Hyatt Hotels Corporation — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Amounts are in millions of dollars, except per-share and operating statistics. Hyatt operates, manages, franchises, owns, leases, and develops hotels globally; its portfolio included 1,012 hotels in 68 countries at quarter-end.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $663 | $250 | $1,101 | $1,243 |
| Net loss attributable to Hyatt | $(9) | $(236) | $(313) | $(339) |
| Diluted loss per share | $(0.08) | $(2.33) | $(3.07) | $(3.35) |
| Adjusted EBITDA (non-GAAP) | $55 | $(117) | $35 | $(31) |
- Q2 revenue rebounded as hotels reopened and demand improved, particularly leisure travel. Revenue includes reimbursed managed-property costs of $366 million in Q2; corresponding costs were $375 million, so these largely pass through.
- Comparable system-wide RevPAR was $72, up 361.5% year over year, but remained well below Q2 2019’s $144. Management said recovery was uneven and group and business-traveler demand remained below pre-pandemic levels.
- Six-month operating cash flow was negative $58 million, versus negative $330 million a year earlier. Investing activities provided $47 million and financing activities used $16 million; cash, cash equivalents, and restricted cash declined $34 million.
- At June 30, cash and cash equivalents were $1,144 million and short-term investments were $593 million. Debt was $3,246 million; net debt, as defined by Hyatt, was $1,509 million, up from $1,362 million at year-end 2020. The $1.5 billion revolving facility was undrawn, leaving $1.5 billion of borrowing capacity.
- Total current assets were $2,474 million and current liabilities $1,017 million. Hyatt reported stockholders’ equity of $2,906 million.
Changes, transactions, and unusual items
- Compared with Q2 2020, the $227 million improvement in net loss reflected operating recovery, a real-estate sale gain, and prior-year impairment and restructuring charges. Q2 2021 included a $104 million pre-tax gain from the sale of Hyatt Regency Lost Pines; the hotel remains under a long-term Hyatt management agreement.
- Hyatt acquired Ventana Big Sur for $146 million. The seller was indirectly owned by a limited partnership affiliated with the brother of Hyatt’s Executive Chairman; the filing identifies the transaction as related-party. Hyatt also acquired the remaining interest in Grand Hyatt São Paulo, repaid its $78 million mortgage, and recorded a $69 million pre-tax gain.
- Six-month income-tax expense was $201 million despite a pre-tax loss of $112 million, primarily reflecting a $192 million valuation allowance on U.S. federal and state deferred tax assets. Hyatt said additional allowances may be needed if losses continue; recovery to normalized pre-tax income could support reversal.
- Hyatt received a $254 million IRS refund in July 2021 related to a 2020 loss carryback; the receivable was included in prepaid income taxes at June 30.
- Hyatt’s March 2021 revolving-credit amendment extended covenant relief through January 1, 2022, set a new minimum fixed-charge coverage covenant for Q1 2022, and tightened subsequent leverage requirements. It also restricts share repurchases and dividends until Q1 2022. No shares were repurchased and no dividends were paid in the first half.
Outlook, risks, and contingencies
- Hyatt reported 98% of system-wide hotels open at June 30. Management expected demand to remain uneven and did not expect results to return to pre-COVID-19 levels until traveler confidence improved and travel restrictions were lifted. New variants, renewed restrictions, and the uncertain pace of recovery could affect demand, operations, cash flows, and estimates.
- Management said it expected liquidity—including cash, short-term investments, operating cash flow, the undrawn revolver, and capital-market access—to meet funding requirements for the foreseeable future. Hyatt expected conservative 2021 capital spending; first-half capital expenditures were $37 million versus $88 million.
- Hyatt continued to target approximately $1.5 billion of real-estate sale proceeds by March 2022; it had realized approximately $1.1 billion by June 30.
- At quarter-end, commitments to lend, invest, or provide consideration could reach $352 million. Performance guarantees had $92 million of remaining maximum exposure. Debt and other guarantees had $415 million of maximum potential payments, $285 million net exposure after stated recoveries, and $57 million of recorded liabilities.
- A loyalty-program tax dispute concerning 2009–2017 tax years could result in a $220 million payment, including estimated interest, if the IRS position prevails; Hyatt said it had recorded an adequate uncertain tax liability. The filing also describes an India service-tax assessment with maximum exposure not expected to exceed $18 million and states Hyatt did not consider a loss probable. A hotel-company antitrust case was settled in July 2021 for an amount attributed to Hyatt deemed immaterial.
Investor verification priorities
- Track RevPAR, occupancy, group and business-travel bookings, and the pace of recovery against the 2019 comparison.
- Reconcile cash generation and liquidity with debt maturities, covenant requirements, and restrictions on dividends and repurchases.
- Monitor the deferred-tax valuation allowance, the IRS refund, and the outcome and exposure of the loyalty-program tax dispute.
- Review guarantee exposure, including the India-related obligations, and the recoverability assumptions supporting disclosed net exposures.
- Review the related-party Ventana Big Sur acquisition terms and the assumptions behind material sale and acquisition gains.