UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended March 31, 2023
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to
Commission File No. 001-34521
HYATT HOTELS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 20-1480589 | |||||||||||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||
150 North Riverside Plaza
8th Floor, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 750-1234
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | |||||||||||||||
| Class A Common Stock, $0.01 par value | H | New York Stock Exchange | |||||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||
| Emerging growth company | ☐ | ||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At April 28, 2023, there were 46,791,640 shares of the registrant's Class A common stock, $0.01 par value, outstanding and 58,917,749 shares of the registrant's Class B common stock, $0.01 par value, outstanding.
HYATT HOTELS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2023
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II – OTHER INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In millions of dollars, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||
| Owned and leased hotels | $ | 314 | $ | 271 | |||||||||||||||||||
| Management, franchise, license, and other fees | 231 | 154 | |||||||||||||||||||||
| Contra revenue | (10) | (9) | |||||||||||||||||||||
| Net management, franchise, license, and other fees | 221 | 145 | |||||||||||||||||||||
| Distribution and destination management | 328 | 246 | |||||||||||||||||||||
| Other revenues | 88 | 77 | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 729 | 540 | |||||||||||||||||||||
| Total revenues | 1,680 | 1,279 | |||||||||||||||||||||
| DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES: | |||||||||||||||||||||||
| Owned and leased hotels | 240 | 210 | |||||||||||||||||||||
| Distribution and destination management | 258 | 194 | |||||||||||||||||||||
| Depreciation and amortization | 98 | 119 | |||||||||||||||||||||
| Other direct costs | 98 | 67 | |||||||||||||||||||||
| Selling, general, and administrative | 161 | 111 | |||||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | 749 | 556 | |||||||||||||||||||||
| Direct and selling, general, and administrative expenses | 1,604 | 1,257 | |||||||||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | 18 | (31) | |||||||||||||||||||||
| Equity earnings (losses) from unconsolidated hospitality ventures | (2) | (9) | |||||||||||||||||||||
| Interest expense | (33) | (40) | |||||||||||||||||||||
| Asset impairments | (2) | (3) | |||||||||||||||||||||
| Other income (loss), net | 48 | (10) | |||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 105 | (71) | |||||||||||||||||||||
| PROVISION FOR INCOME TAXES | (47) | (2) | |||||||||||||||||||||
| NET INCOME (LOSS) | 58 | (73) | |||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | |||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | 58 | $ | (73) | |||||||||||||||||||
EARNINGS (LOSSES) PER SHARE—Basic | |||||||||||||||||||||||
| Net income (loss) | $ | 0.55 | $ | (0.67) | |||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 0.55 | $ | (0.67) | |||||||||||||||||||
EARNINGS (LOSSES) PER SHARE—Diluted | |||||||||||||||||||||||
| Net income (loss) | $ | 0.53 | $ | (0.67) | |||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 0.53 | $ | (0.67) | |||||||||||||||||||
See accompanying Notes to condensed consolidated financial statements.
1
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions of dollars)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Net income (loss) | $ | 58 | $ | (73) | |||||||||||||||||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||||||||||
| Foreign currency translation adjustments, net of tax of $— for the three months ended March 31, 2023 and March 31, 2022 | 15 | 21 | |||||||||||||||||||||
| Available-for-sale debt securities unrealized fair value adjustments, net of tax of $— for the three months ended March 31, 2023 and March 31, 2022 | 3 | (7) | |||||||||||||||||||||
| Derivative instrument adjustments, net of tax of $— for the three months ended March 31, 2023 and March 31, 2022 | 1 | 2 | |||||||||||||||||||||
| Pension liabilities adjustment, net of tax of $— for the three months ended March 31, 2023 and March 31, 2022 | — | (2) | |||||||||||||||||||||
| Other comprehensive income | 19 | 14 | |||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | 77 | (59) | |||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | |||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | 77 | $ | (59) | |||||||||||||||||||
See accompanying Notes to condensed consolidated financial statements.
