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Wednesday, October 13, 2021

Hyatt: First-Quarter Loss Nearly Tripled, Yet Results ‘Exceeded Expectations’

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Hyatt Hotels Corp. reported a $304 million net loss during
the first quarter, which included a $193 million non-cash full valuation
allowance on U.S. deferred income tax assets, according to the company. The loss
is nearly triple the $103 million loss reported one year ago. Total revenues
for the quarter were $438 million, down from $993 million on March 31, 2020. 

Still, “first quarter results exceeded expectations as
demand improved meaningfully over the course of the quarter,” said
president and CEO Mark Hoplamazian in a statement. “We also reported
strong net rooms growth of 6.5 percent, reaching an important milestone with
the opening of our 1,000th hotel in the quarter.”

He added that “pent-up demand for travel is
immense,” during Hyatt’s Wednesday earnings call, noting that Hyatt is
beginning to see “business travelers once again connect in person with
colleagues and customers, and larger groups ready to convene again in our
hotels. The desire to travel and connect has not abated.”

Q1 Earnings Metrics

Meanwhile, systemwide revenue per available room was down 48.9
percent in constant dollars year over year and declined 64.4 percent compared
with the first quarter of 2019. RevPAR was about $46 for the quarter, but it
accelerated from only $37 in January to $57 in March, according to Hyatt CFO
Joan Bottarini. 

For comparable owned and leased hotels, RevPAR decreased
64.4 percent year over year and was down 72.5 percent versus the first quarter
2019. Occupancy was just 28.1 percent, down 27.3 percentage points from 2020,
while average daily rate reached $170, representing a decrease of 29.9 percent
year over year. There were signs of recovery during the quarter, with
sequential monthly increases in RevPAR, driven by leisure demand with notable increases
toward the end of the quarter, according to the company.

Hoplamazian noted that “we are fully aware that group
and business transient demand need to improve meaningfully to reach a full
RevPAR recovery,” he said. “Despite rooms revenue from these segments
being just over 20 percent of 2019 levels in March, we remain optimistic.”

Business transient has shown week-over-week improvement
since January and continues to grow through April, he said, adding that future
bookings for business transient guests improved to about 35 percent of 2019
levels in recent weeks. “Conversations with several of our top corporate
clients suggest that we will continue to see moderate progress in the near-term
with a more pronounced uptick expected in the fall,” he said.

Group Improvement

Groups, which are an important segment for Hyatt, are
“headed in the right direction.” New group business booked in the
first quarter for all future periods finished up 55 percent compared with the
fourth quarter of 2020, Hoplamazian said. “Further, we crossed a notable
inflection point in April when net group production in the month for the year
was approximately $8 million, meaning gross group revenue booked was in excess
of all cancellations and reduced projections for attendees over the remainder
of the year.”

Hyatt has seen group leads increase, with interest from
pharma, information technology, and banking and finance segments. Also, larger
in-person corporate and association events “are occurring as early as
June, and we’re seeing a growing number of citywide events confirming for the
fall,” Hoplamazian added. “All of this positive activity provides
optimism that these segments will continue to strengthen as more of the
population is fully vaccinated and travel restrictions are lifted.”

As with Hilton’s
today, Hyatt noted that the rebound in China provided a positive
outlook for what could happen in the rest of the world “as Covid-19
disruption subsides.” Occupancy in mainland China fell to the mid-30
percent range during the middle of February, but there was a sharp rebound
throughout March, and a fully recovered level of more than 70 percent in April,
Hoplamazian said. “Importantly, RevPAR has more than 90 percent recovered
as rates are within 10 percent of 2019 levels, despite virtually no
higher-rated international inbound travel into China.”

Hoplamazian also talked about Hyatt’s recently announced Together
by Hyatt meetings program
, which focuses on hybrid, and he believes it is a
meaningful part of the company’s strategy on the group side. He described two
large meetings booked, one in June and one in July, that are using the
hub-and-spoke design to connect between 800 and 1,000 attendees both virtually
and in-person at anywhere from 10 hotels for one meeting to up to 27 hotels for
the other. 

“I believe that this is going to be an effective way to
allow people to still have an in-person meeting for those who can attend, those
who are prepared to attend, and get the benefit out of the interpersonal
connections,” Hoplamazian said. 

Q4 2020 earnings

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