This quarterly report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements about the Company's plans, strategies, and financial performance; the impact of the COVID-19 pandemic and pace of recovery; the amount by which the Company intends to reduce its real estate asset base and the anticipated timeframe for such asset dispositions; and prospective or future events. Forward-looking statements involve known and unknown risks that are difficult to predict. As a result, our actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "continue," "likely," "will," "would," and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the factors discussed in our filings with theSEC , including our Annual Report on Form 10-K; risks associated with the acquisition ofApple Leisure Group , including successful integration of theApple Leisure Group business; the duration and severity of the COVID-19 pandemic or any additional resurgence and the pace of recovery following the pandemic or any additional resurgence; the short and long-term effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; the impact of actions taken by governments, businesses, or individuals in response to the COVID-19 pandemic or any additional resurgence on global and regional economies, travel limitations or bans, and economic activity; the ability of third-party owners, franchisees, or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic or any additional resurgence; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the rate and the pace of economic recovery following economic downturns; global supply chain constraints and interruptions, rising costs of construction-related labor and materials, and increases in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business; risks affecting the luxury, resort, and all-inclusive lodging segments; levels of spending in business, leisure, and group segments as well as consumer confidence; declines in occupancy and average daily rate ("ADR"); limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geo-political conditions, including political or civil unrest or changes in trade policy; hostilities, or fear of hostilities, including future terrorist attacks, that affect travel; travel-related accidents; natural or man-made disasters such as earthquakes, tsunamis, tornadoes, hurricanes, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases, or fear of such outbreaks; our ability to successfully achieve certain levels of operating profits at hotels that have performance tests or guarantees in favor of our third-party owners; the impact of hotel renovations and redevelopments; risks associated with our capital allocation plans, share repurchase program, and dividend payments, including a reduction in, or elimination or suspension of, repurchase activity or dividend payments; the seasonal and cyclical nature of the real estate and hospitality businesses; changes in distribution arrangements, such as through internet travel intermediaries; changes in the tastes and preferences of our customers; relationships with colleagues and labor unions and changes in labor laws; the financial condition of, and our relationships with, third-party property owners, franchisees, and hospitality venture partners; the possible inability of third-party owners, franchisees, or development partners to access the capital necessary to fund current operations or implement our plans for growth; risks associated with potential acquisitions and dispositions and the introduction of new brand concepts; the timing of acquisitions and dispositions and our ability to successfully integrate completed acquisitions with existing operations; failure to successfully complete proposed transactions (including the failure to satisfy closing conditions or obtain required approvals); our ability to successfully execute on our strategy to expand our management and franchising business while at the same time reducing our real estate asset base within targeted timeframes and at expected values; declines in the value of our real estate assets; unforeseen terminations of our management or franchise agreements; changes in federal, state, local, or foreign tax law; increases in interest rates, wages, and other operating costs; foreign exchange rate fluctuations or currency restructurings; lack of acceptance of new brands or innovation; general volatility of the capital markets and our ability to access such markets; changes in the competitive environment in our industry, including as a result of the COVID-19 pandemic, industry consolidation, and the markets where we operate; our ability to successfully grow the World of Hyatt loyalty program andUnlimited Vacation Club paid membership program; cyber incidents and information technology failures; outcomes of legal or administrative proceedings; and violations of regulations or laws related to our franchising business. These factors are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors could also harm our business, financial condition, results of operations, or 35
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cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
The following discussion should be read in conjunction with the Company’s
condensed consolidated financial statements and accompanying Notes, which appear
elsewhere in this Quarterly Report on Form 10-Q.
Executive Overview
Our portfolio of properties consists of full service hotels, select service
hotels, all-inclusive resorts, and other forms of residential, vacation
ownership, and condominium units.
At
rooms), including:
•462 managed properties (139,105 rooms), all of which we operate under
management and hotel services agreements with third-party property owners;
•557 franchised properties (93,574 rooms), all of which are owned by third
parties that have franchise agreements with us and are operated by third
parties;
•24 owned properties (10,560 rooms), 1 finance leased property (171 rooms), and
5 operating leased properties (1,965 rooms), all of which we manage;
•22 managed properties and 2 franchised properties owned or leased by
unconsolidated hospitality ventures (7,918 rooms);
•16 franchised properties (2,755 rooms) that are operated by an unconsolidated hospitality venture in connection with a master license agreement by Hyatt, 5 of these properties (1,106 rooms) are leased by the unconsolidated hospitality venture; and •122 all-inclusive resorts (38,840 rooms), including 107 owned by a third party (33,970 rooms), 9 owned by a third party in which we hold common shares (3,591 rooms), and 6 leased properties (1,279 rooms).
Our property portfolio also included:
•22 vacation ownership properties under the Hyatt Residence Club brand and
operated by third parties;
•38 residential properties, which consist of branded residences and serviced
apartments. We manage all of the serviced apartments and those branded
residential units that participate in a rental program with an adjacent
Hyatt-branded hotel; and
•39 condominium properties for which we provide services for the rental programs
and/or homeowners associations (including 1 unconsolidated hospitality venture).
Additionally, through strategic relationships, we provide certain reservation and/or loyalty program services to hotels that are unaffiliated with our hotel portfolio and operate under other tradenames or marks owned by such hotels or licensed by third parties. We also offer travel distribution and destination management services throughALG Vacations and a paid membership program throughUnlimited Vacation Club . We report our consolidated operations inU.S. dollars. Amounts are reported in millions, unless otherwise noted. Percentages may not recompute due to rounding, and percentage changes that are not meaningful are presented as "NM." Constant currency disclosures used throughout Management's Discussion and Analysis of Financial Condition and Results of Operations are non-GAAP measures. See "-Non-GAAP Measures" for further discussion of constant currency disclosures. We manage our business within five reportable segments as described below: •Owned and leased hotels, which consists of our owned and leased full service and select service hotels and, for purposes of segment Adjusted EBITDA, our pro rata share of the Adjusted EBITDA of our unconsolidated hospitality ventures, based on our ownership percentage of each venture; 36
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•Americas management and franchising ("Americas"), which consists of our
management and franchising of properties, including all-inclusive resorts under
the Hyatt Ziva and Hyatt Zilara brand names, located in the United States ,
Canada , the Caribbean , Mexico , Central America , and South America , as well as
our residential management operations;
•ASPAC management and franchising (“ASPAC”), which consists of our management
and franchising of properties located in
•EAME/SW Asia management and franchising ("EAME/SW Asia "), which consists of our management and franchising of properties located inEurope ,Africa , theMiddle East ,India ,Central Asia , andNepal ; and •Apple Leisure Group, which consists of distribution and destination management services offered throughALG Vacations ; management and marketing of primarily all-inclusive ALG resorts inMexico , theCaribbean ,Central America ,South America , andEurope ; and theUnlimited Vacation Club paid membership program, which offers benefits exclusively at ALG resorts withinMexico , theCaribbean , andCentral America .
Within corporate and other, we include the results from our co-branded credit
card program and unallocated corporate expenses.
The Company is planning a geographic realignment of its EAME/SW Asia and ASPAC segments, which is expected to be effective onJanuary 1, 2023 . After the realignment, the segments will be described as EAME management and franchising ("EAME"), which will consist of our management and franchising of properties located inEurope ,Africa , theMiddle East , andCentral Asia , and ASPAC management and franchising, which will consist of our management and franchising of properties located inGreater China , East andSoutheast Asia , the Indian subcontinent, andOceania . See Part I, Item 1 "Financial Statements-Note 16 to the Condensed Consolidated Financial Statements" for further discussion of our segment structure and the planned geographic realignment.
