Hyatt Posts New Loss of $203M in Q4 2020

Hyatt Hotels Corporation reported a net loss of $203 million for the fourth quarter of 2020, ended Dec. 31, compared to $321 million in the fourth quarter of 2019.

“I am extremely proud of, and grateful for, the achievements of our teams around the world throughout 2020,” said Mark Hoplamazian, president/CEO of Hyatt Hotels Corporation. “The Hyatt family demonstrated resilience in the face of difficult decisions and undertook meaningful action to place Hyatt in a strong position as the recovery unfolds. Amidst a backdrop of challenging operating fundamentals, our net rooms growth was strong, demonstrating the strength of our brands. We opened 72 hotels and entered 27 new markets. Our teams also executed new signings to maintain a pipeline representing over 40% growth of our existing hotel rooms in the future.”

Fourth-quarter 2020 financial results as compared to fourth-quarter 2019 are as follows:

  • Net income (loss) decreased from $321 million to $(203) million.
  • Adjusted EBITDA decreased from $191 million to $(98) million, almost half of which relates to costs incurred on behalf of our managed and franchised properties that the company doesn’t intend to recover from hotel owners.
  • Comparable system-wide RevPAR decreased 68.9%.
  • As of Dec. 31, 2020, the company had cash, cash equivalents and short-term investments of $1,882 million.

Fiscal year 2020 financial results as compared to fiscal year 2019 are as follows:

  • Net income (loss) decreased from $766 million to $(703) million.
  • Adjusted EBITDA decreased from $754 million to $(177) million.
  • Comparable system-wide RevPAR decreased 65.4%.
  • Net rooms growth of 5.2%.
  • As of Dec. 31, 2020, the company’s pipeline consisted of approximately 500 hotels, or approximately 101,000 rooms.

Hoplamazian continued, “We maintained a very strong liquidity position while the fourth quarter showed a modest sequential improvement in RevPAR. We are prepared for whatever 2021 brings, and we are looking ahead to realize improving financial results as vaccine distribution continues and travel restrictions are lifted over time. We continue to be guided by our purpose of caring for people so they can be their best, and this has sustained and strengthened our culture throughout the past year.”

Operational Update
RevPAR continued to show improvement in the fourth quarter of 2020 with comparable system-wide RevPAR and comparable owned and leased hotels RevPAR improving modestly from the third quarter of 2020. The pace of recovery varied by region, and similar to trends in the third quarter, was led by relative strength in Greater China and U.S. select-service hotels.

Consistent with third-quarter trends, occupancy was driven primarily by favorable leisure transient demand, particularly on weekends and holidays in the fourth quarter. Business transient and group demand continued to be muted. Hyatt’s full-service hotels in the Americas were negatively impacted by group cancellations.

Nearly all properties in Hyatt’s system were open at year-end. As of Dec. 31, 2020, 94% of total system-wide hotels (93% of rooms) were open compared to 92% of total system-wide hotels (88% of rooms) at Sept. 30.

Fourth-Quarter Results
Fourth quarter of 2020 financial results as compared to the fourth quarter of 2019 are as follows:

Management, Franchise and Other Fees
Total management and franchise fee revenues decreased 67.4% (67.6% in constant currency) to $47 million, reflecting a sequential improvement from $40 million reported in the third quarter of 2020. Base management fees decreased 66.3% to $22 million, incentive management fees decreased 76.6% to $10 million and franchise fees decreased 57.4% to $15 million. Other fee revenues decreased 31.6% to $12 million.

Americas Management and Franchising Segment
Americas management and franchising segment adjusted EBITDA decreased 90.3% (90.2% in constant currency) to $9 million, including $9 million of bad debt expense. At Sept. 30, 2020, 85% of Hyatt’s Americas full-service hotels (81% of rooms) and 98% of Americas select-service hotels and rooms were open, and throughout the fourth quarter, operations continued to resume, with 90% of Americas full-service hotels and rooms and 99% of Americas select-service hotels and rooms open at Dec. 31.

Americas net rooms increased 3.5% compared to the fourth quarter of 2019.

