CHICAGO--Hyatt Hotels Corporation (“Hyatt” or the “Company”) (NYSE: H) today reported first quarter 2013 financial results as follows:
- Adjusted EBITDA was $131 million in the first quarter of 2013 compared to $125 million in the first quarter of 2012, an increase of 4.8%.
- Adjusted for special items, net income attributable to Hyatt was $14 million, or $0.09 per share, during the first quarter of 2013 compared to net income attributable to Hyatt of $5 million, or $0.03 per share, during the first quarter of 2012.
- Net income attributable to Hyatt was $8 million, or $0.05 per share, during the first quarter of 2013 compared to net income attributable to Hyatt of $10 million, or $0.06 per share, in the first quarter of 2012.
- Comparable owned and leased hotel RevPAR increased 4.5% (4.4% excluding the effect of currency) in the first quarter of 2013 compared to the first quarter of 2012.
- Owned and leased hotel operating margins increased 20 basis points in the first quarter of 2013 compared to the first quarter of 2012. Comparable owned and leased hotel operating margins were flat in the first quarter of 2013 compared to the first quarter of 2012.
- Comparable systemwide RevPAR increased 2.4% (3.2% excluding the effect of currency) in the first quarter of 2013 compared to the first quarter of 2012.
- Comparable U.S. full service hotel RevPAR increased 2.7% in the first quarter of 2013 compared to the first quarter of 2012. Comparable U.S. select service hotel RevPAR increased 6.4% in the first quarter of 2013 compared to the first quarter of 2012.
- Eight properties were opened. As of March 31, 2013, the Company's executed contract base consisted of approximately 200 hotels or 45,000 rooms.
- The Company repurchased 664,951 shares of Class A common stock at a weighted average price of $41.32 per share, for an aggregate purchase price of approximately $27 million.
- On April 30, 2013, the Company's Board of Directors authorized the repurchase of up to an additional $200 million of common stock.
Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation, said, "Our first quarter of 2013 reflected continued improvement in average daily rates with comparable owned and leased average daily rate increasing 4% excluding the impact of currency. We continued to see strength in transient demand, however group demand declined, in part due to the timing of Easter as compared to the prior year.
"Our global realignment has been completed and we are seeing the benefits of increased adaptability and innovation. We are operating under a structure that is able to be leveraged as we continue to expand. We believe that our current run-rate in SG&A is at a normalized level and we continue to maintain discipline on expense growth.
"We continue to execute on our strategy of expanding in new and attractive markets, with hotels opening in the United States, South Korea, China and India. We increased our presence in India and France with announced conversions of five existing hotels in India and four iconic hotels in France. We also acquired a historic landmark property, The Driskill, located in Austin, Texas. We remain active in our asset recycling program and seek opportunities to grow our portfolio of hotels. Our executed contract base, as a percentage of our existing portfolio, is the largest among our peers which indicates strong demand for our brands around the world.
"Looking ahead, we continue to focus on improving performance at existing hotels and expanding in new and attractive markets. Owned hotels that have recently undergone renovations are performing well, particularly in New York and San Francisco. As the year progresses, we expect margins to improve as we benefit from increases in average daily rate.
"Finally, we continue to create long-term value for our stockholders by investing in growth for our business while at the same time returning capital to our stockholders. In the first quarter, we repurchased approximately $27 million of common stock and are pleased to announce that our Board of Directors has authorized the repurchase of up to an additional $200 million of common stock."
Owned and Leased Hotels Segment
Total segment Adjusted EBITDA increased 2.2% in the first quarter of 2013 compared to the same period in 2012. Owned and leased Adjusted EBITDA increased 5.3% in first quarter of 2013 compared to the same period in 2012. Pro rata share of unconsolidated hospitality ventures Adjusted EBITDA decreased 11.1% in the first quarter of 2013 compared to the same period in 2012. The decrease was primarily due to asset sales and weaker performance in certain international markets.
RevPAR for comparable owned and leased hotels increased 4.5% (4.4% excluding the effect of currency) in the first quarter of 2013 compared to the same period in 2012. Occupancy improved 20 basis points and ADR increased 4.1% (4.0% excluding the effect of currency) compared to the same period in 2012.