2
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except share and per share amounts)
(Unaudited)
| March 31, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 948 | $ | 991 | |||||||
| Restricted cash | 20 | 39 | |||||||||
| Short-term investments | 103 | 158 | |||||||||
| Receivables, net of allowance of $63 at both March 31, 2023 and December 31, 2022 | 828 | 834 | |||||||||
| Inventories | 10 | 9 | |||||||||
| Prepaids and other assets | 205 | 180 | |||||||||
| Prepaid income taxes | 36 | 39 | |||||||||
| Total current assets | 2,150 | 2,250 | |||||||||
| Equity method investments | 180 | 178 | |||||||||
| Property and equipment, net | 2,371 | 2,384 | |||||||||
| Financing receivables, net of allowances of $43 and $44 at March 31, 2023 and December 31, 2022, respectively | 58 | 60 | |||||||||
| Operating lease right-of-use assets | 384 | 385 | |||||||||
| Goodwill | 3,143 | 3,101 | |||||||||
| Intangibles, net | 1,813 | 1,668 | |||||||||
| Deferred tax assets | 276 | 257 | |||||||||
| Other assets | 2,243 | 2,029 | |||||||||
| TOTAL ASSETS | $ | 12,618 | $ | 12,312 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Current maturities of long-term debt | $ | 648 | $ | 660 | |||||||
| Accounts payable | 544 | 500 | |||||||||
| Accrued expenses and other current liabilities | 475 | 415 | |||||||||
| Current contract liabilities | 1,495 | 1,438 | |||||||||
| Accrued compensation and benefits | 146 | 235 | |||||||||
| Current operating lease liabilities | 39 | 39 | |||||||||
| Total current liabilities | 3,347 | 3,287 | |||||||||
| Long-term debt | 2,454 | 2,453 | |||||||||
| Long-term contract liabilities | 1,572 | 1,495 | |||||||||
| Long-term operating lease liabilities | 294 | 298 | |||||||||
| Other long-term liabilities | 1,255 | 1,077 | |||||||||
| Total liabilities | 8,922 | 8,610 | |||||||||
| Commitments and contingencies (see Note 12) | |||||||||||
| EQUITY: | |||||||||||
| Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding at both March 31, 2023 and December 31, 2022 | — | — | |||||||||
| Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 46,844,698 issued and outstanding at March 31, 2023, and Class B common stock, $0.01 par value per share, 390,912,161 shares authorized, 58,917,749 shares issued and outstanding at March 31, 2023. Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 47,482,787 issued and outstanding at December 31, 2022, and Class B common stock, $0.01 par value per share, 390,912,161 shares authorized, 58,917,749 shares issued and outstanding at December 31, 2022 | 1 | 1 | |||||||||
| Additional paid-in capital | 235 | 318 | |||||||||
| Retained earnings | 3,680 | 3,622 | |||||||||
| Accumulated other comprehensive loss | (223) | (242) | |||||||||
| Total stockholders' equity | 3,693 | 3,699 | |||||||||
| Noncontrolling interests in consolidated subsidiaries | 3 | 3 | |||||||||
| Total equity | 3,696 | 3,702 | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 12,618 | $ | 12,312 | |||||||
See accompanying Notes to condensed consolidated financial statements.
3
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
| Three Months Ended | |||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income (loss) | $ | 58 | $ | (73) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 98 | 119 | |||||||||
| Amortization of share awards | 31 | 31 | |||||||||
| Amortization of operating lease right-of-use assets | 9 | 9 | |||||||||
| Deferred income taxes | (19) | — | |||||||||
| Asset impairments | 2 | 3 | |||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | 2 | 9 | |||||||||
| Contra revenue | 10 | 9 | |||||||||
| Unrealized (gains) losses, net | (43) | 10 | |||||||||
| Working capital changes and other | 77 | 63 | |||||||||
| Net cash provided by operating activities | 225 | 180 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of marketable securities and short-term investments | (35) | (195) | |||||||||
| Proceeds from marketable securities and short-term investments | 86 | 163 | |||||||||
| Contributions to equity method and other investments | (31) | (3) | |||||||||
| Acquisitions | (125) | (39) | |||||||||
| Capital expenditures | (30) | (43) | |||||||||
| Issuance of financing receivables | (13) | (1) | |||||||||
| Other investing activities | (1) | 8 | |||||||||
| Net cash used in investing activities | (149) | (110) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Repayments and repurchases of debt | (14) | (1) | |||||||||
| Repurchases of common stock | (106) | — | |||||||||
| Other financing activities | (13) | (13) | |||||||||
| Net cash used in financing activities | (133) | (14) | |||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (4) | 5 | |||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, INCLUDING CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CLASSIFIED WITHIN CURRENT ASSETS HELD FOR SALE | (61) | 61 | |||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH RECLASSIFIED TO ASSETS HELD FOR SALE | — | (7) | |||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (61) | 54 | |||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—BEGINNING OF YEAR | 1,067 | 1,065 | |||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—END OF PERIOD | $ | 1,006 | $ | 1,119 | |||||||
See accompanying Notes to condensed consolidated financial statements.
