Q1 2022 Hyatt Hotels Corp Earnings Call
Good morning, and welcome to the Hyatt first quarter 2022 earnings call.
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As a reminder, this conference call is being recorded.
I'd like to turn the call over to Noah Hobby Senior Vice President Investor Relations. Thank you. Please go ahead.
Thank you Julia and good morning, everyone and thank you for joining us for our highest first quarter 2022 earnings Conference call. Joining me on today's call are Mark <unk>, Hyatt's, President and Chief Executive Officer, and John Battery ISG Financial Officer before we get started I'd like to remind everyone that our comments today.
They will include forward looking statements under Federal Securities Law. These statements are subject to numerous risks and uncertainties that are 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 in or implied by our forward look.
Statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold.
In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks on our website at Hyatt Com under the financial reporting section of our Investor relation.
In this morning's earnings release, an archive of this call will be available on our website for 90 days and with that I'll turn the call over to Mark.
Thank you Noah.
Morning, everyone and thank you for joining us today.
Before we begin I want to acknowledge the ongoing war.
Right.
Combining designation with growing numbers of lives lost.
Please separated and millions of people displaced continues to cause us concern.
Got it by our purpose of care, we have never wavered and our concern for our colleagues and get impacted by the war and half from the start focused on providing them holistic support.
Even with very limited operations.
<unk>.
<unk> provided supplies and food for Hyatt colleagues and their families remain in Ukraine as well as some guests who are staying at the hotel.
For members of the Hyatt family who've left the country, we have expedited job transfers to other European properties and established a relief fund, providing basic necessities and relocation support.
And that the global high family has come together to supply for the people of Ukraine and provide refugee accommodations across Europe .
Rover Fiat members are also supporting the global Red Cross relief efforts.
World of Hyatt points, and we continue to work on expanding our humanitarian efforts across the Hyatt portfolio.
As a global high family, we hope for a peaceful resolution as quickly as possible.
This morning, we reported our first quarter 2022 earnings results the strongest demonstration yet of how high it is evolving as a fundamentally stronger and better positioned company.
While <unk> was a headwind for us in January the variance spike sharply and fell rapidly in most areas of the world.
Revpar acceleration for all areas outside of Asia Pacific has been extraordinary with comparable Revpar revpar versus 2019 in our Americas and EMEA in southwest Asia region, improving for me being down 33% in January <unk>.
Being down only 5% in March to be up.
Almost 3% in April .
The pace of recovery significantly exceeded our expectations and the progression in our results demonstrates that Hyatt is optimally positioned for several reasons.
First our portfolio is focused on the high end traveler in each segment that we serve.
<unk> significantly weighted towards luxury and leisure with 42% of the hotels in our portfolio classified as luxury lifestyle or a resort.
And nearly 60% of our Revpar in the first quarter was driven by leisure transient revenue.
Our customer base and portfolio concentration allow us to realize a consistent rate premium in this environment.
Our strongest demonstration of that was March and April where we achieved a system wide average rate.
$195 and $199 respectively.
Two highest ADR months and highest history.
Second from a geographic standpoint, and in part as a result of our recent acquisition of ALG. We have significantly increased the concentration of our earnings from U S based travelers.
We estimate that on a stabilized basis.
Approximately 80% of our earnings are generated within the Americas.
This area of the World continues to lead the recovery, which was evident in April where we saw comparable revpar in the Americas up 3% to 2019 and ALG net package Revpar in the Americas was up 12% as compared to 2019.
Third group business, which accounts for a sizable portion of our stabilized total revenue base.
Has accelerated meaningfully through March and April .
We anticipate this will be an area of outside of strength for us as the recovery progresses in the coming months.
Compared to 2019 revenue realized at our Americas managed hotels was down only 8% in April .
Gross revenue booked for the same hotels was 20% higher in the first quarter.
37% higher in March alone and 42% higher than April 1st Phase that will take place this year.
Our conversations with corporate and association customers reveal an intense focus on in person interaction and connection as organizations prioritize nurturing their corporate culture, reconnecting with customers and wellbeing for their employees.
As a result, given that we have significant exposure to with customer segment, we fan to disproportionately benefit from a resurgence in group meetings that we believe will occur in the coming months and years ahead.
Fourth we have a strong positive operating leverage in our business through owned and leased hotels and a higher exposure to incentive fees, including importantly, our ALG platform.
This positive leverage was on full display in the month of March where we generated an adjusted EBITDA of $102 million.
Plus net deferrals of $10 million and net finance contracts of $2 million.
For nearly 60% of that total for the quarter.
The performance in March coupled with a further strengthening of Revpar in April .
And a strong booking pace for may and beyond provides us with confidence.
But our performance in the second quarter will significantly strengthen from the first quarter with higher rates and higher volumes of business in all regions other than Asia Pacific.
Fifth we expect our net rooms growth.
Which has led the industry for five consecutive years.
Difficultly expand fee revenue as recent openings ramp up to more stabilized performance.
14% of our legacy Hyatt fees in Q1.
Far from hotels that have opened since the beginning of 2019.
Our net rooms growth in the first quarter was 18, 6% or five 2% when excluding ALG and we maintained a strong pipeline of 113000 rooms for approximately 40% of our current base.
