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MarketScreener Homepage  >  Equities  >  Nyse  >  Hyatt Hotels Corporation    H

HYATT HOTELS CORPORATION

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HYATT HOTELS : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

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02/20/2020 | 04:13pm EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with Part II, Item 6, "Selected
Financial Data" and Part IV, Item 15, "Exhibits and Financial Statement
Schedule-Consolidated Financial Statements." For our discussion and analysis of
our financial condition and results of operations for the year ended December
31, 2018 compared to the year ended December 31, 2017, see Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our   2018 Form 10-K  . In addition to historical data, this
discussion contains forward-looking statements about our business, operations,
and financial performance based on current expectations that involve risks,
uncertainties, and assumptions. Our actual results may differ materially from
those discussed in the forward-looking statements as a result of various
factors, including but not limited to those discussed in "Disclosure Regarding
Forward-Looking Statements" and Part I, Item 1A, "Risk Factors" included
elsewhere in this annual report.
Overview
At December 31, 2019, our worldwide hotel portfolio consisted of 913 full and
select service hotels (223,111 rooms), including:
•      411 managed properties (126,065 rooms), all of which we operate under

management and hotel services agreements with third-party property owners;

• 441 franchised properties (73,840 rooms), all of which are owned by third

       parties that have franchise agreements with us and are operated by third
       parties;

• 28 owned properties (13,123 rooms) (including 1 consolidated hospitality

venture), 1 finance leased property (171 rooms), and 6 operating leased

       properties (2,086 rooms), all of which we manage; and


•      24 managed properties and 2 franchised properties owned or leased by
       unconsolidated hospitality ventures (7,826 rooms).


Our worldwide property portfolio also included:
• 3 wellness resorts (410 rooms), all of which we own and operate;


• 8 all-inclusive resorts (3,153 rooms), all of which are owned by a third

party in which we hold common shares and which operates the resorts under

franchise agreements with us;

• 16 vacation ownership properties under the Hyatt Residence Club brand and

       operated by third parties;


•      36 residential properties, which consist of branded residences and

serviced apartments. We manage all of the serviced apartments and those

branded residential units that participate in a rental program with an

adjacent Hyatt-branded hotel; and

• 38 condominium ownership properties for which we provide services for the

rental programs or homeowners associations (including 1 unconsolidated

hospitality venture).



Our worldwide property portfolio also included branded spas and fitness studios,
comprised of managed and leased locations. Additionally, through strategic
relationships, we provide certain reservation and/or loyalty program services to
hotels that are unaffiliated with our hotel portfolio and which operate under
other tradenames or marks owned by such hotel or licensed by third parties.
We believe our business model allows us to pursue more diversified revenue and
income streams balancing both the advantages and risks associated with these
lines of business. Our expertise and experience in each of these areas gives us
the flexibility to evaluate growth opportunities across these lines of business.
Growth in the number of management and franchise agreements and earnings
therefrom typically results in higher overall returns on invested capital
because the capital investment under a typical management or franchise agreement
is not significant. The capital required to build and maintain hotels we manage
or franchise for third-party owners and franchisees is typically provided by the
owner of the respective property with minimal capital required by us as the
manager or franchisor. In certain instances, Hyatt has provided funding to
owners for the acquisition and development of hotels that Hyatt will manage or
franchise in the form of cash, debt repayment or performance guarantees,
preferred equity, or mezzanine debt. During periods of increasing demand, we do
not share fully in the incremental profits of hotel operations for hotels we
manage for third-party owners as our fee arrangements generally include a base
amount that is, typically, a percentage of revenue from the subject hotel and an
incentive fee that is, typically, a percentage of hotel

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profits after satisfying certain financial return thresholds to be earned by the
owner, depending on the structure and terms of the management agreement. We do
not share in the benefits of increases in profits from franchised properties
because franchisees pay us an initial application fee and ongoing royalty fees
that are calculated as a percentage of gross room revenues, and also at times as
a percentage of food and beverage revenues, with no fees based on profits.
Disputes or disruptions may arise with third-party owners and franchisees of
hotels we manage, franchise, or license to and these disputes can result in
termination of the relevant agreement.
With respect to property ownership, we believe ownership of selected hotels in
key markets enhances our ability to control our brand presence in these markets.
Ownership of hotels allows us to capture the full benefit of increases in
operating profits during periods of increasing demand and room rates. The cost
structure of a typical hotel is more fixed than variable, so as demand and room
rates increase over time, the rate of growth in operating profits typically is
higher than the rate of growth of revenues. Hotel ownership is, however, more
capital intensive than managing or franchising hotels for third-party owners, as
we are responsible for the costs and all capital expenditures for our owned
hotels. The profits realized from our owned and leased hotels are generally more
significantly affected by economic downturns and declines in revenues than the
management and franchise fees earned from our managed and franchised properties.
This is because we absorb the full impact of declining profits for our owned and
leased hotels whereas our management and franchise fees do not have the same
level of downside exposure to declining hotel profitability. See also
"-Principal Factors Affecting Our Results of Operations-Expenses-Factors
Affecting Our Costs and Expenses-Fixed nature of expenses." and Part I, Item 1A,
"Risk Factors-Risks Related to Our Business-We are exposed to the risks
resulting from significant investments in owned and leased real estate, which
could increase our costs, reduce our profits, limit our ability to respond to
market conditions, or restrict our growth strategy."
For the years ended December 31, 2019 and December 31, 2018, 82.5% and 80.5% of
our revenues were derived from operations in the United States, respectively. At
December 31, 2019 and December 31, 2018, 80.6% and 81.1% of our long-lived
assets were located in the United States, respectively.
We report our consolidated operations in U.S. dollars. Amounts are reported in
millions, unless otherwise noted. Percentages may not recompute due to rounding,
and percentage changes that are not meaningful are presented as "NM". Constant
currency disclosures throughout Management's Discussion and Analysis of
Financial Condition and Results of Operations are non-GAAP measures. See "-Key
Business Metrics Evaluated by Management-Constant Dollar Currency" below for
further discussion of constant currency disclosures. We manage our business
within four reportable segments, see Part IV, Item 15, "Exhibits and Financial
Statement Schedule-Note 19 to our Consolidated Financial Statements."
Key Business Metrics Evaluated by Management
Revenues
We primarily derive our revenues from owned and leased hotel operations,
management of hotels, and licensing of our portfolio of brands to franchisees.
Management uses revenues to assess the overall performance of our business and
analyze trends such as consumer demand, brand preference, and competition. For a
detailed discussion of the factors that affect our revenues, see "-Principal
Factors Affecting Our Results of Operations-Revenues."
Net Income Attributable to Hyatt Hotels Corporation
Net income attributable to Hyatt Hotels Corporation represents the total
earnings or profits generated by our business. Management uses net income to
analyze the performance of our business on a consolidated basis.
Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization
("Adjusted EBITDA") and EBITDA
We use the terms Adjusted EBITDA and EBITDA throughout this annual report.
Adjusted EBITDA and EBITDA, as we define them, are non-GAAP measures. We define
consolidated Adjusted EBITDA as net income attributable to Hyatt Hotels
Corporation plus our pro rata share of unconsolidated owned and leased
hospitality ventures Adjusted EBITDA based on our ownership percentage of each
owned and leased venture, adjusted to exclude the following items:
• interest expense;


• provision for income taxes;

• depreciation and amortization;

• amortization of management and franchise agreement assets constituting

payments to customers ("Contra revenue");



•      revenues for the reimbursement of costs incurred on behalf of managed and
       franchised properties;



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• costs incurred on behalf of managed and franchised properties;

• equity earnings (losses) from unconsolidated hospitality ventures;

• stock-based compensation expense;

• gains (losses) on sales of real estate;


• asset impairments; and


• other income (loss), net


We calculate consolidated Adjusted EBITDA by adding the Adjusted EBITDA of each
of our reportable segments and eliminations to corporate and other Adjusted
EBITDA. See "-Segment Results."
Our board of directors and executive management team focus on Adjusted EBITDA as
a key performance and compensation measure both on a segment and on a
consolidated basis. Adjusted EBITDA assists us in comparing our performance over
various reporting periods on a consistent basis because it removes from our
operating results the impact of items that do not reflect our core operations
both on a segment and on a consolidated basis. Our President and Chief Executive
Officer, who is our chief operating decision maker ("CODM"), also evaluates the
performance of each of our reportable segments and determines how to allocate
resources to those segments, in significant part, by assessing the Adjusted
EBITDA of each segment. In addition, the compensation committee of our board of
directors determines the annual variable compensation for certain members of our
management based in part on consolidated Adjusted EBITDA, segment Adjusted
EBITDA, or some combination of both.
We believe Adjusted EBITDA is useful to investors because it provides investors
the same information that we use internally for purposes of assessing our
operating performance and making compensation decisions and facilitates our
comparison of results before these items with results from other companies
within our industry.
Adjusted EBITDA excludes certain items that can vary widely across different
industries and among companies within the same industry. For instance, interest
expense and provision for income taxes are dependent upon company specifics,
including capital structure, credit ratings, tax policies, and jurisdictions in
which they operate, and therefore, can vary significantly across companies.
Depreciation and amortization, as well as Contra revenue, are dependent on
company policies including how the assets are utilized as well as the lives
assigned to the assets. We exclude revenues for the reimbursement of costs and
costs incurred on behalf of managed and franchised properties which relate to
the reimbursement of payroll costs and for system-wide services and programs
that we operate for the benefit of our hotel owners as contractually we do not
provide services or operate the related programs to generate a profit over the
terms of the respective contracts. Over the long term, these programs and
services are not designed to impact our economics, either positively or
negatively. Therefore, we exclude the net impact when evaluating
period-over-period changes in our operating results. We exclude stock-based
compensation expense to remove the variability amongst companies resulting from
different compensation plans companies have adopted. Finally, we exclude other
items that are not core to our operations, such as asset impairments and
unrealized and realized gains and losses on marketable securities.
Adjusted EBITDA and EBITDA are not substitutes for net income attributable to
Hyatt Hotels Corporation, net income, or any other measure prescribed by GAAP.
There are limitations to using non-GAAP measures such as Adjusted EBITDA and
EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our
operating performance more consistent because it removes items that do not
reflect our core operations, other companies in our industry may define Adjusted
EBITDA differently than we do. As a result, it may be difficult to use Adjusted
EBITDA or similarly named non-GAAP measures that other companies may use to
compare the performance of those companies to our performance. Because of these
limitations, Adjusted EBITDA should not be considered as a measure of the income
generated by our business. Our management compensates for these limitations by
reference to our GAAP results and using Adjusted EBITDA supplementally. See our
consolidated statements of income in our consolidated financial statements
included elsewhere in this annual report.
See below for a reconciliation of net income attributable to Hyatt Hotels
Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted
EBITDA.
Adjusted Selling, General, and Administrative Expenses
Adjusted selling, general, and administrative expenses, as we define it, is a
non-GAAP measure. Adjusted selling, general, and administrative expenses exclude
the impact of deferred compensation plans funded through rabbi trusts and
stock-based compensation expense. Adjusted selling, general, and administrative
expenses assist us in comparing our performance over various reporting periods
on a consistent basis because it removes from our operating results the impact
of items that do

