CHICAGO—Hyatt Hotels Corporation reported a $236 million loss in its Q2 earnings call, but is encouraged by the recovery it has seen in Greater China.
“The second quarter was challenging, but in line with what we expected,” said Mark S. Hoplamazian, president/CEO, Hyatt Hotels in the call. “We do believe that the worst is behind us, and we are seeing positive signs developing around the world with some clear pockets of strength. The recovery, especially as it relates to business travel here in the U.S., will continue to be challenging, but we are confident that pent-up demand for travel will lead to meaningful recovery as COVID-19 cases come under control and, ultimately, when effective treatments or vaccines are widely available. China serves as a great example that travel recovery is possible, even without pharmaceutical treatments or a vaccine, as long as proper, well-coordinated actions are taken to significantly reduce the spread of the virus.”
Second quarter 2020 highlights as compared to the second quarter of 2019 are as follows:
- Net income (loss) decreased 376% to a net loss of $236 million.
- Adjusted EBITDA decreased 154.6% to $117 million.
- Cash and cash equivalents of $1,438 million
- Comparable system-wide RevPAR decreased 89.4%.
- Net rooms growth of 5.8%
- Pipeline of executed management or franchise contracts for approximately 101,000 rooms, an increase of approximately 9.8% compared to the second quarter 2019
The company reported that the recovery in RevPAR has been mixed, as various parts of the world remain subject to travel restrictions and quarantines, which continue to suppress demand and drive uncertainty surrounding the pace and timing of recovery across individual markets. Comparable system-wide RevPAR improved sequentially in each month after the low point in April.
Greater China, where the impacts of the COVID-19 pandemic were first reported, continues to lead the recovery. RevPAR in Greater China has shown continued improvement since May, with preliminary estimates indicating occupancy reaching approximately 57% at the end of July. Excluding Hong Kong, Macau and Taiwan, preliminary estimates indicate occupancy in China reached approximately 65% at the end of July.
The recovery in Greater China and certain markets within the Americas and EAME/SW Asia regions is being led by strength in leisure transient demand.
Hyatt continues to reopen hotels where operations had been suspended. As of July 31, 2020, approximately 87% of total system-wide hotels were open compared to approximately 65% of total system-wide hotels as of April 30, 2020. Approximately 75% of full-service hotels and 96% of select-service hotels in the Americas, 70% of hotels in the EAME/SW Asia region, and 92% of hotels in the ASPAC region were open. All but one of its full- and select-service hotels in Greater China were open. Approximately 69% of owned and leased hotels were open.
For the month of July 2020, preliminary estimates indicate RevPAR decreased approximately 76% for all comparable system-wide hotels compared to July of 2019, reflecting the ongoing impact of the pandemic.
Second Quarter Results
Second quarter of 2020 financial results as compared to the second quarter of 2019 are as follows:
Management, Franchise and Other Fees
Total fee revenues were $20 million. Base management fees decreased 89.1% to $8 million, and incentive management fees decreased 103.9% to negative revenue of $2 million, reflecting a reversal of incentive fees earned year-to-date. Franchise fees decreased 85.1% to $6 million. Other fee revenues decreased 29.7% to $8 million.
Americas Management and Franchising Segment
Americas management and franchising segment Adjusted EBITDA decreased 103% (consistent in constant currency) to $3 million. At March 31, 2020, 51% of Hyatt’s Americas full-service hotels and 91% of Americas select-service hotels were open, and throughout the second quarter, operations started to resume, with 61% of Americas full-service hotels and 93% of Americas select-service hotels open at June 30, 2020.
Americas net rooms increased 4.5% compared to the second quarter of 2019.
Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia (ASPAC) Management and Franchising Segment
ASPAC management and franchising segment Adjusted EBITDA decreased 108.3% (108.5% decrease in constant currency) to $2 million. At both March 31, 2020, and June 30, 2020, 88% of Hyatt’s ASPAC full- and select-service hotels were open.
ASPAC net rooms increased 9.9% compared to the second quarter of 2019.
Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management and Franchising Segment
EAME/SW Asia management and franchising segment Adjusted EBITDA decreased 201.4% (208.5% decrease in constant currency) to $11 million. At March 31, 2020, 52% of Hyatt’s EAME/SW Asia full- and select-service hotels were open, and throughout the second quarter, operations started to resume, with 61% of EAME/SW Asia full- and select-service hotels open at June 30, 2020.
EAME/SW Asia net rooms increased 6.7% compared to the second quarter of 2019.
Owned and Leased Hotels Segment
Total owned and leased hotels segment Adjusted EBITDA decreased 168.2% (168.6% decrease in constant currency) to $78 million. Owned and leased hotels segment results were heavily impacted by the COVID-19 pandemic and also by dispositions in 2019.
At March 31, 2020, 18% of Hyatt’s owned and leased hotels were open, and throughout the second quarter, operations started to resume, with 45% of owned and leased hotels open at June 30, 2020.
Openings and Future Expansion
Ten new hotels (or 1,879 rooms) opened in the second quarter of 2020, contributing to a 5.8% increase in net rooms compared to the second quarter of 2019.
As of June 30, 2020, the company had executed management or franchise contracts for approximately 500 hotels (or approximately 101,000 rooms), unchanged from the quarter ended March 31, 2020.