Ensuring the capacity to drive strong incremental fee revenue from net rooms growth well into the future.
And lastly, the real estate transaction market remains very strong as we continue to transition to a predominantly fee based company.
I am pleased to announce that in April we closed on the sale of three assets and have signed an agreement for the sale of our fourth asset with a scheduled closing in the second quarter.
Bind these four hotels will generate gross proceeds of $812 million or over 40% of our $2 billion disposition target marking significant progress on our fee based earnings evolution. These dispositions reflect an aggregate multiple of $15 seven times 2019 EBITDA.
Again, highlighting our consistent track record of selling assets at attractive multiples in excess of what is implied by our valuation.
In summary, we have reached a new phase in this recovery, we're actualizing performance and future bookings clearly validate our own confidence in the future.
<unk> is uniquely positioned to benefit from current trends given the composition of our portfolio and the operating leverage within our business.
Further as we continue to execute on our disposition program, we look forward to unlocking value on multiple dimensions as we progressed towards a more <unk>.
More agile stronger fee based enterprise.
Diving, a little deeper into our latest trends I wanted to first discuss ALG as it was an important driver of outperformance for the quarter.
John will review the specific financial results.
ALG tightly integrated platform continues to benefit from the outsized demand for leisure and beach destinations.
The performance this quarter was record breaking with the two main lines of business. The first thing AMR and Ami membership club PVC.
And the second being ALG vacations.
Both performing exceptionally well.
This performance is the result.
Very strong underlying demand and the impact of transformative changes that the management team has implemented over the past few years.
As we assess the performance of ALG. It's notable over the trailing 12 months.
That economic performance as measured by adjusted EBITDA, plus the increase in net deferrals and net finance contracts.
Employee and approximately approximate 10 times multiple.
On our $2 $7 billion acquisition price.
These financial results illustrate the power of the platform.
And the attractive valuation of which we acquired.
Based on recent trends we're confident.
That we will exceed our previous expectations of a low double digit multiple by 2023.
Both in terms of timing and magnitude.
It's also worth highlighting that this strong base of activity is occurring before any material benefits from integration efforts that have taken effect, but that is changing as we speak.
Yes, yesterday, we announced that.
Yes.
<unk> AOR resorts and the Americas are bookable through highest channels.
And world of Hyatt members can earn and redeem points at more than 50 <unk> properties.
<unk> resorts in Europe will join the program later this year.
These initiatives will deepen guest loyalty and reduce distribution costs.
In addition, we have launched the inclusive collection.
A designation for our global portfolio of distinctive all inclusive resort brands.
Lastly, we are excited to announce that UEC members have been granted world of Hyatt status.
This adds compelling value for existing EDC members and enhances the value proposition for prospective UBC members.
In summary, ALG is trending significantly ahead of our expectations in every measurable dementia.
Making quick and meaningful integration progress and foresee reaching our 2023 earnings targets significantly ahead of schedule.
Turning to the latest business trends in our legacy high business I'm very encouraged by the pace of recovery.
After a slow start to the quarter EMEA rebounded sharply in most areas of the world.
While system wide Revpar was 25% below 2019 levels for the quarter.
Results vary significantly by month with Revpar in March down only 15% and as we look to the second quarter system wide Revpar in April was down only 9%.
The strengthening of rates has played a critical role in the revpar recovery improving from down 5% compared to 2019 levels in January to up 10% in April .
From a geographic perspective, it's notable how quickly revpar is recovered in many parts of the world Revpar.
Revpar in April was up 3% and 1% to 2019 levels in the Americas and in EDI Southwest Asia regions, respectively.
Meanwhile, Asia Pacific experienced a worsening trend over the course of the first quarter due to travel restrictions in greater China with Revpar remaining at depressed levels in April .
Outside of greater China countries in Asia Pacific Asia Pacific had partially or completely reopened borders and we see improvement as restrictions ease and airline capacity ramps up with revpar, improving 15% from March to April .
We remain optimistic that a rapid recovery will emerge in the region as it has so many other parts of the world, Although the timing remains unpredictable.
From a segmentation perspective, we again experienced a strong level of leisure transient revenue during the quarter up 4% to 2019 on a comparable system wide basis and up 12% to 2019 in March.
This trend has strengthened further in April with leisure transient revenue up 19% over 2019 levels.
We continue to see improvement in urban locations and are benefiting from a longer length of stay specifically with extended weekends.
Driving higher demand on Thursday, and Sunday nights.
We anticipate this trend extended weekends, we continue as consumer behavior shifts post pandemic to the adoption of blended leisure and work travel.
While leisure transient continues to outperform group is where we saw the most pronounced recovery during the quarter.
System wide group rooms revenue was down 43% to 2019 in the fourth quarter of 2021.
And improved to being down 25% to 2019 in March and down only 14% to 2019 to enable.
The speed at which group return was significantly ahead of our expectations.
We've heard repeatedly from meeting planners, how impactful it is to reconnect in person for association and corporate customers alike.
Intimate that as evidenced in our group booking momentum.
Large group bookings driven by corporations with strong food and beverage spend are contributing significantly to our recovery.