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 65.5% (66.8% in constant currency) to $9 million, including $1 million of bad debt expense. At Sept. 30, 2020, 92% of Hyatt’s ASPAC full-service hotels (93% of rooms) and 93% of ASPAC select-service hotels (89% of rooms) were open, operations continued to resume throughout the fourth quarter resulting in 98% of Hyatt’s ASPAC full-service hotels (99% of rooms) and 97% of ASPAC select-service hotels (94% of rooms) being open at Dec. 31.

ASPAC net rooms increased 11.4% compared to the fourth quarter of 2019.

Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management and Franchising Segment
EAME/SW Asia management and franchising segment adjusted EBITDA decreased 121.8% (122.4% in constant currency) to $(3) million, including $4 million of bad debt expense. At Dec. 31, 2020, 84% of EAME/SW Asia full- and select-service hotels (85% of rooms) were open. This reflects a slight decrease in the number of hotels open compared to Sept. 30, as a result of new travel restrictions in Europe.

EAME/SW Asia net rooms increased 4.5% compared to the fourth quarter of 2019.

Owned and Leased Hotels Segment
Total owned and leased hotels segment adjusted EBITDA decreased 148.5% (148.6% in constant currency) to $(48) million. Owned and leased hotels segment results were heavily impacted by decreased demand due to the COVID-19 pandemic, and by dispositions in 2019.

At Dec. 31, 2020, 82% of Hyatt’s owned and leased hotels (81% of rooms) were open. This compares to 87% of owned and leased hotels (78% of rooms) at Sept. 30.

Corporate and Other
Corporate and other adjusted EBITDA decreased 57.1% (56.5% decrease in constant currency) to $(65) million, reflecting an incremental $23 million loss as compared to the fourth quarter of 2019. Adjusted EBITDA was negatively impacted by $45 million of costs incurred on behalf of managed and franchised properties to provide necessary system-wide services and programs that we do not intend to recover from hotel owners.

Selling, General, and Administrative Expenses
Selling, general and administrative expenses decreased 5.9% inclusive of rabbi trust impact and stock-based compensation. Adjusted selling, general and administrative expenses decreased 20.7% or $19 million, primarily due to significant decreases in expenses as a result of cost containment initiatives in 2020, primarily payroll and related costs, and integration-related costs incurred in 2019 associated with the acquisition of Two Roads Hospitality LLC, partially offset by an increase in bad debt expense.

Openings and Future Expansion
23 new hotels (or 6,877 rooms) joined Hyatt’s system in the fourth quarter of 2020, contributing to a 5.2% increase in net rooms compared to the fourth quarter of 2019. In 2020, the company opened a total of 72 new hotels (or 14,972 rooms) including 11 operating properties (or 2,837 rooms) that converted to a Hyatt brand.

As of Dec. 31, 2020, Hyatt had a pipeline of executed management or franchise contracts for approximately 500 hotels (approximately 101,000 rooms). The pipeline was unchanged compared to Dec. 31, 2019.

Capital Strategy
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, and as of Dec. 31, 2020, the company has realized proceeds of nearly $1.0 billion towards that goal from the disposition of owned assets. In December 2020, Hyatt sold the shares of the entities which own the 159-room Hyatt Regency Baku in Azerbaijan for approximately $11 million to an unrelated third party and entered into a long-term management agreement for the property upon sale.

Balance Sheet/Other Items
As of Dec. 31, 2020, the company reported the following:

  • Total debt of $3,244 million.
  • Pro rata share of unconsolidated hospitality venture debt of $671 million, 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 $1,207 million, short-term investments of $675 million and restricted cash of $11 million.
  • Undrawn borrowing availability of $1,499 million under Hyatt’s revolving credit facility, net of letters of credit outstanding.

The company believes it has adequate existing liquidity to fund operations and investments supporting the continued growth of the business for approximately 36 months based on fourth quarter of 2020 demand levels.

2021 Outlook
Given the uncertain pace and timing of recovery from the impacts of the COVID-19 pandemic, Hyatt is providing limited guidance for the 2021 fiscal year:

  • Adjusted selling, general and administrative expenses are expected to be approximately $240 million.
  • Capital expenditures are expected to be approximately $110 million.
  • The company expects to grow units, on a net rooms basis, by approximately 5.0%.

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