Supplemental disclosure of cash flow information:
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 948 | $ | 1,023 | |||||||||||||||||||
| Restricted cash (1) | 20 | 47 | |||||||||||||||||||||
| Restricted cash included in other assets (1) | 38 | 49 | |||||||||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | 1,006 | $ | 1,119 | |||||||||||||||||||
| (1) Restricted cash generally represents debt service on bonds, escrow deposits, and other arrangements. | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Cash paid during the period for interest | $ | 19 | $ | 30 | |||||||||||||||||||
| Cash paid during the period for income taxes | $ | 16 | $ | 8 | |||||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 11 | $ | 11 | |||||||||||||||||||
| Non-cash investing and financing activities are as follows: | |||||||||||||||||||||||
| Change in accrued capital expenditures | $ | 4 | $ | 13 | |||||||||||||||||||
| Non-cash repurchases of common stock (see Note 13) | $ | 8 | $ | — | |||||||||||||||||||
| Non-cash right-of-use assets obtained in exchange for operating lease liabilities | $ | 4 | $ | 1 | |||||||||||||||||||
| Non-cash redemption of financing receivable | $ | 20 | $ | — | |||||||||||||||||||
| Non-cash contingent consideration liability assumed in acquisition (see Note 6) | $ | 107 | $ | — | |||||||||||||||||||
See accompanying Notes to condensed consolidated financial statements.
4
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In millions of dollars, except share and per share amounts)
(Unaudited)
| Common Shares Outstanding | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests in Consolidated Subsidiaries | Total | |||||||||||||||||||||||||||||||||||||||||
| Class | Class | Class | Class | ||||||||||||||||||||||||||||||||||||||||||||
| A | B | A | B | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—January 1, 2022 | 50,322,050 | 59,653,271 | $ | 1 | $ | — | $ | 640 | $ | 3,167 | $ | (245) | $ | 3 | $ | 3,566 | |||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | (73) | 14 | — | (59) | ||||||||||||||||||||||||||||||||||||||
| Employee stock plan issuance | 12,221 | — | — | — | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||
| Class share conversions | 635,522 | (635,522) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Share-based payment activity | 303,355 | — | — | — | 16 | — | — | — | 16 | ||||||||||||||||||||||||||||||||||||||
| BALANCE—March 31, 2022 | 51,273,148 | 59,017,749 | $ | 1 | $ | — | $ | 657 | $ | 3,094 | $ | (231) | $ | 3 | $ | 3,524 | |||||||||||||||||||||||||||||||
| BALANCE—January 1, 2023 | 47,482,787 | 58,917,749 | $ | 1 | $ | — | $ | 318 | $ | 3,622 | $ | (242) | $ | 3 | $ | 3,702 | |||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | — | — | 58 | 19 | — | 77 | ||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock (1) | (1,018,931) | — | — | — | (98) | — | — | — | (98) | ||||||||||||||||||||||||||||||||||||||
| Liability for repurchases of common stock (2) | — | — | — | — | (8) | — | — | — | (8) | ||||||||||||||||||||||||||||||||||||||
| Employee stock plan issuance | 13,925 | — | — | — | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||
| Share-based payment activity | 366,917 | — | — | — | 22 | — | — | — | 22 | ||||||||||||||||||||||||||||||||||||||
| BALANCE—March 31, 2023 | 46,844,698 | 58,917,749 | $ | 1 | $ | — | $ | 235 | $ | 3,680 | $ | (223) | $ | 3 | $ | 3,696 | |||||||||||||||||||||||||||||||
| (1) Includes a $1 million liability for the 1% U.S. federal excise tax on certain share repurchases enacted by the Inflation Reduction Act of 2022. | |||||||||||||||||||||||||||||||||||||||||||||||
(2) Represents repurchases of 73,368 shares for $8 million that were initiated prior to March 31, 2023, but settled in the second quarter of 2023. At March 31, 2023, the shares were included in shares outstanding and the liability was recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet. | |||||||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to condensed consolidated financial statements.
5
HYATT HOTELS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in millions of dollars, unless otherwise indicated)
(Unaudited)
1. ORGANIZATION
Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries have offerings that consist of full service hotels and resorts, select service hotels, all-inclusive resorts, and other properties, including timeshare, fractional, and other forms of residential, vacation, and condominium units. We also offer travel distribution and destination management services through ALG Vacations and a paid membership program through the Unlimited Vacation Club. At March 31, 2023, our hotel portfolio included 596 full service hotels, comprising 186,380 rooms throughout the world; 569 select service hotels, comprising 83,438 rooms, of which 448 hotels are located in the United States; and 114 all-inclusive resorts, comprising 36,676 rooms. At March 31, 2023, our portfolio of properties operated in 75 countries around the world. 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 hotels or licensed by third parties.
