HYATT HOTELS CORPORATION This quarterly report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements about the Company's plans, strategies, financial performance, prospects, or future events and involve known and unknown risks that are difficult to predict. As a result, our actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "continue," "likely," "will," "would," and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the factors discussed in our filings with theSEC , including our Annual Report on Form 10-K and our Current Report on Form 8-K filed onApril 21, 2020 ; the short and longer-term effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; the impact of the COVID-19 pandemic, and actions taken in response to the COVID-19 pandemic or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the ability of third-party owners, franchisees, or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic; the pace of recovery following the COVID-19 pandemic or any future resurgence; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the rate and the pace of economic recovery following economic downturns; levels of spending in business and leisure segments as well as consumer confidence; declines in occupancy and average daily rate; limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geopolitical conditions, including political or civil unrest or changes in trade policy; hostilities, or fear of hostilities, including future terrorist attacks, that affect travel; travel-related accidents; natural or man-made disasters such as earthquakes, tsunamis, tornadoes, hurricanes, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the COVID-19 pandemic; our ability to successfully achieve certain levels of operating profits at hotels that have performance tests or guarantees in favor of our third-party owners; the impact of hotel renovations and redevelopments; risks associated with our capital allocation plans and common stock repurchase program and quarterly dividend, including a reduction in or elimination of repurchase activity or dividend payments; the seasonal and cyclical nature of the real estate and hospitality businesses; changes in distribution arrangements, such as through internet travel intermediaries; changes in the tastes and preferences of our customers; relationships with colleagues and labor unions and changes in labor laws; the financial condition of, and our relationships with, third-party property owners, franchisees, and hospitality venture partners; the possible inability of third-party owners, franchisees, or development partners to access capital necessary to fund current operations or implement our plans for growth; risks associated with potential acquisitions and dispositions and the introduction of new brand concepts; the timing of acquisitions and dispositions, and our ability to successfully integrate completed acquisitions with existing operations; failure to successfully complete proposed transactions (including the failure to satisfy closing conditions or obtain required approvals); our ability to successfully execute on our strategy to expand our management and franchising business while at the same time reducing our real estate asset base within targeted timeframes and at expected values; declines in the value of our real estate assets; unforeseen terminations of our management or franchise agreements; changes in federal, state, local, or foreign tax law; increases in interest rates and operating costs; foreign exchange rate fluctuations or currency restructurings; lack of acceptance of new brands or innovation; general volatility of the capital markets and our ability to access such markets; changes in the competitive environment in our industry, including as a result of the COVID-19 pandemic, industry consolidation, and the markets where we operate; our ability to successfully grow the World of Hyatt loyalty program; cyber incidents and information technology failures; outcomes of legal or administrative proceedings; and violations of regulations or laws related to our franchising business. These factors are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our business, financial condition, results of operations, or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent 29
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required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. The following discussion should be read in conjunction with the Company's condensed consolidated financial statements and accompanying Notes, which appear elsewhere in this Quarterly Report on Form 10-Q. Executive Overview We provide hospitality and other services on a worldwide basis through the development, ownership, operation, management, franchising, and licensing of hospitality and wellness-related businesses. We develop, own, operate, manage, franchise, license, or provide services to a portfolio of properties consisting of full service hotels, select service hotels, resorts, and other properties, including branded spas and fitness studios, and timeshare, fractional, and other forms of residential, vacation, and condominium ownership units. AtMarch 31, 2020 , our worldwide hotel portfolio consisted of 924 full and select service hotels (223,474 rooms), including: • 413 managed properties (126,251 rooms), all of which we operate under
management and hotel services agreements with third-party property owners;
• 446 franchised properties (73,387 rooms), all of which are owned by third
parties that have franchise agreements with us and are operated by third
parties;
• 31 owned properties (13,534 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
• 25 managed properties and 2 franchised properties owned or leased by
unconsolidated hospitality ventures (8,045 rooms).
