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, and financial performance; the impact of the COVID-19 pandemic and pace of recovery; the amount by which the Company intends to reduce its real estate asset base and the anticipated timeframe for such asset dispositions; and prospective or future events. Forward-looking statements 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; the duration of the COVID-19 pandemic and its short and longer-term effects, including the demand for travel, transient and group business, and levels of consumer confidence, and the pace of recovery following the pandemic, any additional resurgence, or COVID-19 variants; the impact of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants, and the impact of actions that governments, businesses, and individuals take in response, on global and regional economies, travel limitations or bans, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the broad distribution of COVID-19 vaccines and wide acceptance by the general population of such vaccines; the ability of third-party owners, franchisees, or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants; 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 ("ADR"); limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geo-political 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, such as the COVID-19 pandemic, or fear of such outbreaks; 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, share repurchase program, and dividend payments, including a reduction in, or elimination or suspension 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 26 -------------------------------------------------------------------------------- Table of Contents factors affecting forward-looking statements, except to the extent 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 operation, management, franchising, ownership, development, and licensing of hospitality businesses. We operate, manage, franchise, own, lease, develop, license, or provide services to a portfolio of properties consisting of full service hotels, select service hotels, resorts, and other properties, including timeshare, fractional, and other forms of residential, vacation, and condominium ownership units. AtMarch 31, 2021 , our worldwide hotel portfolio consisted of 993 full and select service hotels (238,247 rooms), including: •418 managed properties (129,429 rooms), all of which we operate under management and hotel services agreements with third-party property owners; •503 franchised properties (83,498 rooms), all of which are owned by third parties that have franchise agreements with us and are operated by third parties; •32 owned properties (13,841 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; •26 managed properties and 2 franchised properties owned or leased by unconsolidated hospitality ventures (8,207 rooms); and •5 franchised properties (1,015 rooms) that are operated by an unconsolidated hospitality venture in connection with a master license agreement by Hyatt, 3 of these properties (669 rooms) are leased by the unconsolidated hospitality venture. 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; •38 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 •36 condominium ownership properties for which we provide services for the rental programs and/or homeowners associations (including 1 unconsolidated hospitality venture). 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 used 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; 27 -------------------------------------------------------------------------------- Table of Contents •Americas management and franchising ("Americas"), which consists of our management and franchising of properties located inthe United States ,Latin America ,Canada , and theCaribbean , as well as our residential management operations; •ASPAC management and franchising ("ASPAC"), which consists of our management and franchising of properties located inSoutheast Asia ,Greater China ,Australia ,New Zealand ,South Korea ,Japan , andMicronesia ; and •EAME/SW Asia management and franchising ("EAME/SW Asia "), which consists of our management and franchising of properties located inEurope ,Africa , theMiddle East ,India ,Central Asia , andNepal . Within corporate and other, we include the results from our co-branded credit card program, the results of the Exhale spa and fitness business, which was sold during the year endedDecember 31, 2020 , and unallocated corporate expenses. See Part I, Item 1 "Financial Statements-Note 16 to the Condensed Consolidated Financial Statements" for further discussion of our segment structure. Overview of the Impact of the COVID-19 Pandemic The global spread and impact of the COVID-19 pandemic are complex and continuously evolving, resulting 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 large gatherings of people, travel bans, border closings, business closures and restrictions, quarantines, shelter-in-place orders, and social distancing measures. As a result, the COVID-19 pandemic and its impacts have significantly reduced global travel and demand for hotel rooms and travel experiences and have had a material detrimental impact on global commercial activity across the travel, lodging, and hospitality industries, which has had, and is expected to continue to have, a material impact on our business, results of operations, cash flows, and financial condition. While we have seen continued improvement during the quarter endedMarch 31, 2021 , we expect demand could continue to be uneven in the near term, and we do not expect a material improvement in results until business traveler and consumer confidence related to risks associated with the COVID-19 pandemic improves and various government and corporate restrictions on travel and freedom of movement are lifted. We have, at times, suspended operations at certain hotels experiencing low levels of occupancy for different lengths of time across our portfolio. As restrictions have been lifted, we have been able to reopen the majority of hotels where operations were previously suspended, but as cases of COVID-19 increase in various regions around the globe, restrictions have been re-established in certain markets, which have created, and may continue to create, demand volatility and may result in the subsequent re-suspension of operations at certain hotels. AtMarch 31, 2021 , 96% of our system-wide hotels were open compared to 94% atDecember 31, 2020 . Even once all restrictions on global travel have been lifted and vaccines are widely available and distributed, there remains considerable uncertainty as to the pace of recovery of demand for lodging and travel-related