Group rooms revenue at our comparable Americas full service managed properties was down only 8%.
For 2019 levels in April and group pace for the remainder of the year from May through December is down only 12% to <unk> 2019, with tentative group bookings up 60% to 2019.
The continued strength in short term bookings the vast majority of which are corporate.
Gives us full conviction.
The group will continue to narrow the gap to 2019 levels over the course of this year.
Ashford business transient we've seen positive momentum as more people return to the office with system wide business transient at 53% of 2019 levels in April .
With the Americas region, reaching 59% of 2019 levels during the same period.
Large national corporate accounts.
Have improved from 36% recovered in February with 54% recovered in April .
And from a future bookings perspective.
Transient bookings were approximately 65% of 2019 levels in April for the Americas.
Consultant consulting companies and industries with a heavy focus on sales of products and services are leading the recovery with.
With some of those firms now running in excess of 2019 travel levels and.
And demand continues to broaden across industries with each passing week.
We remain optimistic about the recovery as business transient and its continued momentum over the back half of the year as people return to the office travel restrictions are eased and more cross border travel resumes.
Finally, I want to provide additional details on real estate transactions before turning it over to Jeff.
As I mentioned, we've had a very active start to the year.
April we closed on three transactions.
Regency Indian Wells resort and Spa in Palm Springs, California.
The Driscoll and off in Texas, and the Grand Hyatt, San Antonio Riverwalk in Texas and.
In addition, we anticipate closing on our fourth property the confidante and Miami Beach later this quarter.
In total these four properties represent $812 million in gross proceeds at an implied multiple of 15 seven times 2019 EBITDA.
The sale of the Grand Hyatt, San Antonio is particularly impactful to the implied EBITDA average as this 1000 room hotel is attached to the convention center and encumbered with a complicated ground lease and debt structure.
We sold our interest in this hotel at an implied multiple of 11 nine times 2019 EBITDA.
Evaluation represented a significant premium to our internal estimated value.
When excluding Grand Hyatt San Antonio the sale prices are the other three assets, implying aggregate multiple of 19 seven times 2019 EBITDA.
It's also notable that.
Buyers of Hyatt Regency Indian wells the.
The addressable and the confidence.
Are all planning transformative renovations in the near term with an aggregate investment of over $145 million.
This follows a similar pattern to our sales last year of Hyatt Regency Lake Tahoe.
Hyatt Regency lost pines.
Not only are we selling and strong multiples with long term management agreements.
But we're also selling to strategic buyers, who believe deeply in our brands.
Our investing significant amounts to upgrade and repositioning these great hotels, and with whom we expect to grow in the future.
These additional planned investments in our properties will enhance the guest experience.
Supported by high it's uniquely strong customer base and yield strong management fee streams over the decades to come.
We are extremely happy with the progress, we're making and fulfilling our $2 billion disposition commitment by the year end of 2024.
Upon closing of these transactions, we will have completed over 40% of our commitments.
Accelerating our transformation in greater fee based earnings.
Overall, our strong results for the quarter, coupled with the execution of our asset sales and a strong booking momentum we see for Q2 and beyond provide the foundation for continued optimism as we look toward the remainder of this year.
I'll now turn it over to Joan to provide additional details on our operating results John over to you.
Thanks, Mark and good morning, everyone. My commentary today will cover our consolidated financial results key drivers of performance and expectations that can share for the remainder of 2022.
This morning, we reported a first quarter net loss attributable to high at $73 million and a loss per diluted share of <unk> 67.
Adjusted EBITDA for the quarter was $169 million. Additionally.
Additionally, net.
That's it for increased by $24 million and net finance contracts increased by $7 million.
Almost 60% of adjusted EBITDA net deferrals and net finance contracts was earned in the month of March.
Adjusted EBITDA for Hyatt, excluding ALG with $113 million for the quarter and improved rapidly from $11 million in January to $79 million in March a reflection of the Revpar acceleration Mark mentioned.
System wide March Revpar, excluding Asia Pacific was down less than 5% in 2019.
It's important to note adjusted EBITDA in March was approximately 40% better than any previous months in the last two years, a testament to the accelerating trend this quarter and the strength and overall recovery.
As we look deeper into the strong result improvement in our lodging business, primarily driven by the strength in the Americas region, which contributed $85 million and adjusted EBITDA in the quarter down only 9% to 2019.
In addition base incentive and franchise fees accelerated in both the Americas and EMEA Southwest Asia region, improving collectively from January where fees were approximately 20% below 2019 level.
In March where fees return to 2019 levels.
Electing the quickly improving revpar environment and impact from our industry, leading net rooms growth.
Turning to our owned and leased portfolio.
Segment generated $54 million and adjusted EBITDA for the quarter was $39 million earned in March.
Comparable owned and leased margins were 26, 9% for the quarter down 50 basis points to 2019 levels for the same set of properties while margins in March were 36, 1% up 150 basis points as compared to 2019.
The majority of owned and leased properties exceeded 2019 EBITDA in the month of March with Revpar down only 7% 2019 levels.
Over the past several quarters as the recovery has gained momentum we have demonstrated the positive operating leverage and inherent value in our owned and leased portfolio through strong realizations, Jim and excellent flow through.