Our worldwide property portfolio also included: • 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 andserviced 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
• 37 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 operate under other tradenames or marks owned by such hotel or licensed by third parties. We report our consolidated operations inU.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 "-Non-GAAP Measures" for further discussion of constant currency disclosures. We manage our business within four reportable segments as described below: • Owned and leased hotels, which consists of our owned and leased full
service and select service hotels and, for purposes of segment Adjusted
EBITDA, our pro rata share of the Adjusted EBITDA of our unconsolidated
hospitality ventures, based on our ownership percentage of each venture;
•
management and franchising of properties located in
Latin America ,Canada , and theCaribbean ; • ASPAC management and franchising ("ASPAC"), which consists of our management and franchising of properties located inSoutheast Asia ,Greater China ,Australia ,South Korea ,Japan , andMicronesia ; and 30
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• EAME/
of our management and franchising of properties located in
the
Within corporate and other, we include the results of Exhale, results from our co-branded credit cards, and unallocated corporate expenses. See Part I, Item 1 "Financial Statements-Note 17 to the Condensed Consolidated Financial Statements" for further discussion of our segment structure, including changes that were effectiveJanuary 1, 2020 . Overview of the Impact of the COVID-19 Pandemic The global spread and unprecedented impact of the COVID-19 pandemic is complex and rapidly evolving and has resulted in significant disruption to our business, the lodging and hospitality industries, and the global economy. The pandemic has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement, gatherings of large numbers of people, and business operations such as travel bans, border closings, business closures, quarantines, shelter-in-place orders, and social distancing measures. As a result, the COVID-19 pandemic and its consequences have significantly reduced global travel and demand for hotel rooms and have had a material detrimental impact on global commercial activity across the travel, lodging, and hospitality industries, all of which has had, and is expected to continue to have, a material impact on our business, results of operations, and cash flows for the year endingDecember 31, 2020 . We do not expect a material improvement in results until business traveler and general consumer confidence related to risks associated with the COVID-19 pandemic improves and various governmental restrictions on travel and freedom of movement are lifted. Even after such restrictions are lifted and we are able to reopen hotels where operations are currently suspended, there remains considerable uncertainty as to the time it will take to see an increase in travel and demand for lodging and travel-related experiences. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state, and local public health authorities, and we may be required or elect to take additional actions based on their recommendations. Under these circumstances, there may be developments that require us to further adjust our operations. Overview of Financial Results For the quarter endedMarch 31, 2020 , we reported a net loss attributable toHyatt Hotels Corporation of$103 million , representing a$166 million decrease compared to the quarter endedMarch 31, 2019 , primarily driven by the COVID-19 pandemic. Consolidated revenues decreased$248 million or 19.9% ($244 million or 19.7%, excluding the impact of currency), during the quarter endedMarch 31, 2020 compared to the quarter endedMarch 31, 2019 . The decreases in management, franchise, and other fees, other revenues, and revenues for the reimbursement of costs incurred on behalf of managed and franchised properties of$33 million ,$10 million , and$57 million , respectively, for the quarter endedMarch 31, 2020 compared to the quarter endedMarch 31, 2019 , were primarily driven by the impact of the COVID-19 pandemic. Owned and leased hotels revenues decreased$147 million primarily due to the impact of the COVID-19 pandemic on comparable owned and leased hotels and dispositions in 2019. Across our portfolio of properties, we expect significant disruption during the second quarter with a level of recovery beginning in the third quarter. The pace of recovery is difficult to predict at this time and highly dependent on a variety of factors including corporate travel demand, consumer confidence regarding the safety of travel, and the global economic impact resulting from the pandemic. At our owned and leased hotels and at our full and select service hotels in theAmericas , we have seen cancellations concentrated in the first half of 2020. While cancellation activity has been modest for the second half of 2020, we anticipate cancellation activity to increase, especially for larger corporate meetings, as guest and customer booking behavior remains uncertain at this time. Cancellations for 2021 and beyond remain limited, and we continue to see long-term group bookings production; however, booking volumes began to decrease in April. Our consolidated Adjusted EBITDA for the quarter endedMarch 31, 2020 decreased$101 million compared to the first quarter of 2019. See "-Segment Results" for further discussion. For the remainder of the year, we expect Adjusted EBITDA to be negatively impacted by the expected declines in revenues across our portfolio of properties and ongoing non-controllable fixed expenses at our owned and leased hotels. We anticipate this will be partially offset by favorability in Adjusted selling, general, and administrative expenses as a result of decreased payroll and 31
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related costs and the elimination of all non-essential spending. See "-Non-GAAP Measures" for an explanation of how we utilize Adjusted EBITDA, why we present it, and material limitations on its usefulness, as well as a reconciliation of our net income (loss) attributable toHyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA. During the quarter endedMarch 31, 2020 , we returned$69 million of capital to our shareholders through share repurchases and$20 million through our quarterly dividend payment. We discontinued all share repurchase activity, effectiveMarch 3, 2020 , and we also suspended all dividend payments. The suspension of share repurchases and dividend payments will continue through the first quarter of 2021. Furthermore, the terms of the Revolver Amendment restrict our ability to repurchase shares and pay dividends during this same period. We expect to remain on track to successfully execute plans to sell approximately$1.5 billion of real estate byMarch 2022 as part of our capital strategy, and as ofMarch 31, 2020 , we have realized proceeds of over$950 million from the disposition of owned assets.Hotel Chain Revenue perAvailable Room ("RevPAR") Statistics. RevPAR Three Months Ended March 31, Number of comparable vs. 2019 (in (Comparable locations) hotels (1) 2020 constant $) System-wide hotels 816 $ 92 (28.1 )% Owned and leased hotels 37 $ 130 (25.8 )% Americas full service hotels 210 $ 115 (24.2 )% Americas select service hotels 382 $ 75 (22.9 )% ASPAC full service hotels 101 $ 70 (48.0 )% ASPAC select service hotels 20 $ 24 (47.5 )% EAME/SW Asia full service hotels 86 $ 88 (22.5 )% EAME/SW Asia select service hotels 17 $ 53 (12.7 )%
(1) The number of comparable hotels presented above includes owned and leased hotels and hotels that have temporarily suspended operations due to the COVID-19 pandemic.