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not reflect our core operations, both on a segment and consolidated basis. See
"-Results of Operations" for a reconciliation of selling, general, and
administrative expenses to Adjusted selling, general, and administrative
expenses.
Comparable Hotels
"Comparable system-wide hotels" represents all properties we manage or franchise
(including owned and leased properties) and that are operated for the entirety
of the periods being compared and that have not sustained substantial damage,
business interruption, or undergone large scale renovations during the periods
being compared or for which comparable results are not available. We may use
variations of comparable system-wide hotels to specifically refer to comparable
system-wide Americas full service or select service hotels for those properties
that we manage or franchise within the Americas management and franchising
segment, comparable system-wide ASPAC full service or select service hotels for
those properties we manage or franchise within the ASPAC management and
franchising segment, or comparable system-wide EAME/SW Asia full service or
select service hotels for those properties that we manage or franchise within
the EAME/SW Asia management and franchising segment. "Comparable owned and
leased hotels" represents all properties we own or lease and that are operated
and consolidated for the entirety of the periods being compared and have not
sustained substantial damage, business interruption, or undergone large scale
renovations during the periods being compared or for which comparable results
are not available. Comparable system-wide hotels and comparable owned and leased
hotels are commonly used as a basis of measurement in our industry.
"Non-comparable system-wide hotels" or "non-comparable owned and leased hotels"
represent all hotels that do not meet the respective definition of "comparable"
as defined above.
Constant Dollar Currency
We report the results of our operations both on an as-reported basis, as well as
on a constant dollar basis. Constant dollar currency, which is a non-GAAP
measure, excludes the effects of movements in foreign currency exchange rates
between comparative periods. We believe constant dollar analysis provides
valuable information regarding our results as it removes currency fluctuations
from our operating results. We calculate constant dollar currency by restating
prior-period local currency financial results at the current period's exchange
rates. These restated amounts are then compared to our current period reported
amounts to provide operationally driven variances in our results.
Revenue per Available Room ("RevPAR")
RevPAR is the product of the ADR and the average daily occupancy percentage.
RevPAR does not include non-room revenues, which consist of ancillary revenues
generated by a hotel property, such as food and beverage, parking, and other
guest service revenues. Our management uses RevPAR to identify trend information
with respect to room revenues from comparable properties and to evaluate hotel
performance on a regional and segment basis. RevPAR is a commonly used
performance measure in our industry.
RevPAR changes that are driven predominantly by changes in occupancy have
different implications for overall revenue levels and incremental profitability
than do changes that are driven predominantly by changes in average room rates.
For example, increases in occupancy at a hotel would lead to increases in room
revenues and additional variable operating costs (including housekeeping
services, utilities, and room amenity costs), and could also result in increased
ancillary revenues (including food and beverage). In contrast, changes in
average room rates typically have a greater impact on margins and profitability
as average room rate changes result in minimal impacts to variable operating
costs.
Average Daily Rate
ADR represents hotel room revenues, divided by the total number of rooms sold in
a given period. ADR measures average room price attained by a hotel, and ADR
trends provide useful information concerning the pricing environment and the
nature of the customer base of a hotel or group of hotels. ADR is a commonly
used performance measure in our industry, and we use ADR to assess the pricing
levels that we are able to generate by customer group, as changes in rates have
a different effect on overall revenues and incremental profitability than
changes in occupancy, as described above.
Occupancy
Occupancy represents the total number of rooms sold divided by the total number
of rooms available at a hotel or group of hotels. Occupancy measures the
utilization of a hotel's available capacity. We use occupancy to gauge demand at
a specific hotel or group of hotels in a given period. Occupancy levels also
help us determine achievable ADR levels as demand for hotel rooms increases or
decreases.

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Principal Factors Affecting Our Results of Operations
Revenues
Principal Components
We primarily derive our revenues from the following sources:
Revenues from hotel operations.  Represents revenues derived from hotel
operations, including room rentals and food and beverage sales and other
ancillary revenues at our owned and leased properties. Revenues from the
majority of our hotel operations depend heavily on demand from group and
transient travelers, as discussed below. Revenues from our owned and leased
hotels are primarily derived from hotel operations.
Revenues from room rentals and ancillary revenues are primarily derived from
three categories of customers: transient, group, and contract. Transient guests
are individual travelers who are traveling for business or leisure. Our group
guests are traveling for group events that reserve a minimum of 10 rooms for
meetings or social functions sponsored by associations, corporate, social,
military, educational, religious, or other organizations. Group business usually
includes a block of room accommodations as well as other ancillary services,
such as catering and banquet services. Our contract guests are traveling under a
contract negotiated for a block of rooms for more than 30 days in duration at
agreed-upon rates. Airline crews are typical generators of contract demand for
our hotels.
Management, franchise, and other fees.  Represents revenues derived from fees
earned from hotels and residential ownership units managed worldwide (usually
under long-term management agreements), franchise fees received in connection
with the franchising of our brands (usually under long-term franchise
agreements), termination fees, and license fees received in connection with the
licensing of the Hyatt brand names through our co-branded credit card program
and vacation ownership properties. For a detailed discussion of our management
and franchise fees, see Part I, Item 1, "Business-Management Agreements-Hotel
Management Agreements Fees" and Part I, Item 1, "Business-Franchise
Agreements-Fees."
Other revenues.  Represents revenues primarily related to our residential
management operations for our condominium ownership units, co-branded credit
cards, and Exhale.
Revenues for the reimbursement of costs incurred on behalf of managed and
franchised properties.  Represents revenues for the reimbursement of costs
incurred on behalf of the owners of properties. These reimbursed costs relate
primarily to payroll at managed properties where we are the employer, as well as
system-wide services and the loyalty program operated on behalf of owners. We
record these revenues in "Revenues for the reimbursement of costs incurred on
behalf of managed and franchised properties" and the corresponding costs in
"Costs incurred on behalf of managed and franchised properties" in our
consolidated statements of income.
Intersegment eliminations.  Represents management fee revenues and expenses
related to our owned and leased hotels and promotional award redemption revenues
and expenses related to our co-branded credit cards at our owned and leased
hotels, which are eliminated in consolidation.
Factors Affecting Our Revenues
For other factors affecting our revenues, see Part I, Item 1A, "Risk
Factors-Risks Related to Our Business."
Consumer demand and global economic conditions.  Consumer demand for our
products and services is closely linked to the performance of the general
economy and sensitive to business and personal discretionary spending levels.
Declines in consumer demand due to adverse general economic conditions, risks
affecting or reducing travel patterns, lower consumer confidence, high
unemployment, or adverse political conditions can lower the revenues and
profitability of our owned and leased properties and the amount of management
and franchising fee revenues we are able to generate from our managed and
franchised properties. Also, declines in hotel profitability during an economic
downturn directly impact the incentive portion of our management fees, since it
is based on hotel profit measures. As a result, changes in consumer demand and
general business cycles can subject, and have subjected, our revenues to
significant volatility. See Part I, Item 1A, "Risk Factors-Risks Related to the
Hospitality Industry."

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RevPAR Statistics
                                                                            RevPAR
                                                                    Year Ended December 31,
                                                 Number of
                                                 comparable                         vs. 2018
(Comparable locations)                           hotels (1)         2019        (in constant $)
System-wide hotels                                     703     $        136            0.7  %
Owned and leased hotels                                 31              183            1.0  %
Americas full service hotels                           165              159            1.7  %
Americas select service hotels                         355              105           (2.0 )%
ASPAC full service hotels                               80              149           (0.8 )%
ASPAC select service hotels                             14               58            8.4  %
EAME/SW Asia full service hotels                        74              129            3.9  %
EAME/SW Asia select service hotels                      15               65            3.6  %


(1) The number of comparable hotels presented above includes owned and leased
hotels.
System-wide RevPAR increased 0.7% in constant currency during 2019 compared to
2018 driven by increases in transient demand at full service properties in the
Americas and EAME/SW Asia, partially offset by weakened performance at Americas
select service properties and ASPAC full service properties. See "- Segment
Results" for discussion of RevPAR by segment.
Competition.  The hospitality industry is highly competitive. While demand has
continued to grow over the last several years, we have also seen an increase in
supply, particularly in certain key markets. This increased supply can put
significant pressure on ADR at our properties as well as those of our
competitors. Despite this increased supply, our system-wide RevPAR has increased
each year since 2009. Increasingly, we also face competition from new channels
of distribution in the travel industry, including large companies that offer
travel services as part of their business model and peer-to-peer inventory
sources, as well as industry consolidation. We believe our brand strength and
ability to manage our operations in an efficient manner will help us to continue
competing successfully within the hospitality industry.
Agreements with third-party owners and franchisees and relationships with
developers.  We depend on our long-term management and franchise agreements with
third-party owners and franchisees for a significant portion of our management
and franchising fee revenues. The viability of our management and franchising
business depends on our ability to maintain good relationships with third-party
property owners and franchisees. Our relationships with these third parties also
generate new relationships with developers and opportunities for property
development that can support our growth. We believe we have good relationships
with our third-party owners, franchisees, and developers in all of our segments
and are committed to the continued growth and development of these
relationships. These relationships exist with a diverse group of owners,
franchisees, and developers and are not heavily concentrated with any particular
third party.
Access to capital.  The hospitality industry is a capital-intensive business
that requires significant amounts of capital expenditures to develop, maintain,
and renovate properties. Third-party owners and franchisees are required to fund
these capital expenditures for the properties they own in accordance with the
terms of the applicable management or franchise agreement. Access to the capital
that we or our third-party owners, franchisees, or development partners need to
finance the construction of new properties or to maintain and renovate existing
properties is critical to the continued growth of our business and our revenues.
The availability of capital or the conditions under which we or our third-party
owners, franchisees, or development partners can obtain capital can have a
significant impact on the overall level, cost, and pace of future development
and therefore the ability to grow our revenues.
Expenses
Principal Components
We primarily incur the following expenses:
Owned and leased hotels expenses.  Reflects the expenses of our consolidated
owned and leased hotels. Expenses to operate our hotels include rooms expenses,
food and beverage costs, other support costs, and property expenses. Rooms
expenses generally includes compensation costs for housekeeping, laundry, and
front desk staff and supply costs for guest room amenities and laundry. Food and
beverage costs include costs for wait and kitchen staff and food and beverage
products. Other support expenses consist of costs associated with property-level
management (including deferred compensation plans for certain employees that are
funded through contributions to rabbi trusts), utilities, sales and marketing,
hotel spa operations,