Unless otherwise specified or required by the context, references in this Quarterly Report on Form 10-Q to "Hyatt," the "Company," "we," "us," or "our" mean Hyatt Hotels Corporation and its consolidated subsidiaries. As used in these Notes and throughout this Quarterly Report on Form 10-Q:
•"condominium units" refer to whole ownership residential units (condominium and private residences) that we provide services to and, in some cases, manage the rental programs and/or homeowner associations associated with such units;
•"hospitality ventures" refers to entities in which we own less than a 100% equity interest;
•"hotel portfolio" refers to our full service hotels, including our wellness resorts, our select service hotels, and our all-inclusive resorts;
•"loyalty program" refers to the World of Hyatt guest loyalty program that is operated for the benefit of participating properties and generates substantial repeat guest business by rewarding frequent stays with points that can be redeemed for hotel nights and other valuable rewards;
•"properties," "portfolio of properties," or "property portfolio" refer to our hotel portfolio and residential, vacation, and condominium units that we operate, manage, franchise, own, lease, develop, license, or to which we provide services or license our trademarks, including under the Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt, Hyatt Residence Club, Hyatt Place, Hyatt House, Hyatt Studios, UrCove, Miraval, Alila, Andaz, Thompson Hotels, Dream Hotels, Hyatt Centric, Caption by Hyatt, The Unbound Collection by Hyatt, Destination by Hyatt, JdV by Hyatt, Hyatt Ziva, Hyatt Zilara, Zoëtry Wellness & Spa Resorts, Secrets Resorts & Spas, Breathless Resorts & Spas, Dreams Resorts & Spas, Hyatt Vivid Hotels & Resorts, Alua Hotels & Resorts, and Sunscape Resorts & Spas brands;
•"residential units" refer to residential units that we manage, own, or to which we provide services or license our trademarks (such as serviced apartments and Hyatt-branded residential units) that are typically part of a mixed-use project and located either adjacent to or near a full service hotel that is a member of our portfolio of properties or in unique leisure locations; and
•"vacation units" refer to the fractional and timeshare vacation properties with respect to which we license our trademarks and that are part of the Hyatt Residence Club.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. As a result, this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Form 10-K").
6
We have eliminated all intercompany accounts and transactions in our condensed consolidated financial statements. We consolidate entities under our control, including entities where we are deemed to be the primary beneficiary.
Management believes the accompanying condensed consolidated financial statements reflect all adjustments, which are all of a normal recurring nature, considered necessary for a fair presentation of the interim periods.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Future Adoption of Accounting Standards
Reference Rate Reform—In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions that we can elect to adopt, subject to meeting certain criteria, regarding contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued Accounting Standards Update No. 2022-06 ("ASU 2022-06"), Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 was effective upon issuance and defers the sunset date of Topic 848 by two years, extending the provisions of ASU 2020-04 through December 31, 2024. We are currently assessing the impact of adopting ASU 2020-04.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenues
The following tables present our revenues disaggregated by the nature of the product or service:
| Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME management and franchising | Apple Leisure Group | Corporate and other | Eliminations | Total | |||||||||||||||||||
| Rooms revenues | $ | 198 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (8) | $ | 190 | ||||||||||
| Food and beverage | 85 | — | — | — | — | — | — | 85 | ||||||||||||||||||
| Other | 39 | — | — | — | — | — | — | 39 | ||||||||||||||||||
| Owned and leased hotels | 322 | — | — | — | — | — | (8) | 314 | ||||||||||||||||||
| Base management fees | — | 62 | 16 | 7 | 15 | — | (9) | 91 | ||||||||||||||||||
| Incentive management fees | — | 20 | 18 | 8 | 16 | — | (5) | 57 | ||||||||||||||||||
| Franchise, license, and other fees | — | 51 | 4 | 4 | 8 | 16 | — | 83 | ||||||||||||||||||
| Management, franchise, license, and other fees | — | 133 | 38 | 19 | 39 | 16 | (14) | 231 | ||||||||||||||||||