We started 2020 with RevPAR growth in the low single-digits in both comparable system-wide and owned and leased hotels, excluding our ASPAC region. February year-to-date system-wide results decreased approximately 4.8% entirely due to the impact of the COVID-19 pandemic inGreater China and other areas ofAsia . Excluding the results of our ASPAC region, February year-to-date system-wide results increased 1.6%. With the global spread of the COVID-19 pandemic in March, we began to experience significant decreases in demand, with a system-wide RevPAR decrease of 66.6% in March. This system-wide RevPAR decrease reflects declines of 63.6% in theAmericas , 77.8% in ASPAC, 69.3% in EAME/SW Asia , and 71.9% in our owned and leased portfolio in March. The following table sets forth our comparable RevPAR performance by month for the three months endedMarch 31, 2020 compared to the same periods in the prior year: Three Months Ended March 31, January 2020 February 2020 March 2020 2020 Owned and leased 1.7 % 3.4 % (71.9 )% (25.8 )% Management and franchising: Americas 2.0 % 0.3 % (63.6 )% (23.8 )% ASPAC (6.9 )% (56.8 )% (77.8 )% (48.0 )% EAME/SW Asia 10.5 % (2.5 )% (69.3 )% (21.9 )% System-wide 1.2 % (10.6 )% (66.6 )% (28.1 )%
See "-Segment Results" for detailed discussion of RevPAR by segment.
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Various parts of the world remain under strict quarantines and travel restrictions which have resulted in significant declines in occupancy with uncertainty surrounding near-term improvement. System-wide occupancy rates for the month endedApril 30, 2020 are averaging approximately 15% for hotels that remain operational. AtApril 30, 2020 , operations were suspended at approximately 35% of our system-wide hotels. Operations were suspended at 62% of our full service hotels and 19% of our select service hotels in theAmericas , at 17% of our hotels in ASPAC, and at 58% of our hotels in EAME/SW Asia . Operations were suspended at 82% of our owned and leased hotels. Comparable system-wide RevPAR has worsened in April, and we expect a material decrease in RevPAR for the second quarter of 2020. Results of Operations Three Months EndedMarch 31, 2020 Compared with Three Months EndedMarch 31, 2019 Discussion on Consolidated Results For additional information regarding our consolidated results, please also refer to our condensed consolidated statements of income (loss) included in this quarterly report. Consolidated results were impacted significantly by the COVID-19 pandemic during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . See "-Segment Results" for further discussion. 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 (loss). 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. Three Months Ended
2020 2019 Better / (Worse) Currency Impact
Comparable owned and leased
hotels revenues $ 323 $ 418 $ (95 ) (22.8 )% $ (2 )
Non-comparable owned and leased
hotels revenues - 52 (52 ) (99.4 )% (1 )
Total owned and leased hotels
revenues $ 323 $ 470 $ (147 ) (31.2 )% $ (3 )
Owned and leased hotels revenues decreased during the three months ended
March 31, 2020 , compared to the same period in the prior year, driven by
declines in comparable owned and leased hotels revenues due to the impact of the
COVID-19 pandemic and the associated suspension of hotel operations at a number
of hotels and non-comparable owned and leased hotels revenues related to
dispositions. See "-Segment Results" for further discussion.
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Management, franchise, and other fees revenues.
Three Months Ended March 31,
2020 2019 Better / (Worse)
Base management fees $ 47 $ 63 $ (16 ) (24.4 )%
Incentive management fees 8 34 (26 ) (78.1 )%
Franchise fees 27 32 (5 ) (14.8 )%
Management and franchise fees 82 129 (47 ) (36.2 )%
Other fees revenues 26 12 14 105.8 %
Management, franchise, and other fees $ 108 $ 141 $ (33 ) (23.6 )%
Three Months Ended March 31,
2020 2019 Better / (Worse)
Management, franchise, and other fees
(23.6 )% Contra revenue (6 ) (5 ) (1 ) (23.0 )% Net management, franchise, and other fees$ 102 $ 136 $ (34 ) (25.4 )% The decrease in management and franchise fees for the three months endedMarch 31, 2020 , compared to the same period in the prior year, was primarily driven by decreased demand and suspended hotel operations at a number of hotels as a result of the COVID-19 pandemic. The increase in other fees was primarily driven by license fees in theAmericas and ASPAC management and franchising segments. See "-Segment Results" for further discussion. Other revenues. During the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , other revenues decreased$10 million primarily driven by the impact of the COVID-19 pandemic on our residential management operations. Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. Three Months Ended March 31, 2020 2019 Change Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties$ 533 $ 590 $ (57 ) (9.6 )% Less: rabbi trust impact 20 (13 ) 33 255.8 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties excluding rabbi trust impact$ 553 $ 577 $ (24 ) (4.1 )% Excluding the impact of rabbi trust, revenues for the reimbursement of costs incurred on behalf of managed and franchised properties decreased during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , primarily driven by lower reimbursements for payroll and related costs due to the impact of the COVID-19 pandemic and the associated suspension of hotel operations at a number of hotels. 34
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Owned and leased hotels expense.