experiences. We are monitoring guidance from international and domestic authorities, including federal, state, and local public health authorities, and there may be developments that require us to further adjust our operations. Overview of Financial Results For the quarter endedMarch 31, 2021 , we reported a net loss attributable toHyatt Hotels Corporation of$304 million , representing a$201 million decrease compared to the quarter endedMarch 31, 2020 , driven by decreased operating performance as a result of the COVID-19 pandemic and a non-cash tax valuation allowance recognized in the quarter. Consolidated revenues decreased$555 million or 55.9% ($557 million , or 56.0%, excluding the impact of currency) during the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 . The decreases in owned and leased hotels revenues; management, franchise, and other fees; other revenues; and revenues for the reimbursement of costs incurred on behalf of managed and franchised properties of$219 million ,$45 million ,$16 million , and$273 million , respectively, for the quarter endedMarch 31, 2021 , compared to the quarter endedMarch 31, 2020 , were primarily driven by the impact of the COVID-19 pandemic. Across our portfolio of properties, we have continued to experience significant disruption during the first quarter, with sequential improvement in demand over the course of the quarter, largely driven by leisure travel within certain markets, and we expect varied levels of recovery over the remainder of 2021. The pace of recovery is 28 -------------------------------------------------------------------------------- Table of Contents difficult to predict at this time and is highly dependent on a variety of factors including group business and corporate travel demand, consumer confidence regarding the safety of travel, the distribution and broad acceptance of COVID-19 vaccines, and the global economic impact resulting from the pandemic. At our full service hotels in theAmericas , including owned and leased hotels, we have seen long-term group bookings production improve compared to 2020, though still significantly lower than pre-COVID-19 pandemic levels. The revenue associated with group booking demand is dependent on travel restrictions related to gatherings being lifted and confidence from meeting planners and businesses that their attendees are comfortable traveling. Our consolidated Adjusted EBITDA for the quarter endedMarch 31, 2021 decreased$106 million , compared to the first quarter of 2020, driven by the impacts of the COVID-19 pandemic. See "-Segment Results" for further discussion. 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 loss attributable toHyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA. During the quarter endedMarch 31, 2021 , there were no returns of capital to our shareholders through share repurchases, and there was no quarterly dividend payment as we suspended all share repurchase activity and dividend payments beginning inMarch 2020 . We expect to successfully execute plans announced inMarch 2019 to realize proceeds of approximately$1.5 billion from the sale of real estate byMarch 2022 as part of our capital strategy. As ofMarch 31, 2021 , we have realized proceeds of approximately$1 billion towards this goal from the disposition of owned assets.Hotel Chain Revenue perAvailable Room ("RevPAR") Statistics. RevPAR Three Months Ended March 31, Number of comparable vs. 2020 (Comparable locations) hotels (1) 2021 (in constant $) System-wide hotels 889$ 46 (48.9) % Owned and leased hotels 35$ 48 (64.4) % Americas full service hotels 216$ 44 (61.8) % Americas select service hotels 416$ 48 (34.7) % ASPAC full service hotels 111$ 57 (19.8) % ASPAC select service hotels 26$ 32 40.9 % EAME/SW Asia full service hotels 102$ 37 (58.2) % EAME/SW Asia select service hotels 18$ 29 (46.7) %
(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.
System-wide RevPAR decreased 48.9% during the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , driven by decreased group and transient demand due to the impact of the COVID-19 pandemic, which significantly affected most regions beginning inMarch 2020 . System-wide RevPAR had double-digit percentage growth for the month ofMarch 2021 compared to the same period in 2020, as leisure demand continues to drive recovery and travel restrictions have eased in certain markets due to lower COVID-19 cases coupled with an increase in vaccine distribution. The ASPAC region had triple-digit percentage RevPAR growth for the month ofMarch 2021 , compared to the same period in 2020, primarily due to improved transient demand led byGreater China . See "-Segment Results" for discussion of RevPAR by segment. Our comparable system-wide hotels RevPAR of$46 and$90 for the three months endedMarch 31, 2021 andMarch 31, 2020 , respectively, remain significantly below pre-pandemic levels of previously reported comparable system-wide hotels RevPAR of$132 for the three months endedMarch 31, 2019 . While there remains uncertainty surrounding significant near-term improvement, it is our expectation that business transient and group business will continue to gradually improve over the coming months. Leisure transient demand may remain consistent or moderately improve over 2021, especially during the summer months, but demand may be varied and irregular in the current environment. 29 -------------------------------------------------------------------------------- Table of Contents Results of Operations Three Months EndedMarch 31, 2021 Compared with Three Months EndedMarch 31, 2020 Discussion on Consolidated Results For additional information regarding our consolidated results, 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, 2021 andMarch 31, 2020 . 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 recognized on the various financial statement line items discussed below and had no impact on net loss. Owned and leased hotels revenues.
Three Months Ended
2021 2020 Better / (Worse) Currency Impact
Comparable owned and leased hotels
revenues $ 101 $ 301 $ (200) (66.4) % $ 2
Non-comparable owned and leased hotels
revenues 3 22 (19) (86.3) % -
Total owned and leased hotels revenues
(67.8) % $ 2
Comparable owned and leased hotels revenues decreased during the three months
ended March 31, 2021 , compared to the same period in the prior year, driven by
the COVID-19 pandemic beginning in the latter half of the first quarter of 2020,
resulting in decreased demand at a significant number of hotels. For the same
period, non-comparable owned and leased hotels revenues decreased due to the
extended closure of an owned hotel. See "-Segment Results" for further
discussion.