As we turn to the second quarter. The Revpar recovery has strengthened further in April .
Compared to 2019 systemwide Revpar in April was down only 9% with ADR growth of 10%.
And our comparable owned and leased hotel Revpar in April was up 1% with ADR.
Growth, 17% looking into May and onward are booking momentum remains robust driven by ADR strength and this provides us with confidence that we will continue to experience a strong level of recovery.
The exception and clear outlier in our Asia Pacific region.
<unk> results improve outside of greater China in April and remain confident in the long term recovery of the entire region.
While the timing is uncertain.
Turning to ALG that performance of the segments significantly exceeded our expectations.
<unk> EBITDA for the quarter was $56 million net deferrals increased $24 million.
Net finance contracts increased $7 million as a reminder, it's critical to assess performance.
Some of these three items adjusted EBITDA net deferrals and net finance contracts.
GAAP revenue and expense recognition requirements related to <unk> business.
We've provided a table on page three of the schedules in the earnings release for ease of reference a net deferrals and net finance contracts as.
As well as a supplemental presentation for eastern bottling ALG contributions.
Sure.
I'll take a moment to cover three key areas that drove ALG financial results.
First net package Revpar for the same set of hotels in the Americas.
Around 8% to 2019 during the quarter and up 1% to 2019 in March reflecting strong improvement in demand as the impact from Amazon.
Dissipated by mid February <unk>.
Performance drove $30 million in total EMR management franchise and other fees.
Second new contract signed for <unk> Unlimited vacation club the primary driver of performance other revenues net deferrals and net finance contract was 7800 contracts in the quarter.
Ceding 29.
<unk> by 8%.
UPC contract signings continue to pace of off 2019, with a strengthening average contract price exceeding 2019 by nearly 15%.
Driven by sales and membership higher tiers.
<unk> now has 121000 active members exceeding 2019 at 33%.
Third and most pronounced with the ALG vacations business, which realized very strong results driven by the combination of a surge in demand and the positive impact of an operational transformation over the past few years.
Distribution and destination management revenue was $246 million in the quarter a material increase in prior quarters, driven by favorable unit pricing, which was up 16% 2019, and a heavier mix of business to more each destination.
The favorable revenue mix, coupled with lower overhead through automation enhancements and less marketing spend fueled a significant pension margins.
As a result, the first quarter demonstrated the earnings power of a transformed ALG indications platform.
We expect performance to remain strong over the remainder of the year, but we'd also note that the first quarter typically generates higher seasonal results for the ALC vacation platform.
In summary, EOG posted very strong financial results in the quarter ahead of expectations. Despite the headwinds faced in January and as we look ahead. Our positive sentiment is reinforced by the strong leisure demand has continued into the second quarter.
Gross package revenue for all Americans resort is pacing, 37% ahead of 2019 for the second quarter.
And we expect our significant expansion in Europe over the past two years to contribute meaningfully over the summer months.
I'd also like to provide an update on our continued strong cash and liquidity position.
As of March 31, our total liquidity includes $1 3 billion of cash cash equivalents and short term investments.
$118 million from the prior quarter largely from an improvement in cash flow from operations.
In addition to our cash position, we maintain approximately one $5 billion in borrowing capacity on our revolver.
At the end of the quarter, we reported approximately $3 8 billion debt outstanding excluding $164 million of secured debt related to the disposition at Grand Hyatt San Antonio.
Secured debt was included in liabilities held for sale as of March 31, and.
And we paid off in April upon the closing of the sale.
While we have no maturities in the next 12 months, we will have an option beginning in the fourth quarter of 2022 to pay down a portion or all of the notes issued in the fourth quarter of 2021.
We expect the net proceeds from the four dispositions Mark mentioned to allow us to pay down a significant portion of these notes.
Furthermore, we anticipate resuming repurchases under our existing share repurchase authorization this quarter.
Finally, I'd like to make a few additional comments regarding our 2022 outlook consistent with our estimate provided on our fourth quarter earnings call. In February we continue to expect adjusted SG&A to be in the approximate range at $1 $60 million to $465 million.
Excluding any bad debt expense.
As a reminder, we expect legacy high adjusted SG&A to be approximately $300 million to $305 million.
Which includes $25 million to $30 million, one time integration expenses related to ALG.
When excluding these onetime expenses legacy higher SG&A is expected to be approximately $275 million. We continue to expect ALG adjusted SG&A to be approximately $160 million.
Turning to net rooms growth, we are reaffirming our expectation of rooms growth of approximately 6% for the full year, while we recognize that macro factors such as supply chain issues are COVID-19 related restriction present at <unk>.
Three of uncertainty given the activity we see in the marketplace. We remain confident that our guidance is well within reach and expect to deliver another strong year of net rooms growth.
As for capital expenditures, we have revised our outlook to be approximately $210 million down from $215 million, we provided last quarter. The asset sales. The comments about earlier are leading to lower capital needs and a reduction in our estimate.
Legacy higher capital expenditures are now expected to be approximately $185 million and we continue to expect <unk> capital expenditures of approximately $25 million.