| Contra revenue | — | (6) | (1) | (3) | — | — | — | (10) | ||||||||||||||||||
| Net management, franchise, license, and other fees | — | 127 | 37 | 16 | 39 | 16 | (14) | 221 | ||||||||||||||||||
| Distribution and destination management | — | — | — | — | 328 | — | — | 328 | ||||||||||||||||||
| Other revenues | — | 41 | — | — | 41 | 6 | — | 88 | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 640 | 35 | 22 | 32 | — | — | 729 | ||||||||||||||||||
| Total | $ | 322 | $ | 808 | $ | 72 | $ | 38 | $ | 440 | $ | 22 | $ | (22) | $ | 1,680 | ||||||||||
7
| Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising (1) | EAME management and franchising (1) | Apple Leisure Group | Corporate and other | Eliminations | Total | |||||||||||||||||||
| Rooms revenues | $ | 167 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (6) | $ | 161 | ||||||||||
| Food and beverage | 69 | — | — | — | — | — | — | 69 | ||||||||||||||||||
| Other | 41 | — | — | — | — | — | — | 41 | ||||||||||||||||||
| Owned and leased hotels | 277 | — | — | — | — | — | (6) | 271 | ||||||||||||||||||
| Base management fees | — | 46 | 8 | 6 | 8 | — | (8) | 60 | ||||||||||||||||||
| Incentive management fees | — | 12 | 5 | 6 | 19 | — | (2) | 40 | ||||||||||||||||||
| Franchise, license, and other fees | — | 37 | 3 | 1 | 3 | 10 | — | 54 | ||||||||||||||||||
| Management, franchise, license, and other fees | — | 95 | 16 | 13 | 30 | 10 | (10) | 154 | ||||||||||||||||||
| Contra revenue | — | (6) | (1) | (2) | — | — | — | (9) | ||||||||||||||||||
| Net management, franchise, license, and other fees | — | 89 | 15 | 11 | 30 | 10 | (10) | 145 | ||||||||||||||||||
| Distribution and destination management | — | — | — | — | 246 | — | — | 246 | ||||||||||||||||||
| Other revenues | — | 38 | — | — | 34 | 4 | 1 | 77 | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 461 | 32 | 18 | 29 | — | — | 540 | ||||||||||||||||||
| Total | $ | 277 | $ | 588 | $ | 47 | $ | 29 | $ | 339 | $ | 14 | $ | (15) | $ | 1,279 | ||||||||||
| (1) Amounts presented have been adjusted for changes within the segments effective on January 1, 2023 (see Note 16). | ||||||||||||||||||||||||||
Contract Balances
Our contract assets, included in receivables, net on our condensed consolidated balance sheets, were $3 million and insignificant at March 31, 2023 and December 31, 2022, respectively. As our profitability hurdles are generally calculated on a full-year basis, we expect our contract assets to be insignificant at year end.
Contract liabilities were comprised of the following:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Deferred revenue related to the paid membership program | $ | 1,071 | $ | 1,013 | |||||||
| Deferred revenue related to the loyalty program | 1,010 | 928 | |||||||||
| Deferred revenue related to travel distribution and destination management services | 729 | 732 | |||||||||
| Deferred revenue related to insurance programs | 59 | 66 | |||||||||
| Advanced deposits | 54 | 61 | |||||||||
| Initial fees received from franchise owners | 45 | 45 | |||||||||
| Other deferred revenue | 99 | 88 | |||||||||
| Total contract liabilities | $ | 3,067 | $ | 2,933 | |||||||
Revenue recognized during the three months ended March 31, 2023 and March 31, 2022 included in the contract liabilities balance at the beginning of each year was $654 million and $501 million, respectively. This revenue primarily relates to travel distribution and destination management services, the loyalty program, and the Unlimited Vacation Club paid membership program.
8
Revenue Allocated to Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted revenue expected to be recognized in future periods was approximately $500 million at March 31, 2023, approximately 20% of which we expect to recognize over the next 12 months, with the remainder to be recognized thereafter.
4. DEBT AND EQUITY SECURITIES
We invest in debt and equity securities that we believe are strategically and operationally important to our business. These investments take the form of (i) equity method investments where we have the ability to significantly influence the operations of the entity, (ii) marketable securities held to fund operating programs and for investment purposes, and (iii) other types of investments.
Equity Method Investments
Equity method investments were $180 million and $178 million at March 31, 2023 and December 31, 2022, respectively.
Marketable Securities
We hold marketable securities with readily determinable fair values to fund certain operating programs and for investment purposes. We periodically transfer available cash and cash equivalents to purchase marketable securities for investment purposes.