Management, franchise, and other fees revenues.
Three Months Ended
2021 2020 Better / (Worse)
Base management fees $ 24 $ 47 $ (23) (48.8) %
Incentive management fees 8 8 - 2.2 %
Franchise fees 17 27 (10) (38.0) %
Management and franchise fees 49 82 (33) (40.6) %
Other fees revenues 14 26 (12) (46.7) %
Management, franchise, and other fees
$ (45) (42.0) %
Three Months Ended March 31,
2021 2020 Better / (Worse)
Management, franchise, and other fees
$ (45) (42.0) % Contra revenue (8) (6) (2) (24.6) %
Net management, franchise, and other fees
$ (47) (46.3) % The decreases in base management fees and franchise fees for the three months endedMarch 31, 2021 , compared to the same period in the prior year, were driven by decreased demand at a significant number of hotels as a result of the COVID-19 pandemic. Other fees revenues decreased for the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , driven by decreases in license fees in the ASPAC andAmericas management and franchising segments. See "-Segment Results" for further discussion. Other revenues. During the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , other revenues decreased$16 million , primarily driven by the impact of the COVID-19 pandemic 30
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Table of Contents on our residential management operations and the sale of the Exhale spa and fitness business during the fourth quarter of 2020. Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties.
Three
Months Ended
2021 2020 Change
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties
(51.2) %
Less: rabbi trust impact (5) 20 (25) (125.1) %
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties
excluding rabbi trust impact $ 255 $ 553 $ (298) (53.9) %
Revenues for the reimbursement of costs incurred on behalf of managed and
franchised properties decreased during the three months ended March 31, 2021 ,
compared to the three months ended March 31, 2020 , primarily driven by the
impact of the COVID-19 pandemic and associated cost containment initiatives,
which led to lower reimbursements for payroll and related costs and expenses
related to system-wide services provided to managed and franchised properties.
This decrease was partially offset by a $25 million increase in the value of the
marketable securities held to fund our deferred compensation plans through rabbi
trusts due to improved market performance.
Owned and leased hotels expenses.
Three Months Ended
2021 2020 Better / (Worse)
Comparable owned and leased hotels expenses
$ 136 54.7 %
Non-comparable owned and leased hotels expenses 11 32 21 66.1 %
Rabbi trust impact 2 (7) (9) (123.3) %
Total owned and leased hotels expenses
$ 148 54.3 %
The decrease in comparable owned and leased hotels expenses during the three
months ended March 31, 2021 , compared to the same period in the prior year, was
primarily driven by the aforementioned decreased demand at a significant number
of hotels and related suspension of operations at certain hotels due to the
COVID-19 pandemic. For the same period, non-comparable owned and leased hotels
expenses decreased due to the extended closure of an owned hotel. See "-Segment
Results" for further discussion.
Other direct costs. During the three months ended March 31, 2021 , compared to
the three months ended March 31, 2020 , other direct costs decreased $11 million ,
primarily driven by the impact of the COVID-19 pandemic on our residential
management operations and the sale of the Exhale spa and fitness business during
the fourth quarter of 2020.
Selling, general, and administrative expenses.
Three
Months Ended
2021 2020 Change
Selling, general, and administrative expenses
102.0 %
Less: rabbi trust impact (10) 41 (51) (124.4) %
Less: stock-based compensation expense (28) (15) (13) (85.3) %
Adjusted selling, general, and administrative
expenses $ 57 $ 73 $ (16) (22.5) %
Selling, general, and administrative expenses increased during the three months
ended March 31, 2021 , compared to the same period in the prior year, primarily
driven by the improved market performance of the underlying investments in
marketable securities held to fund our deferred compensation plans through rabbi
trusts and an increase in stock-based compensation expense, primarily due to
lapping a reversal of previously recognized stock-based compensation expense
related to certain PSU awards during the three months ended March 31, 2020 .
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During the three months ended March 31, 2021 , compared to the three months ended
March 31, 2020 , Adjusted selling, general, and administrative expenses decreased
as a result of cost containment initiatives that primarily drove decreases in
payroll and related costs.
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, as
we define it, is a non-GAAP measure. See "-Non-GAAP Measures" for further
discussion of Adjusted selling, general, and administrative expenses.
Costs incurred on behalf of managed and franchised properties.