I will conclude my prepared remarks by saying that we are very pleased with our first quarter results. We believe we are uniquely positioned at this stage in the recovery given the positive operating leverage in our business and our mix of leisure luxury in group business.
Alg's results are significantly exceeding our underwriting and we continue to advance our long term strategy to unlocking value in our real estate, while transitioning to a predominantly fee based company.
Thank you and with that I'll turn it back to Julian for Q&A.
Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again.
Our first question comes from Shaun Kelley from Bank of America. Please go ahead. Your line is open.
Hi, good morning, everyone.
Sort of a.
Two part question. The first question would be.
Yes, Mark or John can you give us a little bit more color on the seasonality around algae I think that definitely surprised everyone at how cigna.
Significant that was in the quarter and and maybe just think if I caught the number right I think Marc you said $270 million of adjusted EBITDA.
On a trailing basis or I think you said 10 times on your on your acquisition price, maybe just again help us think about how that kind of break that up across.
Across the year and then set.
Secondarily.
Sort of unrelated follow up would be just any thoughts around the guardrails on capital allocation given the asset sales. Thank you very much.
Yes.
This is Shawn I'll, maybe I'll start with the.
The metrics I had laid out in my prepared remarks, some of the metrics that we experienced in the first quarter from EOG and as a reminder, net package Revpar is close to 2019 level at which drove about $30 million in fees on the EMR business and the UBC.
Program also we signed 7800, new membership contracts in the quarter. So those two metrics actually led to solid results for that line of business within ALG. The outperformance really came from.
Beyond our expectations came from the vacations business, we had significant upside there at a.
A significant portion of that came from the surge and booking activity.
In light of Omicron in late Q4 and in early Q1.
We saw the surge of demand.
Early in February and really drove significant topline results.
The demand itself was strong but also the unit pricing was significant that we realized in the quarter so well.
While Q1 is a seasonally strong quarter for the business.
The packages that are sold and the Caribbean are of a higher revenue mix and higher margin mix. It was.
Significantly stronger because of the search looking ahead as we think about the next couple of quarters.
The backdrop of <unk>.
Demand that we're seeing would lead us to.
Per the results lead us to.
Allow you to think about the results in the context of last year as a benchmark because we also had some surge of demand in the second and third quarter of 2021 coming off of Delta at that time. So if you look at Q2 and Q3 of this year, we think we've got.
Strong strong pacing going into the second and third quarter, but as you think about the seasonal nature you can reference.
Historical information, we gave for the quarters.
In our fourth quarter supplemental package for E. ALG results to help you model out future quarters.
So maybe to round out to extend with Joan just covered into the multiple calculation.
We did lay out by quarter last year.
<unk> produced.
We know what we just reported what is produced in the first quarter. So that's it's relatively straightforward way to add across.
Yes, it's in the range of $270 million for the trailing 12 months.
And.
I would say as I said the <unk>.
Repaired remarks.
Everything is pacing at a higher level.
A better flow through.
Across all dimensions of the business than we had underwritten.
<unk>.
Our underwriting did not actually presume the pickup that we now expect to start to realize through the launch of the world of Hyatt integration.
Which we expect to do two things one we're introducing our 30 million members to these resorts for the first time Bill will have direct book ability through high Dot com and all of our digital channels, but also earn and redeem opportunities through all the highest.
And second for owners.
The progression that we expect to be able to demonstrate to the direct channel bookings.
We believe will be very significant.
How do we know that well if you look at our throughput for Hyatt <unk> Hyatt Laura.
Over 50% of all revenue is generated directly through the highest channels into those hotels.
And that would be starting with Europe currently with the EMR hotels, which already deliver.
More than 50% through their direct channels.
So we think that bringing what will end up being a cheaper delivered costs through the Hyatt channels will help to optimize all non hyatt, meaning not highest non ALG channels.
And be able to really produce some great results for owners from a distribution cost perspective.
We just started this yesterday, we went live yesterday and by the way I think that that is a remarkable achievement having closed the deal only six months ago.
Re reminder, that ALG, sorry, Mark collection hotels.
We're currently on.
On track to deliver.
Double digit low double digit like 10 plus percent net rooms growth this year.
And we and we are on track to do that because all of those resorts are under construction.
Excludes conversions, which we are working on currently so we see the pace of opportunity going forward. So to wrap it up I guess, what I would tell you is we told you when we close the deal that we expect it to be able to demonstrate a low double digit multiple by the end of 'twenty three we've already done it.
We're not focusing any longer on how low double digit we go to where we're on our way to a single digit multiple.
Effectively if you measured on future earnings, but really most importantly, we're going to really focus on growth and maximizing the growth opportunity. We've got a plan that we have in place to accelerate growth in our existing markets.
We have some other <unk>.
<unk> portfolio work that we're doing that we will announce soon and we are.
At both conversions in existing markets, but also expansion into the middle East and Asia, which we've already mapped out and we won't get going on as we speak actually will be coordinated across Europe and the.
Middle East Thats, where we where we're beginning to lead in Asia will follow that.
So.
I guess, what I would say is stay tuned we've got a much more efficient vacations platform than we did before the mix has shifted significantly in the business that they're doing away from lower margin markets to much higher margin business.
Actual package revenue is up significantly.
