Executives with Hyatt Hotels Corp. said they're encouraged by their quick ability to grow the financial contribution of Apple Leisure Group just months after buying the company.

While Hyatt's overall performance still significantly lags its more leisure-focused brand peers, President and CEO Mark Hoplamazian said Apple Leisure's resorts focused business is well-poised to benefit from long-term growth in the leisure segment.

He said the company ended 2021 50% ahead of where executives expected to be with Apple Leisure in underwriting the acquisition, and if current trends continue, the company could realize a fully ramped return a year ahead of schedule.

"The performance and momentum has been remarkable," Hoplamazian said. "The cumulative growth for the system is really taking hold. The ramp-up period for ALG hotels is actually quite fast, and part of that has to do with the integrated nature of ALG vacations, but also [ALG's Unlimited Vacation Club] members being the first ones to book into new properties. So it has that network effect as you grow."

Overall, Hoplamazian said there are strong signs of a broad-based comeback for his business in 2022.

"My confidence is primarily driven by what I'm seeing in group bookings and how they're evolving," he said. "Travel managers and meeting planners all tell me that we're going to see growing momentum over the course of the year."

Hoplamazian said he expects "very robust" cash flow during the year, both from operating revenues and the proceeds of selling off owned hotels in a stronger environment.

Joan Bottarini, chief financial officer for Hyatt, said excess cash will first be dedicated to paying down debt related to the Apple Leisure deal and then focused on reinvesting in the business.

Even outside the Apple Leisure business, Hoplamazian said he believes his company and the broader industry is on the precipice of a massive comeback.

"There's no reason whatsoever to not think we're on that trajectory," he said. "I'll give you some real-time data points. As we sit here right now, Presidents Day weekend is up double digits relative to 2019 in our legacy Hyatt portfolio.

"Omicron considerations dissipated as quickly as they rose at the inception. We keep talking about pent-up demand, but it's just an enduring level of people who really feel compelled to get out, to engage, to connect. We see that come up in data point after data point after data point."

Analysts said Hyatt's fourth-quarter and full-year 2021 earnings report caused a wave of investor confusion upon its release after markets closed Wednesday.

In a note to investors, C. Patrick Scholes, managing director of lodging and experiential leisure equity research for Truist Securities Group, attributed the confusion to the complicated nature of metrics tied to Apple Leisure's subscription business, which he compared to "timeshare accounting," although Hyatt's business does not include timeshares.

The stock is down likely due to confusion on how to interpret the "real" earnings before interest, taxes, depreciation and amortization result, he said.

"Going forward, we strongly encourage Hyatt to work with the investment community to better explain the nuances of deferred revenue accounting to head off any confusion come earnings, and we point to Hilton Grand Vacations as a good example of a company who has successfully done this," Scholes wrote.

Bottarini said while it's an easy and helpful comparison, it's also important to remember that Apple Leisure's Unlimited Vacation Club is a "fundamentally different model." She said the accounting gets complicated compared to Hyatt's legacy business because expenses related to signing on to the club when a member signs the contract to join, but the revenue is realized over time.

Hyatt's stock price did show some significant fluctuation, sitting at $101.84 per share as of press time. The stock was down 4.4% on Thursday, but was up 1.3% over a five-day period and up 6.5% year to date, beating the New York Stock Exchange Composite — down 4% — significantly over that period.

Scholes noted earnings for the fourth quarter beat his team's estimates when looked at holistically. Hyatt executives held a special post-earnings-call follow-up to address questions about the accounting changes.

Hyatt remained in the red for the final quarter of 2021, as well as the full year, reporting net losses of $29 million and $222 million, respectively, at a period when many hotel brand peers are reporting significant revenue and net income increases driven by leisure business. Hyatt's losses were significantly less than those recorded in the fourth quarter [$203 million] and full year [$703 million] in 2021.

The company reported systemwide revenue per available room of $96.75 in the quarter, still down 26.1% from the same quarter in 2019.

Hyatt recorded 19.5% net rooms growth in 2021, the bulk of which came through the Apple Leisure deal. Excluding that, systemwide rooms grew by 6.1%.

Bottarini noted the company has recorded two consecutive quarters of beating 2019 profit margins at owned properties, some of which is attributed to short-term changes such as labor shortages, but she said a good portion of that will result in "permanent improvements."

"It's an intense focus from our managers," she said. "Clearly they're doing what they can to yield revenue on the top line, particularly rates, and driving great flow through and in a difficult environment."

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