Q1 2021 Hyatt Hotels Corp Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Hyatt first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Mr. Noah Noah Happy. Please go ahead Sir.
Thank you Paula good morning, everyone and thank you for joining us for Hyatt's first quarter 2020 One earnings conference call. Joining me on today's call are Mark <unk>, Hyatt's, President and Chief Executive Officer, and Joan Buttery, any hyatt's Chief Financial Officer.
Before we get started I'd like to remind everyone that our comments today will include forward looking statements under federal Securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on form 10-K quarterly reports on form 10-Q, and other SEC filings. These risks could cause our actual results to differ materially from those expressed and.
Our implied by our comments.
Weird looking statements and the earnings release that we issued yesterday along with comments on this call are made only as of today and will not be updated as actual events unfold. And addition, you can find a reconciliation of non-GAAP financial measures referred to and today's remarks on our website at Hyatt Dot com under the financial reporting section of our Investor Relations link and and yesterday's earnings release.
An archive of this call will be available on our website for 90 days with that I'll turn the call over to Mark.
Good morning, everyone and thank you for joining us for our first quarter 2021 earnings call and before I get started I want to take a moment to congratulate Noah who you just heard from his newly assumed expanded position to include all Investor Relations and addition to financial planning and analysis.
This though it has been an essential partner and.
Our Investor relations effort and now he's formerly at the head of that so Noah congratulations. Thank you. Thank you Bob and.
And you'll you'll all get to know him very well in the coming months.
I want to begin today by acknowledging what a difficult period, it's been since the onset of COVID-19. This global pandemic has impacted all of us and profound ways, both personally and professionally we still see and elevated level of travel restrictions and various parts of the world as a result of new COVID-19 cases, which remained and.
Comfortably high, especially in areas, such as India, and South America.
Our heart goes out to those being impacted and these hard hit areas. During this incredibly challenging period.
Even in view of elevated cases, we are optimistic and believe that the road to recovery continues to become clearer and our role and that recovery is inspiring and energizing.
The pent up demand for travel is immense and what's the number of fully vaccinated potential travelers growing by the millions each day, we feel we're at the beginning of a growing level of demand for our hotels.
Personally I can't express how refreshing it is to see people, who are now able to safely visit a loved one or travel to a location they from putting off for far too long.
C business travelers, who can once again connect and person with colleagues and customers or to hear from our growing course of larger groups, who were ready to convene again and our hotels.
The environment remains dynamic, but the desire to travel and connect has not abated.
We remain focused on evolving with the changing needs and expectations of travelers today and.
We're listening to our guests and customers and learning how to support travel and uniquely in individual markets and every geography around the globe.
Our commitment is to make that first and long awaited trip and experience that our guests can feel confident about.
We spent considerable time since the onset of the pandemic planning and positioning Hyatt for this moment and the path ahead.
And we'll give you an update on our business and I plan to share updates on several key initiatives that are focused on the future for both our transient and group guests.
I also plan to share details around our continued growth trajectory.
I can confidently say that this is the most optimistic I've been since the onset of this pandemic.
Let's first focus on the latest trends we're seeing.
While COVID-19 continues to materially impact our business and while results vary widely by country and by purpose of visit I'm encouraged by the sequential uptick in demand that coincides with improved travel sentiment and widening vaccine availability.
Our first quarter system wide revpar declined 49% versus last year, but results varied significantly by month with Revpar in March finishing 54% higher than January.
Roughly double the rate of growth, we typically experienced over this timeframe and a stabilized environment.
Occupancy during the first part of the quarter, largely mirrored trends and the fourth quarter of last year, but we started to see elevated levels of leisure demand and February followed by a pronounced improvement and March driven by spring break and the United States and the easing of travel restrictions and China.
While several weeks do not make a trend we feel the spring break period in the United States provides a preview of pent up demand for travel which.
Which we anticipate will drive performance through our traditionally heavier leisure period and late quarter, two and into quarter three.
During the latter half of March leisure transient room nights for comparable hotels surpassed levels during the same period and 2019.
This was primarily driven by our resort locations, but we also experienced improvement in urban and suburban locations as well.
Occupancy at our resorts and the Continental United States approached 70% over a seven day stretch in late March with significant average rate growth of 15%.
Over 2019 levels during the same timeframe.
In fact for the full month of March our resorts and the United States experienced an increase and average rate of approximately 4% versus 2019 levels for comparable hotels.
The acceleration of transient bookings for future dates also reinforces our optimism.
We experienced the jump and transient bookings of over 50% for our system wide hotels and March as compared to February.
Driven by significant demand for our leisure oriented properties glue.
Globally transient revenue at our resorts is now pacing, 20% ahead of 2019 levels over the back half of the year.
Leisure transient rooms revenue accounted for approximately 45% of our total revenue base for the full year of 2019 and.