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parking and other guest recreation, entertainment, and services. Property
expenses include property taxes, repairs and maintenance, rent, and insurance.
Depreciation and amortization expenses.  These are non-cash expenses that
primarily consist of depreciation of fixed assets such as buildings, furniture,
fixtures, and equipment at our consolidated owned and leased hotels.
Amortization expense primarily consists of amortization of management and
franchise agreement intangibles.
Other direct costs.  Represents expenses primarily related to our residential
management operations for our condominium ownership units, co-branded credit
cards, and Exhale.
Selling, general, and administrative expenses.  Consists primarily of
compensation expense, including deferred compensation plans for certain
employees that are funded through contributions to rabbi trusts, for our
corporate staff and personnel supporting our business segments (including
regional offices that support our management and franchising segments),
professional fees (including consulting, audit, and legal fees), travel and
entertainment expenses, sales and marketing expenses, bad debt expenses, and
office administrative and related expenses, including rent expenses.
Costs incurred on behalf of managed and franchised properties.  Represents costs
incurred on behalf of the owners of properties. These reimbursed costs relate
primarily to payroll at managed properties where we are the employer, as well as
system-wide services and the loyalty program operated on behalf of owners.
Factors Affecting Our Costs and Expenses
For other factors affecting our costs and expenses, see Part I, Item 1A, "Risk
Factors-Risks Related to Our Business."
Fixed nature of expenses.  Expenses associated with managing, franchising,
licensing, owning, leasing, or providing services to hotels, branded spas and
fitness studios, and residential, vacation, and condominium ownership units, are
relatively fixed. These costs include personnel costs, interest, rent, property
taxes, insurance, and utilities, all of which may increase at a greater rate
than our revenues and/or may not be able to be reduced at the same rate as
declining revenues. If we are unable to decrease these costs significantly or
rapidly if demand for our hotels and other properties decreases, the decline in
our revenues can have a particularly adverse effect on our net cash flows and
profits. This effect can be especially pronounced during periods of economic
contraction or slow economic growth. Economic downturns generally affect the
results derived from our owned and leased hotels more significantly than the
results of our management and franchising segments due to the high fixed costs
associated with operating an owned or leased property. The effectiveness of any
cost-cutting efforts is limited by the fixed-cost nature of our business. As a
result, we may not always be able to offset reductions in revenue through cost
cutting. Employees at some of our owned and leased hotels are parties to
collective bargaining agreements that may also limit our ability to make timely
staffing or labor changes in response to declining revenues. In addition,
efforts to reduce costs, or to defer or cancel capital improvements, could
adversely affect the economic value of our properties and brands. We intend to
manage our cost structure at levels appropriate for the degree of demand and
revenue generated at our hotels.
Changes in depreciation and amortization expenses.  Changes in depreciation and
amortization expenses may be driven by renovations of existing properties,
acquisition or development of new properties and/or businesses, or the
disposition of existing properties through sale or closure. If we execute such
transactions, we may add depreciable and/or amortizable assets, which would
result in an increase in depreciation and/or amortization expenses.
Other Items
Asset impairments
We hold significant amounts of goodwill, intangible assets, property and
equipment, and investments. We evaluate these assets on a quarterly basis for
impairment as further discussed in "-Critical Accounting Policies and
Estimates." These evaluations have, in the past, resulted in impairment charges
for certain of these assets based on the specific facts and circumstances
surrounding those assets. We may be required to take additional impairment
charges to reflect further declines in our asset and/or investment values.
Acquisitions, divestitures, and significant renovations
We routinely acquire, divest, or undertake large scale renovations of hotel
properties. The results of operations derived from these properties do not,
therefore, meet the definition of "comparable hotels" as defined in "-Key
Business Metrics Evaluated by Management." The results of operations from these
properties, however, may have a material effect on our results from period to
period and are, therefore, addressed separately in our discussion on results of
operations when material.

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In 2019, we entered into the following key transactions: • sold the shares of the entity which owns Grand Hyatt Seoul and adjacent

       land for approximately $481 million and entered into a long-term
       management agreement for the property upon sale;

• sold Hyatt Regency Atlanta for approximately $355 million and entered into

a long-term management agreement for the property upon sale; and

• sold the property adjacent to Grand Hyatt San Francisco and assigned the

related Apple store lease for approximately $120 million.

In 2018, we entered into the following key transactions: • sold Grand Hyatt San Francisco, Andaz Maui at Wailea Resort together with

       adjacent land, and Hyatt Regency Coconut Point Resort and Spa as a
       portfolio for approximately $1 billion and entered into long-term
       management agreements for the properties upon sale;

• sold the shares of the entity which owns Hyatt Regency Mexico City, an

investment in an unconsolidated hospitality venture, and adjacent land, a

portion of which will be developed as Park Hyatt Mexico City ("HRMC

transaction") for approximately $405 million and entered into long-term

management agreements for the properties upon sale;

• acquired Two Roads, including long-term management and license agreements,

for a purchase price of $405 million plus potential additional

consideration of up to $96 million if the sellers complete certain actions

with respect to certain of the acquired management agreements and up to $8

million in the event of the execution of certain potential new management

       agreements related to the development of certain potential new deals
       previously identified and generated by the sellers or affiliates of the
       sellers;

• acquired Hyatt Regency Phoenix for a purchase price of approximately $140

million; and

• acquired Hyatt Regency Indian Wells Resort & Spa for a purchase price of

approximately $120 million.



See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 7 to our
Consolidated Financial Statements" for further discussion on these key
transactions.
Effect of foreign currency exchange rate fluctuations
A significant portion of our operations are conducted in functional currencies
other than our reporting currency which is the U.S. dollar. As a result, we are
required to translate those results from the functional currency into U.S.
dollars at market based average exchange rates during the period reported. When
comparing our results of operations between periods, there may be material
portions of the changes in our revenues or expenses that are derived from
fluctuations in exchange rates experienced between those periods. See Part I,
Item 1A, "Risk Factors-Risks Related to the Hospitality Industry-Because we
derive a portion of our revenues from operations outside the United States, the
risks of doing business internationally, or in a particular country or region,
could lower our revenues, increase our costs, reduce our profits, or disrupt our
business."

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Results of Operations
Years Ended December 31, 2019 and December 31, 2018
Discussion on Consolidated Results
For additional information regarding our consolidated results, please also refer
to our consolidated statements of income included in Part IV, Item 15, "Exhibits
and Financial Statement Schedule-Consolidated Financial Statements." The impact
from our investments in marketable securities held to fund our deferred
compensation plans through rabbi trusts was recorded on the various financial
statement line items discussed below and had no impact on net income. See "Net
gains (losses) and interest income from marketable securities held to fund rabbi
trusts" for the allocation of the impact to the various financial statement line
items.
Owned and leased hotels revenues.
                                                                     Year 

Ended December 31,

                                                  2019        2018         Better / (Worse)       Currency Impact
Comparable owned and leased hotels revenues     $ 1,563$ 1,559     $   

4 0.3 % $ (11 ) Non-comparable owned and leased hotels revenues 285 359 (74 ) (20.8 )%

              (6 )

Total owned and leased hotels revenues $ 1,848$ 1,918$ (70 ) (3.7 )% $ (17 )



Owned and leased hotels revenues decreased for the year ended December 31, 2019,
compared to the year ended December 31, 2018, driven primarily by non-comparable
owned and leased hotels revenues related to transaction activity. See "-Segment
Results" for further discussion of owned and leased hotels revenues, including
further information on acquisition and disposition activity.
Management, franchise, and other fees revenues.
                                                  Year Ended December 31,
                                                                  Better / (Worse)
                                          2019        2018         2019 vs. 2018
Base management fees                  $   260$ 225$    35           15.7 %
Incentive management fees                 151          148          3            1.7 %
Franchise fees                            141          127         14           11.3 %
Management and franchise fees             552          500         52           10.5 %
Other fees revenues                        56           52          4            9.0 %
Management, franchise, and other fees $   608$ 552$    56           10.3 %


                                                   Year Ended December 31,
                                                                Better / (Worse)
                                           2019      2018         2019 vs. 2018

Management, franchise, and other fees $ 608$ 552$ 56 10.3 % Contra revenue

                              (22 )     (20 )       (2 )     

(11.5 )% Net management, franchise, and other fees $ 586$ 532$ 54 10.3 %



The increase in management, franchise, and other fees, which included a $7
million net unfavorable currency impact for the year ended December 31, 2019,
compared to the same period in 2018, was driven by increases in base fees, most
notably in the Americas management and franchising segment primarily due to the
acquisition of Two Roads, as well as increases in franchise fees driven by the
Americas management and franchising segment. See "-Segment Results" for further
discussion.
Other revenues.  Other revenues increased $77 million during the year ended
December 31, 2019, compared to the year ended December 31, 2018, primarily due
to revenues from the residential management operations acquired as part of Two
Roads.