Recent Developments
We are experiencing continued recovery from the COVID-19 pandemic, which is being led by robust leisure demand and growing momentum in group and business transient travel. The quarter endedSeptember 30, 2022 , compared to the quarter endedSeptember 30, 2021 , showed significant improvement in revenues and RevPAR across all segments. However, we acknowledge that demand may be varied and uneven as the recovery continues to progress. Factors such as the spread of new COVID-19 variants, travel bans, or restrictions in certain markets may continue to impact our financial results for a period of time that we are currently unable to predict. In addition, certain labor and supply chain challenges, and increases in costs due to inflation or other factors may also continue to impact our financial results in the future.
Overview of Financial Results
Consolidated revenues increased$690 million , or 81.2%, during the quarter endedSeptember 30, 2022 compared to the quarter endedSeptember 30, 2021 , driven by continued recovery in operating performance, as compared to the prior year, as well as the acquisition of ALG, which contributed$363 million of total revenues. For the quarter endedSeptember 30, 2022 , we reported net income attributable toHyatt Hotels Corporation of$28 million , compared to net income attributable toHyatt Hotels Corporation of$120 million for the quarter endedSeptember 30, 2021 , representing a decrease of$92 million . During the quarter endedSeptember 30, 2022 compared to the quarter endedSeptember 30, 2021 , strong operating performance was more than offset by a$308 million decrease in gains recognized on the sales of real estate due to prior year disposition activity. Our consolidated Adjusted EBITDA for the quarter endedSeptember 30, 2022 was$252 million , an increase of$142 million compared to the quarter endedSeptember 30, 2021 , driven by increased revenues due to the ongoing recovery from the COVID-19 pandemic and the acquisition of ALG. OurAmericas management and franchising segment Adjusted EBITDA increased$40 million for the quarter endedSeptember 30, 2022 compared to the same period in the prior year. During the quarter endedSeptember 30, 2022 , our consolidated Adjusted EBITDA also included$78 million from theApple Leisure Group segment. See "-Segment Results" for further discussion. See "-Non-GAAP Measures" for an explanation of how we utilize Adjusted EBITDA, why we present it, and material limitations on its usefulness, as well as a reconciliation of our net income (loss) attributable toHyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA. 37
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During quarter endedSeptember 30, 2022 , we returned$162 million of capital to our shareholders through share repurchases, and duringOctober 2022 , we returned an additional$27 million of capital to our shareholders through share repurchases.
RevPAR
Three Months Ended
September 30,
Number of comparable vs. 2021
(Comparable locations) hotels (1) 2022 (in constant $)
System-wide hotels 914 $ 133 45.9 %
Owned and leased hotels 26 $ 177 47.4 %
Americas full service hotels 217 $ 168 46.3 %
Americas select service hotels 431 $ 118 24.8 %
ASPAC full service hotels 118 $ 98 63.8 %
ASPAC select service hotels 31 $ 37 8.9 %
EAME/SW Asia full service hotels 98 $ 137 89.2 %
EAME/SW Asia select service hotels 19 $ 67 77.3 %
(1) The number of comparable hotels presented above includes owned and leased hotels.
Comparable system-wide RevPAR increased 45.9% during the three months ended
primarily driven by the continued recovery from the COVID-19 pandemic and an
increased ADR across all segments. See “-Segment Results” for discussion of
RevPAR by segment.
Our comparable system-wide hotels RevPAR of$133 for the quarter endedSeptember 30, 2022 represented significant improvement compared to the quarter endedSeptember 30, 2021 . RevPAR for the quarter endedSeptember 30, 2022 , represents the strongest comparable system-wide hotels RevPAR reported since the onset of the COVID-19 pandemic, and a 2% improvement as compared to the quarter endedJune 30, 2022 . Strength in leisure transient travel continues to lead the recovery with sustained elevated levels significantly exceeding 2019.
During the three months ended
significant improvement in group travel, which is almost recovered to
pre-COVID-19 pandemic levels. Compared to 2021, group bookings production
increased at our
leased hotels, and business transient demand continued to improve, particularly
in the
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Results of Operations
Three and Nine Months Ended
Months Ended
Discussion on Consolidated Results
For additional information regarding our consolidated results, refer to our condensed consolidated statements of income (loss) included in this quarterly report. During the three and nine months endedSeptember 30, 2022 , consolidated results improved significantly in all segments, compared to the three and nine months endedSeptember 30, 2021 , which were negatively impacted by the COVID-19 pandemic. The three and nine months endedSeptember 30, 2022 also benefited from strong performance by ALG, which was acquired onNovember 1, 2021 . See "-Segment Results" for further discussion. The impact from our investments in marketable securities held to fund our deferred compensation plans through rabbi trusts was recognized on the following financial statement line items and had no impact on net income (loss): revenues for the reimbursement of costs incurred on behalf of managed and franchised properties; owned and leased hotels expenses; selling, general, and administrative expenses; costs incurred on behalf of managed and franchised properties; and net gains (losses) and interest income from marketable securities held to fund rabbi trusts.
Owned and leased hotels revenues.
Three Months Ended
Currency
2022 2021 Better / (Worse) Impact
Comparable owned and leased hotels
revenues $ 253 $ 181 $ 72 40.4 % $ (4)
Non-comparable owned and leased hotels
revenues 56 82 (26) (33.2) % -
Total owned and leased hotels revenues
$ 46 17.4 %$ (4)
Nine Months Ended
Currency
2022 2021 Better / (Worse) Impact
Comparable owned and leased hotels
revenues $ 734 $ 358 $ 376 104.9 % $ (5)
Non-comparable owned and leased hotels
revenues 177 200 (23) (11.6) % -
Total owned and leased hotels revenues
$ 353 63.2 %$ (5) Comparable owned and leased hotels revenues increased during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, driven by increased demand and ADR across the portfolio in 2022 due to the ongoing recovery from the COVID-19 pandemic. The decrease in non-comparable owned and leased hotels revenues during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , was primarily driven by disposition activity, partially offset by the re-opening of an owned hotel that had suspended operations in 2021. During the three and nine months endedSeptember 30, 2022 , ALG's owned and leased hotels revenues were$16 million and$20 million , respectively. 39
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Management, franchise, and other fees revenues.