And more recently at 67% in Q1 of 2021, and we're confident that our brands are well positioned to outperform in this segment as the recovery unfolds.
While leisure transient trends are encouraging we are fully aware that group and business transient demand needs to improve meaningfully to reach a full revpar recovery.
Despite rooms revenue from these segments being just over 20% of 2019 levels in March we remain optimistic.
Business transient has shown steady week over week improvements since January and.
And continues to grow through April.
While visibility remains low and we're encouraged to see future bookings for business transient guests improve to approximately 35 per cent of 2019 levels in recent weeks.
Conversations with several of our top corporate clients suggest that we will continue to see moderate progress and the near term with a more pronounced uptick expected in the fall.
On the group side bookings are also headed and the right direction.
New group business booked in Q1 for all future periods finished up 55% as compared to Q4 2020.
Further we crossed a notable inflection point in April when net group production in the month for the year was approximately $8 million, meaning gross group revenue booked was in excess of all cancellations and reduced projections for attendees over the remainder of the year.
And <unk>.
We're also encouraged by the number of group leads we're receiving.
Which are up materially since January and gaining momentum we're seeing increased interest from the pharma.
Information technology, and banking and finance segments.
It's also notable that larger in person and corporate and association events are occurring as early as June and we're seeing a growing number of citywide events confirming for the fall.
All of this positive activity provides optimism.
And that these segments will continue to strengthen as more of the population is fully vaccinated and travel restrictions are lifted.
As we think about the pace of recovery China continues to serve as an interesting case study for what may occur in other areas as COVID-19 disruption subsides.
We noted in our and our last earnings call that we anticipated the recovery in China to be Swift. Once travel restrictions were eased. This is precisely what we experienced with occupancy and mainland China falling to the mid 30% range during the middle of February.
Followed by a sharp rebound throughout March and reaching a fully recovered level of over 70% in April.
Importantly, revpar has more than 90% recovered as rates are within 10% of 2019 levels. Despite virtually no higher rated international inbound travel into China.
In summary, all of these data points fuel our optimism.
And it is also true that this recovery will not be linear or evenly distributed case.
Case counts remain high and certain parts of the world and the pace of vaccine distribution is uneven.
What we do know is the desire to travel and connect is fundamental and there is clear positive change and the mindset of travelers after vaccination and we remain agile and ready to adapt as our guests return to our hotels.
Speaking of agility I'd like to provide a brief update on three key initiatives that are responsive to shifting needs for our transient and group customers, putting us in a position to meet the needs of travelers returning to our hotels.
First with heightened guest awareness around cleanliness and survey data that shows strong cleaning and sanitation practices improve our guests likelihood to travel and.
Pleased with all we've accomplished through our global care and cleanliness commitment.
And as part of this commitment nearly all of our operating hotels globally have received and independent accreditation through the global bio risk Advisory Council focused on comprehensive processes for cleaning and disinfection and infectious disease prevention.
Additionally, each hotel has a trained hygiene and well being leader responsible for the team's adherence to protocols and training.
All of this provides assurance and inspires confidence and Hyatt unwavering commitment to providing a clean and safe environment for our colleagues and our guests.
Second.
On our fourth quarter conference call I mentioned, our work on a hybrid meeting solution I'm excited to update you on our new meetings and events platform called together by Hyatt.
This is not just a hybrid solution, but a holistic approach to delivering on the essential benefits of an in person meeting.
While allowing meetings to be more inclusive than ever before by expanding participation to those who can only attend remotely.
We know our customers are different points on their journey to return to events and.
And together by Hyatt is designed to provide support at every step of the way.
After extensive research we're proud to announce we're teaming up with swap card to develop a robust and innovative integration of their platform with our proprietary meeting tools, one that will simplify event planning and execution.
And unify in person and virtual attendee experiences.
To further support hybrid formats, we've introduced a dedicated team of hybrid event experts, who bring deep rooted experience and technology and events to Hyatt and will assist meeting planners with exploring hybrid options and execution.
Alongside these experts planners will also have a dedicated support squad during the event to assist virtual speakers and attendees.
Further we know well being is top of mind from many right now and we've incorporated the expertise of our wellness brand mirror ball as well as head space into together by Hyatt offerings, providing planners with a unique opportunity to care for attendees wellbeing during events.
Long term, we believe hybrid formats provide an opportunity for events to be more inclusive than ever before and we look forward to collaborating with our customers on the path forward to create the most meaningful experience as possible.
And third we have accelerated our development of and rapidly deploy deployed a set of digital capabilities that provide guests the ability to manage contact to a customizable level of comfort.
For example, our digital check in experience is unique in our space as it not only supports guest of ours, who are not members of world of Hyatt.
But among the members we serve it recognizes their tier status and notifies elite members when they've been upgraded.
Digital check and also gives these members options for other room types that are available if immediate checking is important to them.