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Revenues for the reimbursement of costs incurred on behalf of managed and
franchised properties.
                                                         Year Ended December 31,
                                                                               Change
                                             2019          2018             2019 vs. 2018
Revenues for the reimbursement of costs
incurred on behalf of managed and
franchised properties                     $   2,461$   1,956$     505         25.9  %
Less: rabbi trust impact                        (26 )           4           (30 )     (729.8 )%
Revenues for the reimbursement of costs
incurred on behalf of managed and
franchised properties excluding rabbi
trust impact                              $   2,435$   1,960     $     

475 24.2 %



Excluding the impact of rabbi trust, revenues for the reimbursement of costs
incurred on behalf of managed and franchised properties increased during the
year ended December 31, 2019, compared to the year ended December 31, 2018,
driven by higher reimbursements for payroll and related costs due to growth of
our third-party managed and franchised portfolio, including the acquisition of
Two Roads.
Owned and leased hotels expenses.
                                                          Year Ended 

December 31,

                                                  2019       2018        Better / (Worse)
Comparable owned and leased hotels expenses     $ 1,185$ 1,183$   (2 )      (0.2 )%
Non-comparable owned and leased hotels expenses     230        265         35        13.1  %
Rabbi trust impact                                    9         (2 )      

(11 ) (741.7 )% Total owned and leased hotels expenses $ 1,424$ 1,446$ 22 1.5 %



The decrease in owned and leased hotels expenses, which included a $14 million
net favorable currency impact, during the year ended December 31, 2019, compared
to the year ended December 31, 2018, was driven primarily by non-comparable
owned and leased hotel dispositions, partially offset by acquisitions. See "-
Segment Results" for a discussion of the non-comparable owned and leased hotels
transaction activity in 2019 and 2018. Additionally, the impact recognized with
respect to our employee benefit programs funded through rabbi trusts was driven
by the performance of the underlying invested assets during the year ended
December 31, 2019 compared to the year ended December 31, 2018.
Other direct costs.  Other direct costs increased $85 million during the year
ended December 31, 2019, compared to the year ended December 31, 2018, primarily
due to expenses incurred from the residential management operations acquired as
part of Two Roads and the growth of our co-branded credit card program.
Selling, general, and administrative expenses.
                                                              Year Ended December 31,
                                                                                 Change
                                                        2019      2018       2019 vs. 2018
Selling, general, and administrative expenses          $ 417$ 320$ 97       30.2  %
Less: rabbi trust impact                                 (53 )       9      (62 )   (693.6 )%
Less: stock-based compensation expense                   (35 )     (29 )    

(6 ) (19.9 )% Adjusted selling, general, and administrative expenses $ 329$ 300$ 29 9.6 %



See "-Key Business Metrics Evaluated by Management" for further discussion of
Adjusted selling, general, and administrative expenses.
During the year ended December 31, 2019, we incurred $37 million of expenses
from the acquisition of Two Roads, inclusive of $22 million of
integration-related costs.

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Costs incurred on behalf of managed and franchised properties.

                                                         Year Ended December 31,
                                                                               Change
                                             2019          2018             2019 vs. 2018
Costs incurred on behalf of managed and
franchised properties                     $   2,520$   1,981$     539         27.2  %
Less: rabbi trust impact                        (26 )           4           (30 )     (729.8 )%
Costs incurred on behalf of managed and
franchised properties excluding rabbi
trust impact                              $   2,494$   1,985     $     

509 25.6 %



Excluding the impact of rabbi trust, costs incurred on behalf of managed and
franchised properties increased during the year ended December 31, 2019,
compared to the year ended December 31, 2018, driven by higher reimbursements
for payroll and related costs due to growth of our third-party managed and
franchised portfolio, including the acquisition of Two Roads.
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts.
                                                             Year Ended December 31,
                                                                                Better / (Worse)
                                               2019           2018               2019 vs. 2018
Rabbi trust impact allocated to selling,
general, and administrative expenses      $       53$      (9 )$       62             693.6 %
Rabbi trust impact allocated to owned and
leased hotels expense                              9              (2 )           11             741.7 %
Net gains (losses) and interest income
from marketable securities held to fund
rabbi trusts                              $       62$     (11 )$       73             700.2 %


Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts increased during the year ended December 31, 2019, compared to the
year ended December 31, 2018, driven by the performance of the underlying
invested assets.
Equity earnings (losses) from unconsolidated hospitality ventures.
                                                          Year Ended December 31,
                                                                            Better / (Worse)
                                             2019           2018             2019 vs. 2018
Equity earnings (losses) from
unconsolidated hospitality ventures       $     (10 )$        8     $    

(18 ) (215.1 )%

The decrease in equity earnings (losses) from unconsolidated hospitality ventures during the year ended December 31, 2019, compared to the year ended December 31, 2018, was driven by the following activity:

                                                            Year Ended December 31,
                                                                                   Better / (Worse)
                                                 2019               2018            2019 vs. 2018
Impairment charges related to investments
in unconsolidated hospitality ventures
(Note 4)                                   $          (7 )     $         (16 )   $             9
Net gains from sales activity related to
unconsolidated hospitality ventures (Note
4)                                                     8                  40                 (32 )
Foreign currency impact (1)                           (3 )               (13 )                10
Other                                                 (8 )                (3 )                (5 )

Equity earnings (losses) from unconsolidated hospitality ventures $ (10 ) $ 8 $

           (18 )


(1) Foreign currency impact is driven by one of our unconsolidated hospitality
ventures which holds loans denominated in a currency other than its functional
currency.
Gains on sales of real estate.  During the year ended December 31, 2019, we
recognized a $349 million pre-tax gain related to the sale of our shares of the
entity which owns Grand Hyatt Seoul and adjacent land, a $272 million pre-tax
gain related to the sale of Hyatt Regency Atlanta, and a $101 million pre-tax
gain related the sale of the property adjacent to Grand Hyatt San Francisco and
assignment of the Apple store lease.

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During the year ended December 31, 2018, we recognized a $531 million pre-tax
gain related to the sales of Grand Hyatt San Francisco, Andaz Maui at Wailea
Resort, and Hyatt Regency Coconut Point Resort and Spa and a $238 million
pre-tax gain associated with the HRMC transaction.
See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 7 to the
Consolidated Financial Statements" for additional information.
Asset impairments.  During the year ended December 31, 2019, we recognized $18
million of asset impairment charges related to Two Roads intangible assets
primarily as a result of contract terminations. During the year ended December
31, 2018, we recognized $25 million of asset impairment charges related to
goodwill primarily in relation to the HRMC transaction. See Part IV, Item 15,
"Exhibits and Financial Statement Schedule-Note 9 to the Consolidated Financial
Statements" for additional information.
Other income (loss), net.  Other income (loss), net increased $176 million
during the year ended December 31, 2019 compared to the year ended December 31,
2018. See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 21
to the Consolidated Financial Statements" for additional information.
Provision for income taxes.
                                      Year Ended December 31,
                                                       Better / (Worse)
                               2019         2018         2019 vs 2018

Income before income taxes $ 1,006$ 951 $ 55 Provision for income taxes (240 ) (182 )

            (58 )
Effective tax rate               23.9 %     19.1 %           (4.8 )%



The increased effective tax rate and provision for income taxes during the year
ended December 31, 2019, compared to the year ended December 31, 2018, are
primarily due to a low effective tax rate on the HRMC transaction in 2018, which
was based on the local country tax laws unique to the transaction.
See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 14 to our
Consolidated Financial Statements" for further detail.
Segment Results
We evaluate segment operating performance using owned and leased hotels
revenues, management, franchise, and other fees revenues, and Adjusted EBITDA,
as described in Part IV, Item 15, "Exhibits and Financial Statement
Schedule-Note 19 to our Consolidated Financial Statements."
Owned and leased hotels segment revenues.
                                                                     Year 

Ended December 31,

                                                  2019        2018         Better / (Worse)       Currency Impact
Comparable owned and leased hotels revenues     $ 1,546$ 1,541$     5         0.3  %   $         (11 )
Non-comparable owned and leased hotels revenues     262         348         (86 )     (24.7 )%              (6 )
Total segment revenues                          $ 1,808$ 1,889$   (81 )      (4.3 )%   $         (17 )


The increase in comparable owned and leased hotels revenues during the year
ended December 31, 2019, compared to the year ended December 31, 2018, was
primarily driven by improved transient revenue in certain international markets,
partially offset by decreased group revenues within certain markets in the
United States and net unfavorable currency impacts.
Excluding net unfavorable currency impacts, the decrease in non-comparable owned
and leased hotels revenues was driven by:
•      the dispositions of Hyatt Regency Mexico City, Andaz Maui at Wailea

Resort, Grand Hyatt San Francisco, and Hyatt Regency Coconut Point Resort

and Spa in 2018, and

• the dispositions of Hyatt Regency Atlanta and Grand Hyatt Seoul in 2019,




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• partially offset by the acquisitions of Hyatt Regency Indian Wells Resort

       & Spa and Hyatt Regency Phoenix in 2018.


