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If Hyatt could post these results and distribute this much cash back to shareholders every quarter, maybe there wouldn't be a 2 turn EBITDA valuation discount

"Our second quarter of 2013 reflected ongoing positive trends in transient demand at U.S. hotels and strong average daily rate progression.  Looking ahead, we remain focused on improving performance at existing hotels and expanding in new and attractive markets. We expect continued healthy levels of transient demand at U.S. hotels, and anticipate further rate growth. Over the short-term, we believe that U.S. group demand growth will be modest and that demand in certain markets, such as India and China, will be volatile. We remain confident in the long-term outlook for both transient and group segments."

- Mark S. Hoplamazian, president and CEO of Hyatt

CONF CALL

  • New capex schedule on page 12 of release
  • 2Q strong:  higher rate, improved F&B and good flow through and earnings from newly renovated hotels
  • 5 owned & lease hotels each grew EBITDA by 50%
  • Strong Transient sectors:  manufacturing, housing, technology
  • Group business weak - timing of Easter partially offset lower govt group business
  • Group
    • In the quarter for the quarter growth: +1%
    • In the quarter for the year growth:  +7%, this pace has been maintained
    • 2014 bookings are flat - corporate associations doing well; govt/specialty groups lagging
    • 2015/2016 up
    • Expect DC in next 18 months to be weaker relatively; expect Chicago/Orlando to be stronger
  • 4 France hotels post conversion:  $5MM - base fees; $5-10MM incentive fees (expect more in 2nd/3rd quarters because of seasonally strong summer); because the annual guarantee is measured on a quarterly basis, Hyatt may be required to fund up to the guarantee level (e.g. 4Q) which could negatively impact incentive fees. Hence, $10-15MM euros in total fees in 1st year.
    • French hotels incentive fees:  $10MM in 2Q; $10MM or slightly below in 3Q, - $5MM adverse impact on 4Q
  • 5% of adjusted EBITDA from Greater China
    • China will continue to be challenging in 2013
  • 2nd half of 2013:  earnings from recently sold hotels will have a negative impact 
  • Baku/London:  difficult comps in 3Q
  • 1/2 Mexico resorts are all-inclusive
  • 3Q 2013:  20% equity stake in Playa for $100MM, $18-20MM EBITDA impact; ROI: mid-teens
    • Min return on convertible preferred equity: 10%
  • Have four hotels in the process of being transacted - (2/3rd of $25 EBITDA impact)
  • Recent MGM marketing deal:  activity levels are higher than expected

Q & A

  • Owned REVPAR:  50-100 bps impact from renovations coming back online
  • Govt remains weak; group nights fell by 50% (consistent with Q1); govt <5% of mix
  • 2Q managed property renovations:  $1MM; 1Q managed property renovations:  $2-3MM impact 
  • Group REVPAR - April: +20%, May: flat,  June: -3%
  • Transient REVPAR - April: mid-single digits, May/June: high-single digits
  • New York REVPAR:  up high single digits (mostly rate and driven by transient demand)
    • Additional supply seems to be getting absorbed
  • DC REVPAR:  up slightly, challenging environment, group is weak, 2014 pace down a bit, 
  • Easter shift impact from 1Q to 2Q:  $2-3MM impact, 130bps on Americas portfolio
  • ASPAC
    • Ex China, ASPAC REVPAR grew 5% (mostly by Japan)
    • Northern China the weakest; Southern China relatively positive REVPAR
    • Maintained comp set leadership in Beijing
    • Competitive environment in China
    • Supply issues in China?  will see new supply coming on
  • Europe - gateway cities strong;  
  • Middle East -strongest region
  • Southwest Asia - India REVPAR has been stable
  • Float:  higher than IPO time (44MM class A vs a little under 44MM Class A)
  • Reup Repurchase authorization?  Continue to evaluate.
  • Capex 2013:  Down from 275MM to 250MM due to timing.  Large owned renovations will be mostly completed.  Investment spending guidance is increased to $500MM because of inclusion of $325MM in Playa investment and $85MM acquisition of Driskol Hotel.
  • M&A:  no changes in price expectations
  • Continue to be active in M&A deals
  • Playa is in the market with a $650MM debt deal
    • 2H 2013 contribution will be 'modest'; closing date hasn't been finalized yet
    • Hyatt investment:  $160k/per key 
    • Impact of renovations in the coming years
  • No significant impact from wage changes