Three Months Ended
2022 2021 Better / (Worse)
Base management fees $ 84 $ 50 $ 34 67.2 %
Incentive management fees 43 10 33 347.8 %
Franchise fees 52 36 16 42.8 %
Management and franchise fees 179 96 83 85.8 %
Other fees revenues 45 17 28 181.1 %
Management, franchise, and other fees
$ 111 99.3 %
Three Months Ended September 30,
2022 2021 Better / (Worse)
Management, franchise, and other fees
$ 111 99.3 % Contra revenue (9) (9) - (0.2) %
Net management, franchise, and other fees
$ 111 107.8 %
Nine Months Ended
2022 2021 Better / (Worse)
Base management fees $ 223 $ 110 $ 113 102.4 %
Incentive management fees 128 30 98 332.0 %
Franchise fees 139 82 57 69.9 %
Management and franchise fees 490 222 268 120.9 %
Other fees revenues 92 47 45 96.9 %
Management, franchise, and other fees
$ 313 116.8 %
Nine Months Ended September 30,
2022 2021 Better / (Worse)
Management, franchise, and other fees
$ 313 116.8 % Contra revenue (27) (26) (1) (5.1) %
Net management, franchise, and other fees
$ 312 128.7 % The increases in management and franchise fees during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were due to increased demand and ADR in 2022 driven by the ongoing recovery from the COVID-19 pandemic as well as portfolio growth. During the three and nine months endedSeptember 30, 2022 , ALG's base and incentive management fees were$22 million and$75 million , respectively. Other fees revenues increased for the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , primarily driven by fees from marketing services provided by ALG and a termination fee. Distribution and destination management revenues. Distribution and destination management revenues were$244 million and$746 million for the three and nine months endedSeptember 30, 2022 , respectively, driven by strong leisure travel demand. Other revenues. During the three and nine months endedSeptember 30, 2022 , other revenues increased$40 million and$137 million , respectively, compared to the three and nine months endedSeptember 30, 2021 , primarily driven by theUnlimited Vacation Club paid membership program, which was acquired in the ALG Acquisition, and increases in revenues related to our residential management operations due to the ongoing recovery from the COVID-19 pandemic. 40
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Revenues for the reimbursement of costs incurred on behalf of managed and
franchised properties.
Three Months Ended September 30,
2022 2021 Change
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties
54.4 % Less: rabbi trust impact 5 1 4 NM Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties excluding rabbi trust impact$ 710 $ 457 $ 253 55.5 % Nine Months Ended September 30, 2022 2021 Change
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties
74.2 % Less: rabbi trust impact 41 (15) 56 372.5 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties excluding rabbi trust impact$ 1,926 $ 1,067 $ 859 80.7 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties increased during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, primarily driven by higher reimbursements for payroll and related expenses at managed properties where we are the employer and reimbursements for costs related to system-wide services provided to managed and franchised properties due to increased hotel operations and performance as a result of the ongoing recovery from the COVID-19 pandemic. During the three and nine months endedSeptember 30, 2022 , ALG revenues for the reimbursement of costs incurred on behalf of managed and franchised properties were$27 million and$82 million , respectively. The increases in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , reflect a$4 million and$56 million decrease, respectively, in marketable securities held to fund our deferred compensation plans through rabbi trusts due to a decline in market performance.
Owned and leased hotels expenses.
Three Months Ended
2022 2021 Better / (Worse)
Comparable owned and leased hotels expenses
(33.5) % Non-comparable owned and leased hotels expenses 44 63 19 30.5 % Rabbi trust impact (1) - 1 841.8 %
Total owned and leased hotels expenses
(13.6) %
Nine
Months Ended
2022 2021 Better / (Worse)
Comparable owned and leased hotels expenses
(61.7) % Non-comparable owned and leased hotels expenses 146 168 22 13.2 % Rabbi trust impact (9) 5 14 295.7 %
Total owned and leased hotels expenses
(33.5) % The increases in comparable owned and leased hotels expenses during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were primarily due to higher variable expenses driven by increased demand in 2022 due to the ongoing recovery from the COVID-19 pandemic. The decrease in non-comparable owned and leased hotels expenses during the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , was primarily driven by disposition activity, partially offset by the re-opening of an owned hotel that was closed due to suspended operations in 2021. During 41
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the three and nine months ended
hotels expenses were
Distribution and destination management expenses. Distribution and destination management expenses were$186 million and$586 million for the three and nine months endedSeptember 30, 2022 , respectively, driven by leisure travel demand. Depreciation and amortization expenses. Depreciation and amortization expenses increased$25 million and$101 million during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , respectively, primarily driven by amortization of intangible assets acquired in the ALG Acquisition, partially offset by dispositions of owned hotels. Other direct costs. During the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, other direct costs increased$42 million and$131 million , respectively, primarily driven by theUnlimited Vacation Club paid membership program, which was acquired in the ALG Acquisition, and increased expenses related to our residential management operations due to the ongoing recovery from the COVID-19 pandemic.
Selling, general, and administrative expenses.
Three
Months Ended
2022 2021 Change
Selling, general, and administrative expenses $ 108 $
69$ 39 56.1 % Less: rabbi trust impact 11 1 10 NM Less: stock-based compensation expense (7) (6) (1) (10.7) % Adjusted selling, general, and administrative expenses $ 112$ 64 $ 48 75.1 % Nine Months Ended September 30, 2022 2021 Change
Selling, general, and administrative expenses
17.9 % Less: rabbi trust impact 80 (30) 110 365.8 % Less: stock-based compensation expense (47) (42) (5) (12.0) % Adjusted selling, general, and administrative expenses$ 328 $ 178 $ 150 83.8 % Selling, general, and administrative expenses during the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 , reflect the decline in market performance of the underlying investments in marketable securities held to fund our deferred compensation plans through rabbi trusts. Adjusted selling, general, and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. Adjusted selling, general, and administrative expenses increased during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, primarily driven by costs from the ALG businesses as well as$8 million and$19 million , respectively, of ALG integration-related costs. Adjusted selling, general, and administrative expenses, as we define it, is a non-GAAP measure. See "-Non-GAAP Measures" for further discussion of Adjusted selling, general, and administrative expenses. 42
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Costs incurred on behalf of managed and franchised properties.
Three
Months Ended
2022 2021 Change
Costs incurred on behalf of managed and
franchised properties $ 697 $ 465 $ 232 49.6 %
Less: rabbi trust impact 5 1 4 NM
Costs incurred on behalf of managed and
franchised properties excluding rabbi trust
impact $ 702 $ 466 $ 236 50.6 %
Nine Months Ended September 30,
2022 2021 Change
Costs incurred on behalf of managed and
franchised properties $ 1,881 $ 1,117 $ 764 68.3 %
Less: rabbi trust impact 41 (15) 56 372.5 %
Costs incurred on behalf of managed and
franchised properties excluding rabbi trust
impact $ 1,922 $ 1,102 $ 820 74.5 %
Costs incurred on behalf of managed and franchised properties increased during
the three and nine months ended September 30, 2022 , compared to the three and
nine months ended September 30, 2021 , primarily driven by increased payroll and
related expenses at managed properties where we are the employer and expenses
related to system-wide services provided to managed and franchised properties
due to improved hotel operating performance as a result of the ongoing recovery
from the COVID-19 pandemic. During the three and nine months ended September 30,
2022 , ALG costs incurred on behalf of managed and franchised properties were $28
million and $82 million , respectively.
The increases during the three and nine months ended September 30, 2022 ,
compared to the three and nine months ended September 30, 2021 , reflect a $4
million and $56 million decrease, respectively, in the value of the marketable
securities held to fund our deferred compensation plans through rabbi trusts due
to a decline in market performance.
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts.
Three Months Ended
2022 2021 Better / (Worse)
Rabbi trust impact allocated to selling,
general, and administrative expenses $ (11) $ (1) $ (10) NM
Rabbi trust impact allocated to owned and leased
hotels expenses (1) - (1) (841.8) %
Net gains (losses) and interest income from
marketable securities held to fund rabbi trusts $ (12) $ (1) $ (11) NM
Nine Months Ended
2022 2021 Better / (Worse)
Rabbi trust impact allocated to selling,
general, and administrative expenses $ (80) $ 30 $ (110) (365.8) %
Rabbi trust impact allocated to owned and leased
hotels expense (9) 5 (14) (295.7) %
Net gains (losses) and interest income from
marketable securities held to fund rabbi trusts
(356.2) %
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts decreased during the three and nine months ended
2022
performance of the underlying invested assets.