Additionally, we're providing flexibility around guest and remember housekeeping preferences, and if guests prefer not to have a housekeeping and their room. Our digital platform. It makes this a simple request by way of our App.
And for elite tier members, there's additional flexibility to choose between morning, and afternoon housekeeping to fit their schedule and preference.
It's an example of lenient and to our digital platforms to personalize the guest experience and we will continue to build on it in the coming months to offer more purpose suited solutions.
These are just a few of the many initiatives that we have underway that respond to how the world is changing we will remain agile and continue to put health safety and care at the heart of our hospitality as we welcome more and more guests back to our hotels.
Turning to growth we achieved a noteworthy milestone in Q1, we opened our 1000th hotel the magnificent Leila and Napa Valley and St Helena and California.
This is an impressive milestone and our growth as we've more than doubled the number of hotels and brands and a span of about eight years.
We continue to grow at an industry, leading rate with net rooms growth of six 5% and Q1.
Conversions continue to serve as a meaningful catalyst with three properties converted from other brands in Q1.
Two of these conversions we're into brands that more recently joined our portfolio from our true roads acquisition, mainly J D V by Hyatt and Ah Leila.
The pace of openings has been especially swift over the past three quarters with just over 15000 rooms entering our system during that time, and consequently, leaving our pipeline.
We're pleased to have kept our pipeline relatively flat at around 100000 rooms. During this period. Despite the pressure of significant openings, coupled with a difficult financing environment.
We remain encouraged by the volume of leads and feel confident and our ability to keep our pipeline strong well into the future.
One particular area that has propelled hyatt's industry, leading growth is the expansion of our franchise distribution.
Over the past decade, our mix of franchise rooms has grown from 16% of our total rooms to over 36% today, reflecting a compound annual growth rate of 15%.
As part of our long term strategy to further maximize our growth potential. We recently launched a new global franchise and owner relations organization dedicated to accelerated growth moving forward. This cross functional team is focused on operating with excellence and revenue maximization for our franchise partners.
While growth in our franchise business has been strong we see an opportunity to excel and accelerate this further and as we think about resource allocation, we're investing and our franchise business, while staying highly disciplined and our overall cost profile.
Finally, I want to provide a brief update on transactions before I turn it over to John.
We are advancing negotiations for the sale of one owned hotel and.
And actively evaluating offers for a second owned hotel.
We look forward to providing details on these two transactions and the future.
We're actively evaluating potential asset acquisitions for strategic purposes, it's and it's important to reiterate however that even with potential acquisition activity, we remain steadfast and absolute and reaching our sell down commitment of $1 $5 billion by March of 2022 and for clarity.
And this commitment is based on net proceeds meaning that any capital spend on acquisitions will be counted against our commitment.
I'll conclude my prepared remarks. This morning by saying that we are optimistic and encouraged by strong leisure transient demand and improving sentiment around group and business travel we continue to stay agile to be able to quickly adapt to the changing needs of our guests by staying deeply focused on cleanliness.
Enhancing our digital capabilities and expanding how we support our groups coming together to meet.
We are optimistic about the future and are ready to welcome all the travelers who are eager to get back to experiencing and connecting with others I'll now turn it over to Joe and to provide additional detail on our operating results Joan over to you. Thank.
Thank you Mark and good morning, everyone.
Late yesterday, we reported a first quarter net loss attributable to Hyatt of $304 million and a diluted loss per share of $2.99.
Adjusted EBITDA for the quarter was negative $20 million with a reported system wide revpar decline of approximately 49% and constant dollars compared to the first quarter of 2020, and a decline of approximately 65% compared to the first quarter of 2019 on a reported basis.
And a moment I will review the nature of the tax valuation allowance, we recorded in the quarter, which significantly impacted our net loss, but first I would like to cover our operating performance.
As of March 31st 96 per cent of our hotels are 94% of our rooms were open.
And while hotel closures continue to weigh on our results the impact is diminishing with and 160 basis point negative impact and system wide revpar as compared to 2019 reported results.
System wide comparable Revpar was approximately $46 for the quarter and accelerated over the course of the quarter with a revpar of $57 in March compared to only $37 and January the.
And the improved demand led to positive consolidated adjusted EBITDA in March and we increased fee revenue from our managed and franchised business, while narrowing losses from our owned and leased hotels.
Our management and franchising business continue to lead the way on our path back towards profitability with a combined adjusted EBITDA of $33 million for the quarter with over 50% of that amount attributable to the month of March.
United States, Greater China, and the Middle East combined to generate approximately 80% of our base incentive and franchise fees for the quarter with notable acceleration from leisure oriented destinations and the United States during the latter half of the quarter.
We are seeing continued strength and the United States and greater China through April and momentum we experienced in March is continuing into Q2.
Having said that certain markets are still facing travel restrictions and the timing of the full opening of orders is uncertain and many countries around the world.
