Hyatt Hotels' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Hyatt Hotels (H)

Q1 2012 Earnings Call

May 03, 2012 11:30 am ET

Executives

Atish Shah -

Mark S. Hoplamazian - Chief Executive Officer, President and Director

Harmit J. Singh - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Carlo Santarelli - Deutsche Bank AG, Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Hyatt Hotels Corporation Earnings Conference Call. My name is Shequan, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Atish Shah, Head of Investor Relations. Please proceed, sir.

Atish Shah

Thank you very much. Good day, everyone, and thank you for joining us for Hyatt's first quarter 2012 earnings call.

Here with me in Chicago today are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Harmit Singh, Hyatt's Chief Financial Officer.

Before we get started, I would like to remind everyone that we have a different format to our earnings call this quarter. Mark will make a few introductory comments, and then we will read and respond to the questions which we have received by email this morning. We've not screened the questions, but have grouped them by category. We intend to take follow-up questions via live Q&A for the final 15 to 20 minutes of the call.

Before I turn it over to Mark, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.

Forward-looking statements in the earnings release that we issued earlier this morning, along with the comments on this call, are made only as of today, May 3, 2012, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold.

You can find the reconciliation of non-GAAP financial measures referred to in our remarks on our website at hyatt.com under the Press Release section of our Investor Relations link and in this morning's earnings release.

An archive of this call will be available on our website for 90 days, and a telephone replay of this call will be available for one week per the information included in this morning's release.

And with that, I'll turn it over to Mark to get started.

Mark S. Hoplamazian

Thank you, Atish, and good morning to everyone. Thank you for joining us.

We received a number of questions. Thank you for the engagement and the participation. And we look forward to turning to those in just a moment. I want to cover a few topics before we cover the questions.

First, first quarter results. 2012 was really off to a good start. I think when you look at North American group in transient revenue, growing in high single digits and the group booking in the first quarter -- bookings in the quarter -- for the quarter and in the quarter for the year, we're quite encouraged by the level of demand that we see. We had recently renovated hotels that are performing well. We've got great feedback from guests and meeting planners alike. Occupancy lift has been significant year-over-year, and we're looking forward to -- for the rate growth later in this year. And finally, as of the first quarter, the hotels that we acquired from LodgeWorks are doing well. RevPAR progression has been very strong. RevPAR index expansion has been very strong, and we've really seen the positive results of the Hyatt brand and the Gold Passport customer penetration into those hotels.

Second, we announced yesterday the acquisition of a hotel in Mexico City. We're very excited about this. This will be Hyatt Regency in Mexico City. We're very excited about establishing our presence there, especially in this location. And we have been looking at building our brand presence there for some time. The level of travel to Mexico has been quite strong both in leisure, as well as business travel. And overall, the economic trajectory in Latin America is quite positive. We are very happy with the acquisition. The all-in costs, including an approximately $40 million renovation, will bring us an adjusted over $300,000 per key, which we believe is well below replacement cost.

Most importantly, it's really consistent with our strategy of how we intend to use our balance sheet, which is to really secure opportunities and gateway cities. And eventually, these hotel, we will look to recycle it and sell it, but retain a long-term management contract. But we really believe that the repositioning of the hotel, the branding of it and some other work that we're going to do will have a positive impact.

Third, I want to talk briefly about the organizational changes that we announced yesterday. We've covered quite a lot of ground over the last few years and established a great foundation for our future. We built a lot of capabilities and added a lot of resources over the last several years. As we look forward, we recognize that our business mix will shift over time as we open hotels in our pipeline. We also recognize that the velocity of the changes in consumer behavior is increasing. There's a large increase of consumers and business travelers in places like China and India. And that will change the profile of our customer base over time.

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