to a 6.5% increase in net rooms compared to the first quarter of 2020.
As of March 31, 2021, the Company had executed management or franchise contracts for approximately 490 hotels (or approximately 100,000 rooms).
TRANSACTION / CAPITAL STRATEGY UPDATE
During the first quarter, the Company completed the following transaction:
- In March 2021, the Company acquired its partner’s 50% stake in an unconsolidated joint venture that owned the 467-room Grand Hyatt São Paulo in Brazil for $6 million of cash and recognized a $69 million pre-tax gain. The Company also repaid all third-party mortgage debt on the property, totaling $78 million.
The Company intends to successfully execute plans to sell approximately $1.5 billion of real estate by March 2022 as part of its capital strategy announced in March of 2019. As of March 31, 2021, the Company has realized proceeds of approximately $1.0 billion towards that goal from the disposition of owned assets.
SHARE REPURCHASE / DIVIDEND
There were no Class A or Class B shares repurchased during the first quarter of 2021. The Company ended the first quarter with 40,523,505 Class A and 61,238,749 Class B shares issued and outstanding. Effective March 3, 2020, the Company suspended all share repurchase activity, and suspended its quarterly dividend.
The Company is providing the following guidance for the 2021 fiscal year:
- Adjusted selling, general, and administrative expenses are expected to be approximately $240 million. Refer to the table on page 13 of the schedules for a reconciliation of selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses.
- Capital expenditures are expected to be approximately $110 million.
- The Company expects to grow units, on a net rooms basis, by over 5.0%.
No disposition or acquisition activity beyond what has been completed as of the date of this release has been included in the 2021 Outlook. The Company’s 2021 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.
As of March 31, 2021, the Company reported the following:
- Total debt of $3,242 million.
- Pro rata share of unconsolidated hospitality venture debt of approximately $643 million, compared to $671 million as of December 31, 2020, 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 $1,078 million, restricted cash of $9 million, and short-term investments of $550 million.
- Undrawn borrowing availability of $1,499 million under Hyatt’s revolving credit facility, net of letters of credit outstanding.
On March 18, 2021, the Company successfully amended its revolving credit facility, reinforcing Hyatt’s ability to continue to effectively navigate the COVID-19 recovery period with significant liquidity and flexibility. At March 31, 2021, the Company had approximately $3.1 billion of total liquidity.
ABOUT HYATT HOTELS CORPORATION
Hyatt Hotels Corporation, headquartered in Chicago, is a leading global hospitality company offering 20 premier brands. As of March 31, 2021, the Company’s portfolio included more than 1,000 hotel, all-inclusive, and wellness resort properties in 68 countries across six continents.
1 RevPAR percentage changes calculated from comparable system-wide and comparable owned and leased hotels RevPAR of $132.17 and $173.98, respectively, as reported for the first quarter of 2019.