As for hotel margins, approximately 60% of our global managed hotels achieved positive growth operating profit during the quarter, which is largely consistent with Q4 as more full service hotels, and the United States, which profitable levels.
Offset by fewer hotels, and greater China due to Lockdowns in January and February.
Gross operating profit margins were notably strong and our resorts due to the combination of business mix and the ability to yield strong rates and those hotels.
<unk> also experienced a pronounced need for incremental staffing coinciding with an inability to quickly fill those staffing needs, especially in markets where demand for room nights is high and.
And certain circumstances margins were higher due to the inability to reach needed staffing levels and when the employment situation stabilizes, we expect to see solid and sustainable productivity results.
Turning to our owned and leased hotels segment.
Revpar decreased 64% compared to 2020 and constant dollars and 73% compared to 2019 and reported dollars when.
When excluding the impact of closed hotels.
And and lease Revpar decreased 70% compared to 2019 and reported dollars.
With the system wide performance owned and leased results strengthened considerably over the quarter with comparable revpar improving to $63 and March from $34 and January driven by increased leisure transient demand.
Importantly, similar to Q4, our operational efforts to maximize efficiency has contributed significantly to improved margins and as a result, we significantly significantly narrowed the owned and leased segment adjusted EBITDA loss to $29 million and Q1 of 2020, one as compared to a.
A loss of $48 million and Q4 of 2020.
In addition to improved efficiency certain owned and leased hotels were not immediately able to fill open positions as I touched upon earlier, we expect the employment situation to stabilize allowing for improved staffing levels in the future and healthy productivity results.
Furthermore, as we look to future quarters I would also note the impact of the remaining closed hotels as of March 31st there were six owned and leased hotels, representing 17% of our owned and leased room count that remain closed with.
And with since opened two hotels in April and anticipate nearly all owned and leased hotels to be opened in the coming weeks.
Majority of hotels reopening during the second quarter require higher revpar levels to generate incrementally better results than remaining and suspended operations.
Therefore, we can continue to expect improvement and our owned and leased segment adjusted EBITDA, but the rate of flow through will be impacted as these hotels reopen and ramp up and the coming months.
I wanted to be very clear that we expect Pos positive lasting impacts from our operational initiatives, which we expect to improve productivity and drive expanded stabilized margins. However results are not expected to be at the 100% or greater flow through we experienced the last two quarters.
I'd now like to provide and update on our liquidity and cash utilization.
During the first quarter, our average monthly cash utilization, excluding severance payments and other onetime costs.
Materially improved to $42 million per month versus an expectation of $55 million to $60 million per month based on Q4 demand levels.
The improvement is largely due to stronger owned and leased results during the quarter and.
As a reminder, our cash utilization is primarily driven by two areas operating and investing.
Our average operating cash utilization, including interest costs amounted to less than $30 million per month and represents a decrease of over 30% versus Q4, we.
We anticipate our operating cash utilization will steadily improve as revpar strengthens.
Our investing cash utilization, which fuels the growth of our brands and includes capital expenditures remained flat versus fourth quarter spend and with lower than anticipated due to the due to the timing of certain investments.
We expect monthly investment spend to trend higher consistent with our expected strong year of openings and increased deal activity.
We anticipate average spending in this area could be double first quarter levels of about $10 million to $15 million per month for the remainder of the year.
As of March 31st our total liquidity inclusive of cash cash equivalents and short term investments combined with borrowing capacity was approximately $3 $1 billion with the only near term debt maturity being $250 million of senior notes due in the third quarter of 2021.
In March we also successfully amended our revolving credit facility to provide a waiver extension and additional flexibility, including a one year extension option.
Next I'd like to provide a couple of important tax updates.
First we filed our 2020 U S tax refund claim this quarter and we expect to receive a tax refund of approximately $250 million later, this year and connection with 2020 net operating losses carried back to prior years.
And second and entirely unrelated we recorded a $193 million noncash valuation allowance on deferred tax assets in the first quarter.
And this valuation allowance was based on and accounting assessment as required by U S. GAAP.
Which places significant weight on our recent pre tax book losses.
Resulting from the impact of COVID-19 on our business and does not factor in our outlook are forward looking projections.
Furthermore, the valuation allowance we recorded has no impact on cash flows and does not limit our ability to utilize current year losses and deferred tax assets on future tax filings.
And in an environment of normal normalized pre tax income levels. We anticipate these allowances will reverse resulting in an increase to reported net income at that time.
Finally, I'd like to just make a few additional comments regarding our 2021 outlook. We continue to expect adjusted SG&A to be approximately $240 million, excluding any bad debt expense.
Our adjusted SG&A guidance is inclusive of the investments and our global franchise and owner relations organization that Mark touched upon earlier.
Additionally, we continue to expect capital expenditures to be approximately $110 million for 2020, one and have updated our net rooms growth guidance to be greater than five per cent for the year.
