Hyatt reports record fees; continues push for asset-light

CHICAGO — Hyatt Hotels Corp. reported a record amount of fees and a continued push for an asset-light approach as part of its delayed fourth quarter and full-year earnings. It also announced on its earnings call a decision to sell 80% of Apple Leisure Group's Unlimited Vacation Club (UVC) for $80 million to an unnamed buyer.

Hyatt reported management, franchise, license, and other fees of $256 million in the fourth quarter, driven by continued strong global travel demand and net room growth.

“While growing fees-per-room is what differentiates Hyatt and creates value for shareholders, we don’t need to be the biggest in the industry to be the best because we have, and we will continue to, play the game differently,” said Hyatt President and CEO Mark Hoplamazian.

He said the company’s asset-light earnings mix has changed substantially over the past six years (from 47% in 2017 to 76% for full-year 2023).

While growing fees-per-room is what differentiates Hyatt and creates value for shareholders, we don’t need to be the biggest in the industry to be the best because we have, and we will continue to, play the game differently.

Mark Hoplamazian

Share this quote

“We are on a path to reaching a run-rate of approximately 85%,” Hoplamazian said. “Over the past six years, we’ve realized significant proceeds from the sale of our own hotels and reinvested these proceeds in strategic asset-light acquisitions.”

Analysts from Truist Securities said Hyatt’s reported fourth-quarter economic EBITDA of $274 million was above its projections. “We had expected results would have been ahead of consensus given the KPIs in the pre-announcement on February 14… Overall, results were ahead of consensus assumptions for Legacy Hyatt RevPAR, core fees, and owned/leased margins.”

Apple Leisure Group segment

Hyatt reported that its Apple Leisure Group (ALG) segment benefited from improved results in Cancun and said the segment’s adjusted EBITDA for Q4 increased 33% when adjusted for the $23 million non-cash benefit that was reported in the fourth quarter of 2022, which didn’t repeat, and the unfavorable impact from the strengthening of the Mexican Peso. Its net financed contracts and net deferrals were $33 million.

Analysts at Truist said they view the Apple Leisure Group results as a miss but said the results should create streamlined reporting in the future.

“We view ALG results as a miss in part on the net deferrals, which, as discussed below, will be eliminated with the sale of 80% of ALG Unlimited Vacations Club (we view ALG guidance should be more straightforward for the investment community starting this year post-sale and may lead to less volatility in beats/misses). Consensus had wide-ranging assumptions on Apple Leisure Group Net Package RevPAR, but we assume a beat on this line.”

Hyatt CFO Joan Bottarini said the accounting related to the UVC was the reason for the delay of its earnings call on February 15. The UVC sale is expected to “clean up” its earnings and reporting going forward. Hyatt will continue to manage the UVC business through a long-term management agreement and licensing and loyalty agreement, which it said will ensure a seamless transition for UVC members and hotel owners. As a result, Hyatt will no longer report net deferrals and net financed contracts.

“We simply needed additional time to complete our year-end procedures around UVC deferred costs and net deferrals. Those procedures are now complete, and we expect to file our [Form] 10-K this afternoon,” Bottarini said.

Other Hyatt results

Hyatt reported that on February 9, it sold the 359-key Hyatt Regency Aruba to an unrelated third party for $240 million and provided $41 million of seller financing as part of the transaction. Hyatt also said it has signed agreements to sell two aggregate assets for approximately $310 million in expected gross proceeds. It said it is marketing one additional asset for sale and is in off-market discussions for two others (analysts at R.W. Baird said one of those is likely in Zurich).

Other Hyatt results:

• Hyatt said its net income was $26 million for Q4 and $220 million for 2023, which exceeded its full-year outlook. Adjusted net income was $76 million in Q4 and $276 million for 2023.
• Its adjusted EBITDA was $241 million in Q4 and $1.029 billion for 2023, exceeding its outlook.
• Comparable systemwide RevPAR increased by 9.1% in Q4 and 17% for the full year.
• Comparable owned and leased hotels RevPAR increased 5.9% in Q4 and 15.5% for 2023.
• Net room growth was 5.9%, which was in line with its full-year outlook of approximately 6%.
• Its pipeline of executed management or franchise contracts was 650 hotels (approximately 127,000 rooms).
• Hyatt said it repurchased approximately 890,000 shares for $95 million in Q4 and approximately 4.1 million for $453 million in 2023.
• It returned $500 million to shareholders for 2023, including dividends and share repurchases, which aligned with its outlook.
• Hyatt said 29 new hotels (9,648 rooms) joined its portfolio in Q4, and 101 (23,965 rooms) joined in 2023.
• At year-end 2023, the company had total debt of $3.056 billion and total liquidity of approximately $2.4 billion with $896 million of cash, cash equivalents or short-term investments. It said it had borrowing availability of $1.496 billion under its revolving credit facility, net of letters of credit outstanding.

2024 guidance

Hyatt provided the following guidance for full-year 2024 vs. 2023: 

• Systemwide RevPAR growth of +3-5%
• Net rooms growth of +5.5-6%
• Net income of approximately $560 million
• Management, franchise, license or other fees of $1.1-1.13 billion
• Adjusted EBITDA of $1.175-1.225 billion
• Capital expenditures of approximately $170 million
• Capital return to shareholders of $550-600 million