Three
Months Ended
2021 2020 Change
Costs incurred on behalf of managed and
franchised properties $ 277 $ 555 $ (278) (50.1) %
Less: rabbi trust impact (5) 20 (25) (125.1) %
Costs incurred on behalf of managed and
franchised properties excluding rabbi trust
impact $ 272 $ 575 $ (303) (52.7) %
Costs incurred on behalf of managed and franchised properties decreased during
the three months ended March 31, 2021 , compared to the three months ended
March 31, 2020 , driven by the impact of the COVID-19 pandemic and associated
cost containment initiatives, both of which led to lower reimbursements for
payroll and related costs and expenses related to system-wide services provided
to managed and franchised properties. This decrease was partially offset by a
$25 million increase in the value of the marketable securities held to fund our
deferred compensation plans through rabbi trusts due to improved market
performance.
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts.
Three Months Ended March 31,
2021 2020 Better / (Worse)
Rabbi trust impact allocated to selling,
general, and administrative expenses $ 10 $ (41) $ 51 124.4 %
Rabbi trust impact allocated to owned and leased
hotels expenses 2 (7) 9 123.3 %
Net gains (losses) and interest income from
marketable securities held to fund rabbi trusts
60 124.3 %
Net gains (losses) and interest income from marketable securities held to fund
rabbi trusts increased during the three months ended March 31, 2021 , compared to
the same period in prior year, driven by the aforementioned performance of the
underlying invested assets.
Equity earnings (losses) from unconsolidated hospitality ventures. Equity
earnings (losses) from unconsolidated hospitality ventures increased $56 million
during the three months ended March 31, 2021 compared to the same period in
prior year. This increase is driven by a $69 million pre-tax gain recognized in
connection with the acquisition of the remaining 50% interest in the entities
that own Grand Hyatt São Paulo, partially offset by an increase in Hyatt's share
of unconsolidated hospitality ventures' net losses.
Interest expense. Interest expense increased $24 million during the three
months ended March 31, 2021 , compared to the same period in the prior year,
driven by the 2025 and 2030 Notes issued during the second quarter of 2020 and
the 2022 Notes issued during the third quarter of 2020. See Part I, Item 1
"Financial Statements-Note 9 to the Condensed Consolidated Financial Statements"
for additional information.
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 developed Hyatt Centric Center
City Philadelphia and adjacent parking and retail space and a $4 million pre-tax
gain for the sale of a commercial building in Omaha, Nebraska . See Part I, Item
1 "Financial Statements-Note 6 to the Condensed Consolidated Financial
Statements" for additional information.
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Other income (loss), net. Other income (loss), net increased $93 million during
the three months ended March 31, 2021 compared to the same period in the prior
year. See Part I, Item 1 "Financial Statements-Note 18 to the Condensed
Consolidated Financial Statements" for additional information.
Benefit (provision) for income taxes.
Three Months Ended
2021 2020 Better / (Worse)
Loss before income taxes $ (118) $ (138) $ 20 14.2 %
Benefit (provision) for income taxes (186) 35 (221) (629.6) %
Effective tax rate (156.6) % 25.4 % (182.0) %
The income tax provision of $186 million for the three months ended March 31,
2021 is primarily driven by a non-cash expense to recognize a full valuation
allowance on U.S. federal and state deferred tax assets as further described in
Part I, Item 1 "Financial Statements-Note 11 to the Condensed Consolidated
Financial Statements."
Segment Results
As described in Part I, Item 1 "Financial Statements-Note 16 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.
Owned and leased hotels segment.
Revenues, comparable RevPAR, and Adjusted EBITDA decreased during the three
months ended March 31, 2021 , compared to the three months ended March 31, 2020 ,
primarily driven by the impact of the COVID-19 pandemic beginning in March 2020
at our owned and leased properties, resulting in decreased group and transient
demand. At March 31, 2021 , 85% of our owned and leased hotels were open.
Owned and leased hotels segment revenues.
Three Months Ended
2021 2020 Better / (Worse) Currency Impact
Comparable owned and leased hotels revenues
$ (204) (66.4) % $ 2 Non-comparable owned and leased hotels revenues 3 22 (19) (86.3) % - Total segment revenues$ 107 $ 330 $ (223) (67.7) % $ 2 Comparable owned and leased hotels revenues decreased for the three months endedMarch 31, 2021 , compared to the same period in the prior year, driven by the significant impacts of the COVID-19 pandemic as described above. The decrease in non-comparable owned and leased hotels revenues for the three months endedMarch 31, 2021 , compared to the same period in the prior year, was primarily driven by the extended closure of an owned hotel. Three Months Ended March 31, RevPAR Occupancy ADR vs. 2020 vs. 2020 2021 (in constant $) 2021 vs. 2020 2021 (in constant $) Comparable owned and leased hotels$ 48 (64.4) % 28.1 % (27.3)% pts$ 170 (29.9) % The decline in RevPAR at our comparable owned and leased hotels during the three months endedMarch 31, 2021 , compared to the same period in the prior year, was driven by low demand due to the impact of the COVID-19 pandemic. The comparable owned and leased hotel portfolio overall showed signs of recovery during the three months endedMarch 31, 2021 with sequential monthly increases in RevPAR, driven by leisure demand with notable increases toward the end of the quarter. 33 -------------------------------------------------------------------------------- Table of Contents During the three months endedMarch 31, 2021 , one property was removed from comparable owned and leased hotels results as the property has been closed for an extended period. Owned and leased hotels segment Adjusted EBITDA.
