CHICAGO—Hyatt Hotels Corporation reported third-quarter 2019 financial results, including 13% net room growth, driving 11% management and franchise fee growth in the quarter.
“The strength of our brands and the consistent approach we have to operating with excellence and efficiency are serving us very well in this period of volatile economic conditions,” said Mark S. Hoplamazian, president/CEO, Hyatt Hotels Corporation. “In particular, our management and franchise fee growth of nearly 11% this quarter is driven by roughly 13% year-over-year net rooms growth. Further, we have successfully increased productivity and operating efficiency for 23 straight quarters, which has allowed us to maintain strong hotel operating margins even in the face of flat RevPAR growth this quarter.”
Net income attributable to Hyatt was $296 million, or $2.80 per diluted share, in the third quarter of 2019, compared to $237 million, or $2.09 per diluted share, in the third quarter of 2018, a 24.4% increase. Adjusted net income attributable to Hyatt was $39 million, or $0.37 per diluted share, in the third quarter of 2019, compared to $37 million, or $0.33 per diluted share, in the third quarter of 2018.
Comparable system-wide RevPAR was flat, including a decrease of 0.1% at comparable owned and leased hotels. Comparable system-wide RevPAR growth was favorably impacted by approximately 50 basis points from the timing of the Jewish holidays, but was offset by a similar reduction resulting from political unrest in Hong Kong.
Comparable U.S. hotel RevPAR decreased 0.6%; full-service hotel RevPAR increased 0.2% and select-service hotel RevPAR decreased 2.3%.
Net rooms growth was 13.2%, or 7.9% excluding the acquisition of Two Roads Hospitality LLC in the fourth quarter of 2018. Comparable owned and leased hotels operating margin decreased 20 basis points to 21.0%.
“We continue to execute on our capital strategy and shift our earnings profile while maintaining our focus on global growth,” Hoplamazian. “We expect to end the year with approximately 57% of our earnings coming from our hotel management and franchise business, an increase of roughly 400 basis points from 2018. Our pipeline remains robust while continuing to deliver solid organic net rooms growth of almost 8% this quarter, net of the acquisition of Two Roads in the fourth quarter of 2018. While the current global operating environment is challenging, we feel confident in our ability to manage through volatility and identify opportunities to strengthen our brands and performance.”
Total management, franchise and other fees increased 11.9% (12.5% increase in constant currency) to $148 million. Base management fees increased 17.8% to $64 million, primarily in the Americas management and franchising segment due to the acquisition of Two Roads. Incentive management fees decreased 1.3% to $33 million. Franchise fees increased 11.8% to $37 million. Other fees increased 22.0% to $14 million. Excluding other fees, management and franchise fees increased 10.9% (11.6% increase in constant currency) to $134 million.
Americas management and franchising segment adjusted EBITDA increased 11.2% (11.4% increase in constant currency), driven by higher management, franchise and other fees from the Two Roads acquisition and recently opened hotels. RevPAR for comparable Americas full-service hotels increased 1.5%, occupancy increased 70 basis points and ADR increased 0.7%. RevPAR growth was driven by strength in certain resort locations outside of the United States and benefited from the timing of the Jewish holidays, which had an approximate 110 basis point favorable impact. RevPAR for comparable Americas select-service hotels decreased 2.4%, occupancy decreased 40 basis points, and ADR decreased 1.8%. Total Americas management and franchising adjusted revenues increased 29.6% (29.9% increase in constant currency) including revenue from the residential management operations acquired as part of Two Roads.
Transient rooms revenue at comparable U.S. full-service hotels increased 1.0%, room nights increased 2.3%, and ADR decreased 1.3%. Group rooms revenue at comparable U.S. full-service hotels decreased 0.2%, room nights decreased 2.3%, and ADR increased 2.2%.
Americas net rooms increased 11.5% compared to the third quarter of 2018, or 5.2% excluding Two Roads.
Total owned and leased hotels segment Adjusted EBITDA decreased 17.6% (16.9% decrease in constant currency), including a decrease of 12% (11.4% decrease in constant currency) in pro rata share of unconsolidated hospitality ventures Adjusted EBITDA.
Owned and leased hotels segment revenues decreased 3.9% (3% decrease in constant currency), and was negatively impacted by non-comparable hotels. RevPAR for comparable owned and leased hotels decreased 0.1%. Occupancy and ADR were both flat.
Twenty hotels (or 4,422 rooms) opened in the third quarter of 2019, contributing to a 13.2% increase in net rooms compared to the third quarter of 2018. Excluding the impact of the Two Roads acquisition, net rooms increased 7.9% compared to the third quarter of 2018.
As of September 30, 2019, the company had executed management or franchise contracts for approximately 460 hotels, or approximately 92,000 rooms. The company is expected to open approximately 85 hotels in the 2019 fiscal year.