Marketable Securities Held to Fund Operating Programs—Marketable securities held to fund operating programs, which are recorded at fair value on our condensed consolidated balance sheets, were as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Loyalty program (Note 8) | $ | 756 | $ | 728 | |||||||
| Deferred compensation plans held in rabbi trusts (Note 8 and Note 10) | 450 | 420 | |||||||||
| Captive insurance company (Note 8) | 125 | 110 | |||||||||
| Total marketable securities held to fund operating programs | $ | 1,331 | $ | 1,258 | |||||||
| Less: current portion of marketable securities held to fund operating programs included in cash and cash equivalents and short-term investments | (370) | (339) | |||||||||
| Marketable securities held to fund operating programs included in other assets | $ | 961 | $ | 919 | |||||||
At March 31, 2023 and December 31, 2022, marketable securities held to fund operating programs included:
•$188 million and $174 million, respectively, of available-for-sale ("AFS") debt securities with contractual maturity dates ranging from 2023 through 2069. The amortized cost of our AFS debt securities approximates fair value;
•$83 million and $138 million, respectively, of time deposits classified as held-to-maturity ("HTM") debt securities with contractual maturity dates ranging from 2023 through 2026. The amortized cost of our time deposits approximates fair value;
•$63 million and $62 million, respectively, of equity securities with a readily determinable fair value.
9
Net unrealized and realized gains (losses) from marketable securities held to fund operating programs recognized on our condensed consolidated financial statements were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Unrealized gains (losses), net | |||||||||||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts (1) | $ | 17 | $ | (32) | |||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) | 9 | (15) | |||||||||||||||||||||
| Other income (loss), net (Note 18) | 6 | (18) | |||||||||||||||||||||
| Other comprehensive income (loss) (Note 13) | 3 | (7) | |||||||||||||||||||||
| Realized gains, net | |||||||||||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts (1) | $ | 1 | $ | 1 | |||||||||||||||||||
| (1) The impact from our investments in marketable securities held to fund our deferred compensation plans through rabbi trusts was recognized on the following financial statement line items and had no impact on net income (loss): revenues for the reimbursement of costs incurred on behalf of managed and franchised properties; owned and leased hotels expenses; selling, general, and administrative expenses; costs incurred on behalf of managed and franchised properties; and net gains (losses) and interest income from marketable securities held to fund rabbi trusts. | |||||||||||||||||||||||
Marketable Securities Held for Investment Purposes—Marketable securities held for investment purposes, which are recorded at cost or fair value, depending on the nature of the investment, on our condensed consolidated balance sheets, were as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Interest-bearing money market funds | $ | 256 | $ | 430 | |||||||
| Common shares in Playa N.V. (Note 8) | 116 | 79 | |||||||||
| Time deposits (1) | 12 | 10 | |||||||||
| Total marketable securities held for investment purposes | $ | 384 | $ | 519 | |||||||
| Less: current portion of marketable securities held for investment purposes included in cash and cash equivalents and short-term investments | (268) | (440) | |||||||||
| Marketable securities held for investment purposes included in other assets | $ | 116 | $ | 79 | |||||||
| (1) Time deposits have contractual maturity dates in 2023. The amortized cost of our time deposits approximates fair value. | |||||||||||
We hold common shares in Playa Hotels & Resorts N.V. ("Playa N.V."), which are accounted for as an equity security with a readily determinable fair value as we do not have the ability to significantly influence the operations of the entity. We did not sell any shares of common stock during the three months ended March 31, 2023 or March 31, 2022. Net unrealized gains recognized on our condensed consolidated statements of income (loss) were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Other income (loss), net (Note 18) | $ | 37 | $ | 8 | |||||||||||||||||||
10
Fair Value—We measure marketable securities at fair value on a recurring basis:
| March 31, 2023 | Cash and cash equivalents | Short-term investments | Other assets | ||||||||||||||||||||||||||
| Level One - Quoted Prices in Active Markets for Identical Assets | |||||||||||||||||||||||||||||
| Interest-bearing money market funds | $ | 534 | $ | 534 | $ | — | $ | — | |||||||||||||||||||||
| Mutual funds | 513 | — | — | 513 | |||||||||||||||||||||||||