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Equity earnings (losses) from unconsolidated hospitality ventures.
Three Months Ended September 30, Nine Months Ended September 30,
Better / Better /
2022 2021 (Worse) 2022 2021 (Worse)
Hyatt's share of unconsolidated hospitality
ventures net losses excluding foreign currency $ (2) $ (14)
Net gains from sales activity related to
unconsolidated hospitality ventures (Note 4)
- - - 4 68 (64) Hyatt's share of unconsolidated hospitality ventures foreign currency net gains - - - - 4 (4) Other 4 2 2 13 (16) 29 Equity earnings (losses) from unconsolidated hospitality ventures $ 2$ (12) $ 14 $ (6)$ 8 $ (14) During the three and nine months endedSeptember 30, 2022 , we recognized decreased net losses, compared to the same periods in the prior year, driven by ongoing recovery from the COVID-19 pandemic by our unconsolidated hospitality ventures. Additionally, during the nine months endedSeptember 30, 2021 , we recognized a$69 million pre-tax gain in connection with the acquisition of the remaining 50% interest in the entities that own Grand Hyatt São Paulo, that was partially offset by debt repayment guarantees for hotel properties inIndia that we entered into during 2021. See Part I, Item 1 "Financial Statements-Note 12 to the Condensed Consolidated Financial Statements" for additional information.
Gains (losses) on sales of real estate. During the nine months ended
•$137 million pre-tax gain related to the sale of Grand Hyatt San Antonio River
Walk;
•$51 million pre-tax gain related to the sale of The Driskill;
•$40 million pre-tax gain related to the sale of
Resort & Spa
•$24 million pre-tax gain related to the sale of The Confidante
During the three months ended
•$305 million pre-tax gain related to the sale of
Resort
•$2 million pre-tax gain related to the sale of
During the nine months ended
following:
•$104 million pre-tax gain related to the sale of
Resort and Spa
See Part I, Item 1 “Financial Statements-Note 6 to the Condensed Consolidated
Financial Statements” for additional information.
Asset impairments. During the three and nine months endedSeptember 30, 2022 , we recognized$9 million and$12 million , respectively, of asset impairment charges related to intangible assets, primarily as a result of contract terminations. Additionally, during the nine months endedSeptember 30, 2022 , we recognized a$7 million goodwill impairment charge in connection with the sale of Grand Hyatt San Antonio River Walk. Other income (loss), net. Other income (loss), net decreased$21 million and$87 million during the three and nine months endedSeptember 30, 2022 , respectively, compared to the same periods in the prior year. See Part I, Item 1 "Financial Statements-Note 18 to the Condensed Consolidated Financial Statements" for additional information. 44
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Provision for income taxes.
Three Months Ended September 30,
2022 2021 Change
Income before income taxes $ 63 $ 258 $ (195) (75.5) %
Provision for income taxes (35) (138) 103 74.0 %
Effective tax rate 56.6 % 53.5 % 3.1 %
Nine Months Ended September 30,
2022 2021 Change
Income before income taxes $ 304 $ 146 $ 158 108.9 %
Provision for income taxes (143) (339) 196 57.6 %
Effective tax rate 47.2 % 232.6 % (185.4) %
The decrease in provision for income taxes during the three months ended
September 30, 2022 , compared to the three months ended September 30, 2021 , was
primarily driven by the sale of Hyatt Regency Lake Tahoe Resort , Spa and Casino
in 2021.
The decrease in provision for income taxes during the nine months ended
September 30, 2022 , compared to the nine months ended September 30, 2021 , was
primarily driven by a non-cash expense to recognize a full valuation allowance
on U.S. federal and state deferred tax assets in 2021. See Part I, Item 1
"Financial Statements-Note 11 to the Condensed Consolidated Financial
Statements."
Segment Results
As described in Part I, Item 1 "Financial Statements-Note 16 to the Condensed Consolidated Financial Statements," we evaluate segment operating performance using owned and leased hotels revenues; management, franchise, and other fees revenues; distribution and destination management revenues; and Adjusted EBITDA. During the three and nine months endedSeptember 30, 2022 , our segment revenues, comparable RevPAR, and Adjusted EBITDA improved significantly in all segments, compared to the three and nine months endedSeptember 30, 2021 , which were negatively impacted by the COVID-19 pandemic.
Owned and leased hotels segment revenues.
Three Months Ended September 30,
Currency
2022 2021 Better / (Worse) Impact
Comparable owned and leased hotels revenues
$ 74 40.7 %$ (4) Non-comparable owned and leased hotels revenues 40 82 (42) (51.9) % - Total segment revenues$ 300 $ 268 $ 32 12.3 %$ (4) Nine Months Ended September 30, Currency 2022 2021 Better / (Worse) Impact
Comparable owned and leased hotels revenues
$ 386 104.6 %$ (5) Non-comparable owned and leased hotels revenues 157 200 (43) (21.5) % - Total segment revenues$ 912 $ 569 $ 343 60.3 %$ (5) Comparable owned and leased hotels revenues increased during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, driven by increased demand and ADR in 2022 primarily due to the ongoing recovery from the COVID-19 pandemic. Non-comparable owned and leased hotels revenues decreased during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , primarily driven by disposition activity, partially offset by the re-opening of an owned hotel that had suspended operations in 2021. 45
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Three Months Ended September 30,
RevPAR Occupancy ADR
vs. 2021 vs. 2021
2022 (in constant $) 2022 vs. 2021 2022 (in constant $)
Comparable owned and
leased hotels $ 177 47.4 % 69.3 % 13.1% pts $ 256 19.4 %
Nine Months Ended September 30,
RevPAR Occupancy ADR
vs. 2021 vs. 2021
2022 (in constant $) 2022 vs. 2021 2022 (in constant $)
Comparable owned and leased hotels$ 166 111.8 % 64.3 % 25.0% pts$ 259 29.6 % The increases in RevPAR at our comparable owned and leased hotels during the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were primarily due to continued recovery from the COVID-19 pandemic, driven by strong group and leisure transient demand and ADR, as well as growing momentum in business transient travel. During the nine months endedSeptember 30, 2022 , we removed four properties from the comparable owned and leased hotels results as they were sold, we removed one property from the comparable owned and leased hotels results as the property is undergoing a significant renovation, and we combined two properties into one.
Owned and leased hotels segment Adjusted EBITDA.
Three Months Ended
2022 2021 Better / (Worse)
Owned and leased hotels Adjusted EBITDA
9 21.7 % Pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA 15 9 6 69.0 % Segment Adjusted EBITDA$ 66 $ 51 $ 15 29.7 %
Nine Months Ended
2022 2021 Better / (Worse)
Owned and leased hotels Adjusted EBITDA
28 $ 153 550.5 % Pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA 38 6 32 526.8 % Segment Adjusted EBITDA$ 219 $ 34 $ 185 546.3 % The increases in Adjusted EBITDA at our owned and leased hotels for the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were primarily driven by increased comparable owned and leased hotels revenues, partially offset by increased comparable owned and leased hotels expenses due to higher variable expenses incurred as a result of higher demand in 2022 related to the ongoing recovery from the COVID-19 pandemic.