                                                      Year Ended December 31,
                                RevPAR                       Occupancy                        ADR
                                      vs. 2018                                                     vs. 2018
                       2019        (in constant $)       2019       vs. 2018        2019        (in constant $)
Comparable owned
and leased hotels  $      183              1.0 %          76.8 %   (0.1)% pts   $      238              1.0 %


The increase in comparable RevPAR at our owned and leased hotels during the year
ended December 31, 2019, compared to the same period in 2018, was driven
primarily by improved transient business at certain international hotels as well
as strong group business within key European markets, partially offset by
decreased group demand in certain United States markets.
During the year ended December 31, 2019, we removed two properties from the
comparable owned and leased hotels results as the hotels were sold.
Owned and leased hotels segment Adjusted EBITDA.
                                                        Year Ended December 31,
                                                                           Better / (Worse)
                                         2019            2018               2019 vs. 2018
Owned and leased hotels Adjusted
EBITDA                               $       337$      373$       (36 )          (9.9 )%
Pro rata share of unconsolidated
hospitality ventures Adjusted EBITDA          50             55              (5 )          (8.4 )%
Segment Adjusted EBITDA              $       387$      428$       (41 )          (9.7 )%


Owned and leased hotels Adjusted EBITDA.  The decrease in Adjusted EBITDA at our
owned and leased hotels during the year ended December 31, 2019, compared to the
same period in 2018, which included a $2 million net unfavorable currency
impact, was primarily driven by a $34 million decrease related to non-comparable
owned and leased hotels due to the aforementioned transaction activity.
Pro rata share of unconsolidated hospitality ventures Adjusted EBITDA.  Our pro
rata share of Adjusted EBITDA from our unconsolidated hospitality ventures
decreased during the year ended December 31, 2019, compared to the year ended
December 31, 2018, primarily driven by the sale of our ownership interest in an
unconsolidated hospitality venture in 2018.
Americas management and franchising segment revenues.
                                                       Year Ended December 31,
                                                                         Better / (Worse)
                                         2019           2018               2019 vs. 2018
Segment revenues
Management, franchise, and other
fees                                 $      433$      400$        33            8.2  %
Contra revenue                              (15 )          (13 )            (2 )        (15.5 )%
Other revenues                               89              -              89             NM
Revenues for the reimbursement of
costs incurred on behalf of managed
and franchised properties                 2,268          1,787             481           27.0  %
Total segment revenues               $    2,775$    2,174$       601           27.7  %


The increase in management, franchise, and other fees during the year ended
December 31, 2019, compared to the year ended December 31, 2018, included a $25
million increase in management fees related to the acquisition of Two Roads and
recently opened hotels. The increase was also driven by an increase in franchise
fees of $13 million primarily attributable to new and ramping hotels, partially
offset by a $5 million decrease in other fees driven by $8 million of legal
settlement proceeds received in 2018 related to a franchise agreement
termination for an unopened property.
Other revenues increased during the year ended December 31, 2019, compared to
the year ended December 31, 2018, due to revenues earned from the residential
management operations acquired as part of Two Roads.
The increase in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties for the year ended December 31, 2019, compared
to the year ended December 31, 2018, was driven by higher reimbursements for

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payroll and related costs due to growth of our third-party managed and
franchised portfolio, including the acquisition of Two Roads.
United States managed group revenue booked in 2019 for stays in 2019 as well as
for stays in future years was lower as compared to 2018. Group revenue booked
for 2020 increased modestly as compared to the same period in the prior year.
                                                     Year Ended December 31,
(Comparable                    RevPAR                       Occupancy                        ADR
System-wide                           vs. 2018                                                    vs. 2018
Hotels)                2019       (in constant $)       2019       vs. 2018        2019       (in constant $)
Americas full
service            $      159            1.7  %          74.9 %     0.1% pts   $      212            1.5  %
Americas select
service            $      105           (2.0 )%          75.7 %   (0.6)% pts   $      139           (1.3 )%


Comparable full service hotels RevPAR increased during the year ended
December 31, 2019, compared to the year ended December 31, 2018, driven
primarily by improved transient business throughout the segment, including
certain markets within the United States and Caribbean, partially offset by
decreased group demand within certain United States markets.
Comparable select service hotels RevPAR decreased during the year ended
December 31, 2019, compared to the year ended December 31, 2018, due largely to
supply growth in the United States outpacing demand and programming changes we
made relating to our Hyatt Place brand.
During the year ended December 31, 2019, no properties were removed from the
comparable Americas full service system-wide hotels results, and one property
that left the chain was removed from the comparable Americas select service
system-wide hotel results.
Americas management and franchising segment Adjusted EBITDA.
                                     Year Ended December 31,
                                                     Better / (Worse)
                            2019         2018         2019 vs. 2018
Segment Adjusted EBITDA $   376$ 352$    24            6.9 %


Adjusted EBITDA increased during the year ended December 31, 2019, compared to
the year ended December 31, 2018, primarily driven by the aforementioned
increases in management, franchise, and other fees, partially offset by
incremental selling, general, and administrative expenses related to the
acquisition of Two Roads.
ASPAC management and franchising segment revenues.
                                                         Year Ended December 31,
                                                                            Better / (Worse)
                                         2019            2018                 2019 vs. 2018
Segment revenues
Management, franchise, and other
fees                                 $       136$      127     $         9                6.9  %
Contra revenue                                (2 )           (2 )             -               (4.4 )%
Revenues for the reimbursement of
costs incurred on behalf of managed
and franchised properties                    113             95              18               19.3  %
Total segment revenues               $       247$      220$        27               12.3  %


Management, franchise, and other fees, which included a $3 million net
unfavorable currency impact, increased during the year ended December 31, 2019,
compared to the year ended December 31, 2018, primarily driven by increased
management fees related to new hotels, due in part to the acquisition of Two
Roads, as well as a $5 million increase in other fees driven by license fees
from the sale of branded residential ownership units, partially offset by the
impact of political unrest in Hong Kong.
The increases in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties during the year ended December 31, 2019,
compared to the year ended December 31, 2018, was driven by overall growth of
our third-party owned full and select service portfolio.

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                                                    Year Ended December 31,
(Comparable                    RevPAR                      Occupancy                        ADR
System-wide                           vs. 2018                                                   vs. 2018
Hotels)                2019       (in constant $)       2019      vs. 2018        2019       (in constant $)
ASPAC full service $      149           (0.8 )%          74.5 %    0.3% pts   $      201           (1.1 )%
ASPAC select
service            $       58            8.4  %          68.5 %    8.2% pts   $       84           (4.6 )%


The decrease in comparable full service RevPAR during the year ended
December 31, 2019, compared to year ended December 31, 2018, was primarily
driven by decreased performance in Greater China, including political unrest in
Hong Kong and lower ADR in Macau. The decrease was partially offset by strong
transient demand in certain markets within Southeast Asia and improved ADR in
Japan.
During the year ended December 31, 2019, two properties that left the chain were
removed from the comparable ASPAC full service system-wide hotel results, and no
properties were removed from the comparable ASPAC select service system-wide
hotel results.
ASPAC management and franchising segment Adjusted EBITDA.
                                     Year Ended December 31,
                                                     Better / (Worse)
                             2019         2018         2019 vs. 2018
Segment Adjusted EBITDA $   87$  78$   9            11.6 %


Adjusted EBITDA increased during the year ended December 31, 2019, compared to
the year ended December 31, 2018, including a $2 million net unfavorable
currency impact. The increase was driven by the aforementioned increases in
management, franchise, and other fees.
EAME/SW Asia management and franchising segment revenues.
                                                          Year Ended December 31,
                                                                             Better / (Worse)
                                         2019            2018                 2019 vs. 2018
Segment revenues
Management, franchise, and other
fees                                 $        83$       80     $         3                 4.3  %
Contra revenue                                (5 )           (5 )             -                (3.2 )%
Revenues for the reimbursement of
costs incurred on behalf of managed
and franchised properties                     74             68               6                 9.3  %
Total segment revenues               $       152$      143     $         9                 6.7  %


Management, franchise, and other fees, which included a $3 million net
unfavorable currency impact, increased during the year ended December 31, 2019,
compared to the year ended December 31, 2018, primarily driven by increased
management fees related to new hotels as well as hotels coming out of
renovation, partially offset by hotels in Russia, which benefited from hosting
the FIFA World Cup in 2018.
The increase in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties during the year ended December 31, 2019,
compared to the year ended December 31, 2018, was driven by overall growth of
our third-party owned full and select service portfolio.
                                                     Year Ended December 31,
(Comparable                     RevPAR                      Occupancy                        ADR
System-wide                           vs. 2018                                                    vs. 2018
Hotels)                2019        (in constant $)       2019      vs. 2018        2019       (in constant $)
EAME/SW Asia full
service            $      129              3.9 %          70.6 %    3.2% pts   $      183           (0.8 )%
EAME/SW Asia
select service     $       65              3.6 %          73.0 %    6.5% pts   $       89           (5.7 )%

The increase in comparable full service RevPAR during the year ended December 31, 2019, compared to the year ended December 31, 2018, was driven primarily by increased transient performance in certain European markets, including one hotel

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in France that benefited from the completion of a renovation, and Southwest
Asia. The increase was partially offset by lower ADR in Russia which benefited
from hosting the FIFA World Cup in 2018.
During the year ended December 31, 2019, no properties were removed from the
comparable EAME/SW Asia full service system-wide hotel results, and one property
that left the chain was removed from the comparable EAME/SW Asia select service
system-wide hotel results.
EAME/SW Asia management and franchising segment Adjusted EBITDA.
                                       Year Ended December 31,
                                                        Better / (Worse)
                              2019          2018          2019 vs. 2018
Segment Adjusted EBITDA $    49$  46$     3             7.3 %


The increase in Adjusted EBITDA during the year ended December 31, 2019,
compared to the year ended December 31, 2018, was primarily driven by the
aforementioned increase in management, franchise, and other fees.
Corporate and other.
                                                       Year Ended December 31,
                                                                         Better / (Worse)
                                         2019           2018               2019 vs. 2018
Revenues                             $      140$      132     $         8            6.3  %
Revenues for the reimbursement of
costs incurred on behalf of managed
and franchised properties            $        6$        6     $         -          (11.9 )%
Adjusted EBITDA                      $     (146 )$     (127 )$       (19 )        (14.3 )%


Corporate and other revenues increased during the year ended December 31, 2019,
compared to the year ended December 31, 2018, driven primarily by growth in our
co-branded credit card program.
Corporate and other Adjusted EBITDA decreased for the year ended December 31,
2019, compared to the year ended December 31, 2018, primarily due to $20 million
of increased expenses associated with Two Roads.



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Adjusted EBITDA by Segment and Non-GAAP Measure Reconciliation
The charts below illustrate Adjusted EBITDA by segment. For a discussion of our
definition of Adjusted EBITDA, how we use it, why we present it, and material
limitations on its usefulness, see "-Key Business Metrics Evaluated by
Management."
[[Image Removed: h123119chart653158e7.jpg]]
[[Image Removed: h123118chart5766963.jpg]]
*Consolidated Adjusted EBITDA for the year ended December 31, 2019 included
eliminations of $1 million and corporate and other Adjusted EBITDA of $(146)
million.
**Consolidated Adjusted EBITDA for the year ended December 31, 2018 included
eliminations of $0 million and corporate and other Adjusted EBITDA of $(127)
million.



