HYATT: NOT THE WOW Q LIKE Q1

Hyatt's 2Q results beat the Street's EBITDA estimate due to a $6MM Rabbi trust benefit. While the results were still "good," they lacked the "wow" factor from their 1Q, and RevPAR didn't show the same sequential acceleration as those of other lodging companies.

Owned and Leased Hotel revenues of $483MM were materially lower than we estimated primarily due to weak F&B and other revenues. Owned and leased EBITDA also missed our mark.  Here are our takeaways:

The not so great:

  • ADR was lower than we estimated – given that Hyatt’s ADR was only down 40 bps for full service owned hotels, we expected slightly positive ADR this quarter.
  • Unlike Host and HOT, Hyatt didn’t experience strong growth in their F&B and other revenues.  We estimate that this category was up about 1% YoY
  • Pro-rata share of JV properties was flat YoY at $18MM compared to a 40% YoY lift last quarter

On the positive end:

  • CostPAR was down 5.9%, compared to  down 5.3% in 1Q09 on a much tougher comp.  In 1Q09, CostPAR was down 2.1% vs. being down 6% in 2Q09.
  • Put another way total implied costs increased only 3% YoY despite the large occupancy increase

Management, franchise, incentive & other revenues were $2MM below our estimate, but margins on the business were much better.  Thus, EBITDA contribution was $3MM higher than we expected.  If you take the difference between the $64MM of fee revenue and $59MM of EBITDA, the implied costs of the business were only $5MM.  This compares to $12MM of implied costs last quarter and $40MM of implied costs in 2009.

Other stuff

  • If not for the $6MM Rabbi Trust benefit, Adjusted EBITDA would have missed the street by $2MM. Well, at least now we know that 3Q09 was negatively impacted by $7MM of rabbi trust expenses – so the clean SG&A comp is $59MM.
  • D&A was $5MM below our estimate- not sure why it would have declined $4MM sequentially either
  • Interest expense was $3MM lower than our estimate