Three Months Ended
2021 2020 Better / (Worse)
Owned and leased hotels Adjusted EBITDA
(187.5) %
Pro rata share of unconsolidated hospitality
ventures' Adjusted EBITDA (4) 6 (10) (164.2) %
Segment Adjusted EBITDA $ (29) $ 34 $ (63) (183.5) %
Owned and leased hotels Adjusted EBITDA. The decrease in Adjusted EBITDA at our
owned and leased hotels for the three months ended March 31, 2021 , compared to
the same period in the prior year, was primarily driven by the aforementioned
decrease in comparable owned and leased hotels revenues. Within Adjusted EBITDA,
the decrease in revenues was partially offset by a decrease in comparable owned
and leased hotels expenses during the three months ended March 31, 2021 ,
compared to the three months ended March 31, 2020 , primarily driven by a reduced
payroll and related costs.
Pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA. Our pro
rata share of Adjusted EBITDA from our unconsolidated hospitality ventures
decreased during the three months ended March 31, 2021 , compared to the same
period in 2020, primarily driven by decreased demand due to the COVID-19
pandemic.
Americas management and franchising segment.
Revenues, full service and select service RevPAR, and Adjusted EBITDA decreased
during the three months ended March 31, 2021 , compared to the three months ended
March 31, 2020 , driven by the impact of the COVID-19 pandemic beginning in March
2020 . At March 31, 2021 , 93% of our Americas full service hotels and 99% of
Americas select service hotels were open.
Americas management and franchising segment revenues.
Three
Months Ended
2021 2020 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 38 $ 84 $ (46) (53.9) %
Contra revenue (4) (4) - (9.0) %
Other revenues 17 27 (10) (34.8) %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties 227 484 (257) (53.0) %
Total segment revenues $ 278 $ 591 $ (313) (52.8) %
The decreases in management, franchise, and other fees and other revenues for
the three months ended March 31, 2021 , compared to the same period in the prior
year, were driven by depressed demand due to the COVID-19 pandemic.
The decrease in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties for the three months ended March 31, 2021 ,
compared to the same period in the prior year, was driven by the impact of the
COVID-19 pandemic as well as cost containment initiatives, both of which led to
lower reimbursements for payroll and related costs and expenses related to
system-wide services provided to managed and franchised properties.
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Three Months Ended March 31,
RevPAR Occupancy ADR
(Comparable System-wide vs. 2020 vs. 2020
Hotels) 2021 (in constant $) 2021 vs. 2020 2021 (in constant $)
Americas full service $ 44 (61.8) % 26.3 % (27.4)% pts $ 166 (21.8) %
Americas select service $ 48 (34.7) % 48.4 % (7.3)% pts $ 99 (25.0) %
The RevPAR decreases at our comparable system-wide full service and select
service hotels during the three months ended March 31, 2021 , compared to the
three months ended March 31, 2020 , were due to the COVID-19 pandemic. RevPAR
increased sequentially throughout the months in 2021, for both full service and
select service hotels, driven by transient demand.
During the three months ended March 31, 2021 , two properties were removed from
the comparable Americas full service system-wide hotel results as one is
undergoing a significant renovation and one has been closed for an extended
period. No properties were removed from the comparable Americas select service
system-wide hotel results.
Americas management and franchising segment Adjusted EBITDA.
Three Months Ended
2021 2020 Better / (Worse)
Segment Adjusted EBITDA $ 28 $ 68 $ (40) (59.3) %
The decrease in Adjusted EBITDA was primarily driven by the aforementioned
decreases in revenues during the three months ended March 31, 2021 , compared to
the same period in the prior year, partially offset by reduced expenses as a
result of cost containment initiatives, primarily payroll and related costs.
ASPAC management and franchising segment.
The impact of the COVID-19 pandemic began in late January 2020 , primarily in
Greater China , and expanded throughout ASPAC, primarily Japan and South Korea ,
in February 2020 as hotels were operating with reduced occupancy rates due to
lockdowns, travel restrictions, and quarantine measures. Recovery into 2021 has
been led by improved transient demand in Greater China and at March 31, 2021 ,
all hotels in Greater China and 97% of our ASPAC full and select service hotels
were open.
ASPAC management and franchising segment revenues.
Three Months Ended
2021 2020 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 15 $ 19 $ (4) (21.7) %
Contra revenue (1) (1) - (44.7) %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties 20 27 (7) (27.6) %
Total segment revenues $ 34 $ 45 $ (11) (25.9) %
Management, franchise, and other fees decreased for the three months ended
March 31, 2021 , compared to the same period in the prior year, primarily driven
by a decrease in license fees due to timing of sales of branded residential
ownership units, partially offset by an increase in base and incentive
management fees driven by Greater China .
