Hyatt Hotels Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless stated otherwise. Amounts are in millions of dollars, except per-share and operating statistics.
Business context
Hyatt operates, manages, and franchises hotels, resorts, and related businesses across 71 countries. The portfolio includes full-service and select-service hotels, all-inclusive resorts, and Apple Leisure Group (ALG) travel distribution, destination management, and membership businesses. ALG, acquired in November 2021, contributed $339 million of Q1 2022 revenue. Reported revenue also includes substantial reimbursements for costs incurred on behalf of managed and franchised properties.
Financial and operating results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $1,279 | $438 |
| Net loss attributable to Hyatt | $(73) | $(304) |
| Diluted loss per share | $(0.67) | $(2.99) |
| Adjusted EBITDA (non-GAAP) | $169 | $(20) |
| Operating cash flow | $180 | $(91) |
| Capital expenditures | $43 | $19 |
- Revenue rose $841 million, or 191.9%, reflecting recovery in hotel operations and ALG’s contribution. ALG generated $56 million of Adjusted EBITDA.
- Comparable system-wide RevPAR was $94, up 107.2% year over year, but remained below the $132 reported for Q1 2019. Leisure demand led the recovery; group and business-transient demand improved. Q1 was the second consecutive quarter in which leisure transient room revenue exceeded 2019 levels.
- Net loss improved by $231 million, primarily due to stronger operating performance and lower income-tax expense. The 2021 comparison included a $186 million tax provision, primarily from a non-cash valuation allowance on U.S. deferred tax assets.
- Adjusted EBITDA increased $189 million. Owned and leased hotels contributed $54 million, Americas management and franchising $85 million, and ALG $56 million; corporate and other recorded $(38) million.
- Revenue includes $540 million of reimbursements for managed and franchised property costs, with corresponding costs of $556 million. These largely pass-through amounts make total-revenue comparisons less representative of underlying fee economics.
Cash, debt, and liquidity
- At March 31, cash and cash equivalents were $1,023 million, restricted cash was $47 million, and short-term investments were $282 million. Cash, cash equivalents, and restricted cash totaled $1,119 million for cash-flow reporting purposes.
- Long-term debt was $3,815 million; consolidated debt for the company’s net-debt calculation was $3,821 million. Net consolidated debt was $2,516 million, down from $2,791 million at year-end 2021. Net debt to total capital was 34.3%, versus 37.0%.
- No amounts were drawn under the revolving credit facility; available borrowing capacity was $1,496 million, net of letters of credit. Hyatt reported compliance with applicable debt covenants.
- Operating cash flow improved by $271 million year over year, reflecting the recovery and ALG booking-related working capital. Investing cash outflow was $110 million, including $43 million of capital expenditures and $39 million paid for ALG purchase-price adjustments. Financing cash outflow was $14 million.
Changes, outlook, and risks
- Recovery and outlook: Management described improving demand in February, March, and into Q2 2022, following Omicron-related weakness in January. It noted continued uncertainty and uneven recovery; the filing provides no quantified earnings or revenue guidance.
- Asset dispositions: Hyatt reiterated its commitment to generate $2.0 billion of proceeds from owned-asset dispositions by the end of 2024; it had realized $584 million by May 10, 2022. Three hotel sales agreed during Q1 subsequently closed in April 2022 for stated prices of $145 million, $310 million, and $125 million. Hyatt entered into long-term management agreements for each property; debt associated with the San Antonio hotel was repaid after its sale.
- ALG integration: ALG added revenue and earnings, but also increased depreciation and amortization. Hyatt recorded $7 million of ALG integration-related costs in Q1 and was continuing to integrate ALG into internal control processes. Acquisition purchase-price allocations remained preliminary.
- Material contingencies: A pending U.S. Tax Court matter concerns the tax treatment of loyalty-program contributions. If the IRS position is upheld, Hyatt estimates payments of $225 million, including interest, for assessed years; it says an adequate uncertain tax liability is recorded, but cannot estimate the range of possible changes over the next 12 months.
- Other risks: Management cited COVID-19 and variants, travel restrictions including conditions in Greater China, inflation and labor and supply-chain costs, and the Russia-Ukraine conflict. Russia and Ukraine represented less than 1% of managed and franchised hotels and less than 1% of 2021 management and franchise fee revenue; the broader economic consequences remain uncertain.
- At March 31, maximum remaining exposure under hotel performance guarantees was $94 million. Commitments to lend, invest, or provide consideration to ventures could total up to $326 million, net of related letters of credit. The filing also reports debt-repayment guarantees and other contractual contingencies.
- No share repurchases or dividends occurred in Q1. Management stated that cash, investments, operating cash flow, revolving capacity, and capital-market access should be adequate for funding needs and capital deployment objectives.
Most important facts for investors to verify
- Whether RevPAR and group and business-travel momentum continued after Q1, particularly in Greater China and other markets affected by restrictions.
- ALG’s ongoing contribution to earnings and cash flow, integration costs, and final purchase-price allocation.
- Progress toward the $2.0 billion asset-disposition target, sale proceeds actually received, and the use of proceeds for debt reduction, investment, or shareholder returns.
- The resolution and potential cash and tax effects of the loyalty-program tax litigation.
- Debt maturities, liquidity and covenant headroom, and exposure under guarantees and venture commitments.