I will conclude my prepared remarks by saying that we're pleased with the improved levels of demand that have enabled us to significantly narrow our adjusted EBITDA loss and improve our operating cash utilization.
Our management and franchise business continues to power us closer to adjusted EBITDA breakeven level.
While highly disciplined operational execution and field excellent owned and leased hotel flow through.
We remain and our strong cash position, we're on pace for another solid year of net rooms growth and believe we are well positioned to maximize performance during recovery and burnout and beyond thank you and with that I'll turn it back to poly for Q&A.
Thank you and the reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Your first question comes from the line of Stephen Grambling with Goldman Sachs.
Hey, good afternoon, and thanks for taking the questions.
I was hoping that perhaps you could.
Frame the productivity impact on owned and leased hotels, perhaps where demand.
Might need to get back to recover to prior levels of EBITDA and within that can you just remind us of.
Maybe some of the puts and takes it right and were headwinds from mirror of all that impacted your 2019, EBITDA and what trends look like and some of those assets within the context of this strong leisure environment. Thanks.
Sure Stephen let me start definitely exceptional owned and leased flow through over the past couple of quarters.
Led by some of the what I would call contingency measures that we put in place, but also actions that have long lasting impacts and.
The future. So we've gone through some of those but the efficiency measures that we've taken and enhanced digital capabilities leaning into our F&B options that are the most profitable and importantly meeting customer needs at that at this time.
The headwinds you mentioned headwinds over the next several quarters and.
And as I mentioned in my prepared remarks with respect to our expectations for flow through the.
And the labor situation, we expect will improve and we will get back to more sustainable productivity measures.
And properties that have.
That require higher revpar levels to breakeven and have recently opened or are opening up shortly and that would be specifically properties in our European and urban markets. So those will be ramping up and those will be some of the headwinds that we'll experience and we also are.
Have.
Continue to receive some subsidies and international markets as well. So that's helped us on a current quarter and as some of the headwinds that we'll see and into the future, but we remain confident that we will achieve margin expansion as top line stabilizes over time and a good portion of our.
These measures will lead to sustainable improvements into the future, we would estimate that that could.
Relate to about 100 to 300 basis points higher based on our modeling of those efficiencies into the future on a stabilized basis.
And.
So Steve and thanks for the questions.
Sue Miraval the dynamics and durable.
Were impacted last year by the the conclusion of the renovation.
Renovation and construction of Mirabel, Berkshares, which opened in the second quarter of last year. It was.
Overall, a challenging year last year for all of all of our hotels and including me.
Miraval and primarily due to travel restrictions and also social distancing issues and the first quarter. We likewise had a number of restrictions.
That were imposed by.
Local law.
With respect to social distancing and.
And travel restrictions as well.
Out of certain feeder markets.
And that did impact our overall results by way of reminder, our Ma.
Majority of the.
The revenues at our Miraval resorts come from programming revenue that is.
Treatments and other programs that people experience on property. So the fact that that was the dimension of the business that was impacted.
Meant a significant impact in the in the first quarter, we've seen those restrictions start to be loosened up the bookings that we're seeing into the summer are extremely strong and we think that we will see a.
Significant pick up over the summer months into the fall and assuming that we continue to go down the path of elevated levels of.
Vaccination and and easing of those other travel restrictions or capacity constraints, we expect to finish the year very strong.
Well positioned through the three resorts that we got one and Tucson, as you know and Austin and and the Berkshires and Lenox, Massachusetts.
The only other point that I would add with respect to first quarter dynamics as that.
And as you'll remember the state of Texas, essentially shut down for some period of time because of the electric electrical grid going down and that of course affected.
Our resort and Austin, primarily because people literally could not get there over the roads that were.
Blocked or ice two IC to drive on and of course, the electric electric electricity needs to be restored. So those are some factors that I would point to.
Maybe help to contextualize, what happened last year and into this year.
That's helpful and perhaps and unrelated follow up you had referenced from strategic asset acquisitions that you might start to look into I guess help us frame, where you're looking where are there any holes in our portfolio and how you're thinking about.
Deploying capital strategically.
Yeah. So look I think if we if we go back to late 2018, when we bought two roads by way of reminder, Hyatt without two roads was about two thirds, one third mix of business and leisure travel and with.
That's really a U S. A U S number if you look at the overall global number. It's about 45 was about 45% of our total revenue came from leisure transient travel in 2019, 2018 actually and 2019 so.
By way of reminder, two roads was two thirds, one third and the opposite direction day, two thirds of their of their guest base were leisure guests and that was a really important and significant.
Step towards expanding our leisure focused and and and vacation focused.
Segment than business.
So as we look into potential opportunities.
That would be meaningful to us we're looking to ensure that we've got very competitive.
Impelling resort alternatives for our guests not just because of the benefits within the world of Hyatt, but because it's.
