Hyatt reported a strong start to 2024, with system-wide RevPAR increasing by 5.5%.
Leisure transient revenue rose by 7% in Q1, while group room revenue increased by approximately 6%.
Business transient revenue grew by about 6% in the quarter, with a notable increase in April of 21% globally compared to 2023.
World of Hyatt membership grew 22% over the past year, reaching approximately 46 million members.
Hyatt’s development pipeline reached a record of approximately 129,000 rooms, a 10% year-over-year increase.
Net rooms growth was 5.5%, with significant openings in various locations.
Strategic Developments and Partnerships
More than 700 Mr & Mrs Smith properties are now available through Hyatt channels, with expectations to reach 1,000 by year-end.
Collaboration with Peloton announced to reward World of Hyatt members.
Hyatt was recognized with several accolades for its loyalty program and properties.
Transaction and Asset Sales
Completed the sale of Hyatt Regency Aruba and three other properties for combined proceeds of $535 million.
Provided $45 million in seller financing for the Park Hyatt Zurich sale.
Hyatt’s stake in Juniper Hotels, post-IPO, is valued close to $475 million.
Hyatt has realized $1.5 billion of gross proceeds from its $2 billion asset sell-down commitment.
Financial Results and Outlook
First quarter gross fees were $262 million, up 13%.
Management and franchising segment adjusted EBITDA increased approximately 10%.
Owned and leased segment adjusted EBITDA decreased by 9% when adjusted for asset dispositions.
Total company adjusted EBITDA for Q1 was $252 million, a 3% increase year-over-year when excluding certain impacts.
Total liquidity as of March 31, 2024, was $2.3 billion.
Over $400 million returned to shareholders in Q1 through dividends and share repurchases.
2024 full year system-wide RevPAR growth expected to be between 3% and 5%.
Net rooms growth projected to be between 5.5% and 6%.
Updated outlook for adjusted EBITDA is now $1.15 billion to $1.19 billion.
Capital returns to shareholders for 2024 are expected to be in the range of $800 million to $850 million.
Question and Answer
Asset Sales and Capital Allocation
Question
How does the company view future asset sales after reaching the $2 billion target, and what is the capital allocation strategy moving forward?
Answer
The company will exceed 80% fee-based earnings after closing remaining asset sales and is fully asset-light.
No new targeted sell-down program will be published, but the company will continue to opportunistically sell assets, particularly high-value properties.
The company will also pursue value-accretive opportunities to buy and sell hotels while retaining long-term management agreements.
RevPAR Guidance and Market Trends
Question
What are the key factors influencing the 3% to 5% RevPAR guidance, and how has the outlook for China evolved?
Answer
International markets are exceeding the high end of the RevPAR guidance range, driven by strong performance and inbound travel, particularly in China and Asia Pacific.
The U.S. is on the lower end of the RevPAR guidance, with group business and business transient showing strength in the later quarters of the year.
China is experiencing positive trends with increasing international inbound travel, although still below pre-COVID levels, and strong outbound travel to destinations like Japan, South Korea, and Thailand.
ALG Vacations and Distribution Segment
Question
Can you elaborate on the performance of ALG Vacations, specifically regarding the balance between strong packaged tour demand and distribution headwinds?
Answer
ALG Vacations experienced a $20 million headwind in the first quarter, primarily due to extraordinary comparisons from the previous year when the company backfilled air demand and drove traffic to its all-inclusive resorts.
While packaged levels have decreased, demand for the company’s resorts remains strong, with Cancun showing positive pace.
The performance of ALG Vacations can differ from the company’s resorts due to the mix of packages and markets served by ALG Vacations.
Distribution Segment Margin and Performance
Question
What are the expectations for the distribution segment margin and underlying top-line assumptions, and how do they compare to pre-COVID levels?
Answer
The distribution margin is expected to be within the range of 16% to 19% for the full year, with flat margins for the last three quarters of the year, excluding the first-quarter headwind.
The company is seeing a healthy pipeline and more opportunities for growth, including brand acquisitions and management company deals, all of which are expected to be asset-light or have clear asset strategies.
Capital Structure and Debt Capacity
Question
How is the company thinking about its capital structure as the model shifts, and what factors are being considered to potentially take advantage of greater debt capacity?
Answer
The capital allocation strategy remains focused on generating free cash flow, maintaining an investment-grade profile, and returning excess cash to shareholders.
The company’s ratios are currently strong, and as it evaluates opportunities for growth, it will balance managing those ratios with pursuing growth.
M&A and Growth Opportunities
Question
How has the company’s approach to capital allocation and M&A evolved, and are there more or less opportunities for growth compared to previous periods?
Answer
The company is currently more actively engaged in transactions than in the past year, with a significant pipeline and a focus on customer base, geography, and expanding the network effect for World of Hyatt.
The company is pursuing both on-market and off-market opportunities, with a preference for fully asset-light or clearly defined asset strategies.
World of Hyatt and Mr & Mrs Smith
Question
What are the drivers behind the significant increase in the World of Hyatt loyalty program, and how is the relationship with Mr & Mrs Smith evolving?
Answer
The World of Hyatt program has been continuously refined to cater to the core customer base, with a focus on building network effect and driving direct bookings.
The partnership with Mr & Mrs Smith has seen strong early traction, with thousands of room nights booked at high rates, primarily in Europe.
Over time, the company expects to segment the Mr & Mrs Smith portfolio and offer franchise arrangements to hotel owners interested in a deeper connection with the Hyatt network.
Other Fees and Credit Card Contracts
Question
What are the expectations for other fees within revenues, and when is the next major credit card contract renegotiation coming up?
Answer
Other fees are expected to continue growing at a healthy pace, driven by strong RevPAR and package RevPAR performance.
Discussions on the renewal of the credit card contract will begin later this year and extend into early next year.
EBITDA Outlook and Buyback Program
Question
How do you expect EBITDA to trend by quarter, and what factors influenced the sizing of the buyback increase to $800 million?
Answer
The company highlights the strength and positive trends across all three business segments, with particular strength in business transient, group, and leisure travel.
The $800 million buyback increase reflects the evaluation of increased proceeds from asset sales and the potential for excess cash generation throughout the year.
Juniper Hotel Stake
Question
What are the company’s intentions regarding the Juniper Hotel stake, and how does the outlook for the Indian market impact these plans?
Answer
The company is pleased with the IPO of Juniper and its performance, and the management team sees opportunities for further growth in the Indian market.
While the company expects to eventually lighten its stake, the timing is not yet determined.