Revenue increased 4.0% in the first quarter of 2013 compared to the same period in 2012. Comparable hotel revenue increased 1.7% in the first quarter of 2013 compared to the same period in 2012.
Revenue for comparable owned and leased hotels was negatively impacted by a decline in group room revenue and lower banquet revenue.
Owned and leased hotel expenses increased 3.7% in the first quarter of 2013 compared to the same period in 2012. Excluding expenses related to benefit programs funded through Rabbi Trusts and non-comparable hotel expenses, expenses increased 1.6% in the first quarter of 2013 compared to the same period in 2012. See the table on page 9 of the accompanying 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:
- The Driskill (owned, 189 rooms)
Americas Management and Franchising Segment
Adjusted EBITDA increased 4.3% in the first quarter of 2013 compared to the same period in 2012.
RevPAR for comparable Americas full service hotels increased 2.6% (2.8% excluding the effect of currency) in the first quarter of 2013 compared to the same period in 2012. Occupancy decreased 70 basis points and ADR increased 3.6% (3.8% excluding the effect of currency) compared to the same period in 2012. RevPAR was negatively impacted by renovations at certain managed hotels and the timing of Easter.
Group rooms revenue at comparable U.S. full service hotels decreased 5.8% in the first quarter of 2013 compared to the same period in 2012. Group room nights decreased 7.4% and group ADR increased 1.7% in the first quarter of 2013 compared to the same period in 2012.
Transient rooms revenue at comparable U.S. full service hotels increased 8.0% in the first quarter of 2013 compared to the same period in 2012. Transient room nights increased 3.7% and transient ADR increased 4.1% in the first quarter of 2013 compared to the same period in 2012.
RevPAR for comparable Americas select service hotels increased 6.4% (6.4% excluding the effect of currency) in the first quarter of 2013 compared to the same period in 2012. Occupancy increased 170 basis points and ADR increased 3.9% (3.9% excluding the effect of currency) compared to the same period in 2012.
Revenue from management and franchise fees was flat in the first quarter of 2013 compared to the same period in 2012. Fees were negatively impacted by the previously mentioned renovations at certain managed hotels, contract change or termination fees received in the prior period and fewer managed hotels in the first quarter of 2013 compared to the same period in 2012.
The following four hotels were added to the portfolio during the first quarter:
- The Driskill (owned, 189 rooms)
- Hyatt Place Corpus Christi (franchised, 103 rooms)
- Hyatt Place Austin Downtown (franchised, 296 rooms)
- Hyatt Place New York/Midtown-South (franchised, 185 rooms)
Southeast Asia, China, Australia, South Korea and Japan (ASPAC) Management and Franchising Segment
Adjusted EBITDA decreased 18.2% in the first quarter of 2013 compared to the same period in 2012.
RevPAR for comparable ASPAC hotels decreased 2.6% (0.4% excluding the effect of currency) in the first quarter of 2013 compared to the same period in 2012. Occupancy increased 70 basis points and ADR decreased 3.6% (1.4% excluding the effect of currency) compared to the same period in 2012. RevPAR was negatively impacted by renovations at several hotels.
Revenue from management and franchise fees decreased 13.6% in the first quarter of 2013 compared to the same period in 2012. Fees were negatively impacted by a contract termination fee received in the prior period and the previously mentioned renovations.
The following two hotels were added to the portfolio during the first quarter:
- Park Hyatt Busan, South Korea (managed, 269 rooms)
- Hyatt Regency Qingdao, China (managed, 439 rooms)
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management Segment
Adjusted EBITDA increased 33.3% in the first quarter of 2013 compared to the same period in 2012.
RevPAR for comparable EAME/SW Asia hotels increased 4.6% (6.2% excluding the effect of currency) in the first quarter of 2013 compared to the same period in 2012. Occupancy increased 440 basis points and ADR decreased 2.5% (1.0% excluding the effect of currency) compared to the same period in 2012.
Revenue from management and franchise fees was flat in the first quarter of 2013 compared to the same period in 2012.