The decrease in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties during three months ended March 31, 2021 ,
compared to the three months ended March 31, 2020 , was driven by cost
containment initiatives that lowered reimbursements for expenses related to
system-wide services provided to managed and franchised properties.
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Three Months Ended March 31,
RevPAR Occupancy ADR
(Comparable System-wide vs. 2020 vs. 2020
Hotels) 2021 (in constant $) 2021 vs. 2020 2021 (in constant $)
ASPAC full service $ 57 (19.8) % 37.5 % 3.0% pts $ 151 (26.2) %
ASPAC select service $ 32 40.9 % 48.0 % 21.7% pts $ 68 (22.9) %
Comparable full service RevPAR decreased for the three months ended March 31,
2021 , compared to the same period in the prior year, driven by decreased
transient business as a result of the COVID-19 pandemic and travel restrictions
in certain markets in the region, partially offset by stronger recovery in
Greater China as a result of domestic demand. Comparable select service RevPAR
increased for the three months ended March 31, 2021 , compared to the same period
in the prior year, driven by the aforementioned increase in domestic demand led
by Greater China .
During the three months ended March 31, 2021 , one property left the chain and
was removed from the comparable ASPAC full service system-wide hotel results and
one property left the chain and was removed from the ASPAC select service
system-wide hotel results.
ASPAC management and franchising segment Adjusted EBITDA.
Three Months Ended
2021 2020 Better / (Worse)
Segment Adjusted EBITDA $ 5 $ 8 $ (3) (39.7) %
The decrease in Adjusted EBITDA was primarily driven by the aforementioned
decrease in revenues during the three months ended March 31, 2021 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
during the three months ended March 31, 2021 , compared to the three months ended
March 31, 2020 , driven by the impact of the COVID-19 pandemic beginning in March
2020 . At March 31, 2021 , 89% of our EAME/SW Asia full and select service hotels
were open.
EAME/SW Asia management and franchising segment revenues.
Three Months Ended
2021 2020 Better / (Worse)
Segment revenues
Management, franchise, and other fees $ 7 $ 10 $ (3) (35.2) %
Contra revenue (3) (1) (2) (54.1) %
Revenues for the reimbursement of costs
incurred on behalf of managed and franchised
properties 13 20 (7) (34.5) %
Total segment revenues $ 17 $ 29 $ (12) (40.6) %
The decrease in management, franchise, and other fees during the three months
ended March 31, 2021 , compared to the three months ended March 31, 2020 , was
driven by the COVID-19 pandemic.
The decrease in revenues for the reimbursement of costs incurred on behalf of
managed and franchised properties during three months ended March 31, 2021 ,
compared to the three months ended March 31, 2020 , was driven by cost
containment initiatives that lowered reimbursements for expenses related to
system-wide services provided to managed and franchised properties.
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Three Months Ended March 31,
RevPAR Occupancy ADR
(Comparable System-wide vs. 2020 vs. 2020
Hotels) 2021 (in constant $) 2021 vs. 2020 2021 (in constant $)
EAME/SW Asia full service $ 37 (58.2) % 29.6 % (19.4)% pts $ 124 (31.0) %
EAME/SW Asia select service $ 29 (46.7) % 45.3 % (15.0)% pts $ 63 (29.2) %
Comparable system-wide hotels RevPAR decreased during the three months ended
March 31, 2021 , compared to March 31, 2020 , driven by the COVID-19 pandemic and
associated travel restrictions.
During the three months ended March 31, 2021 , no properties were removed from
the comparable EAME/SW Asia full service system-wide hotel results and one
property left the chain and was removed from the comparable EAME/SW Asia select
service system-wide hotel results.
EAME/SW Asia management and franchising segment Adjusted EBITDA.
Three Months Ended
2021 2020 Better / (Worse)
Segment Adjusted EBITDA $ - $ 1 $ (1) (102.5) %
The decrease in Adjusted EBITDA during the three months ended March 31, 2021 ,
compared to the same period in the prior year, was primarily driven by the
aforementioned decrease in revenues. This decrease was partially offset by cost
containment initiatives that reduced expenses, primarily payroll and related
costs, and prior year selling, general, and administrative expenses for reserves
recognized on certain receivables.
Corporate and other.
Three Months Ended
2021 2020 Better / (Worse)
Revenues $ 8 $ 14 $ (6) (44.8) %
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties
- 2 (2) (100.0) %
Adjusted EBITDA (24) (27) 3 13.3 %
Revenues decreased during the three months ended March 31, 2021 , compared to the
three months ended March 31, 2020 , primarily driven by the sale of the Exhale
spa and fitness business during the fourth quarter of 2020.
Adjusted EBITDA increased during the three months ended March 31, 2021 , compared
to the three months ended March 31, 2020 , primarily due to cost containment
initiatives that reduced expenses, predominantly payroll and related costs.