| Common shares in Playa N.V. | 116 | — | — | 116 | |||||||||||||||||||||||||
| Level Two - Significant Other Observable Inputs | |||||||||||||||||||||||||||||
| Time deposits | 95 | 1 | 92 | 2 | |||||||||||||||||||||||||
| U.S. government obligations | 236 | — | 1 | 235 | |||||||||||||||||||||||||
| U.S. government agencies | 57 | — | 9 | 48 | |||||||||||||||||||||||||
| Corporate debt securities | 117 | — | 1 | 116 | |||||||||||||||||||||||||
| Mortgage-backed securities | 20 | — | — | 20 | |||||||||||||||||||||||||
| Asset-backed securities | 22 | — | — | 22 | |||||||||||||||||||||||||
| Municipal and provincial notes and bonds | 5 | — | — | 5 | |||||||||||||||||||||||||
| Total | $ | 1,715 | $ | 535 | $ | 103 | $ | 1,077 | |||||||||||||||||||||
| December 31, 2022 | Cash and cash equivalents | Short-term investments | Other assets | ||||||||||||||||||||||||||
| Level One - Quoted Prices in Active Markets for Identical Assets | |||||||||||||||||||||||||||||
| Interest-bearing money market funds | $ | 620 | $ | 620 | $ | — | $ | — | |||||||||||||||||||||
| Mutual funds | 482 | — | — | 482 | |||||||||||||||||||||||||
| Common shares in Playa N.V. | 79 | — | — | 79 | |||||||||||||||||||||||||
| Level Two - Significant Other Observable Inputs | |||||||||||||||||||||||||||||
| Time deposits | 148 | 1 | 145 | 2 | |||||||||||||||||||||||||
| U.S. government obligations | 237 | — | 3 | 234 | |||||||||||||||||||||||||
| U.S. government agencies | 55 | — | 8 | 47 | |||||||||||||||||||||||||
| Corporate debt securities | 109 | — | 2 | 107 | |||||||||||||||||||||||||
| Mortgage-backed securities | 21 | — | — | 21 | |||||||||||||||||||||||||
| Asset-backed securities | 21 | — | — | 21 | |||||||||||||||||||||||||
| Municipal and provincial notes and bonds | 5 | — | — | 5 | |||||||||||||||||||||||||
| Total | $ | 1,777 | $ | 621 | $ | 158 | $ | 998 | |||||||||||||||||||||
During the three months ended March 31, 2023 and March 31, 2022, there were no transfers between levels of the fair value hierarchy. We do not have nonfinancial assets or nonfinancial liabilities required to be measured at fair value on a recurring basis.
Other Investments
HTM Debt Securities—We hold investments in third-party entities associated with certain of our hotels. The investments are redeemable on various dates through 2062 and recorded as HTM debt securities within other assets on our condensed consolidated balance sheets:
| March 31, 2023 | December 31, 2022 | ||||||||||
| HTM debt securities | $ | 98 | $ | 96 | |||||||
| Less: allowance for credit losses | (32) | (31) | |||||||||
| Total HTM debt securities, net of allowances | $ | 66 | $ | 65 | |||||||
11
The following table summarizes the activity in our HTM debt securities allowance for credit losses:
| 2023 | 2022 | ||||||||||
| Allowance at January 1 | $ | 31 | $ | 38 | |||||||
| Provisions, net (1) | 1 | 1 | |||||||||
| Allowance at March 31 | $ | 32 | $ | 39 | |||||||
| (1) Provisions for credit losses were partially or fully offset by interest income recognized in the same periods (see Note 18). | |||||||||||
We estimated the fair value of these HTM debt securities to be approximately $84 million and $81 million at March 31, 2023 and December 31, 2022, respectively. The fair values of our investments in preferred shares, which are classified as Level Three in the fair value hierarchy, are estimated using internally-developed discounted cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is the selection of appropriate discount rates. Fluctuations in these assumptions could result in different estimates of fair value. The remaining HTM debt securities are classified as Level Two in the fair value hierarchy due to the use and weighting of multiple market inputs being considered in the final price of the security.
Convertible Debt Security—During the three months ended March 31, 2023, we invested in a $30 million convertible debt security associated with a franchised property, which is classified as AFS and recorded within other assets on our condensed consolidated balance sheet. The investment has a contractual maturity date in 2029. At March 31, 2023, the amortized cost of our convertible debt investment approximates fair value. Based on the lack of available market data, we have classified the investment as Level Three in the fair value hierarchy. During the three months ended March 31, 2023, there were no unrealized or realized gains or losses recognized on our investment.
Equity Securities Without a Readily Determinable Fair Value—At both March 31, 2023 and December 31, 2022, we held $12 million of investments in equity securities without a readily determinable fair value, which are recorded within other assets on our condensed consolidated balance sheets and represent investments in entities where we do not have the ability to significantly influence the operations of the entity.