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The table below provides a reconciliation of our net income attributable to
Hyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to
consolidated Adjusted EBITDA:
                                                        Year Ended December 31,
                                                                                 Change
                                          2019             2018               2019 vs. 2018
Net income attributable to Hyatt
Hotels Corporation                   $        766$        769$       (3 )        (0.4 )%
Interest expense                               75               76             (1 )        (1.2 )%
Provision for income taxes                    240              182             58          32.2  %
Depreciation and amortization                 329              327              2           0.7  %
EBITDA                                      1,410            1,354             56           4.2  %
Contra revenue                                 22               20              2          11.5  %
Revenues for the reimbursement of
costs incurred on behalf of managed
and franchised properties                  (2,461 )         (1,956 )         (505 )       (25.9 )%
Costs incurred on behalf of managed
and franchised properties                   2,520            1,981            539          27.2  %
Equity (earnings) losses from
unconsolidated hospitality ventures            10               (8 )           18         215.1  %
Stock-based compensation expense               35               29              6          19.9  %
Gains on sales of real estate                (723 )           (772 )           49           6.3  %
Asset impairments                              18               25             (7 )       (27.2 )%
Other (income) loss, net                     (127 )             49           (176 )      (358.6 )%
Pro rata share of unconsolidated
owned and leased hospitality
ventures Adjusted EBITDA                       50               55             (5 )        (8.4 )%
Adjusted EBITDA                      $        754$        777$      (23 )        (2.9 )%


Inflation
We do not believe inflation had a material effect on our business in 2019 or
2018.
Liquidity and Capital Resources
Overview
We finance our business primarily with existing cash, short-term investments,
and cash generated from our operations. As part of our business strategy, we use
net proceeds from dispositions to support our acquisitions and new investment
opportunities as well as return capital to our shareholders. When appropriate,
we borrow cash under our revolving credit facility or from other third-party
sources and may also raise funds by issuing debt or equity securities as
necessary. We maintain a cash investment policy that emphasizes preservation of
capital. We believe our cash position, short-term investments, and cash from
operations, together with borrowing capacity under our revolving credit facility
and our access to the capital markets, will be adequate to meet all of our
funding requirements and capital deployment objectives for the foreseeable
future.
We may, from time to time, seek to retire or purchase additional amounts of our
outstanding equity and/or debt securities through cash purchases and/or
exchanges for other securities, in open market purchases, privately negotiated
transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an
accelerated share repurchase transaction. Such repurchases or exchanges, if any,
will depend on prevailing market conditions, our liquidity requirements,
contractual restrictions, and other factors. The amounts involved may be
material.
Recent Transactions Affecting Our Liquidity and Capital Resources
During the years ended December 31, 2019 and December 31, 2018, various
transactions impacted our liquidity. See "-Sources and Uses of Cash."

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Sources and Uses of Cash
                                                               Year Ended December 31,
                                                                2019             2018
Cash provided by (used in):
Operating activities                                       $       396$       341
Investing activities                                               585               374
Financing activities                                              (541 )            (850 )
Effect of exchange rate changes on cash                              1                 5

Net increase (decrease) in cash, cash equivalents, and restricted cash

                                            $       441

$ (130 )



Cash Flows from Operating Activities
Cash provided by operating activities increased $55 million in the year ended
December 31, 2019 compared to the year ended December 31, 2018. The increase was
primarily due to higher tax payments in 2018 driven by transactions and changes
in our working capital.
Cash Flows from Investing Activities
2019 Activity:
•      We sold the shares of the entity which owns Grand Hyatt Seoul and adjacent
       land to an unrelated third party for approximately $467 million, net of
       closing costs and proration adjustments.


•      We sold Hyatt Regency Atlanta to an unrelated third party for
       approximately $346 million, net of closing costs and proration
       adjustments.

• We sold the property adjacent to Grand Hyatt San Francisco and assigned

       the related Apple store lease to an unrelated third party
       for approximately $115 million, net of closing costs and proration
       adjustments. Proceeds from the sale were held as restricted for use in a
       potential like-kind exchange.

• We collected $46 million of unsecured financing receivables related to the

HRMC transaction.

• We received $25 million of proceeds from sales activity related to certain

equity method investments.

• We sold our contractual right to purchase Hyatt Regency Portland at the

Oregon Convention Center to an unrelated third party for approximately $21

       million, net of closing costs.


•      We invested $369 million in capital expenditures (see "-Capital
       Expenditures").

2018 Activity: • We sold Grand Hyatt San Francisco, Andaz Maui at Wailea Resort, and Hyatt

Regency Coconut Point Resort and Spa to an unrelated third party as a

portfolio for approximately $992 million, net of closing costs and

proration adjustments. Proceeds from the sale of Hyatt Regency Coconut

       Point Resort and Spa of $221 million were held as restricted for use in a
       potential like-kind exchange, of which approximately $198 million were
       subsequently used for acquisitions and the remaining $23 million were
       released.

• We received $360 million of proceeds from the HRMC transaction.

• We sold a Hyatt House hotel for approximately $48 million, net of closing

costs and proration adjustments.

• We received $43 million of proceeds from sales activity related to certain

       equity method investments.


•      We acquired Two Roads for cash of $415 million, net of $37 million cash
       acquired, which was inclusive of a $36 million payment of additional
       consideration and $4 million of other purchase price adjustments.


•      We invested $297 million in capital expenditures (see "-Capital
       Expenditures").


•      We acquired Hyatt Regency Phoenix for a purchase price of
       approximately $139 million, net of proration adjustments.


•      We acquired Hyatt Regency Indian Wells Resort & Spa for a purchase price
       of approximately $120 million, net of proration adjustments.



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•      We had $41 million of net purchases of marketable securities and
       short-term investments.


Periodically, we enter into like-kind exchange agreements upon the disposition
or acquisition of certain properties. Pursuant to the terms of these agreements,
the proceeds from the sales are placed into an escrow account administered by a
qualified intermediary and are unavailable for our use until released. The
proceeds are recorded as restricted cash on our consolidated balance sheets and
released (i) if they are utilized as part of a like-kind exchange agreement,
(ii) if we do not identify a suitable replacement property within 45 days after
the agreement date, or (iii) when a like-kind exchange agreement is not
completed within the remaining allowable time period.
Cash Flows from Financing Activities
2019 Activity:
•      We repurchased 5,621,281 shares of Class A and Class B common stock for an

aggregate purchase price of $421 million.

• We paid four quarterly $0.19 per share cash dividends on Class A and Class

       B common stock totaling $80 million.


•      We paid $24 million of contingent consideration as a result of the
       acquisition of Two Roads.

• We borrowed and repaid $400 million on our revolving credit facility.

2018 Activity: • We repurchased 12,723,895 shares of Class A and Class B common stock for

an aggregate purchase price of $946 million, including shares repurchased

under the 2018 ASR programs and 244,260 shares delivered in settlement of

       the fourth quarter of 2017 ASR ("November 2017 ASR") in 2018, for which
       payment was made during 2017.

• We repaid the remaining $196 million of 6.875% senior notes due 2019 (the

"2019 Notes") for approximately $203 million, inclusive of a $7 million

make-whole premium.

• We paid four quarterly $0.15 per share cash dividends on Class A and Class

B common stock totaling $68 million.

• We borrowed and repaid $20 million on our revolving credit facility.

• We redeemed the Miraval preferred shares for approximately $10 million.

• We issued $400 million of 4.375% senior notes due 2028, at an issue price

of 99.866% (the "2028 Notes") and received $396 million of net proceeds,

       after deducting approximately $4 million of underwriting discounts and
       offering expenses.


We define net debt as total debt less the total of cash and cash equivalents and
short-term investments. We consider net debt and its components to be an
important indicator of liquidity and a guiding measure of capital structure
strategy. Net debt is a non-GAAP measure and may not be computed the same as
similarly titled measures used by other companies. The following table provides
a summary of our debt to capital ratios:
                                                            December 31, 2019     December 31, 2018
Consolidated debt (1)                                      $           1,623     $           1,634
Stockholders' equity                                                   3,962                 3,670
Total capital                                                          5,585                 5,304
Total debt to total capital                                             29.1 %                30.8 %
Consolidated debt (1)                                                  1,623                 1,634
Less: Cash and cash equivalents and short-term investments              (961 )                (686 )
Net consolidated debt                                      $             662     $             948
Net debt to total capital                                               11.9 %                17.9 %


(1) Excludes approximately $572 million and $528 million of our share of indebtedness of our unconsolidated hospitality ventures accounted for under the equity method at December 31, 2019 and December 31, 2018, respectively, substantially all of which is non-recourse to us and a portion of which we guarantee pursuant to separate agreements.

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Capital Expenditures
We routinely make capital expenditures to enhance our business. We classify our
capital expenditures into maintenance and technology, enhancements to existing
properties, and investment in new properties under development or recently
opened. We have been and will continue to be prudent with respect to our capital
spending, taking into account our cash flow from operations.
                                                              Year Ended 

December 31,

                                                               2019         

2018

Investment in new properties under development or
recently opened                                         $          139       $         79
Enhancements to existing properties                                137                137
Maintenance and technology                                          93                 81
Total capital expenditures                              $          369       $        297


The increase in investment in new properties under development or recently
opened is primarily driven by renovation spend at Miraval properties and the
development of a hotel in Philadelphia, Pennsylvania in 2019.
Senior Notes
The table below sets forth the outstanding principal balance of our various
series of senior unsecured notes (the "Senior Notes") at December 31, 2019, as
described in Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note
11 to our Consolidated Financial Statements." Interest on the Senior Notes is
payable semi-annually.
                                                               Principal 

amount

$250 million senior unsecured notes maturing in 2021-5.375%   $             

250

$350 million senior unsecured notes maturing in 2023-3.375%                 

350

$400 million senior unsecured notes maturing in 2026-4.850%                 

400

$400 million senior unsecured notes maturing in 2028-4.375%                  400
Total Senior Notes                                            $            1,400

In the indenture that governs the Senior Notes, we agreed not to: • create any liens on our principal properties, or on the capital stock or

debt of our subsidiaries that own or lease principal properties, to secure

debt without also effectively providing that the Senior Notes are secured

equally and ratably with such debt for so long as such debt is so secured;

       or


•      enter into any sale and leaseback transactions with respect to our
       principal properties.