It's been shown especially in the customer base that we serve which is a relatively higher customer base on that they are continuously.
Demanding and and and and looking to travel and at an elevated rate.
Some of the booking data that I cited in my prepared remarks demonstrate that and.
And we feel like we are at a moment to be able to.
<unk> focus on that as as a potential opportunity set for.
Deployment of capital, but again it does not take us off track with respect to the idea of generating our net proceeds as we committed to and the other thing I would say is whatever we might end up doing.
Would be focused on being able to recycle whatever repurchase with a long term management arrangement or a franchise arrangement in place.
That's helpful. Thanks, so much.
Sure. Thank you.
And your next question comes from the line of Thomas Allen with Morgan Stanley.
And so one of your peers.
Adjusted this morning that they saw a path to getting back to about 70% of 2019 revpar by yearend.
Do you think that's a fair assessment or AR and am anymore color would be helpful.
Yeah, I'd love to actually nowhere to get that Crystal ball because.
So if you find out if you could let us know that would be really great and what I can tell you is that we are seeing a sequential.
Sequential improvement.
The month over month over month, and it's very pronounced in March and April as we talked about so.
I guess, it's theoretically possible, but I think it is unlikely primarily because.
The some of the international inbound travel that impacts gateway cities is still going to be with us and I think again, you need a crystal ball for this but it's going to be a highly.
Highly dependent on when those when those international travel routes reopen and secondly, we're starting to see as you probably have read and the papers recently that some companies are actually moving towards.
Requiring their employees to be back and the office by a certain date, that's actually not so.
Not so.
And the distant from now pretty pretty soon and that is important for business transient travel.
So.
Anyway, those are the key considerations I would say that just based on our current outlook.
We will be.
Significantly higher in terms of our expected revpar.
Revpar levels by the end of the year, assuming that we don't have any significant caseload issues that.
Come to pass.
I can't tell you that.
It'll be 70 per cent or above but.
It'll be significantly higher than where we are today.
Perfect. Thanks, Mark.
And your next question comes from the line of Shaun Kelley with Bank of America.
Hi, good good morning and afternoon everyone.
Mark I think and the prepared remarks, you mentioned a little bit about.
Youre looking at on the acquisition Trail, but you also mentioned sort of going back to the capital recycling.
And a little bit.
Could you just talk about some of the criteria within the portfolio that you are looking for and just the broader environment right now on the disposition side, you know what might make it attractive what do you think is going to work for a potential buyers out there.
Yeah, I mean, I guess, what I would say to you is that the two deals that are the two hotels that were in the midst of evaluating disposition of.
And that are advancing they're not mature enough for us to be more.
More detailed with you at this point.
What I would tell you is that they are unsurprisingly in.
Compelling resort destinations and that the.
Values that we see through indications of interest and through our negotiations are at or above our.
Pre pandemic estimates.
So we're very encouraged by that it happens that.
These are particular assets that have some compelling attributes so I think they are.
They are opportunities for us to realize.
Proceeds from sale and also an opportunity for a new one or to deploy additional capital.
In those properties, which do include some developable land in both cases.
To further expand those operations by the way, which would enhance our fee base going forward as well so.
And I've been encouraged though overall I see a growing level of of interest in asset deals that is to say.
The opportunity for us to consider selling other assets and we're actively evaluating what might be next.
And the valuations are quite encouraging and I think interest rates have remained low.
We've talked about a number of times the financing market for construction is quite challenging.
But rates are rates remain low even if advance rates are somewhat lower.
So I think that the.
And in some ways the pattern of what kinds of assets, we will look to will follow in some ways.
And the path of the recovery and so it's not too surprising that resorts would be at the front end.
Thank you very much.
Sure. Thank you.
And your next question comes from the line of Michael Bellisario with Baird.
Good afternoon, everyone.
Just a good afternoon for you.
A question on the development pipeline.
Have you been or and maybe are you willing to invest more key money into deals today and are you seeing any of your development partners coming to you to be a joint venture partner to help them get a project across the finish line.
Yeah. So.
First of all we do utilize.
And key money investments in relation to our.
And in relation to development in general we have and the past we are now and we will and the future.
With respect to capital formation.
<unk>.
We're at a point, where we're starting to see the very first signs of banks, mostly regional not not necessarily money center banks.
Starting to make.
Make proposals that are getting closer to a debt stack that could make sense for a developer.
And it really has significantly impacted the select service segment and other segments in and around select service, but for our for US the primary impact for US is on select service development and the United States.
And part of that has to do with.
And inability to get enough senior debt.
At a reasonable rate to make the capital stack work for developer.
And we're investigating ways in which we can help support that.
And we've historically been very successful in providing what I would describe as purpose suited and innovative financing alternatives and sometimes that's been in the form of mezzanine debt or preferred capital.