Three
Months Ended
2020 2019 Better / (Worse)
Comparable owned and leased hotels expense $ 276 $ 313 $ 37 11.9 %
Non-comparable owned and leased hotels expense 3 40 37 92.3 %
Rabbi trust impact (7 ) 4 11 260.0 %
Total owned and leased hotels expense
$ 85 23.9 % Owned and leased hotels expense decreased during the three months endedMarch 31, 2020 , compared to the same period in the prior year, driven primarily by declines in comparable owned and leased hotels expense due to the aforementioned suspension of hotel operations at a number of hotels and non-comparable owned and leased hotels expense related to dispositions. See "-Segment Results" for further discussion. The impact recognized from our employee benefit programs funded through rabbi trusts was driven by the performance of the underlying invested assets during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . Other direct costs. Other direct costs decreased$11 million during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , primarily driven by a$6 million decrease in our residential management operations as a result of the COVID-19 pandemic and a$4 million decrease related to our co-branded credit card program. Selling, general, and administrative expenses. Three Months Ended
2020 2019 Change
Selling, general, and administrative expenses$ 47 $ 128 $ (81 ) (63.2 )% Less: rabbi trust impact 41 (26 ) 67 258.0 % Less: stock-based compensation expense (15 ) (20 ) 5 21.0 % Adjusted selling, general, and administrative expenses$ 73 $ 82 $ (9 ) (11.4 )% Adjusted selling, general, and administrative expenses exclude the impact of expenses related to deferred compensation plans funded through rabbi trusts and stock-based compensation expense. Adjusted selling, general, and administrative expenses, as we define it, is a non-GAAP measure. See "-Non-GAAP Measures" for further discussion of Adjusted selling, general, and administrative expenses. Adjusted selling, general, and administrative expenses decreased during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , driven by an$8 million decrease in payroll and related costs as a result of the COVID-19 pandemic and$5 million of integration related costs in 2019 associated with the acquisition of Two Roads, partially offset by a$3 million increase in bad debt expense in 2020. Costs incurred on behalf of managed and franchised properties. Three Months Ended
2020 2019 Change
Costs incurred on behalf of managed and franchised properties$ 555 $ 605 $ (50 ) (8.2 )% Less: rabbi trust impact 20 (13 ) 33 255.8 % Costs incurred on behalf of managed and franchised properties excluding rabbi trust impact$ 575 $ 592 $ (17 ) (2.8 )% Excluding the impact of rabbi trust, costs incurred on behalf of managed and franchised properties decreased during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , primarily 35
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driven by lower reimbursements for payroll and related costs due to the impact
of the COVID-19 pandemic and the associated suspension of hotel operations at a
number of hotels.
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts.
Three Months Ended March 31,
2020 2019 Better / (Worse)
Rabbi trust impact allocated to selling,
general, and administrative expenses $ (41 ) $ 26 $ (67 ) (258.0 )%
Rabbi trust impact allocated to owned and
leased hotels expense (7 ) 4 (11 ) (260.0 )%
Net gains (losses) and interest income
from marketable securities held to fund
rabbi trusts $ (48 ) $ 30 $ (78 ) (258.3 )%
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts decreased during the three months ended March 31, 2020 , compared to
the three months ended March 31, 2019 , driven by the performance of the
underlying invested assets.
Gains on sales of real estate. During the three months ended March 31, 2020 , we
recognized a $4 million pre-tax gain related to an unrelated third-party's
investment in certain of our subsidiaries that are developing a hotel, parking,
and retail space in Philadelphia, Pennsylvania and a $4 million pre-tax gain for
the sale of a building in Omaha, Nebraska . See Part I, Item 1 "Financial
Statements-Note 7 to the Condensed Consolidated Financial Statements" for
additional information.
Other income (loss), net. Other income (loss), net decreased $132 million
during the three months ended March 31, 2020 compared to the same period in the
prior year. See Part I, Item 1 "Financial Statements-Note 19 to the Condensed
Consolidated Financial Statements" for additional information.
Benefit (provision) for income taxes.
Three Months Ended March 31,
2020 2019 Better / (Worse)
Income (loss) before income taxes$ (138 ) $ 83 $ (221 ) (267.0 )% Benefit (provision) for income taxes 35 (20 ) 55 280.2 % Effective tax rate 25.4 % 23.5 % (1.9 )% For the three months endedMarch 31, 2020 , we recognized an income tax benefit of$35 million , compared to an income tax expense of$20 million for three months endedMarch 31, 2019 . The income tax benefit for the three months endedMarch 31, 2020 is primarily due to net losses before income taxes. See Part I, Item 1 "Financial Statements-Note 12 to the Condensed Consolidated Financial Statements" for additional information. Segment Results As described in Part I, Item 1 "Financial Statements-Note 17 to the Condensed Consolidated Financial Statements," we evaluate segment operating performance using owned and leased hotels revenues, management, franchise, and other fees revenues, and Adjusted EBITDA, and amounts for the three months endedMarch 31, 2019 have been adjusted retrospectively for the change effectiveJanuary 1, 2020 . Owned and leased hotels segment. Revenues, comparable RevPAR, and Adjusted EBITDA decreased significantly during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , primarily driven by the impact of the COVID-19 pandemic beginning inMarch 2020 at our full service hotels inthe United States and certain international markets, resulting in decreased group and transient demand and the temporary suspension of hotel operations at a number of hotels. AtMarch 31, 2020 , 82% of our owned and leased hotels had temporarily suspended operations. 36
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Owned and leased hotels segment revenues.
Three Months
Ended
2020 2019 Better / (Worse) Currency Impact
Comparable owned and leased hotels
revenues $ 330 $ 425 $ (95 ) (22.4 )% $ (2 )
Non-comparable owned and leased
hotels revenues - 52 (52 ) (99.4 )% (1 )
Total segment revenues $ 330 $ 477 $ (147 ) (30.7 )% $ (3 )
The $95 million decrease in comparable owned and leased hotels revenue includes
a $12 million increase in revenues in January and February 2020 , compared to the
same months in the prior year, primarily driven by strong group and transient
revenues in certain markets in the United States . The strong performance in the
first two months of the quarter was offset by significant revenue declines in
March as described above.
The decrease in non-comparable owned and leased hotels revenues for the three
months ended March 31, 2020 , compared to the same period in the prior year, was
driven by the dispositions of Hyatt Regency Atlanta and Grand Hyatt Seoul in
2019.