These limitations are subject to significant exceptions.
The indenture also limits our ability to enter into mergers or consolidations or
transfer all or substantially all of our assets unless certain conditions are
satisfied.
If a change of control triggering event occurs, as defined in the indenture
governing the Senior Notes, we will be required to offer to purchase the Senior
Notes at a price equal to 101% of their principal amount, together with accrued
and unpaid interest, if any, to the date of purchase. We may also redeem some or
all of the Senior Notes at any time prior to their maturity at a redemption
price equal to 100% of the principal amount of the Senior Notes redeemed plus
accrued and unpaid interest, if any, to the date of redemption plus a make-whole
amount.
We are in compliance with all applicable covenants under the indenture governing
our Senior Notes at December 31, 2019.
Revolving Credit Facility
The revolving credit facility is intended to provide financing for working
capital and general corporate purposes, including commercial paper backup and
permitted investments and acquisitions. At December 31, 2019 and December 31,
2018, we had no balance outstanding. We had $1 million and no outstanding
undrawn letters of credit issued under our revolving credit facility (and
reduced availability thereunder) at December 31, 2019 and December 31, 2018,
respectively. At December 31, 2019, we had available borrowing capacity
of $1.5 billion under our revolving credit facility, net of outstanding

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undrawn letters of credit. See Part IV, Item 15, "Exhibits and Financial
Statement Schedule-Note 11 to our Consolidated Financial Statements."
All of our borrowings under our revolving credit facility are guaranteed by
substantially all of our material domestic subsidiaries, as defined in the
revolving credit facility. All guarantees are guarantees of payment and
performance and not of collection. Hotel Investors I, Inc., a wholly owned
subsidiary, is an additional borrower under our revolving credit facility.
Interest rates on outstanding borrowings are either LIBOR-based or based on an
alternate base rate, with margins in each case based on our credit rating or, in
certain circumstances, our credit rating and leverage ratio. At December 31,
2019, the interest rate for a one month LIBOR borrowing under our revolving
credit facility would have been 2.813%, or LIBOR of 1.763% plus 1.050%.
Borrowings under our revolving credit facility bear interest, at our option, at
either one, two, three, or six month LIBOR plus a margin ranging from 0.900% to
1.500% per annum (plus any mandatory costs, if applicable) or the alternative
base rate plus a margin ranging from 0.000% to 0.500% per annum, in each case
depending on our credit rating by either S&P or Moody's or, in certain
circumstances, our credit rating and leverage ratio. Borrowings under our
swingline subfacility will bear interest at a per annum rate equal to the
alternate base rate plus the applicable percentage for revolving loans that are
alternate base rate loans. We are also required to pay letter of credit fees
with respect to each letter of credit equal to the applicable margin for LIBOR
on the face amount of each letter of credit. In addition, we must pay a fronting
fee to the issuer of each letter of credit of 0.10% per annum on the face amount
of such letter of credit.
The revolving credit facility also provides for a facility fee ranging from
0.100% to 0.250% of the total commitment of the lenders under the revolving
credit facility (depending on our credit rating by either S&P or Moody's). The
facility fee is charged regardless of the level of borrowings.
In the event we no longer have a credit rating from either S&P or Moody's or our
rating falls at or below BBB-/Baa3, with respect to borrowings under our
revolving credit facility (a) such borrowings will bear interest at either LIBOR
plus 1.300% or 1.500% per annum or the alternative base rate referenced above
plus 0.300% or 0.500% per annum, in each case, depending on our leverage ratio
and (b) the facility fee will be 0.200% or 0.250%.
Our revolving credit facility contains a number of affirmative and restrictive
covenants including limitations on the ability to place liens on our or our
direct or indirect subsidiaries' assets; to merge, consolidate, and dissolve; to
sell assets; to engage in transactions with affiliates; to change our or our
direct or indirect subsidiaries' fiscal year or organizational documents; and to
make restricted payments.
Our revolving credit facility also requires us to meet Leverage Ratio and
Secured Funded Debt Ratio financial covenants in each case measured quarterly as
defined in our revolving credit facility.
The revolving credit facility contains certain covenants, including financial
covenants that limit our maximum leverage (consisting of the ratio of Adjusted
Total Debt to Consolidated EBITDA, each as defined in the revolving credit
facility) to not more than 4.5 to 1, and limit our Secured Funded Debt Ratio
(consisting of the ratio of Secured Funded Debt to Property and Equipment, each
as defined in the revolving credit facility), to not more than 0.30 to 1. Our
outstanding Senior Notes do not contain a corresponding financial covenant or a
requirement that we maintain certain financial ratios. We currently satisfy all
the covenants in our revolving credit facility and Senior Notes and do not
expect the covenants will restrict our ability to meet our anticipated borrowing
and guarantee levels or increase those levels should we decide to do so in the
future.
Letters of Credit
We issue letters of credit either under the revolving credit facility as
discussed above or directly with financial institutions. We had $263 million and
$277 million in letters of credit issued directly with financial institutions
outstanding at December 31, 2019 and December 31, 2018, respectively. These
letters of credit had weighted-average fees of approximately 99 basis points and
a range of maturity of up to approximately three years at December 31, 2019.
Other Indebtedness and Future Debt Maturities
Excluding the $1,400 million of Senior Notes, all other third-party indebtedness
was $223 million, net of $15 million of unamortized discounts and deferred
financing fees, at December 31, 2019.
At December 31, 2019, $11 million of our outstanding debt will mature in the
following 12 months. We believe we will have adequate liquidity, including our
capacity to borrow under our revolving credit facility, and/or the ability to
execute on refinancing or new issuances of debt to meet requirements for
scheduled maturities.

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Contractual Obligations
The following table summarizes our contractual obligations at December 31, 2019:
                                                             Payments Due by Period
                                 Total      2020     2021     2022     2023     2024     Thereafter
Debt (1)                        $ 2,117$  84$ 334$  70$ 419$  57$      1,153
Finance lease obligations (1)        14        3        2        2        2        2               3

Operating lease obligations 631 47 45 42 39

       36             422
Purchase obligations                 80       80        -        -        -        -               -

Other long-term liabilities (2) 472 2 1 1 1

       1             466
Total contractual obligations   $ 3,314$ 216$ 382$ 115$ 461$  96$      2,044



(1) Includes principal and interest payments; assumes constant foreign exchange
rates for floating-rate debt at December 31, 2019.
(2) Primarily consists of deferred compensation plan liabilities; excludes $147
million in long-term taxes payable due to the uncertainty related to the timing
of the reversal of those liabilities.
Guarantee Commitments
The following table summarizes our guarantee commitments at December 31, 2019:
                                                                 Amount of 

Guarantee Commitments Expiration by Period

                        Total                        2020                        2021          2022          2023         2024         Thereafter
Performance
guarantees (1)       $     238$       180$      12$      11$      6$       1     $         28
Debt repayment and
other guarantees (2)       415             192                                       36            75          112             -                -
Total guarantee
commitments          $     653$       372$      48$      86$    118$       1     $         28



(1) Consists of contractual agreements with third-party owners which require us
to guarantee payments to the owners if specified levels of operating profit are
not achieved by their hotels.
(2) Consists of various debt repayment and other guarantees related to our
unconsolidated hospitality ventures, managed and franchised hotels, and other
properties. Certain of these underlying debt agreements have extension periods
which are not reflected in the table above. With respect to certain of these
guarantees, we have agreements with our unconsolidated hospitality venture
partners, the respective hotel owners, or other third parties which reduce our
maximum guarantee and are not reflected in the table above.
See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 15 to our
Consolidated Financial Statements."
Investment Commitments
The following table summarizes our investment commitments, which represent our
commitment, under certain conditions, to lend or provide certain consideration
to, or invest in, various business ventures at December 31, 2019:
                                                            Amount of 

Investment Commitments Expected Funding by Period

                          Total                    2020                     2021          2022          2023          2024         Thereafter
Investment commitments $     296     $         140                       $      41$      70$       8$       8     $         29



See Part IV, Item 15, "Exhibits and Financial Statement Schedule-Note 15 to our
Consolidated Financial Statements."
Off-Balance Sheet Arrangements
At December 31, 2019, our off-balance sheet arrangements included $80 million of
purchase obligations, $264 million of letters of credit, and $48 million of
surety bonds. These amounts are discussed in "-Sources and Uses of
Cash-Revolving Credit Facility and -Letters of Credit," "-Contractual
Obligations," and Part IV, Item 15, "Exhibits and Financial Statement
Schedule-Note 15 to our Consolidated Financial Statements."
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements, the reported amounts of
revenues and expenses during the reporting periods, and the related disclosures
in our consolidated financial statements and accompanying notes.