Our pro rata share of Adjusted EBITDA from our unconsolidated hospitality
ventures increased during the three and nine months ended
compared to the same periods in 2021, primarily driven by increased demand
during 2022 due to continued recovery from the COVID-19 pandemic.
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Three Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 127 $ 85 $ 42 49.4 %
Contra revenue (5) (5) - (18.2) %
Other revenues 28 24 4 17.7 %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties (1) 614 412 202 49.2 %
Total segment revenues $ 764 $ 516 $ 248 48.1 %
Nine Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 354 $ 189 $ 165 87.4 %
Contra revenue (17) (14) (3) (24.3) %
Other revenues 91 60 31 51.7 %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties (1) 1,632 966 666 69.0 %
Total segment revenues $ 2,060 $ 1,201 $ 859 71.6 %
(1) See “-Results of Operations” for further discussion regarding the increase in revenues for the reimbursement of costs incurred on
behalf of managed and franchised properties.
The increases in management, franchise, and other fees for the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were primarily driven by the continued recovery from the COVID-19 pandemic, which was led by certain markets inthe United States , particularly leisure destinations. The increases in other revenues for the three and nine months endedSeptember 30, 2022 , compared to the same periods in the prior year, were driven by our residential management business due to continued recovery from the COVID-19 pandemic. Three Months Ended September 30, RevPAR Occupancy ADR (Comparable System-wide vs. 2021 vs. 2021 Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $) Americas full service$ 168 46.3 % 69.0 % 15.0% pts$ 244 14.5 % Americas select service$ 118 24.8 % 74.4 % 5.7% pts$ 158 15.2 % Nine Months Ended September 30, RevPAR Occupancy ADR (Comparable System-wide vs. 2021 vs. 2021 Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $) Americas full service$ 156 93.0 % 63.7 % 22.6% pts$ 245 24.5 % Americas select service$ 106 46.1 % 70.3 % 10.3% pts$ 151 24.6 %
The RevPAR increases at our comparable system-wide full service and select
service hotels during the three and nine months ended
compared to the three and nine months ended
primarily to the continued recovery from the COVID-19 pandemic, with ADR
exceeding pre-COVID-19 pandemic levels in the quarter.
During the nine months endedSeptember 30, 2022 , we removed five properties from the comparableAmericas full service system-wide hotel results as four properties left the hotel portfolio and one property is undergoing a significant renovation, and we combined two properties into one. 47
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During the three months endedSeptember 30, 2022 , we removed four properties that left the hotel portfolio from the comparableAmericas select service system-wide hotel results. During the nine months endedSeptember 30, 2022 , we removed two additional properties that left the hotel portfolio from the comparableAmericas select service system-wide hotel results.
Three Months Ended
2022 2021 Better / (Worse) Segment Adjusted EBITDA $ 114$ 74 $ 40 54.3 % Nine Months Ended September 30, 2022 2021 Better / (Worse) Segment Adjusted EBITDA$ 316 $ 156 $ 160 102.4 %
The increases in Adjusted EBITDA for the three and nine months ended
primarily driven by the increased management and franchise fees.
ASPAC management and franchising segment revenues.
Three Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees
10 59.5 % Contra revenue (1) (1) - 12.9 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) 37 26 11 47.3 % Total segment revenues$ 62 $ 41 $ 21 53.5 %
Nine Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 58 $ 51 $ 7 14.0 %
Contra revenue (3) (3) - (2.4) %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties (1) 100 70 30 43.4 %
Total segment revenues $ 155 $ 118 $ 37 31.6 %
(1) See “-Results of Operations” for further discussion regarding the increase in revenues for the reimbursement of costs incurred on
behalf of managed and franchised properties.
The increases in management, franchise, and other fees for the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , were primarily driven by continued recovery from the COVID-19 pandemic, which was led by all markets, excludingGreater China , as locations eased the remaining travel restrictions and global travel demand increased. Three Months Ended September 30, RevPAR Occupancy ADR (Comparable System-wide vs. 2021 vs. 2021 Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $) ASPAC full service $ 98 63.8 % 58.1 % 18.4% pts$ 170 12.0 % ASPAC select service $ 37 8.9 % 56.2 % 5.4% pts$ 66 (1.5) % 48
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Nine Months Ended September 30,
RevPAR Occupancy ADR
(Comparable System-wide vs. 2021 vs. 2021
Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $)
ASPAC full service $ 78 26.5 % 46.7 % 6.1% pts $ 167 9.9 %
ASPAC select service $ 34 (8.4) % 50.4 % (4.2)% pts $ 67 (0.7) %
Comparable full service RevPAR increased for the three and nine months ended
September 30, 2022 , compared to the three and nine months ended September 30,
2021 , primarily due to increased demand and ADR in Southeast Asia and Australia ,
partially offset by decreased demand and ADR in Greater China .
Comparable select service RevPAR increased for the three months ended
September 30, 2022 , compared to the same period in the prior year, primarily due
to increased demand. Comparable select service RevPAR decreased for the nine
months ended September 30, 2022 , compared to the same period in the prior year,
primarily driven by decreased demand in Greater China .
During the three months ended September 30, 2022 , we removed two properties from
the comparable ASPAC full service hotel results as one property is undergoing a
significant renovation and one property had partially suspended operations.
During the nine months ended September 30, 2022 , we removed one additional
property from the comparable ASPAC full service hotel results as it is
undergoing a significant renovation.
During the nine months ended September 30, 2022 , we removed two properties from
the comparable ASPAC select service system-wide hotel results as one property
left the hotel portfolio and one property experienced a seasonal closure.
ASPAC management and franchising segment Adjusted EBITDA.
Three Months Ended
2022 2021 Better / (Worse) Segment Adjusted EBITDA $ 15$ 6 $ 9 163.0 % Nine Months Ended September 30, 2022 2021 Better / (Worse) Segment Adjusted EBITDA$ 26 $ 21 $ 5 26.4 %
The increases in Adjusted EBITDA during the three and nine months ended
primarily driven by the increased management and franchise fees.
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EAME/
Three Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees
18 161.8 % Contra revenue (2) (3) 1 35.0 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) 27 18 9 37.8 % Total segment revenues$ 55 $ 27 $ 28 97.8 %
Nine Months Ended
2022 2021 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 66 $ 25 $ 41 168.3 %
Contra revenue (6) (9) 3 31.8 %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties (1) 71 46 25 52.4 %
Total segment revenues $ 131 $ 62 $ 69 111.2 %
(1) See “-Results of Operations” for further discussion regarding the increase in revenues for the reimbursement of costs incurred on
behalf of managed and franchised properties.
