CHICAGO—Hyatt Hotels Corporation has reported third quarter 2018 financial results, citing growth and the recent acquisition of Two Roads Hospitality.
Acquisition of Two Roads Hospitality
On Oct. 8, Hyatt acquired Two Roads Hospitality LLC, a hotel management company for a base purchase price of approximately $480 million. Through the addition of Two Roads, Hyatt will expand its presence in 23 new markets and offer an expanded portfolio of high-quality lifestyle brands including Destination Hotels, Joie de Vivre, Thompson Hotels, Alila and Tommie, further supporting the company’s evolution to a more fee-based enterprise.
“These are attractive segments. If you look at what’s going on in the world, lifestyle brands and boutique brands are growing at very good pace up and down the chain segments. And we believe that these are very compelling brands that have already proved their mettle in terms of garnering interests from outside third-party developers,” said Mark S. Hoplamazian, president/CEO of Hyatt Hotels Corporation, in an earnings call.
The company expects to assume the management agreements for the majority of Two Roads’ 85 properties, equivalent to approximately 14,000 rooms. The acquisition is expected to close this month, with the potential for Hyatt to invest up to an additional $120 million in the aggregate, contingent upon certain terms to be defined after closing.
Hoplamazian added, “It fits our strategy because it’s asset-light. We are buying a management platform and brands and that’s what we intend to leverage going forward.”
Third quarter of 2018 financial highlights as compared to the third quarter of 2017:
- Net income increased to $237 million, aided by gains on sales of real estate.
- Adjusted EBITDA decreased 0.9% to $175 million, an increase of 0.1% in constant currency.
- Comparable system-wide RevPAR increased 2.8%, including an increase of 5.3% at comparable owned and leased hotels.
- Comparable U.S. hotel RevPAR increased 1.4%; full-service hotel RevPAR increased 2.5% and select-service hotel RevPAR decreased 1.1%.
- Net rooms growth was 7.6%.
- Comparable owned and leased hotel operating margin increased 70 basis points to 21.8%.
- Adjusted EBITDA margin of 29.7% increased 240 basis points in constant currency.
“We are continuing to execute our long-term growth strategy while returning meaningful capital to shareholders, enabled in part by our sell-down of real estate,” Hoplamazian said. “We also increased our shareholder capital return expectations for 2018 to approximately $1.0 billion inclusive of share repurchases and dividends and have a new $750 million share repurchase authorization.”
Openings and Future Expansion
Hyatt opened 12 hotels (or 2,608 rooms) in the third quarter of 2018 and is on pace to open approximately 60 hotels in the 2018 fiscal year.
As of Sept. 30, Hyatt had executed management or franchise contracts for approximately 340 hotels, or approximately 73,000 rooms, consistent with expectations at the end of the second quarter. This represents development pipeline growth of approximately 6%, compared to the third quarter of 2017.