Three Months Ended March 31,
RevPAR Occupancy ADR
vs. 2019 vs. 2019
2020 (in constant $) 2020 vs. 2019 2020 (in constant $)Comparable owned and leased hotels$ 130 (25.8 )% 55.3 % (18.8)% pts$ 235 (0.5 )% The 25.8% decline in RevPAR at our comparable owned and leased hotels reflects a 1.7% and 3.4% RevPAR increase in January andFebruary 2020 , respectively, and a 71.9% decrease inMarch 2020 compared to the same months in the prior year. The increase in January andFebruary 2020 was primarily driven by strong group business inthe United States . The decrease beginning inMarch 2020 was driven by low occupancies at our full service hotels, primarily inthe United States , as a result of low transient and group demand due to the impact of the COVID-19 pandemic. During the three months endedMarch 31, 2020 , no properties were removed from the comparable owned and leased hotels results. Owned and leased hotels segment Adjusted EBITDA. Three Months Ended
2020 2019 Better / (Worse)
Owned and leased hotels Adjusted
EBITDA $ 28 $ 92 $ (64 ) (69.3 )%
Pro rata share of unconsolidated
hospitality ventures Adjusted EBITDA 6 11 (5 ) (47.4 )%
Segment Adjusted EBITDA $ 34 $ 103 $ (69 ) (66.9 )%
The decrease in Adjusted EBITDA was primarily driven by the aforementioned
decrease in revenues during the three months ended March 31, 2020 compared to
the same period in the prior year. Within Adjusted EBITDA, the decreases in
revenues were partially offset by a $43 million decrease in comparable owned and
leased hotels expense during the three months ended March 31, 2020 , compared to
the three months ended March 31, 2019 , primarily driven by a reduction of
payroll and related costs due to the temporary suspension of hotel operations at
a number of hotels. Adjusted EBITDA at our non-comparable owned and leased
hotels decreased $12 million driven by the aforementioned dispositions.
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Americas management and franchising segment. Revenues, full service and select service RevPAR, and Adjusted EBITDA decreased significantly during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , driven by the impact of the COVID-19 pandemic beginning inMarch 2020 . AtMarch 31, 2020 , 49% of ourAmericas full service hotels and 9% ofAmericas select service hotels had temporarily suspended operations.Americas management and franchising segment revenues. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment revenues Management, franchise, and other fees$ 84 $ 104 $ (20 ) (20.0 )% Contra revenue (4 ) (4 ) - (12.2 )% Other revenues 27 36 (9 ) (25.0 )% Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties 484 548 (64 ) (11.6 )% Total segment revenues$ 591 $ 684 $ (93 ) (13.7 )% Management, franchise, and other fees include a$6 million increase in other fees driven by a license fee associated with an amended license agreement forHyatt Residence Club and a$3 million increase in franchise fees primarily attributable to new and ramping hotels during January andFebruary 2020 compared to the same months in the prior year. The strong performance in the first two months of the quarter was offset by revenue declines in March. The decrease in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties was primarily driven by lower reimbursements for payroll and related costs due to suspension of hotel operations at a number of hotels, partially offset by an$11 million increase during January andFebruary 2020 , compared to the same months in the prior year, primarily driven by growth of our third-party owned managed and franchised portfolio. Additionally, the changes in the market value of the underlying invested assets for our benefit programs funded through rabbi trusts resulted in a$33 million decrease during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . Three Months Ended March 31, RevPAR Occupancy ADR (Comparable vs. 2019 System-wide vs. 2019 (in (in Hotels) 2020 constant $) 2020 vs. 2019 2020 constant $) Americas Full Service$ 115 (24.2 )% 54.3 % (16.5)% pts$ 212 (1.2 )% Americas Select Service$ 75 (22.9 )% 56.7 % (13.8)% pts$ 133 (4.0 )% Comparable system-wide hotels RevPAR increased 2.0% and 0.3% in January andFebruary 2020 , respectively, and decreased 63.6% inMarch 2020 compared to the same months in the prior year. The 24.2% RevPAR decrease at our comparable full service hotels reflects a 1.8% RevPAR increase in the first two months of the quarter offset by a 66.0% RevPAR decrease inMarch 2020 due to the COVID-19 pandemic compared to the same periods in the prior year. The RevPAR increase in January andFebruary 2020 was due to strong group business in certain markets inthe United States and theCaribbean . Comparable select service RevPAR was flat in the first two months of the quarter and decreased 57.7% inMarch 2020 , resulting in a 22.9% decrease in RevPAR for the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . 38
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During the three months endedMarch 31, 2020 , no properties were removed from the comparableAmericas full service system-wide hotel results, and two properties were removed from the comparableAmericas select service system-wide hotel results as one property left the chain and one property is undergoing a significant renovation.Americas management and franchising segment Adjusted EBITDA. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment Adjusted EBITDA$ 68 $ 93 $ (25 ) (26.6 )% The decrease in Adjusted EBITDA was primarily driven by the aforementioned decrease in revenues during the three months endedMarch 31, 2020 compared to the same period in the prior year. ASPAC management and franchising segment. Revenues, full service and select service RevPAR, and Adjusted EBITDA decreased significantly during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , driven by the impact of the COVID-19 pandemic beginning in lateJanuary 2020 , primarily inGreater China , and continuing inFebruary 2020 , primarily inJapan andSouth Korea , as hotels were operating with reduced occupancy rates due to lock downs, travel restrictions, and quarantine measures. DuringGreater China's peak of the pandemic in February, 30% of our full and select service hotels inGreater China and 18% of our full and select service hotels in ASPAC had temporarily suspended operations. Operations have resumed at many properties as travel restrictions were lifted and demand showed gradual improvement at the end ofMarch 2020 . AtMarch 31, 2020 , 12% of both our full and select service hotels inGreater China and in ASPAC had temporarily suspended operations. ASPAC management and franchising segment revenues. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment revenues Management, franchise, and other fees$ 19 $ 32 $ (13 ) (40.6 )% Contra revenue (1 ) - (1 ) (23.5 )% Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties 27 24 3 13.3 % Total segment revenues$ 45 $ 56 $ (11 ) (17.5 )% Management, franchise, and other fees includes an$8 million increase driven by license fees from the sale of branded residential ownership units during three months endedMarch 31, 2020 compared to the same period in the prior year The increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties during three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , was driven by the overall growth of our third-party owned full and select service portfolio. Three Months Ended March 31, RevPAR Occupancy ADR (Comparable vs. 2019 System-wide vs. 2019 (in (in Hotels) 2020 constant $) 2020 vs. 2019 2020 constant $) ASPAC Full Service$ 70 (48.0 )% 36.3 % (31.5)% pts$ 193 (3.1 )% ASPAC Select Service$ 24 (47.5 )% 30.6 % (26.4)% pts$ 79 (2.3 )% Comparable system-wide hotels RevPAR decreased 6.9%, 56.8%, and 77.8% in January, February, andMarch 2020 , respectively, compared to the same months in the prior year. The decrease in comparable full service RevPAR during the three months endedMarch 31, 2020 , compared to the same period in the prior year, was 39
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primarily driven by decreased inbound travel to the region and low transient demand, primarily inGreater China , as a result of the COVID-19 pandemic. Occupancy levels inGreater China , where the impacts of the COVID-19 pandemic were first reported, have shown gradual improvement over the past few weeks as quarantines and travel restrictions have lifted, with occupancy approaching 25% at the end of April, recovering from a low of mid-single digits in mid-February. There is currently one hotel where operations are suspended inGreater China , compared to 26 hotels at the peak of the crisis during February. The increase in demand is primarily driven by leisure travel. During the three months endedMarch 31, 2020 , no properties were removed from the comparable ASPAC full service system-wide hotel results, and one property that left the chain was removed from the comparable ASPAC select service system-wide hotel results. ASPAC management and franchising segment Adjusted EBITDA. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment Adjusted EBITDA$ 8 $ 20 $ (12 ) (58.5 )% The decrease in Adjusted EBITDA was primarily driven by the aforementioned decrease in revenues during the three months endedMarch 31, 2020 compared to the same period in the prior year. EAME/SW Asia management and franchising segment. Revenues, full service and select service RevPAR, and Adjusted EBITDA decreased significantly during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , driven by the impact of the COVID-19 pandemic beginning inMarch 2020 as hotels began to temporarily suspend operations. AtMarch 31, 2020 , 48% of our EAME/SW Asia full and select service hotels had temporarily suspended operations. EAME/SW Asia management and franchising segment revenues. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment revenues Management, franchise, and other fees$ 10 $ 18 $ (8 ) (43.0 )% Contra revenue (1 ) (1 ) - (55.0 )% Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties 20 17 3 21.7 % Total segment revenues$ 29 $ 34 $ (5 ) (14.6 )% The decrease in management, franchise, and other fees during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , was driven by the COVID-19 pandemic. The increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties during three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , was driven by the overall growth of our third-party owned full and select service portfolio. Three Months Ended March 31, RevPAR Occupancy ADR (Comparable vs. 2019 System-wide vs. 2019 (in (in Hotels) 2020 constant $) 2020 vs. 2019 2020 constant $) EAME/SW Asia Full Service$ 88 (22.5 )% 51.3 % (13.5)% pts$ 172 (2.0 )% EAME/SW Asia Select Service$ 53 (12.7 )% 58.2 % (8.0)% pts$ 90 (0.7 )% 40
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Comparable system-wide hotels RevPAR increased 10.5% inJanuary 2020 , compared toJanuary 2019 , and decreased 2.5% and 69.3% in February andMarch 2020 , respectively, compared to the same months in the prior year. The 22.5% RevPAR decrease at our comparable full service hotels reflects a 3.6% RevPAR increase in the first two months of the quarter offset by a 70.3% RevPAR decrease inMarch 2020 due to the COVID-19 pandemic compared to the same period in the prior year. The RevPAR increase in January andFebruary 2020 was due to increased transient demand and ADR in markets inWestern Europe . During the three months endedMarch 31, 2020 , no properties were removed from the comparable EAME/SW Asia full and select service system-wide hotel results. EAME/SW Asia management and franchising segment Adjusted EBITDA. Three Months Ended March 31, 2020 2019 Better / (Worse) Segment Adjusted EBITDA$ 1 $ 10 $ (9 ) (91.2 )% The decrease in Adjusted EBITDA was primarily driven by the aforementioned decrease in revenues during the three months endedMarch 31, 2020 compared to the same period in the prior year. Corporate and other. Three Months Ended March 31, 2020 2019 Better / (Worse) Revenues$ 14 $ 15 $ (1 ) (4.1 )% Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties 2 1 1 6.1 % Adjusted EBITDA (27 ) (40 ) 13 30.6 % Adjusted EBITDA increased during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , primarily due to$5 million of integration related costs in 2019 associated with the acquisition of Two Roads, a$4 million decrease of expenses related to our co-branded credit card program, and a$4 million reduction in payroll and related costs. 41
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Non-GAAP Measures
Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization
("Adjusted EBITDA") and EBITDA
We use the terms Adjusted EBITDA and EBITDA throughout this quarterly report.
