In preparation for HYATT's F1Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.
POST CONFERENCE CALL COMMENTARY
- "Our expectation on the market is that there will be periods of time where there maybe is matches between supply and demand as new hotels come online, but over the long haul, we think our positioning in China is very strong."
- "In India, what we're seeing right now is continued interest in all of our brands. India is a market is experiencing some softness from a macroeconomic point of view, and while that we haven't experienced any softness in our pipeline that's one thing we're mindful of going forward."
- "With regard to that executed contract base, 45,000 rooms …, less than 10% of it are owned or joint venture rooms, so the majority are managed or franchised. Our total commitments into future periods is… roughly $560 million. Those commitments are in the form of equity, joint ventures, loans, mezzanine debt and other types of investments that we plan on making to support that pipeline. There are two projects in particular that are a little chunkier, one being our investment in the Park Hyatt, New York. We expect to acquire that hotel upon completion of construction mid 2014. And our expectation is our two-thirds interest in that hotel will be $250 million, we have a fixed price purchase contract. Although we could apply some project level debt to that project in which case the amount of funding could be up to $125 million less than the $250 million if you apply 50% leverage. The Andaz Wailea is another high profile project that's within that $560 million, that hotel is under development right now, it's a joint venture with Starwood Capital. We expect to open that hotel sometime in the third quarter of this year."
- "We think about that executed contract base and 45,000 rooms is that on average these hotels take about five years to open from the time of contract signing, which is when we include it in that executed contract base, to opening. Some of the international full-service hotels in our base will take a little bit longer than that and select service hotels will take a little bit less than that, but on average about five years."
- "If you look at the openings we've forecasted, for this year we expect to open approximately 30 hotels."
- "What some of the leading brokerage houses and others are saying, they expect transaction activity in the U.S. for instance to be up at least 25% this year versus last year. So you're seeing more transaction activity and therefore there will be higher ability for us to participate. On a net basis, we've been an acquirer. Going forward, we'll take a balanced approach."
- "If you think about our business in North America particularly of full service hotels, 45% to 50% of that mix is group-oriented. The two main segments of group business are corporate group and association group. On the corporate side, what you're seeing is low levels of visibility… a lot of bookings for forward 90-day period. So short-term bookings and the bookings are tending to be a little bit smaller, both in terms of number of room nights as well as duration of meetings and I think some of that speaks to uncertainty on the part of corporations to make long-term forward commitments... With regard to associations that have more visibility into the future are making those longer-term commitments. So, you're seeing strength on the association side for future periods."
- "Markets and hotels that have been more transient oriented have outperformed. So, on the transient side, of course visibility is lower, generally folks don't make their transient room commitments until a few weeks before the travel dates. So, we have less visibility on that piece of the business, but strength continues to be positive."
- "The focus on the capital base is really building out the platform, that's first and foremost. I think in the context of that, we do recognize that we can create value by return of capital as well, and we have in the past returned capital to shareholders in the form of share repurchases. So, we bought back about $400 million of stock in 2011 and then last year in the summer, our board authorized the repurchase of up to $200 million of stock in the third and fourth quarter. We expended about $135 million repurchasing stock. So that has been a part of the story in terms of value creation over the last couple of years, and we still have capacity left under that $200 million authorization."
- "Based on the facts and circumstances, their [Board’s] belief and our belief was return of capital through share repurchases made more sense for us. The way we view dividends is if you look at operating cash flow less CapEx, what's remaining, and is that what's remaining significant enough to pay a meaningful dividend; and frankly if you look at our history over the last few years, operating cash flow has been recovering and we have been spending quite a lot of money in CapEx, particularly with regard to improvements at some of our own hotels. Now we're past most of that outsize spending at least with regard to improvements at owned hotels at this point, but that's been a relatively recent occurrence. So I wouldn't say it's off the table, but I would say it's not something that we're looking at implementing in the short-term."
- "Looking ahead, we expect margin expansion to be a function of and dependent upon higher rates at our hotels and higher levels of food and beverage revenues and profitability. We believe higher rates are likely going forward as occupancies now are at peak or near peak levels. Margin expansion represents significant future earnings potential for the company."
- "We've also started marketing six owned full service hotels in the U.S. These hotels in the aggregate earned about $25 million in adjusted EBITDA in 2012. If we do ultimately sell these hotels, we'll maintain brand presence through long-term agreements."
YOUTUBE FROM 4Q CONFERENCE CALL
- "Hyatt Regency New Orleans--We anticipated earning a low-teens percentage return when we underwrote the deal. But based on the strong performance of the hotel, our current expectation is that we'll earn a return higher than that, in the mid to high-teens."
- "In May 2011, we acquired three extended stay hotels in California and projected reaching a 10% cash-on-cash return by stabilization. We're well on our way towards that, with a 2012 adjusted EBITDA yield of over 10%, which we expect to increase after we renovate these three properties."
- "We acquired the Hyatt Regency Birmingham in England this past November, with an expectation that we would earn $5 million of adjusted EBITDA in 2013. While it's still early days, based on progress at that hotel, we believe we could exceed our initial expectations. "
- "We expect 2013 to be a year of stable growth. While we believe that the first half of the year has the potential be somewhat choppy, we're optimistic for the whole year based really on four primary indicators."
- "2013 group pace for full-serviced managed hotels in the U.S. is up about 4%. We're seeing significant levels of group production. December was our busiest group production month since late 2007, and January was good as well."
- "While the booking window is lengthening in certain cases, we're still seeing high levels of activity for close-in dates. For example, 40% of the group production in January was for the following 90 days."
- "Our corporate negotiated rate discussions have yielded mid-to-high single-digit percentage rate increases."
- "Transient demand continues to bolster results."
- "We expect certain specific items may negatively impact us in the first part of this year and the impact will lessen as the year progresses. These items would include: the ongoing renovations of several large managed hotels, both in the U.S. and the ASPAC region, market conditions in several international markets with significant new supply growth such as Baku and some cities in India, lower levels of government demand in some markets, specific areas of expense pressure, such as insurance costs and real estate taxes for owned and leased hotels, and a continued lag in the recovery of F&B spending as groups and banquet customers limit their spending. We expect these items to negatively impact us by $3 million to $6 million per quarter over the next several quarters, primarily due to lower fees as a result of renovations of managed properties. We expect that this level of quarterly impact will start at the higher end of the range, exacerbated a bit by the timing of Easter this year, and will trend down as the year progresses."
- "On the buy side, we're looking at a number of potential new investments, including acquisitions and investments in joint venture hotels, both existing JV properties and new properties in the U.S., Latin America and in Europe. Deal flow is higher than it's been over the last few years and we are actively looking at investments in excess of $100 million in these types of projects."
- "We remain very focused on and disciplined around how we're actually managing costs at our properties. And if you look at cost per occupied room, which is not the only measure that's relevant, but it is one metric, it's been flat basically since 2007. For our select service hotels, partly by virtue of some shared services initiatives, we've actually seen a decline over that period of time in cost per occupied room."
- "With regard to openings this coming year, about half international and half within the U.S. And two-thirds of all the hotels are managed properties."
- [Incentive fees] "So for 2013 we will see a continuation of some choppiness"
- "Maintenance CapEx remains relatively steady at approximately 5% of owned revenues"
- "From an owned perspective, we will continue to see supply issues in Baku, where we have an oversupply of hotel rooms. We also expect continuing issues in India with regards to the economical challenges they have there and some government policies. There are some markets in China where we see some short-term supply impacts. But those will in the medium to long term regulate itself because there is still an undersupply in our belief in the major markets there. And some headwinds are going to be created by the renovations in key gateway cities in Asia."