Hyatt Hotels Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the company notes fourth-quarter leisure demand exceeded 2019 levels.
Business context and performance
Hyatt operates, manages, and franchises hotels and resorts, and provides vacation distribution and destination-management services. At year-end, its portfolio included 1,162 hotels and all-inclusive resorts with 284,944 rooms. Hyatt acquired Apple Leisure Group (ALG) on November 1, 2021, adding resort management, vacation distribution, and the Unlimited Vacation Club membership business. The 2021 results include two months of ALG operations.
Key financial metrics
| Metric (USD millions, except per-share data) | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $3,028 | $2,066 |
| Net loss attributable to Hyatt | $(222) | $(703) |
| Basic and diluted loss per share | $(2.13) | $(6.93) |
| Adjusted EBITDA (non-GAAP) | $257 | $(177) |
| Cash provided by (used in) operating activities | $315 | $(611) |
| Capital expenditures | $111 | $122 |
- Revenue rose 46.6% year over year, but remained well below 2019’s $5,020 million. Revenue includes substantial reimbursements of costs incurred for managed and franchised properties; reported revenue therefore is not a direct measure of fee growth.
- System-wide comparable RevPAR increased 66.5% from 2020 to $78, versus $136 in 2019. Comparable owned-and-leased hotel RevPAR was $96, up 94.9% year over year.
- Income before tax was $44 million, compared with a $960 million loss in 2020. The $266 million tax provision—primarily reflecting a valuation allowance on U.S. deferred tax assets—resulted in a net loss despite pretax income.
- Year-end cash and cash equivalents were $960 million; short-term investments were $227 million. Available revolving-credit capacity was approximately $1,493 million, net of letters of credit.
- Consolidated debt was $3,978 million on the company’s debt-to-capital presentation; net debt was $2,791 million. Net debt to total capital rose to 37.0% from 21.1% in 2020. These figures exclude approximately $581 million of Hyatt’s share of unconsolidated-venture debt, substantially all non-recourse, though some is guaranteed.
- The filing does not provide a single, clearly comparable consolidated operating-margin measure; reported revenue includes pass-through reimbursements, and Adjusted EBITDA is a non-GAAP measure.
Material changes versus the prior comparable period
- Results improved from the pandemic-affected 2020 year: revenue, RevPAR, operating cash flow, and Adjusted EBITDA increased, while the net loss narrowed. Management cautions that 2021 performance remained significantly below pre-pandemic levels.
- ALG added $165 million of revenue and a $28 million net loss from acquisition through year-end; acquired intangibles generated $22 million of amortization in that period. The purchase price was $2.7 billion net of acquired cash, with preliminary purchase accounting including $2,677 million of goodwill.
- Hyatt sold Hyatt Regency Lake Tahoe and Hyatt Regency Lost Pines, recognizing pretax gains of $305 million and $104 million, respectively. The sales generated approximately $611 million of proceeds and both properties remained in Hyatt’s system under long-term management agreements.
- Hyatt issued $575 million of common stock net of offering costs and issued new senior notes to help fund ALG. S&P downgraded Hyatt’s rating from BBB- to BB+ in November 2021.
Outlook, risks, and unusual items
- No quantified FY2022 revenue, earnings, or cash-flow guidance is provided in the supplied filing text. Management described recovery as underway but uneven, citing robust leisure demand and improving momentum in business-transient and group travel. Leisure demand improved during 2021; fourth-quarter leisure demand exceeded 2019 levels, while group bookings remained below pre-pandemic levels.
- COVID-19, new variants, travel restrictions, consumer confidence, and the pace of recovery remain material uncertainties. Management also cited labor shortages, inflation, supply-chain constraints, and rising construction costs that may not be offset by higher revenue.
- ALG integration, realization of acquisition benefits, additional integration costs, and acquired intangible-asset valuations are significant execution and accounting risks. The filing reports $8 million of integration-related costs in 2021 and $45 million of acquisition transaction costs.
- Cash flows and results are exposed to owned-property fixed costs, possible owner or franchisee distress, agreement terminations, guarantees, and the ability to complete planned asset sales. Hyatt committed in August 2021 to realize an additional $2.0 billion of owned-asset disposition proceeds by the end of 2024; completion and proceeds are not assured.
- At year-end, maximum remaining performance-guarantee exposure was $99 million; maximum potential payments under debt-repayment guarantees were $362 million, with stated exposure net of recoverability of $265 million. Hyatt also expected to fund investment commitments of $172 million within 12 months and $181 million thereafter. It continued reviewing ALG contracts for additional obligations.
- A tax dispute concerning the treatment of loyalty-program contributions was pending in U.S. Tax Court; the filing states an adverse outcome could require $223 million of tax and estimated interest for assessed years. Hyatt recorded an uncertain-tax-benefit liability and said it believed the reserve adequate.
- Share repurchases were suspended, and revolving-credit terms restricted dividends and repurchases until the first quarter of 2022. The Pritzker family held approximately 88.8% of total voting power at January 31, 2022, creating concentrated control and limiting public shareholders’ influence.
Important facts for investors to verify
- Track comparable RevPAR and the recovery in business-transient and group demand against 2019, alongside the effects of COVID-19 and operating-cost inflation.
- Review ALG integration progress, updated purchase-price allocations, acquired goodwill and intangibles, and the acquired business’s contribution after the two-month reporting period.
- Assess debt-service capacity, rating implications, refinancing needs, covenant tests, and net leverage, including guaranteed and unconsolidated-venture obligations.
- Monitor execution and net proceeds from the $2.0 billion asset-disposition commitment, and how proceeds are applied to debt reduction, investment, or shareholder returns.
- Follow the loyalty-program tax litigation, deferred-tax valuation allowance, guarantee exposure, and any further liabilities identified in ALG contracts.
- Confirm future dividend and repurchase decisions and consider potential dilution from the 2021 share issuance and the company’s dual-class voting structure.