The following two hotels were added to the portfolio during the first quarter:
- Hyatt Amritsar, India (managed, 248 rooms)
- Hyatt Ahmedabad, India (managed, 178 rooms)
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses decreased by 9.7% in the first quarter of 2013 compared to the same period in 2012. Adjusted selling, general, and administrative expenses decreased by 7.2% in the first quarter of 2013 compared to the same period in 2012. See the table on page 8 of the accompanying schedules for a reconciliation of adjusted selling, general, and administrative expenses to selling, general, and administrative expenses.
OPENINGS AND FUTURE EXPANSION
Eight hotels were added in the first quarter of 2013, each of which is listed above.
The Company expects that a significant number of new properties will be opened under various Company brands in the future. As of March 31, 2013 this effort was underscored by executed management or franchise contracts for approximately 200 hotels (or approximately 45,000 rooms) across all brands. The executed contracts represent potential entry into several new countries and expansion into new markets or markets in which the Company is under-represented.
CAPITAL EXPENDITURES
Capital expenditures during the first quarter of 2013 totaled $43 million, categorized as follows:
- Maintenance: $14 million
- Enhancements to existing properties: $20 million
- Investment in new properties: $9 million
SHARE REPURCHASE
During the first quarter of 2013, the Company repurchased 664,951 shares of Class A common stock at a weighted average price of $41.32 per share, for an aggregate purchase price of approximately $27 million. From April 1 through April 26, 2013, the Company repurchased 372,764 shares of Class A common stock at a weighted average price of $41.78 per share, for an aggregate purchase price of approximately $16 million, and had approximately $21 million remaining under its repurchase authorization as of April 26, 2013. On April 30, 2013, the Company's Board of Directors authorized the repurchase of up to an additional $200 million of the Company's common stock. These repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan, at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion. The Company is not obligated to repurchase any dollar amount or any number of shares of common stock, and repurchases may be suspended or discontinued at any time. The Company intends to pay for shares repurchased with cash from its balance sheet.
CORPORATE FINANCE
During the quarter, the Company completed the following transactions:
- Acquired The Driskill in Austin, Texas for approximately $85 million.
- Sold three select service hotels, with an aggregate of 426 rooms, for approximately $36 million.
- Sold its interest in a joint venture for a nominal amount. The joint venture owned one ASPAC hotel which the Company continues to manage under a long-term agreement. As a result of this sale, the Company's pro rata share of unconsolidated hospitality venture debt was reduced by approximately $23 million.
- Entered into long-term management agreements for four hotels in France. In conjunction with the agreements, the Company entered into a seven year performance guarantee.
Subsequent to the end of the quarter, the Company:
- Announced that it will redeem its outstanding 5.750% Senior Notes due 2015, of which an aggregate principal amount of $250 million is currently outstanding, on May 10, 2013. In accordance with the terms of the Notes, the redemption price is expected to be approximately $281 million.
- Commenced a cash tender offer to purchase any and all of its $250 million outstanding aggregate principal amount of 6.875% Senior Notes due 2019.
On March 31, 2013, the Company had total debt of approximately $1.2 billion.
On March 31, 2013, the Company had cash and cash equivalents, including investments in highly-rated money market funds and similar investments, of approximately $330 million and short-term investments of approximately $457 million.
On March 31, 2013, the Company had undrawn borrowing availability of approximately $1.4 billion under its revolving credit facility.
2013 INFORMATION
The Company is providing the following information for the 2013 fiscal year:
- Adjusted SG&A expense is expected to be approximately $305 million.
- Capital expenditures are expected to be approximately $275 million, including approximately $100 million for investment in new properties, such as Grand Hyatt Rio de Janeiro, Hyatt Place Omaha and other properties.
- In addition to the capital expenditures described above, investment spending is expected to be approximately $100 to $120 million. Investment spending includes new equity investments in joint ventures, debt investments, contract acquisition costs, or other investments.
- Depreciation and amortization expense is expected to be approximately $340 million.
- Interest expense is expected to be approximately $70 million (excluding any impact from the previously mentioned 2015 Senior Notes redemption and 2019 Senior Notes tender offer, as these have not been completed).
- Expects to open over 35 hotels in 2013.