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A number of our accounting policies, which are described in Part IV, Item 15,
"Exhibits and Financial Statement Schedule-Note 2 to our Consolidated Financial
Statements," are critical due to the fact they involve a higher degree of
judgment and estimates. Those accounting policies and other critical estimates
are included below. As a result, these accounting policies could materially
affect our financial position and results of operations. While we have used our
best estimates based on the facts and circumstances available to us at the time,
different estimates reasonably could have been used in the current period. In
addition, changes in the accounting estimates that we use are reasonably likely
to occur from period to period, which may have a material impact on the
presentation of our financial condition and results of operations. Although we
believe our estimates, assumptions, and judgments are reasonable, they are based
upon information presently available. Actual results may differ significantly
from these estimates under different assumptions, judgments, or conditions.
Management has discussed the development and selection of these critical
accounting policies and estimates with the audit committee of the board of
directors.
Guarantees
We enter into performance guarantees related to certain hotels we manage. We
also enter into debt repayment and other guarantees with respect to
unconsolidated hospitality ventures, certain managed or franchised hotels, and
other properties. We record a liability for the fair value of these guarantees
at their inception date. In order to estimate the fair value, we use a Monte
Carlo simulation to model the probability of possible outcomes. The valuation
methodology requires that we make certain assumptions and judgments in our
determination of the fair value, which are based on our knowledge of the
hospitality industry, market conditions, location of the property, and specific
information available at the time of the valuation.
Goodwill and Indefinite-Lived Intangible Assets
We evaluate goodwill and indefinite-lived intangible assets for impairment
annually during the fourth quarter of each year using balances at October 1 and
at an interim date if indications of impairment exist. The Company has seven
reporting units which have goodwill at December 31, 2019.
We are required to apply judgment when determining whether or not indications of
impairment exist. The determination of the occurrence of a triggering event is
based on our knowledge of the hospitality industry, historical experience,
location of the property or properties, market conditions, and specific
information available at the time of the assessment. We realize, however, that
the results of our analysis could vary from period to period depending on how
our judgment is applied and the facts and circumstances available at the time of
the analysis. Judgment is also required in determining the assumptions and
estimates used when calculating the fair value of the reporting unit or the
indefinite-lived intangible asset.
Historically, changes in estimates used in the goodwill and indefinite-lived
intangible assets impairment valuations have not resulted in material impairment
charges in subsequent periods as a result of changes in those estimates.
However, changes in the economic and operating conditions impacting the
assumptions and estimates could result in an impairment charge which could be
material to our earnings. At December 31, 2019, excluding assets recently
impaired or acquired, a change in our assumptions and estimates that could
reduce the fair value of each of our reporting units or indefinite-lived
intangible assets by 10% would not result in an impairment charge. See Part IV,
Item 15, "Exhibits and Financial Statement Schedule-Note 9 to our Consolidated
Financial Statements."
Acquisitions
Assets acquired and liabilities assumed in acquisitions are recorded at fair
value as of the acquisition date. We use judgment to determine the fair value of
the assets or businesses acquired and to allocate the fair value to identifiable
tangible and intangible assets. Generally, tangible assets acquired include
property and equipment, and intangible assets acquired may include management
agreement intangibles, brand intangibles, advanced bookings, or goodwill in a
business combination. Changes to the significant assumptions or factors used to
determine fair value, in particular assumptions related to cash flow
projections, inclusive of revenue projections, and the selection of discount
rates, could affect the measurement and allocation of fair value. See Part IV,
Item 15 "Exhibits and Financial Statement Schedule-Notes 7 and 9 to the
Consolidated Financial Statements."
Property and Equipment and Definite-Lived Intangible Assets
We evaluate property and equipment and definite-lived intangible assets for
impairment quarterly. We use judgment to determine whether indications of
impairment exist. The determination of the occurrence of a triggering event is
based on our knowledge of the hospitality industry, historical experience,
location of the property, market conditions, termination of an underlying
management agreement, and property-specific information available at the time of
the assessment. We realize, however, that the results of our analysis could vary
from period to period depending on how our judgment is applied and the facts and
circumstances available at the time of the analysis. When a triggering event
occurs, judgment is also required in

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determining the assumptions and estimates to use within the recoverability
analysis and when calculating the fair value of the asset or asset group, if
applicable.
Changes in economic and operating conditions impacting the judgments used could
result in impairments to our long-lived assets in future periods, which could be
material to our earnings. Historically, changes in estimates used in the
property and equipment and definite-lived intangible assets impairment
assessment process have not resulted in material impairment charges in
subsequent periods as a result of changes made to those estimates.
As a result of the Two Roads acquisition, we recorded management agreement
intangibles for both operating and prospective hotels. During the year ended
December 31, 2019, we recognized $13 million of impairment charges related to
management agreement intangibles for contracts that terminated. We may incur
impairment charges in a future period if agreements terminate, the timing of
which is unpredictable. See Part IV, Item 15 "Exhibits and Financial Statement
Schedule-Notes 7 and 9 to the Consolidated Financial Statements."
Equity Method Investments
We assess investments in unconsolidated hospitality ventures accounted for under
the equity method for impairment quarterly. We use judgment to determine whether
or not there is an indication that a loss in value has occurred and whether a
decline is deemed to be other than temporary. The determination of whether a
loss in value has occurred and whether such a decline is deemed to be other than
temporary is based on our knowledge of the hospitality industry, historical
experience, location of the underlying venture property, market conditions, and
venture-specific information available at the time of the assessment. When there
is an indication that a loss in value has occurred, judgment is also required in
determining the assumptions and estimates to use when calculating the fair
value.
Changes in economic and operating conditions impacting these estimates and
judgments could result in impairments to our equity method investments in future
periods. Historically, changes in estimates used in the impairment assessment
process have not resulted in material impairment charges in subsequent periods
as a result of changes made to those estimates. See Part IV, Item 15, "Exhibits
and Financial Statement Schedule-Note 4 to our Consolidated Financial
Statements."
Income Taxes
Judgment is required in addressing the future tax consequences of events that
have been recognized in our consolidated financial statements or tax returns
(e.g., realization of deferred tax assets, changes in tax laws, or
interpretations thereof). In addition, we are subject to examination of our
income tax returns by the IRS and other tax authorities. A change in the
assessment of the outcomes of such matters could materially impact our
consolidated financial statements.
We evaluate tax positions taken or expected to be taken on a tax return to
determine whether they are "more likely than not" of being sustained assuming
that the tax reporting positions will be examined by taxing authorities with
full knowledge of all relevant information prior to recording the related tax
benefit in our consolidated financial statements. If a position drops below the
"more likely than not" standard, the benefit can no longer be recognized.
Assumptions, judgment, and the use of estimates are required in determining if
the "more likely than not" standard has been met when developing the provision
for income taxes. A change in the assessment of the "more likely than not"
standard with respect to a position could materially impact our consolidated
financial statements. See Part IV, Item 15, "Exhibits and Financial Statement
Schedule-Note 14 to our Consolidated Financial Statements."
Loyalty Program Future Redemption Obligation and Revenue Recognition
We utilize an actuary to assist with the valuation of the deferred revenue
liability related to the loyalty program. Changes in the estimates, including
the anticipated timing and value of future point redemptions and an estimate of
the breakage for points that will not be redeemed, could result in a material
change to our liability and the amount of revenue we recognize when redemptions
occur. See Part IV, Item 15 "Exhibits and Financial Statement Schedule-Notes 2
and 3 to the Consolidated Financial Statements."
At December 31, 2019, our total deferred revenue liability related to the
loyalty program was $671 million. A 10% decrease in the breakage assumption
would result in an increase in the liability of approximately $35 million at
December 31, 2019.

Incremental Borrowing Rate and Accounting for Leases
In determining the present value of our ROU assets and lease liabilities, we
estimate an Incremental Borrowing Rate ("IBR") by applying a portfolio approach
based on lease terms. Certain of our leases have terms that exceed 30 years.
Given the lack of publicly available data for longer-term borrowing rates,
determining the IBR for certain of our longer term leases

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requires additional judgment. Changes in these estimates could result in a
material change to our lease liabilities. See Part IV, Item 15 "Exhibits and
Financial Statement Schedule-Notes 2 and 8 to the Consolidated Financial
Statements."
At December 31, 2019, our operating lease liabilities are $425 million. A 1%
decrease in our estimated IBR would increase our operating lease liabilities by
approximately $40 million.
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk primarily from changes in interest rates and
foreign currency exchange rates. In certain situations, we seek to reduce
earnings and cash flow volatility associated with changes in interest rates and
foreign currency exchange rates by entering into financial arrangements to
provide a hedge against a portion of the risks associated with such volatility.
We continue to have exposure to such risks to the extent they are not hedged. We
enter into derivative financial arrangements to the extent they meet the
objectives described above, and we do not use derivatives for trading or
speculative purposes. At December 31, 2019, we were a party to hedging
transactions, including the use of derivative financial instruments, as
discussed below.
Interest Rate Risk
In the normal course of business, we are exposed to the impact of interest rate
changes due to our borrowing activities. Our objective is to manage the risk of
interest rate changes on the results of operations, cash flows, and the market
value of our debt by creating an appropriate balance between our fixed and
floating-rate debt. We enter into interest rate derivative transactions from
time to time, including interest rate swaps and interest rate locks, in order to
maintain a level of exposure to interest rate variability that we deem
acceptable.
At December 31, 2019, we had outstanding interest rate locks that hedge a
portion of the risk of changes in the benchmark interest rate associated with
long-term debt we anticipate issuing in the future. See Part IV, Item 15,
"Exhibits and Financial Statement Schedule-Note 11 to the Consolidated Financial
Statements." At December 31, 2019 and December 31, 2018, we did not hold any
interest rate swap contracts.
The following table sets forth the contractual maturities and the total fair
values at December 31, 2019 for our financial instruments materially affected by
interest rate risk:
                                             Maturities by Period
                                                                                                 Total carrying    Total fair
                    2020        2021         2022        2023         2024        Thereafter       amount (1)         value
Fixed-rate debt  $      5$   255$      5$   355$      6$        952$    1,578$   1,680
Average interest
rate (2)                                                                                               4.51 %
Floating-rate
debt (3)         $      5$     5$      5$     4$      4     $         26     $       49$      60
Average interest
rate (2)                                                                                               7.54 %


(1) Excludes $11 million of finance lease obligations and $15 million of
unamortized discounts and deferred financing fees.
(2) Average interest rate at December 31, 2019.
(3) Includes Grand Hyatt Rio de Janeiro construction loan which had a 7.54%
interest rate at December 31, 2019.
Foreign Currency Exposures and Exchange Rate Instruments
We transact business in various foreign currencies and utilize foreign currency
forward contracts to offset our exposure associated with the fluctuations of
certain foreign currencies. The U.S. dollar equivalents of the notional amount
of the outstanding forward contracts, the majority of which relate to
intercompany transactions, with terms of less than one year, were $194 million
and $210 million at December 31, 2019 and December 31, 2018, respectively.
We intend to offset the gains and losses related to our third-party debt and
intercompany transactions with gains or losses on our foreign currency forward
contracts such that there is a negligible effect on net income. At December 31,
2019, a hypothetical 10% change in foreign currency exchange rates would result
in an immaterial change in the fair value of the hedging instruments.
For the years ended December 31, 2019, December 31, 2018, and December 31, 2017,
the effects of these derivative instruments resulted in $3 million of net gains,
$15 million of net gains, and $19 million of net losses, respectively,
recognized in other income (loss), net on our consolidated statements of income.
We offset the gains and losses on our foreign currency forward contracts with
gains and losses related to our intercompany loans and transactions, such that
there is a negligible effect to net income.

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Latest news on HYATT HOTELS CORPORATION
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