The increases in management, franchise, and other fees during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , were driven by increased base and incentive management fees across certain markets inWestern Europe , theMiddle East , andIndia primarily due to the continued recovery from the COVID-19 pandemic. The three months endedSeptember 30, 2022 also benefited from an increase in other fees due to the termination of a management contract for a hotel in the pipeline. Three Months Ended September 30, RevPAR Occupancy ADR (Comparable System-wide vs. 2021 vs. 2021 Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $) EAME/SW Asia full service$ 137 89.2 % 65.3 % 17.8% pts$ 210 37.8 % EAME/SW Asia select service$ 67 77.3 % 76.9 % 21.4% pts$ 88 28.1 % Nine Months Ended September 30, RevPAR Occupancy ADR (Comparable System-wide vs. 2021 vs. 2021 Hotels) 2022 (in constant $) 2022 vs. 2021 2022 (in constant $) EAME/SW Asia full service$ 121 147.1 % 59.8 % 24.5% pts$ 203 45.7 % EAME/SW Asia select service$ 61 101.9 % 68.3 % 22.0% pts$ 89 36.7 % Comparable system-wide hotels RevPAR increased during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , primarily driven by certain leisure destinations in Western andSouthern Europe , theMiddle East , andIndia due to the continued recovery from the COVID-19 pandemic and the easing of travel restrictions in certain markets. During the three months endedSeptember 30, 2022 , we removed one property from the comparable EAME/SW Asia full service system-wide hotel results due to a significant expansion. During the nine months endedSeptember 30, 2022 , we removed five additional properties from the comparable EAME/SW Asia full service system-wide hotel results as four properties had suspended operations and one property left the hotel portfolio. 50
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During the three months endedSeptember 30, 2022 , we removed one property from the comparable EAME/SW Asia select service system-wide hotels results as it left the hotel portfolio. During the nine months endedSeptember 30, 2022 , we removed one additional property from the comparable EAME/SW Asia select service system-wide hotel results as it converted from franchised to managed.
EAME/
Three Months Ended
2022 2021 Better / (Worse) Segment Adjusted EBITDA$ 21 $ 5 $ 16 364.7 % Nine Months Ended September 30, 2022 2021 Better / (Worse) Segment Adjusted EBITDA$ 40 $ 4 $ 36 905.9 % During the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , Adjusted EBITDA increased primarily due to the increased management, franchise, and other fees revenues.
Three Months Ended
2022 2021 Better / (Worse)
Segment revenues
Owned and leased hotels $ 16 $ - $ 16 NM
Management, franchise, and other fees 40 - 40 NM
Contra revenue (1) - (1) NM
Distribution and destination management 244 - 244 NM
Other revenues 37 - 37 NM
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties 27 - 27 NM
Total segment revenues $ 363 $ - $ 363 NM
Nine Months Ended
2022 2021 Better / (Worse) Segment revenues Owned and leased hotels $ 20 $ - $ 20 NM Management, franchise, and other fees 106 - 106 NM Contra revenue (1) - (1) NM Distribution and destination management 746 - 746 NM Other revenues 104 - 104 NM Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties 82 - 82 NM Total segment revenues$ 1,057 $ - $ 1,057 NM For the three and nine months endedSeptember 30, 2022 , management, franchise, and other fees revenues reflect Net Package RevPAR of$179 and$199 , respectively, for ALG resorts in theAmericas , including resorts inMexico , theCaribbean ,Central America , andSouth America . For the three and nine months endedSeptember 30, 2022 , management, franchise, and other fees revenues reflect Net Package RevPAR of$135 and$104 , respectively, for ALG resorts inEurope . 51
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Three
Months Ended
2022 2021 Change
Segment Adjusted EBITDA $ 78 $ - $ 78 NM
Net Deferral activity
Increase in deferred revenue $ 46 $ - $ 46 NM
Increase in deferred costs (29) - (29) NM
Net Deferrals $ 17 $ - $ 17 NM
Increase in Net Financed Contracts $ 26 $ - $ 26 NM
Nine Months Ended September 30,
2022 2021 Change
Segment Adjusted EBITDA $ 188 $ - $ 188 NM
Net Deferral activity
Increase in deferred revenue $ 147 $ - $ 147 NM
Increase in deferred costs (81) - (81) NM
Net Deferrals $ 66 $ - $ 66 NM
Increase in Net Financed Contracts $ 48 $
–
During the three and nine months endedSeptember 30, 2022 , ALG benefited from the sale of newUnlimited Vacation Club membership contracts, which increased Net Deferrals and Net Financed Contracts. Net Deferrals represent cash received in the period for both membership down payments and monthly installment payments on financed contracts, less cash paid for costs incurred to sell new contracts, net of revenues and expenses recognized on our condensed consolidated statements of income (loss) during the period. Net Financed Contracts represent contractual future cash flows due to the Company over an average term of less than 4 years, less expenses that will be incurred to fulfill the contract, net of monthly cash installment payments received during the period. AtSeptember 30, 2022 , the Net Financed Contract balance not recorded on our condensed consolidated balance sheet was$181 million . Corporate and other. Three Months Ended September 30, 2022 2021 Better / (Worse) Revenues$ 16 $ 14 $ 2 12.3 % Adjusted EBITDA$ (42) $ (26) $ (16) (70.6) % Nine Months Ended September 30, 2022 2021 Better / (Worse) Revenues $ 43$ 33 $ 10 28.8 % Adjusted EBITDA$ (114) $ (71) $ (43) (62.4) % Revenues increased during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , primarily driven by increased revenues related to our co-branded credit card program. Adjusted EBITDA decreased during the three and nine months endedSeptember 30, 2022 , compared to the three and nine months endedSeptember 30, 2021 , primarily driven by increases in certain selling, general, administrative expenses, including$8 million and$19 million , respectively, of ALG integration-related costs, as well as increased payroll and related costs due to increased headcount. 52
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Non-GAAP Measures
Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization
(“Adjusted EBITDA”) and EBITDA
We use the terms Adjusted EBITDA and EBITDA throughout this quarterly report. Adjusted EBITDA and EBITDA, as we define them, are non-GAAP measures. We define consolidated Adjusted EBITDA as net income (loss) attributable toHyatt Hotels Corporation plus our pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA based on our ownership percentage of each owned and leased venture, adjusted to exclude the following items:
•interest expense;
•benefit (provision) for income taxes;
•depreciation and amortization;
•contra revenue;
•revenues for the reimbursement of costs incurred on behalf of managed and
franchised properties;
•costs incurred on behalf of managed and franchised properties that we intend to
recover over the long term;
•equity earnings (losses) from unconsolidated hospitality ventures;
•stock-based compensation expense;
•gains (losses) on sales of real estate and other;
•asset impairments; and
•other income (loss), net.
We calculate consolidated Adjusted EBITDA by adding the Adjusted EBITDA of each
of our reportable segments and eliminations to corporate and other Adjusted
EBITDA.
Our board of directors and executive management team focus on Adjusted EBITDA as
one of the key performance and compensation measures both on a segment and on a
consolidated basis. Adjusted EBITDA assists us in comparing our performance over
various reporting periods on a consistent basis because it removes from our
operating results the impact of items that do not reflect our core operations
both on a segment and on a consolidated basis. Our President and Chief Executive
Officer, who is our CODM, also evaluates the performance of each of our
reportable segments and determines how to allocate resources to those segments,
in part, by assessing the Adjusted EBITDA of each segment. In addition, the
compensation committee of our board of directors determines the annual variable
compensation for certain members of our management based in part on consolidated
Adjusted EBITDA, segment Adjusted EBITDA, or some combination of both.
We believe Adjusted EBITDA is useful to investors because it provides investors
with the same information that we use internally for purposes of assessing our
operating performance and making compensation decisions and facilitates our
comparison of results with results from other companies within our industry.