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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;
•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 that we intend to
recover over the long term;
•equity earnings (losses) from unconsolidated hospitality ventures;
•stock-based compensation expense;
•gains 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 benefit (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 are dependent on company
policies including how the assets are utilized as well as the lives assigned to
the assets, and Contra revenue is dependent on company policies and strategic
decisions regarding payments to hotel owners. 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. Adjusted
EBITDA includes costs incurred on behalf of our managed and franchised
properties related to system-wide services and programs that we
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do not intend to recover from hotel owners. 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 (loss)
attributable to Hyatt 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 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 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-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. 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.
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The table below provides a reconciliation of our net loss attributable to Hyatt
Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated
Adjusted EBITDA:
Three Months Ended March 31,
2021 2020 Change
Net loss attributable to Hyatt Hotels
Corporation $ (304) $ (103) $ (201) (195.2) %
Interest expense 41 17 24 132.6 %
(Benefit) provision for income taxes 186 (35) 221 629.6 %
Depreciation and amortization 74 80 (6) (7.4) %
EBITDA (3) (41) 38 91.3 %
Contra revenue 8 6 2 24.6 %
Revenues for the reimbursement of costs incurred
on behalf of managed and franchised properties (260) (533) 273 51.2 %
Costs incurred on behalf of managed and
franchised properties 277 555 (278) (50.1) %
Equity (earnings) losses from unconsolidated
hospitality ventures (54) 2 (56) NM
Stock-based compensation expense 28 15 13 85.3 %
Gains on sales of real estate - (8) 8 100.0 %
Asset impairments - 3 (3) (100.0) %
Other (income) loss, net (12) 81 (93) (114.8) %
Pro rata share of unconsolidated owned and
leased hospitality ventures' Adjusted EBITDA (4) 6 (10) (164.2) %
Adjusted EBITDA $ (20) $ 86 $ (106) (123.3) %
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 long-term 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 travel and lodging and hospitality
industries and, as a result, on our business, results of operations, cash flows,
and financial condition. 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 the reduction of (i) capital expenditures; (ii)
selling, general, and administrative expenses, including permanent reductions in
staffing levels; (iii) a significant portion of owned and leased hotels expense;
and (iv) costs incurred on behalf of our third-party owners. We also suspended
our quarterly dividend and all share repurchases.
On March 18, 2021 , we entered into the Revolver Amendment. See Part I, Item 1
"Financial Statements-Note 9 to the Condensed Consolidated Financial Statements"
and our Current Report on Form 8-K filed with the SEC on March 22, 2021 ,
which is incorporated in this quarterly report by reference, for more
information related to the Revolver Amendment. 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 may, from time to time, seek to retire or purchase 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, restrictions in our existing or future
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financing arrangements, 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 ended March 31, 2021 and March 31, 2020 , various
transactions impacted our liquidity. See "-Sources and Uses of Cash."
Sources and Uses of Cash
Three Months Ended
2021 2020
Cash provided by (used in):
Operating activities $ (91) $ (100)
Investing activities (31) 13
Financing activities (14) 253
Effect of exchange rate changes on cash 5 3
Net increase (decrease) in cash, cash equivalents, and restricted cash
$ (131)
Cash Flows from Operating Activities Cash used in operating activities decreased$9 million for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 . The decrease was primarily due to an increase in our working capital and a decrease in tax payments in 2021. This decrease was partially offset by a decline in performance across the portfolio as results were negatively impacted by the COVID-19 pandemic, which significantly affected operations beginning inMarch 2020 . Cash Flows from Investing Activities During the three months endedMarch 31, 2021 : •We purchased our partner's interest in the entities that own Grand Hyatt São Paulo for$6 million of cash, and we repaid the$78 million third-party mortgage loan on the property. •We invested$19 million in capital expenditures (see "-Capital Expenditures"). •We invested$16 million in unconsolidated hospitality ventures. •We received$100 million in net proceeds from marketable securities and short-term investments. During the three months endedMarch 31, 2020 : •We received$72 million of proceeds related to the disposition of a 58% ownership interest in certain subsidiaries that developed Hyatt Centric Center City Philadelphia and adjacent parking and retail space. •We received$6 million of proceeds, net of closing costs and proration adjustments, from the sale of a commercial building inOmaha, Nebraska . •We invested$55 million in capital expenditures (see "-Capital Expenditures"). 41 -------------------------------------------------------------------------------- Table of Contents Cash Flows from Financing Activities •During the three months endedMarch 31, 2021 , we did not repurchase common stock. During the three months endedMarch 31, 2020 , we repurchased 827,643 shares of Class A common stock for an aggregate purchase price of$69 million . •During the three months endedMarch 31, 2021 , we did not pay dividends. During the three months endedMarch 31, 2020 , we paid a quarterly$0.20 per share cash dividend on Class A and Class B common stock totaling$20 million . •During the three months endedMarch 31, 2021 , we did not draw on our revolving credit facility. During the three months endedMarch 31, 2020 , we borrowed$400 million and repaid$50 million on our revolving credit facility. 