Adjusted EBITDA and EBITDA, as we define them, are non-GAAP measures. We define
consolidated Adjusted EBITDA as net income (loss) 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;
• benefit (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;
• 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.
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 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
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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 (loss) attributable toHyatt Hotels Corporation , net income (loss), 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 condensed consolidated statements of income (loss) in our condensed consolidated financial statements included elsewhere in this quarterly report. See below for a reconciliation of net income (loss) attributable toHyatt 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 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. Hotels that have temporarily suspended operations due to the COVID-19 pandemic are included in our definition of comparable system-wide hotels. We may use variations of comparable system-wide hotels to specifically refer to comparable system-wideAmericas full service or select service hotels for those properties that we manage or franchise within theAmericas 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. Hotels that have temporarily suspended operations due to the COVID-19 pandemic are included in our definition of comparable owned and leased hotels. 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. 43
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The charts below illustrate Adjusted EBITDA by segment. [[Image Removed: chart-ff9a326846085d46840.jpg]] [[Image Removed: chart-b3ec0f1b543d56dfa41.jpg]] *Consolidated Adjusted EBITDA for the three months endedMarch 31, 2020 included eliminations of$2 million and corporate and other Adjusted EBITDA of$(27) million . **Consolidated Adjusted EBITDA for the three months endedMarch 31, 2019 included eliminations of$1 million and corporate and other Adjusted EBITDA of$(40) million . ***Adjusted EBITDA percentages for the three months endedMarch 31, 2019 have been adjusted for changes within the segments effectiveJanuary 1, 2020 . See Part I, Item 1 "Financial Statements-Note 17 to the Condensed Consolidated Financial Statements" for additional information. 44
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The table below provides a reconciliation of our net income (loss) attributable
to
Three Months Ended March 31,
2020 2019 Change
Net income (loss) attributable to Hyatt Hotels Corporation$ (103 ) $ 63 $ (166 ) (262.8 )% Interest expense 17 19 (2 ) (8.7 )% (Benefit) provision for income taxes (35 ) 20 (55 ) (280.2 )% Depreciation and amortization 80 80 - (0.1 )% EBITDA (41 ) 182 (223 ) (122.3 )% Contra revenue 6 5 1 23.0 % Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (533 ) (590 ) 57 9.6 % Costs incurred on behalf of managed and franchised properties 555 605 (50 ) (8.2 )% Equity losses from unconsolidated hospitality ventures 2 3 (1 ) (40.6 )% Stock-based compensation expense 15 20 (5 ) (21.0 )% Gains on sales of real estate (8 ) (1 ) (7 ) (794.5 )% Asset impairments 3 3 - (16.7 )% Other (income) loss, net 81 (51 ) 132 258.4 % Pro rata share of unconsolidated owned and leased hospitality ventures Adjusted EBITDA 6 11 (5 ) (47.4 )% Adjusted EBITDA$ 86 $ 187 $ (101 ) (54.3 )% 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. If we deem necessary, 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. We maintain a cash investment policy that emphasizes preservation of capital. The COVID-19 pandemic and related travel restrictions and other containment efforts have had a significant impact on the travel industry and, as a result, on our business, results of operations, and cash flows. Given the uncertainty and dynamic nature of the situation, we cannot currently estimate the ultimate financial impact of the COVID-19 pandemic and have therefore taken significant actions to manage operating expenses and cash flows consistent with business needs and demand levels. Those actions include (i) the reduction of capital expenditures; (ii) the reduction of selling, general, and administrative expenses; (iii) the reduction of a significant portion of owned and leased hotels expenses; (iv) the reduction of costs incurred on behalf of our third-party owners; and (v) the suspension of our quarterly dividend and all share repurchases. In addition, onApril 21, 2020 , we entered into the Revolver Amendment and issued the 2025 Notes and the 2030 Notes. See our Current Reports on Form 8-K filed with theSEC onApril 21, 2020 andApril 24, 2020 , respectively, for more information related to our revolving credit facility amendment and notes offering. Based on these actions, we believe that 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 believe we have adequate existing liquidity to fund our operations for at least the next 30 months assuming no improvement in operating conditions. 45
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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 three months endedMarch 31, 2020 andMarch 31, 2019 , various transactions impacted our liquidity. See "-Sources and Uses of Cash." Sources and Uses of Cash Three Months Ended March 31, 2020 2019 Cash provided by (used in): Operating activities $ (100 ) $ 13 Investing activities 13 (39 ) Financing activities 253 (5 ) Effect of exchange rate changes on cash 3 -
Net increase (decrease) in cash, cash equivalents, and restricted cash
$ 169 Cash Flows from Operating Activities Cash provided by (used in) operating activities decreased by$113 million for the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . The decrease was primarily due to a decline in performance in our management and franchising and owned and leased hotels segments which were negatively impacted by the COVID-19 pandemic in 2020 and higher tax payments in 2020 driven by a transaction in 2019. Cash Flows from Investing Activities During the three months endedMarch 31, 2020 : • We received$72 million of proceeds related to the disposition of a 60%
ownership interest in certain subsidiaries that are developing a hotel,
parking, and retail space in
• We received
• We invested
During the three months ended
• We acquired land for
• We received
securities and short-term investments.