Adjusted EBITDA excludes certain items that can vary widely across different
industries and among companies within the same industry including interest
expense and benefit (provision) for income taxes, which are dependent on company
specifics including capital structure, credit ratings, tax policies, and
jurisdictions in which they operate; depreciation and amortization which are
dependent on company policies including how the assets are utilized as well as
the lives assigned to the assets; Contra revenue which is dependent on company
policies and strategic decisions regarding payments to hotel owners; and
stock-based compensation expense which varies among companies as a result of
different compensation plans companies have adopted. We exclude revenues for the
reimbursement of costs and costs incurred on behalf of managed and franchised
properties which relate to the reimbursement of payroll costs and for
system-wide services and programs that we operate for the benefit of our hotel
owners as contractually we do not provide services or operate the related
programs to generate a profit over the terms of the respective contracts. Over
the long term, these programs and services are not designed to impact our
economics, either positively or negatively. Therefore, we exclude the net impact
when evaluating period-over-period changes in our operating results. Adjusted
EBITDA includes costs incurred on behalf of our managed and
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franchised properties related to system-wide services and programs that we do not intend to recover from hotel owners. Finally, we exclude other items that are not core to our operations, such as asset impairments and unrealized and realized gains and losses on marketable securities. Adjusted EBITDA and EBITDA are not substitutes for net income (loss) attributable toHyatt Hotels Corporation , net income (loss), or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA and EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income (loss) generated by our business. Our management compensates for these limitations by referencing our GAAP results and using Adjusted EBITDA supplementally. See our condensed consolidated statements of income (loss) in our condensed consolidated financial statements included elsewhere in this quarterly report. See below for a reconciliation of net income (loss) attributable toHyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA.
Adjusted selling, general, and administrative expenses
Adjusted selling, general, and administrative expenses, as we define it, is a non-GAAP measure. Adjusted selling, general, and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. Adjusted selling, general, and administrative expenses assist us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operations, both on a segment and consolidated basis. See "-Results of Operations" for a reconciliation of selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses. Comparable hotels "Comparable system-wide hotels" represents all properties we manage or franchise, including owned and leased properties, that are operated for the entirety of the periods being compared and that have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared or for which comparable results are not available. Hotels that suspended operations due to the COVID-19 pandemic and have not yet re-opened are no longer included in our definition of comparable system-wide hotels. We may use variations of comparable system-wide hotels to specifically refer to comparable system-wideAmericas full service hotels, including our wellness resorts, our select service hotels, or our all-inclusive resorts, for those properties that we manage or franchise within theAmericas management and franchising segment, comparable system-wide ASPAC full service or select service hotels for those properties we manage or franchise within the ASPAC management and franchising segment, or comparable system-wide EAME/SW Asia full service or select service hotels for those properties that we manage or franchise within the EAME/SW Asia management and franchising segment. "Comparable owned and leased hotels" represents all properties we own or lease that are operated and consolidated for the entirety of the periods being compared and have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared or for which comparable results are not available. Comparable system-wide hotels and comparable owned and leased hotels are commonly used as a basis of measurement in our industry. "Non-comparable system-wide hotels" or "non-comparable owned and leased hotels" represent all hotels that do not meet the respective definition of "comparable" as defined above. Constant dollar currency We report the results of our operations both on an as-reported basis, as well as on a constant dollar basis. Constant dollar currency, which is a non-GAAP measure, excludes the effects of movements in foreign currency exchange rates between comparative periods. We believe constant dollar analysis provides valuable information regarding our results as it removes currency fluctuations from our operating results. We calculate constant dollar currency by restating prior-period local currency financial results at the current period's exchange rates. These restated amounts are then compared to our current period reported amounts to provide operationally driven variances in our results. 54
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Net Financed Contracts
Net Financed Contracts representUnlimited Vacation Club contracts signed during the period for which an initial cash down payment has been received and the remaining balance is contractually due in monthly installments over an average term of less than 4 years. The Net Financed Contract balance is calculated as the unpaid portion of membership contracts reduced by expenses related to fulfilling the membership program contracts and further reduced by an allowance for future estimated uncollectible installments. Net Financed Contract balances are not reported on our condensed consolidated balance sheets as our right to collect future installments is conditional on our ability to provide continuous access to member benefits at ALG resorts over the contract term, and the associated expenses to fulfill the membership contracts become liabilities of the Company only after the installments are collected. We believe Net Financed Contracts is useful to investors as it represents an estimate of future cash flows due in accordance with contracts signed in the current period. AtSeptember 30, 2022 , the Net Financed Contract balance not recorded on our condensed consolidated balance sheet was$181 million .
Net Deferrals
Net Deferrals represent the change in contract liabilities associated with theUnlimited Vacation Club membership contracts less the change in deferred cost assets associated with the contracts. The contract liabilities and deferred cost assets are recognized as revenue and expense, respectively, on our condensed consolidated statements of income (loss) over the customer life, which ranges from 3 to 25 years.
The table below provides a reconciliation of our net income (loss) attributable
to
consolidated Adjusted EBITDA:
Three
Months Ended
2022 2021 Change
Net income attributable to Hyatt Hotels
Corporation $ 28 $ 120 $ (92) (77.2) %
Interest expense 38 40 (2) (5.0) %
Provision for income taxes 35 138 (103) (74.0) %
Depreciation and amortization 96 71 25 34.5 %
EBITDA 197 369 (172) (46.5) %
Contra revenue 9 9 - 0.2 %
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties (705) (456) (249) (54.4) %
Costs incurred on behalf of managed and
franchised properties 697 465 232 49.6 %
Equity (earnings) losses from unconsolidated
hospitality ventures (2) 12 (14) (120.8) %
Stock-based compensation expense 7 6 1 10.7 %
(Gains) losses on sales of real estate 1 (307) 308 100.3 %
Asset impairments 9 - 9 NM
Other loss, net 24 3 21 533.1 %
Pro rata share of unconsolidated owned and
leased hospitality ventures' Adjusted EBITDA 15 9 6 69.0 %
Adjusted EBITDA $ 252 $ 110 $ 142 128.1 %
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Nine Months Ended September 30,
2022 2021 Change
Net income (loss) attributable to Hyatt Hotels
Corporation $ 161 $ (193) $ 354 183.3 %
Interest expense 116 123 (7) (5.4) %
Provision for income taxes 143 339 (196) (57.6) %
Depreciation and amortization 320 219 101 45.9 %
EBITDA 740 488 252 51.7 %
Contra revenue 27 26 1 5.1 %
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties (1,885) (1,082) (803) (74.2) %
Costs incurred on behalf of managed and
franchised properties 1,881 1,117 764 68.3 %
Equity (earnings) losses from unconsolidated
hospitality ventures 6 (8) 14 169.7 %
Stock-based compensation expense 47 42 5 12.0 %
Gains on sales of real estate (250) (412) 162 39.3 %
Asset impairments 19 2 17 708.7 %
Other (income) loss, net 53 (34) 87 258.5 %
Pro rata share of unconsolidated owned and
leased hospitality ventures' Adjusted EBITDA 38 6 32 526.8 %
Adjusted EBITDA $ 676 $ 145 $ 531 365.1 %
Liquidity and Capital Resources
Overview
We finance our business primarily with existing cash, short-term investments, and cash generated from our operations. As part of our long-term business strategy, we use net proceeds from dispositions to pay down debt; support new investment opportunities, including acquisitions; and return capital to our shareholders when appropriate. If we deem it necessary, we borrow cash under our revolving credit facility or from other third-party sources and raise funds by issuing debt or equity securities. We maintain a cash investment policy that emphasizes the preservation of capital. We expect to successfully execute our commitment announced in August of 2021 to realize$2.0 billion of proceeds from the disposition of owned assets, net of acquisitions, by the end of 2024. As ofNovember 3, 2022 , we have realized$721 million of proceeds from the net disposition of owned assets as part of this commitment. We may, from time to time, seek to retire or purchase our outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an accelerated share repurchase transaction. Such repurchases or exchanges, if any, will depend on prevailing market conditions, restrictions in our existing or future financing arrangements, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. During the three and nine months endedSeptember 30, 2022 , we returned$162 million and$263 million , respectively, of capital to our shareholders through share repurchases, and duringOctober 2022 , we returned an additional$27 million of capital to our shareholders through share repurchases. During the three and nine months endedSeptember 30, 2022 , there were no dividend payments. We believe that our cash position, short-term investments, and cash from operations, together with borrowing capacity under our revolving credit facility and our access to the capital markets, will be adequate to meet all of our funding requirements and capital deployment objectives in both the short term and long term.