We have we've provided preferred capital over the last two years to some.
Partners of ours developers, who have developed Hyatt place and Hyatt House hotels.
We're evaluating how we could do something that's got more leverage and it I don't mean financial leverage I mean impact.
By.
Maybe seeding and opportunity to put some capital together with some third parties.
To help provide some additional construction financing and the short term because we have a significant number of deals that are.
Either in LOI stage or signed that we don't count and our pipeline by virtue of the fact that we don't we don't see the financing in place to actually.
Start the construction I think that will evolve and saw over the course of the summer, but we're still not quite there yet.
So it's something that we're paying a lot of attention to it it has a lot more to do with capital stack than it does.
That capital stack than it does equity the equity is actually available.
Available and it's a matter of getting the debt stack in place that makes sense for a developer to put a shovel in the ground.
Is that helpful.
Okay, great. Thanks.
Your next question comes from the line of Chad Beynon with Macquarie.
Hi, Thanks for taking my question.
Mark last quarter, you talked a lot about this hybrid meeting solution that you were coming up with which I think could differentiate you guys from from some of your competitors and in urban markets and I'm, just wondering how the city planners and some of your partners have reacted to that and if you still believe based on everything you're you're collecting from your conversations.
And as with with corporates. If if this is still going to be a meaningful part of your strategy and the next couple of years. Thanks.
Yes, it's going to be a very meaningful part of the strategy on the group side for sure.
I'm I'm thrilled to tell you that we've got two large.
Meetings, one in June and one in July they both happen to be two different two different clients.
Pharma companies and the format of those meetings is really interesting. So in both cases, they they range from sort of 800 to 1000, depending on which one of these two that youre looking at participants, but the way that they're comprised is theyre spread.
And one case across 10 of our hotels across the country and another as many as 27 of our hotels will be involved across the country and they are and effectively doing a multi local linked multi local hybrid event, where you you've got somewhere in the range of 30 people per hotel across that.
Say 25 to 27 hotels and you also have remote participants who are coming in digitally and.
I I personally believe that this is going to be and effective way to allow people to still have and in person meeting for those who can attend those who are prepared to attend and get the benefit out of the the inner personal connections and I was just talking to.
<unk> lead the lead partner of a professional services firm yesterday evening.
And.
I described what we were doing and.
I think it can apply to.
One of those firms and that from in particular is looking at a partner meeting of 500 people at the end of this and the fourth quarter of this year. They never considered doing a format like I had described to them and I think that that could very well turn into a lead up to talk to our sales team about what kind of commission and I can get.
But I.
I think the point is that we're opening up a very different type of thought process to.
Enabling people to actually hold a portion of their meeting or have a significant portion of their attendees attendant person. The other thing I would just say is that.
And the integration of some of these well being practices has been met with tremendous.
Positive feedback.
The mental and emotional strain and stress of getting people back and the office is hard a lot of companies and professional services firms have pushed those decisions because they don't want to provide they don't want to impose further pressure, but theyre also desperate to get people together, because they're worried about maintaining culture and connectivity to the firm and anything.
And that allows them to provide for caring for their own associates and employees through some very deliberate meant.
Mental well being practices that we've designed is a big deal for them. So I think the integrated approach is going to is going to yield tremendous benefits now we're literally at the very beginning of this we only launched together by Hyatt.
A week ago, so stay tuned but the.
<unk> the.
The initial dialogue with a lot of our corporate customers has been very very positive.
Thank you very much best of luck with that.
Thank you.
And your next question comes from the line of David Katz with Jefferies.
Hi afternoon, everyone I wanted to.
Go back to the notion of above hotel.
Costs and fees.
As a point of discussion much earlier, obviously, there's been some flexibility and so for US where are you with respect to that and should we expect you to come out of this.
<unk> and some way.
Yeah.
Yes, David.
And last year, we and we made a decision to continue to incur some costs that we chose not to while we have the option to we chose not to build back to our owners given all of the disruption that was.
Okay.
That was ahead of them last year. This year as we're looking at recovery our goal and intention was always to monitor the cost we incur and make sure that we were doing that and a way that we could recover fully from our owners. So that is where we sit today you may see that.
<unk> is maybe a little bit off from quarter to quarter with respect to the expenses, we incur and the revenue that.
And we're reimbursed for it but.
All of the costs that we're incurring right now we have every intention to recover from our owners and to the future.
If I can just follow that up from a strategic perspective and <unk>.
Of structuring that use differently or perhaps with greater flexibility or specificity going forward has there been any initiatives to that and.
Absolutely David we had an incredible initiative that we undertook.
In a record amount of time to fundamentally and completely revamp R.
Our cost recovery structure at last year, and we launched that with.
When we announced it and to all of our owners for application in January on January 1st of this year. So we referred to this as the funding model with respect to our above above property hotel services and.