Cash Flows from Financing Activities During the three months endedMarch 31, 2020 : • We repurchased 827,643 shares of Class A common stock for an aggregate
purchase price of
• We paid a quarterly
common stock totaling
• We borrowed
facility.
During the three months ended
purchase price of $102 million .
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• We paid a quarterly
common stock totaling
• We borrowed
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:
March 31, 2020 December 31, 2019
Consolidated debt (1) $ 1,962 $ 1,623
Stockholders' equity 3,705 3,962
Total capital 5,667 5,585
Total debt to total capital 34.6 % 29.1 %
Consolidated debt (1) 1,962 1,623
Less: cash and cash equivalents and short-term
investments (1,262 ) (961 )
Net consolidated debt $ 700 $ 662
Net debt to total capital 12.4 % 11.9 %
(1) Excludes approximately $596 million and $572 million of our share of
unconsolidated hospitality venture indebtedness at March 31, 2020 and
December 31, 2019 , respectively, substantially all of which is non-recourse to
us and a portion of which we guarantee pursuant to separate agreements.
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. In 2020, we
plan to reduce discretionary capital expenditures as a result of the COVID-19
pandemic.
Three Months Ended March 31,
2020 2019
Maintenance and technology $ 13 $ 13
Enhancements to existing properties 27 31
Investment in new properties under development or recently opened 15
22
Total capital expenditures $ 55 $
66
The decrease in investment in new properties under development or recently opened is primarily driven by a decrease in renovation spend at a Miraval property in 2020. Senior Notes The table below sets forth the outstanding principal balance of our Senior Notes atMarch 31, 2020 , as described in Part I, Item 1 "Financial Statements-Note 10 to the Condensed Consolidated Financial Statements." Interest on the Senior Notes is payable semi-annually. Principal amount 2021 Notes $ 250 2023 Notes 350 2026 Notes 400 2028 Notes 400 Total Senior Notes $ 1,400
We are in compliance with all applicable covenants under the indenture governing
our Senior Notes at
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OnApril 21, 2020 , we issued the 2025 Notes and the 2030 Notes. See Part I, Item 1 "Financial Statements-Note 20 to the Condensed Consolidated Financial Statements" and our Current Reports on Form 8-K filed with theSEC onApril 21, 2020 andApril 24, 2020 , respectively, for more information related to our Notes offering. 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. We had$350 million and$0 balance outstanding on our revolving credit facility atMarch 31, 2020 andDecember 31, 2019 , respectively. See Part I, Item 1 "Financial Statements-Note 10 to the Condensed Consolidated Financial Statements." We are in compliance with all applicable covenants under the revolving credit facility atMarch 31, 2020 . OnApril 21, 2020 , we entered into the Revolver Amendment. See Part I, Item 1 "Financial Statements-Note 20 to the Condensed Consolidated Financial Statements" and our Current Report on Form 8-K filed with theSEC onApril 21, 2020 for more information related to the Revolver Amendment. Letters of Credit We issue letters of credit either under the revolving credit facility or directly with financial institutions. We had$253 million and$263 million in letters of credit issued directly with financial institutions outstanding atMarch 31, 2020 andDecember 31, 2019 , respectively. These letters of credit had weighted-average fees of approximately 99 basis points and a range of maturity of up to approximately two years atMarch 31, 2020 . Critical Accounting Policies and Estimates Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have disclosed those estimates that we believe are critical and require the use of complex judgment in their application in our 2019 Form 10-K, with additional considerations below. Loyalty Program Future Redemption Obligation We utilize an actuary to assist with the valuation of the deferred revenue liability related to the loyalty program. As a result of the impact of the COVID-19 pandemic, we revised our estimate of the anticipated timing of our future point redemptions over the next 12 months, which resulted in a$116 million reclassification of our deferred revenue liability related to the loyalty program from current to long-term atMarch 31, 2020 .Goodwill and Indefinite-Lived Intangible Assets Historically, changes in estimates used in our goodwill and indefinite-lived intangible asset valuations have not resulted in material impairment charges in subsequent periods. However, the extent, duration, and magnitude of the COVID-19 pandemic will depend on factors such as the impact of the pandemic on global and regional economies, travel, and economic activity, as well as actions taken by governments, businesses, and individuals in response to the pandemic or any resurgence. Future impacts of the COVID-19 pandemic are highly uncertain and difficult to predict, but they may change the estimates and assumptions used in our goodwill valuations, which could result in future impairment charges. AtMarch 31, 2020 , a 10% decline in the underlying cash flows or a 1% increase in the discount rates or terminal capitalization rates could reduce the fair value of two of our goodwill reporting units below the carrying value which could result in future impairment charges of up to$38 million . One reporting unit has a carrying value of$200 million , inclusive of goodwill of$17 million , and the other reporting unit has a carrying value of$400 million , inclusive of goodwill of$21 million . For all other goodwill reporting units, a 10% decline in the underlying cash flows or a 1% increase in the discount rates or terminal capitalization rates atMarch 31, 2020 would not result in an impairment of the goodwill as we have sufficient coverage in excess of our carrying value. 48
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