Hyatt Hotels Corporation's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Hyatt Hotels Corporation (H)

Q2 2012 Earnings Call

August 01, 2012 11:30 am ET


Atish Shah - SVP, IR

Mark Hoplamazian - President, CEO & Director


Steven Kent - Goldman Sachs

Joshua Attie - Citi

Shaun Kelley - Bank of America



Good day ladies and gentlemen, and welcome to the second quarter 2012 Hyatt Hotels Corporation earnings conference call. At this time all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Atish Shah, Head of Investor Relations. You may proceed.

Atish Shah

Thank you, Francis. Good day, everyone, and thank you for joining us for Hyatt's second quarter 2012 earnings call.

Here with me in Chicago is Mark Hoplamazian, Hyatt's President and Chief Executive Officer. Mark is going to start by making some brief comments and then we are going to read and respond to questions emailed to us this morning. Finally, we will take live Q&A towards the end of the call.

Before we get started, 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, August 1, 2012, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold.

You can find a reconciliation of non-GAAP financial measures referred to in our remarks on our website at 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 for the information included in this morning's release.

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

Mark Hoplamazian

Thanks, Atish. Good morning and welcome to Hyatt second quarter 2012 conference call. I’d like to talk about three items today. One, some color on quarterly results and our perspective on business around the world. Two, the $200 million stock repurchase authorized by our Board of Directors. And three, an update on our organizational realignment.

Starting with the state of our business around the world, I'll note a few things. First, the markets in which we earn the significant majority of our adjusted EBITDA are doing well. Business is solid and trends are positive. Recent economic reports indicate challenges in consumer spending in many markets around the world and we know that the hospitality industry lags the overall economy by about two quarters.

Having said this, the levels of economic activity for the primary customer segments that we serve measured by employment data, corporate profits and higher end leisure spend continue to be relatively strong.

Second, it's important to note that from market-to-market and even within markets, there is a lot of diversity in our business and the guests that we serve. Many of our hotels have unique positioning through branding, location, design, innovation and service offerings. So, we're confident that our business can withstand market fluctuations.

So with that, let's start with the business here in North America, our largest region by profit measure. We generate about two-thirds of our earnings in terms of overall adjusted EBITDA in North America. During the quarter, RevPAR increased over 8% due primarily to strong transient demand and higher transient rates.

Occupancy levels approached 80%. This is a return to peak levels. Rates continue to be strong, but are still below peak levels in nominal terms. Both corporate and leisure transient demand have led this recovery. This was one of the few quarters since the downturn began that we saw transient rate growth outpace room night growth.

If current trends continue, we expect there to be more pricing power ahead which should help drive margin expansion overtime. On the group side, both demand and rate increased. In the quarter, for the quarter, bookings were up by one-third versus last year. In the quarter, for the year bookings were up over 15% with almost half the increase coming from higher rates.

Overall pace for the remainder of 2012 was up 5%. There were two drivers of strong overall results in North America. First, hotels coming off renovations such as the Grand Hyatt New York where we are seeing solid market share and RevPAR improvements. And second, recently acquired hotels such as the three extended [safe] properties in California and the group of hotels we acquired from LodgeWorks.

These properties are performing ahead of our expectations as the Hyatt flagging has led to nearly double-digit market share gains and strong RevPAR growth. We're currently on track to exceed projected returns overtime as these properties continue to ramp up.

From a market standpoint, Hawaii performed at the top end with RevPAR up over 20% and Washington DC performed at the low end, reporting a slight RevPAR decline partially due to softness in the market and partially due to ongoing renovations of our managed hotels in the market.

Let me now move on to our business outside of North America, which represents about a third of our overall adjusted EBITDA. We own or lease 11 hotels and manage or franchise a 100 hotels including a number of hotels in which we have a JV interest.

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