And the fundamental change that we made was that we moved a number of the dimensions that we're covered out of fixed charges and history towards variable charges prospectively.
And.
Rough roughly speaking.
That structural shift reflected.
<unk>.
Economics that we actually experienced last year anyway, because we Joan just mentioned, we've additionally undertook spending at a certain level for the benefit of our owners and we and do we did end up taking a charge and the fourth quarter of $45 million in relation to that.
But we see the opportunity to <unk>.
First of all.
Fully recover going forward on a more.
On a more tightly aligned basis that is alignment to our owners interests, but secondly, we've also identified a few areas, especially in the digital sphere, where we have created effectively a pay for performance structure and.
And that's actually started off very and we've got encouraging results to date.
It started.
At the beginning of this year and I believe that that will free.
Frankly allow us to expand what we're doing on the digital front.
Through and incremental set of fees that we built into the new structure and by the way.
We spent an enormous amount of time with our owners too.
It's a process. This in fact, we had several of our largest owner sitting at the table with us designing it.
And we were able to accomplish that and the space of about 12 weeks.
During the third quarter of last year, So that's that.
And that's really what we've done and undertaken its it was a huge lift but we feel really good about where we stand at this point and we have no.
The expectation that we're going to need to revisit anything and material form anytime in the near future.
Perfect. Thank you very much appreciate it thanks.
And your final question comes from the line of Vince deal.
Deal with Cleveland Research.
Hi, Thanks for taking my question. It sounded like you mentioned some positive trends and group bookings earlier in the call I'm curious if you could provide updated piece for the second half and for 2022 and how you think those are coming together.
Sure.
So.
Maybe just to begin with I would say that our group revenue and the first quarter.
Realized group revenue that is booked that we reported was.
Almost 90% off of 2019 levels.
Now.
Thats for the Americas hotels that we manage if you'd looked at it globally. It would probably be off maybe close to 80%.
The reason is because and really the <unk>.
Most of the exclusive difference there is group business in China.
What did take a hit because of the lockdown in China, but has been pretty vibrant and robust because corporations have definitely taken to holding meetings the balance of year pace.
Is off and the range of 60% in our Americas.
And our Americas hotels that we manage.
And as we look into next year, we're sort of we're sort of tracking at this point down and the mid teens.
And about 50% of our revenue for next year has been booked so far at this time.
So we are.
Just seeing this significant increase in lead generation.
And as accelerated enormously over the last.
Five to six weeks and so we're we're increasingly catching our breath to say Wow.
Now, let's pay attention to how much of this translates into realized revenue.
I mentioned during my prepared remarks that we hit this inflection point in April where the.
The gross bookings exceeded any cancellations or reductions and attendee expectations for the remainder of this year, that's a big deal.
Because you know frankly.
All pace numbers that might've been cited over the last 12 months are either irrelevant or misleading because you can't really track pace properly unless you know what's falling out the bottom with respect to cancel and future.
Future cancellations or reductions in attendance and.
And so we're just now getting to a point, where I think we will start to have more reliable pace estimates going forward and it happens to come at a time when lead generation is just extremely robust.
That's helpful and as a follow up to that and our food and beverage a zone.
A large.
Chunk of the business and the focus for you guys over the years curious how that.
He is developing for the second half and and then next year, how much of that's lovely to recovery and group and I think you alluded to some changes and F&B and help improve profitability curious kind of what specifically those were.
Yeah. So those changes that we referenced were primarily outlets that as restaurants that we either closed or modified significantly and we moved more to a self service model for our high end markets food markets and our hotels that do cover and some cases.
Breakfast. So we don't we're not actually standing up and Ala Carte breakfast menu and a number of hotels in favor of that we're actually making it more of a grab and growth co operation with a ability to finish cooking breakfast burrito or muffin onsite.
We have an excellent platform.
And through a oven that provides for a really.
A great way to be able to provide a high quality breakfast item.
So that's the some of the savings that we talked about I think what we're seeing and China is a significant demand level for.
Restaurants.
And the opportunity for people to come back and entertain people and also banqueting, we really seeing some very strong corporate demand for meetings and and high and events.
Our event pace.
Into the remainder of this year's track.
Tracking consistent with room pace, if you will.
But I would say that.
The impact of being able to truly get back into serving large numbers of people on property is going to ramp.
Between the end of this year into next year. So we won't really fully realize the F&B revenue opportunity until next year.
Primarily because we will have less on property attendees and in some cases and also because.
They will remain I believe although we could get lucky and have all spacing requirements and and concentration requirements attendee requirements and indoor spaces be alleviated, but there may be some that persist through the end of the year. So that's how we think about it.
Thank you.
Okay.
And there are no further audio questions are there any closing remarks.
Thanks Poly. Thank you to everyone for joining us today take care and we look forward to speaking with you again soon.
And thank you. This concludes today's conference call. Thank you for your participation you may now disconnect.
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