I think it's mid teens increases over 2019 levels.
For net package values.
So.
I guess, what I would tell you is that there is nothing that we see anywhere that suggests that we have any issues other than upside. It's a question right now.
Our addressing ourselves to really focusing on is how high is high and what can we do to accelerate that activity.
With respect to capital allocation.
You asked about how do you how do you.
How do you balance all of this with the cash that we're generating from asset sales net positive cash flow from our business.
And the momentum that we see heading into the second quarter, especially in the into the summer. We have every expectation that we will be able to pay down the debt that we need to by the end of this year to be back into.
All of the ratios that the rating agencies look at for a very solid investment grade.
Level and open up significant capacity for share repurchases, which is something that John as John mentioned, we are resuming this quarter.
Very exciting thank you everyone.
Our next question comes from Stephen Grambling from Goldman Sachs. Please go ahead. Your line is open.
Thanks.
The strength in forward bookings as well as what you saw in the quarter and I recognize there's a lot of macro crosscurrents, but what would you need to see to reinstate EBITDA guidance and as a related follow up could you help us triangulate a baseline for the core non ALG EBITDA given all the moving parts there with asset sales two roads.
Integration costs renovations Amira Baltimore thanks.
I'll start on that and Jonathan.
Thats correct me as I know.
As you pointed out we've got a lot going on we're selling assets. We will continue to report on the net impacted.
The asset sales.
As we go.
I guess as a quick reference point for your for your information you could derive this from the multiple that we gave you.
We made something like $54 million for the year of 2019 and the four assets.
We are selling.
Free which has sold and the other one assortments is slated for.
As the second quarter.
In terms of what the first quarter was for those four assets.
It was about $21 million in both 2019 and in 2022.
So there are some quick reference points on the earnings impact from what we've already announced.
With respect to getting to a point, where we can.
Provide you with visibility into the future.
We are still living through.
A upward inflection point in many different dimensions.
Sure.
And we are learning as we go.
And I think that what we have already seen relative to our expectations.
Is that we're being surprised by.
The bigger and the pace of the.
The return of bookings so we're seeing booking activity Joan mentioned that with respect to simplifications business, which I mean omicron.
Yes.
Severe downturn for business transient, but a quick sharp fee.
It was much more extended for group, but Bruce is worrying back in March and April as I've described it and leisure.
It really didn't get impacted too badly.
The issue is back on positive bookings in January actually.
So we've seen those sorts of.
I guess you could continue to an extension of pent up demand. So we keep seeing.
Behaviors that are supporting.
Better results than we would have otherwise expected given how we started the year with <unk>. So we're still learning and I think we'll have a much better handle on how we can get our hands around modeling this out, especially given our.
Our mix second.
Secondly, China is an issue.
Sue.
We're sort of operating at from a fee based perspective, maybe a third of the run rate, where we were pre pandemic or where we would expect to be.
Currently if we werent stabilized operations, we have confidence that they will sort through how they migrate from a bureau covered policy to a more open policy, but we really don't have a good handle on timing okay.
That creates some volatility and was as well and then.
Finally, I think we're still.
Learning.
Just how impactful some of the operational model changes that the management team at ALG put into place for vacations and for UTC as EMR.
The platform is just more.
On power from a profit delivery perspective on a flow through perspective menopause.
Two years ago, and some of that has to do with machine learning the application of machine learning.
Using bots for.
And and other AI for processing things like price changes that flowed through the system and how packages are presented.
Some of that has to do with a reduction in marketing spend and some of that has to do with a reduction in overheads, but and a lot of it has to do with the mix of business that they're doing so what we are learning at this point is just to understand how powerful those things together taken together.
<unk> in the delivery of profit.
On the total revenue base the volumes are quite high as we as we covered in the last call. So I would say that we will be dramatically better position by the fourth quarter.
To start to look back towards guidance.
And that assumes that we see and have a more predictable future for how China is going to migrate from a year ago, the policy to a more normalized environment.
Fair enough. Thanks, so much I'll jump back in the queue.
Thank you our next.
Our next question comes from Patrick Scholes from <unk> Securities. Please go ahead. Your line is open.
Hi, good morning, everyone.
You talked quite a bit about encouraging revenues.
From the Alg's segment.
In the quarter you had.
Very strong margins in the <unk>.
Distribution and destination.
Management component I guess for modeling purposes.
Should we think about that.
Those margins going forward are the sustainable seasonality et cetera with that thank you.
Yes, Patrick I would take the Mark just went through some of the drivers.
The change is the operational changes that the team has put in place over the past couple of years and I alluded to them.
My prepared remarks.
Think about top line.
Q1, really was helped by the search and booking activity, but it remains healthy and my point My point earlier, they actually look to the second and third quarter performance of last year at the benchmark is a good place to start and we're definitely seeing better pricing power as it relates to the packages that we.
Our selling through the platform. So elevated pricing is expected to continue and the margins that you would see in the second and third quarter of last year also reflect improving.
Improving.
Flow through from that business, so 20% in the first quarter.
Is solid strong partially driven by the search.
I'd say.
A fair place to be in the mid teen margins that we shared in that supplemental package in Q2 and Q3 of 2021.
Okay. Thank you that's it for me.
