Hyatt Hotels Corp.'s goal of transforming into an asset-light business is well on its way after a number of sales in the second quarter.
During the company's second-quarter earnings call , President and CEO Mark Hoplamazian said it's been an active first half of the year for the company. Hyatt generated gross proceeds of $812 million from asset sales related to its owned and leased portfolio during the second quarter.
Asset sales include the 530-room Hyatt Regency Indian Wells Resort and Spa sold for $145 million; the 1,003-room Grand Hyatt San Antonio River Walk for $310 million; the 189-room The Driskill for $125 million; and the 339-room The Confidante Miami Beach for $232 million.
Each property was sold to an unrelated third-party buyer, and Hyatt entered into long-term management agreements on the hotels.
Hoplamazian added that Hyatt is also marketing two owned hotels for sale.
"We are also pleased to announce that on Aug. 3, we acquired the Hotel Irvine in Irvine, California, a hotel we know very well, as it was previously the Hyatt Regency Irvine for over 20 years before exiting our system several years ago," he said. "We purchased this 541-room hotel for $135 million, securing our presence in a highly sought-after location where we are underrepresented."
Hyatt plans to unlock the property's value through a renovation and repositioning, then will seek a third-party buyer to be a long-term owner.
Chief Financial Officer Joan Bottarini said these deals contribute to Hyatt's progress in its asset-light transformation.
Additionally, she said that her team is encouraged by the volume of conversion opportunities to come in the second half of 2022.
Success With Apple Leisure Group
Along with ongoing success in Hyatt's transaction and capital strategy among its legacy hotels, the company is achieving favorable gains from its 2021 acquisition of Apple Leisure Group. ALG is a luxury resort management group from affiliates of KKR and KSL Capital Partners.
Bottarini said Hyatt has achieved a record level of leisure demand during the second quarter, as well as a rapid recovery in group and business-transient demand.
Overall, Hyatt reported a second-quarter net income attributable to the company of $206 million, and diluted earnings per share of $1.85, with "results favorably impacted by gains of sale of real estate of $251 million dollars, the acquisition of ALG and significantly improved operating performance," she said.
Performance of the ALG segment specifically "significantly exceeded our expectations," she said.
Adjusted earnings before interest, taxes, depreciation and amortization for the resort properties during the quarter was $54 million.
Hoplamazian said through the first six months of 2022, ALG has already surpassed full-year 2019 economic performance.
"Net package RevPAR for properties managed by ALG in the Americas in both 2019 and 2022 had a strong recovery, improving from down 8% in the first quarter [of 2022] to up 17% in the second quarter, relative to 2019," he said. "Further, non-package revenue had a significant positive impact on results as well with a 26% increase, when compared to 2019 — a testament to compelling programming at ALG's resorts."
He added accelerated growth in Hyatt's fee-based business during the quarter was heavily driven by its ALG resorts.
"It's notable that ALG has already achieved net rooms growth of 10% since the start of the year, which is well ahead of the approximately 10% growth target we anticipated for the full year," Hoplamazian said.
Second-Quarter Performance
During the second quarter, Hyatt's net income increased to $206 million compared to a $9 million loss during the same period in 2021, according to the company's earnings release.
Additionally, adjusted earnings before interest, taxes, depreciation and amortization increased to $255 million from $55 million year over year.
Among the key performance metrics, comparable system-wide revenue per available room rose 82% in the quarter to $130.16, while comparable U.S. hotel RevPAR grew 85% to $150.52.
In the quarter, Hyatt's pipeline of executed management or franchise contracts was roughly 113,00 rooms.
Hoplamazian said in the release: "We had a strong second quarter of gross rooms expansion through the opening of approximately 5,500 rooms during the quarter. While there have been delays in the timing of openings across the industry, we are particularly encouraged by the volume of conversion opportunities driven by the compelling value of our brands, and expect net rooms growth for the full year to be greater than 6%."
Total debt as of June 30 is $3.8 billion, reflecting a reduction of about $180 million during the second quarter. Total liquidity amounts to $3.5 billion.
As of press time, Hyatt's stock was trading at $85.31 per share, down 11% year to date. The NASDAQ Composite Index was down 20.1% for the same period.