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, 2021 December 31, 2020 Consolidated debt (1) $ 3,242 $ 3,244 Stockholders' equity 2,885 3,211 Total capital 6,127 6,455 Total debt to total capital 52.9 % 50.3 % Consolidated debt (1) 3,242 3,244 Less: cash and cash equivalents and short-term investments (1,628) (1,882) Net consolidated debt $ 1,614 $ 1,362 Net debt to total capital 26.3 % 21.1 % (1) Excludes approximately$643 million and$671 million of our share of unconsolidated hospitality venture indebtedness atMarch 31, 2021 andDecember 31, 2020 , 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, disciplined with respect to our capital spending, taking into account our cash flow from operations. Three Months Ended March 31, 2021 2020 Maintenance and technology $ 10 $ 13 Enhancements to existing properties 9 27 Investment in new properties under development or recently opened - 15 Total capital expenditures $ 19 $ 55 In response to the COVID-19 pandemic and its impact to our business, we have taken actions to reduce capital expenditures. We expect to maintain conservative levels of capital expenditures during 2021 due to a continuation of demand pressure resulting from the COVID-19 pandemic. The decrease in enhancements to existing properties is driven by a decrease in discretionary hotel renovations. 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 and the development of Hyatt Centric Center City Philadelphia and adjacent parking and retail space in 2020. 42 -------------------------------------------------------------------------------- Table of Contents Senior Notes The table below sets forth the outstanding principal balance of our Senior Notes atMarch 31, 2021 , as described in Part I, Item 1 "Financial Statements-Note 9 to the Condensed Consolidated Financial Statements." Interest on the Senior Notes is payable semi-annually or quarterly. Principal amount 2021 Notes $ 250 2022 Notes 750 2023 Notes 350 2025 Notes 450 2026 Notes 400 2028 Notes 400 2030 Notes 450 Total Senior Notes $ 3,050 We are in compliance with all applicable covenants under the indenture governing our Senior Notes atMarch 31, 2021 . Revolving Credit Facility The revolving credit facility is intended to provide financing for working capital and general corporate purposes, including permitted investments and acquisitions. At bothMarch 31, 2021 andDecember 31, 2020 , we had no balance outstanding. See Part I, Item 1 "Financial Statements-Note 9 to the Condensed Consolidated Financial Statements." We are in compliance with all applicable covenants under the revolving credit facility atMarch 31, 2021 . OnMarch 18, 2021 , we entered into the Revolver Amendment. See Part I, Item 1 "Financial Statements-Note 9 to the Condensed Consolidated Financial Statements" and our Current Report on Form 8-K filed with the SEC on March 22 , 202 1 , which is incorporated in this quarterly report by reference, 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$237 million and$234 million in letters of credit issued directly with financial institutions outstanding atMarch 31, 2021 andDecember 31, 2020 , respectively. AtMarch 31, 2021 , these letters of credit had weighted-average fees of approximately 141 basis points and maturity dates of less than one year. 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 2020 Form 10-K, with additional considerations below. Income Taxes Judgment is required in assessing the future tax consequences of events that have been recognized in our condensed 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 theIRS and other tax authorities. A change in the assessment of the outcomes of such matters could materially impact our condensed 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 condensed consolidated financial statements. If a position does not meet the "more likely than not" standard, the benefit cannot be recognized. Assumptions, judgment, and the use of estimates are required in determining if the "more likely than 43 -------------------------------------------------------------------------------- Table of Contents 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 condensed consolidated financial statements. See Part I, Item 1, "Financial Statements-Note 11 to our Condensed Consolidated Financial Statements." Deferred Income Taxes - Valuation Allowance On a quarterly basis, we assess the realizability of our deferred tax assets and recognize a valuation allowance when it is "more likely than not" that some or all of our deferred tax assets are not realizable. This assessment is completed by tax jurisdiction and relies on the weight of both positive and negative evidence available with significant weight placed on recent financial results. Cumulative pre-tax losses for the three-year period are considered significant objective negative evidence that some or all of our deferred tax assets may not be realizable. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. We generated significant pre-tax losses in 2020 and the first quarter of 2021 due to the impact of the COVID-19 pandemic, and during the three months endedMarch 31, 2021 , we entered into a three-yearU.S. cumulative loss position. We expect the cumulative three-year loss position may continue in 2021 as 2018 pre-tax income is replaced by 2021 results. As a result of our three-yearU.S. cumulative loss and the scheduling estimates discussed above, we recognized a$193 million valuation allowance during the three months endedMarch 31, 2021 . If we continue to generate losses in future periods, additional valuation allowances may be required that could have an adverse impact on our net income (loss). When pre-tax income returns to normalized levels, we will consider the pre-tax income as positive evidence weighted within our analysis to evaluate the realizability of ourU.S. deferred tax asset balances and determine whether a portion of the valuation allowance can be reversed. However, significant judgment will be required to determine the timing and amount of any reversal of the valuation allowance in future periods. See Part I, Item 1, "Financial Statements-Note 11 to our Condensed Consolidated Financial Statements." 44
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