Our next question comes from Smedes Rose from Citi. Please go ahead. Your line is open.
Hi, Thanks.
I'm curious maybe you could talk a little bit about how you think about sort of the system.
The higher prices you are seeing in the all inclusive business I think there's sort of growing concern that these very strong leisure comps get more difficult.
Consumers are spending downs with those excess savings credit card thats going out centers is LG.
Choosing.
They run their business to emphasize higher rates, maybe at the expense of lower occupancy or how do you sort of think about that going forward.
Sure.
We it's going to be difficult for me to moderate my enthusiasm because the data is quite clear.
The ABR.
The embedded ADR in our Q2 bookings for the <unk> sorry, the Empire resorts business is up 22% over 2019 levels.
And if you look at the Americas it outside of ALJ for Hyatt.
Our leisure focused business is up 38%.
In rates for Q2 bookings, so we see not only no evidence.
That we're not seeing sustained levels, we're seeing stronger levels of price realization as we look forward now.
I understand I'm the first person.
Find ourselves and others that <unk> do not grow to the Sky and you can't model something compounding at a 38% growth rate.
However, what I would say.
With respect to a an impending crash.
Or a massive correction I want to just remind everybody that.
<unk>.
Our customer basis.
So our customer base is as we keep as we keep reminding everyone is the high end traveler in each segment that we serve.
And importantly.
30% of our total portfolio globally.
As in the luxury our luxury chain scale.
With rates and a customer base that are attendant to that.
Second sorry.
Sorry speeds that referred to our competitors piece of research with Morgan Stanley Research put out this morning.
From the director of research for the Americas.
U S consumer spending.
<unk>.
Alpha lies.
And when you look across the different categories of spend domestic travel for leisure.
Work business related travel.
Our national travel for leisure.
And.
Leisure entertainment activities.
Our customer base, which are the top two categories are the ones that are showing continued strength and we're not when I say continued strength the highest.
Demographic income bracket, it as $150000 or higher.
We're talking about rates of the next six months spend expectations of plus 20% and domestic travel for leisure plus 25% work related and high teens increase in international travel for leisure now this is a survey and.
<unk> you have to see what people do not what they say they're going to do so.
So far our people have done what they what we thought that they would turn to they're just doing it a little bit more vigorously than we had previously anticipated.
So we don't see any evidence of a slowdown in either a booking pace.
The fact booking pace itself is increasing.
Really across all.
Of our segments and business transient.
Business transient.
As <unk>.
Bookings in April our 27% higher than they were in 202019.
I already described in my prepared remarks, the group bookings and how much higher they are.
And the same is true in leisure, we just cover now on the group side just quickly.
To provide you a little context, you might you might be sitting back and saying I know group a strong but you said the pace for the remainder of the year is down 12.
Percent versus 2019.
When you look at the dollars involved that gap being down 12% for the remainder of the year with an $85 million gap $85 million revenues.
April alone.
Was 42% above the bookings were 42% above where they were in 2019, that's $12 million of incremental.
Revenues booked in April versus 2019, I'll leave the math for you. If we're clicking along at something that looks like a 10 or $12 million increase over 2019 levels bookings and we have an $85 million gap to fill.
You can understand why.
Of the belief that we will exit this year at a run.
Run rate for group business higher than where we were in 2019.
So pretty much across the board.
Really largely driven by where we're positioned.
The high end traveler for both in the leisure segment and the high end travelers with respect to our corporate customers and the kind of service kinds of services that we offer.
That's why we feel so strongly that we are well positioned.
Not to mention the positive operating leverage people seem to have forgotten that operating leverage works in two directions.
We have been roundly criticized.
Think.
I think.
The negative sentiment around owning assets has been fairly stated and articulated for so many quarters, but people seem to have forgotten that it works exactly the same way except in the other direction. When you start seeing the kind of rates and flow throughs that we've been able to generate with more efficient operations. So.
Pretty much across the board, we feel like we are extremely well positioned for a market that we're in.
Great. Thank you I appreciate it.
Our next question comes from event CBL from Cleveland Research Company. Please go ahead. Your line is open.
Great. Thanks.
About the owned business a little bit just in light of.
Significant growth in leisure progress with ADR your comments on the recovery in group and business transient and when you put all that together and think about how that might impact on margins I think historically you.
With C a build quarter over quarter into the second quarter, and then margins would soften into three Q. When you would lose a lot of that.
Business that was kind of the old pre COVID-19 business.
I'm curious, how you envision kind of the path for own margins.
New World that we're living in.
Well in the core in the first quarter, we generated 70% of our EBITDA in the month of March and.
And in the month of March we had 150 basis point improvement over 2019 to the portfolio.
We have to look at the portfolio and the mix because we have a.
Distribution of properties and product types leisure properties, some of which are on our transaction lists that we mentioned earlier group and business oriented properties.
High end luxury properties in urban centers are mirasol properties that we own.
Each of those in different quarters, we'll take advantage of demand that is.
Frankly, our managers have been doing a great job.
<unk> concepts Inc.
In Egypt the property so far we've reported on several earnings calls that some of our legacy group hotels.
Reinvented themselves as leisure hotels.