Recent Transactions Affecting our Liquidity and Capital Resources
During the nine months ended
transactions impacted our liquidity. See “-Sources and Uses of Cash.”
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Sources and Uses of Cash
Nine Months Ended
2022 2021 Cash provided by (used in): Operating activities $ 403$ 209 Investing activities 430 738 Financing activities (305) 300 Effect of exchange rate changes on cash 26 (3)
Cash, cash equivalents, and restricted cash reclassified to assets held for
sale
(2) - Net increase in cash, cash equivalents, and restricted cash
$ 552
Cash Flows from Operating Activities
Cash provided by operating activities increased$194 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase was primarily due to improved performance driven by continued recovery from the COVID-19 pandemic and the acquisition of ALG. During the three months endedSeptember 30, 2021 , we received a$254 million refund from theIRS for a loss carryback claim allowed under the provision of the Coronavirus Aid, Relief, and Economic Security Act.
Cash Flows from Investing Activities
During the nine months ended
•We received
adjustments, from the sale of The Confidante
•We received
adjustments, from the sale of
•We received
adjustments, from the sale of The Driskill.
•We received
sale of Grand Hyatt San Antonio River Walk.
•We received
and short-term investments.
•We received
interest in an equity method investment and the redemption of a HTM debt
security.
•We invested
•We acquired
proration adjustments.
•We paid
seller for purchase price adjustments.
During the nine months ended
•We received
adjustments, from the sale of
•We received
and short-term investments.
•We received
adjustments, from the sale of
•We received
equity method investments and the redemption of a HTM debt security.
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•We acquiredAlila Ventana Big Sur for$146 million of cash, net of closing costs and proration adjustments, and received$148 million of proceeds, net of closing costs and proration adjustments from the subsequent sale. •We purchased our partner's interest in the entities that own Grand Hyatt São Paulo for$6 million of cash, and we repaid the$78 million third-party mortgage loan on the property.
•We invested
•We invested
•We acquired land from an unrelated third party for
Cash Flows from Financing Activities
During the nine months ended
•We repurchased 3,075,891 shares of Class A common stock for an aggregate
purchase price of
•We repurchased
•We utilized
During the nine months ended
•We issued and sold 8,050,000 shares of Class A common stock and received
million
underwriting discounts and other offering expenses.
•We repaid our outstanding 2021 Notes at maturity for approximately
million
We define net debt as total debt less the total of cash and cash equivalents and
short-term investments. We consider net debt and its components to be an
important indicator of liquidity and a guiding measure of capital structure
strategy. Net debt is a non-GAAP measure and may not be computed the same as
similarly titled measures used by other companies. The following table provides
a summary of our debt to capital ratios:
September 30, 2022 December 31, 2021
Consolidated debt (1) $ 3,804 $ 3,978
Stockholders' equity 3,443 3,563
Total capital 7,247 7,541
Total debt to total capital 52.5 % 52.8 %
Consolidated debt (1) 3,804 3,978
Less: cash and cash equivalents and short-term
investments (1,374) (1,187)
Net consolidated debt $ 2,430 $ 2,791
Net debt to total capital 33.5 % 37.0 %
(1) Excludes approximately
unconsolidated hospitality venture indebtedness at
us and a portion of which we guarantee pursuant to separate agreements.
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Capital Expenditures
We routinely make capital expenditures to enhance our business. We classify our
capital expenditures into maintenance and technology, enhancements to existing
properties, and other. We have been, and will continue to be, disciplined with
respect to our capital spending, taking into account our cash flow from
operations.
Nine Months Ended September 30,
2022 2021
Enhancements to existing properties $ 75 $ 42
Maintenance and technology 61 23
Other 6 -
Total capital expenditures $ 142 $ 65
The increase in enhancements to existing properties is primarily driven by
renovation spend at an owned hotel in 2022. The increase in maintenance and
technology is primarily driven by corporate IT projects and equipment purchases.
Total capital expenditures for the nine months ended September 30, 2022 include
$20 million related to ALG. Excluding ALG, our capital expenditures continue to
be below pre-COVID-19 pandemic levels.
Senior Notes
The table below sets forth the outstanding principal balance of our Senior Notes atSeptember 30, 2022 , as described in Part I, Item 1 "Financial Statements-Note 9 to the Condensed Consolidated Financial Statements." Interest on the Senior Notes is payable semi-annually or quarterly.
Outstanding principal
amount
300$350 million senior unsecured notes maturing in 2023-3.375% 350$700 million senior unsecured notes maturing in 2023-1.300% 700$750 million senior unsecured notes maturing in 2024-1.800% 746$450 million senior unsecured notes maturing in 2025-5.375% 450$400 million senior unsecured notes maturing in 2026-4.850% 400$400 million senior unsecured notes maturing in 2028-4.375% 399$450 million senior unsecured notes maturing in 2030-5.750% 440 Total Senior Notes $ 3,785
We are in compliance with all applicable covenants under the indenture governing
our Senior Notes at
Revolving Credit Facility
OnMay 18, 2022 , we entered into a new credit agreement that refinanced and replaced in its entirety our prior revolving credit facility. The revolving credit facility is intended to provide financing for working capital and general corporate purposes, including commercial paper backup and permitted investments and acquisitions. At bothSeptember 30, 2022 andDecember 31, 2021 , we had no balance outstanding. See Part I, Item 1 "Financial Statements-Note 9 to the Condensed Consolidated Financial Statements."
We are in compliance with all applicable covenants under the revolving credit
facility at
Letters of Credit
We issue letters of credit either under the revolving credit facility or directly with financial institutions. We had$264 million and$276 million in letters of credit issued directly with financial institutions outstanding atSeptember 30, 2022 andDecember 31, 2021 , respectively. AtSeptember 30, 2022 , these letters of credit had weighted-average fees of approximately 153 basis points and typically have maturity dates of up to one year. 59
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Critical Accounting Policies and Estimates
Preparing financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect reported amounts and related
disclosures. We have disclosed those estimates that we believe are critical and
require complex judgment in their application in our 2021 Form 10-K. Since the
date of our 2021 Form 10-K, there have been no material changes to our critical
accounting policies or the methodologies or assumptions we apply under them.
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