H 1Q2010 THOUGHTS

H 1Q2010 THOUGHTS

Hyatt reported very strong numbers this morning.  The biggest upside surprise came from the huge owned RevPAR number- which of course carried through to better EBITDA on the owned portfolio.  Below are some of our thoughts on the less obvious stuff in the quarter.

  • Hyatt reported $112MM "Adjusted" EBITDA which included an $8MM settlement related to a vacation ownership property.  We would argue that this should be deducted from "Adjusted" EBITDA as it's not recurring in nature. 
  • Hyatt's Adjusted EBITDA also includes $16MM of "other income" which is comprised of "below the line stuff" which is simply not "core" to their business and in our opinion "noise"
    • "below the line stuff ": Interest income, gains on marketable securities, income from cost method investments (not JV's), FX gains/losses, debt settlement costs, provisions for hotels loans, etc
  • Owned EBITDA of $82MM includes $14MM of JV EBITDA, which implies that clean EBITDA from Owned and Leased hotels was $68MM in 1Q2010 compared to $54MM in the 1Q2009 - an impressive improvement
    • EBITDA margins on owned and leased increased 2.1% on a 9.8% increase in RevPAR that was completely occupancy driven
    • CostPAR decreased 5.3% y-o-y after declining 2.1% y-o-y in 1Q09.   The comparisons become more difficult going forward as 2Q09-4Q09 had 6.0%, 7.8%, and 5.4% declines in CostPAR
    • Looks like F&B and other revenues grew about 6% y-o-y
  • At current rates, currency will continue to positively impact Hyatt's results until 4Q
  • Management & franchise fees were actually a little below our expectations
    • North American Full Service RevPAR was a bit lower then we estimated, while Select Service & International were better 
    • Base fees were as expected, but they were a bit lower as a % of estimated mgmt revenues
    • Incentive fees were $2MM light of our estimate and were flat y-o-y after being up 4.2% last quarter
    • The implied costs associated with the global management and franchise business were flat y-o-y at $12MM. Margins were up to 79%. 
  • SG&A was up a lot more than inflation.  As a reminder, adjusting out the Rabbi Trust numbers, clean SG&A was $246MM last year.