In the south markets and using the spacing in the hotels to welcome major gap compared.
Great.
Where we are substituting and driving business in different ways because of the high quality of the asset and.
The customer demand profile over the last few years. So very strong results, we reported actually in excess of 2019 for the past three quarters and.
Phenomenal results in March when we had Amazon behind us.
Mark you were going to make.
Comment about.
Yes.
Included included in <unk> results I, just want to remind you that the bureau of all our nearby properties are embedded in that <unk> result, mirabal not surprisingly given the huge focus on wellbeing, especially mental roby.
Are seeing remarkable results and remarkable bookings.
That business across those three properties that are now fully operational for the first year since we acquired <unk> because we've been in the midst of doing a lot of rental rate renovation work.
Are on track, we believe to earn something on the order of $40 million in EBITDA. This year.
30% margin.
Two revenues Thats before management fees.
After management fees would be.
About $35 million and 26% margin.
So.
Just a remarkable financial results.
At.
Total revenue per available room that is tracking in the.
Let's see.
Trying to remember give me one second.
Over 1000 flight, yes over $1000 total revenue per available room total available per occupied room is actually over $500.
And really the key thing that we demonstrated at this point is that we can replicate the model we have often which is now.
Demonstrating results that are in line with Tucson, Tucson has been in business for 40 years and the Big question that we had for ourselves was could we replicate this unique operating model and actually expand that land I think you'd know answer that question, which is very important because we have new developments underway right now premier of all.
Through third party numbers.
So that that small and mighty business is actually having an impact on our on our margins as we look forward as well.
Great.
To close that we expect on a stabilized basis that we will.
Expand margins by 100 to 300 basis points.
Above pre COVID-19 levels.
We still have that expectation given what we've seen our managers do.
And driving productivity gains and software.
Julien we will take our last question. Please.
Next question will come from David Katz from Jefferies. Please go ahead. Your line is open.
Hi, Good morning, everyone. Thanks for working me in.
I just wanted to ask about property sales and asset sales. It may not be the top of mind issue today, but is there anything.
Changed or evolved over the past few weeks in terms of.
Your ability or engagement in terms of thinking about asset sales going forward.
We.
As you might imagine when you announced the $2 billion commitments.
We are proud of the <unk>.
The 800 million plus.
We're going to generate.
In the first four months of this year.
We are or have already mapped out all of our alternatives and we're thinking about how we're going to execute against it.
For our properties has been very high I pointed out that.
The owners of three of the properties that we're selling are putting $145 million of new capital in to reposition one asset and rebranded it to higher asset.
What level and the others are significant renovations.
So actually two of them are doing repositioning two different brands.
And so we're seeing a tremendous ability to find owners. They are all very very <unk>.
Strong financially strong owners, who believe in our brands.
And are prepared to put a lot of capital into our hotels same was true for Tahoe and for last time last year. So I guess, what I would say is given the kind of properties, we have and given the kinds of owners that we are dealing with.
Tremendous confidence that capital formation is not going to be an issue. There is lots of equity out there. The one thing that has changed I mean, all you have to do is take a look at the tenure now.
Solidly in the threes.
Up 150 basis points at the beginning of this year.
Rates are higher and you understand the math, which is you are paying more for your debt. Therefore, the yields from your equity are coming down.
Now I think that there are other ways in which.
Sellers can assist in that and that.
That might be providing some capital or providing some.
Some other participation so if we need to and it makes sense for us to do so we could.
Do that but right now the demand that we see for the kinds of properties that we have and the remaining inventory that we got this is tremendous with multiple different options. The second thing I would say is in terms of total cash generation, we have a number of JV.
Deals that are in process right now selling our JV interest in a couple of hotels.
And.
And actually have a couple of other deals that have already been.
Signed we're not we're not committed yet because there are a lot of conditions to the commitment, but the Grand Hyatt New York and the Andaz in London are both under contract at this point subject to massive redevelopment entitlements.
Processes that are underway in both of those cities. So in some ways, we've already effectively locked in value for <unk>.
Some of the some of our other properties. So I think it's going to be.
A tighter market just by virtue of debt yields.
Which will impact financing.
Cost and so forth, but for us I don't think its going to have a.
Pronounced impact on our ability to execute.
Understood and if I can pardon me ask one just detailed question I apologize if you.
Discuss this very but there was a $31 million loss from interest income and marketable securities did you discuss where that came from and what that's about.
No.
Hi, Mark.
Well they are housing.
Either held for world of Hyatt for possibly for the Rabbi Trust. This first half.
Yes.
I don't know if answered so im not going to speculate.
Securities values.
In general have come down obviously, the market's down there and so and if you've been holding anything that looks like a fixed income instrument your prices down yields.
Yields are up.
So that's.
That's my macro response, but beyond that I'm not going to comment I'm not sure.
We can follow up on that yes.
We continue and probably it.
So it's very possible that that is not a realized loss.
Right Alright.
Alright, Okay, we could circle.
Excellent.
Okay. Thank you all.
Thank you very much.
We have no further questions I'd like to turn the call back over to Noah happy for any closing remarks.
Thank you everyone for joining us today to take care of you look forward to speaking with you again Tim.
This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.
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