5. RECEIVABLES
Receivables
At March 31, 2023 and December 31, 2022, we had $828 million and $834 million of net receivables, respectively, recorded on our condensed consolidated balance sheets.
The following table summarizes the activity in our receivables allowance for credit losses:
| 2023 | 2022 | ||||||||||||||||
| Allowance at January 1 | $ | 63 | $ | 53 | |||||||||||||
| Provisions, net | 3 | 7 | |||||||||||||||
| Write-offs | (3) | (4) | |||||||||||||||
| Allowance at March 31 | $ | 63 | $ | 56 | |||||||||||||
Financing Receivables
| March 31, 2023 | December 31, 2022 | ||||||||||
| Unsecured financing to hotel owners | $ | 111 | $ | 120 | |||||||
| Less: current portion of financing receivables, included in receivables, net | (10) | (16) | |||||||||
| Less: allowance for credit losses | (43) | (44) | |||||||||
| Total long-term financing receivables, net of allowances | $ | 58 | $ | 60 | |||||||
12
Allowance for Credit Losses—The following table summarizes the activity in our unsecured financing receivables allowance for credit losses:
| 2023 | 2022 | ||||||||||||||||
| Allowance at January 1 | $ | 44 | $ | 69 | |||||||||||||
| Provisions (reversals), net | (1) | — | |||||||||||||||
| Foreign currency exchange, net | — | 3 | |||||||||||||||
| Allowance at March 31 | $ | 43 | $ | 72 | |||||||||||||
Credit Monitoring—Our unsecured financing receivables were as follows:
| March 31, 2023 | |||||||||||||||||||||||
| Gross loan balance (principal and interest) | Related allowance | Net financing receivables | Gross receivables on nonaccrual status | ||||||||||||||||||||
| Loans | $ | 109 | $ | (42) | $ | 67 | $ | 22 | |||||||||||||||
| Other financing arrangements | 2 | (1) | 1 | — | |||||||||||||||||||
| Total unsecured financing receivables | $ | 111 | $ | (43) | $ | 68 | $ | 22 | |||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| Gross loan balance (principal and interest) | Related allowance | Net financing receivables | Gross receivables on nonaccrual status | ||||||||||||||||||||
| Loans | $ | 118 | $ | (43) | $ | 75 | $ | 22 | |||||||||||||||
| Other financing arrangements | 2 | (1) | 1 | 1 | |||||||||||||||||||
| Total unsecured financing receivables | $ | 120 | $ | (44) | $ | 76 | $ | 23 | |||||||||||||||
Fair Value—We estimated the fair value of financing receivables to be approximately $110 million and $117 million at March 31, 2023 and December 31, 2022, respectively. The fair values, which are classified as Level Three in the fair value hierarchy, are estimated using discounted future cash flow models. The principal inputs used are projected future cash flows and the discount rate, which is generally the effective interest rate of the loan.
6. ACQUISITION
Dream Hotel Group—During the three months ended March 31, 2023, a Hyatt affiliate acquired 100% of the limited liability company interests of each of Chatwal Hotels & Resorts, LLC, DHG Manager, LLC, and each of the subsidiaries of DHG Manager, LLC (collectively, "Dream Hotel Group") for $125 million of base consideration, subject to customary adjustments related to working capital and indebtedness, and up to an additional $175 million of contingent consideration through 2028 upon the achievement of certain milestones related to the development of additional hotels and/or potential new hotels previously identified by the sellers (the "Dream Acquisition").
We closed on the transaction on February 2, 2023 and paid $125 million of cash. Upon acquisition, we recorded a $107 million contingent consideration liability at fair value in other long-term liabilities on our condensed consolidated balance sheet (see Note 10). The fair value was estimated using a Monte Carlo simulation to model the likelihood of achieving the agreed-upon milestones based on available information as of the acquisition date. The valuation methodology includes assumptions and judgments regarding the discount rate, estimated probability of achieving the milestones, and expected timing of payments, which are primarily Level Three assumptions. The contingent consideration liability will be remeasured at fair value on a quarterly basis.
Net assets acquired were determined as follows:
| Cash paid | $ | 125 | |||
| Fair value of contingent consideration | 107 | ||||
| Net assets acquired | $ | 232 | |||
13
The acquisition includes management and license agreements for both operating and additional hotels that are expected to open in the future, primarily across North America, and the affiliated trade names for three lifestyle hotel brands. Following the acquisition date, the operating results of Dream Hotel Group were recognized in our condensed consolidated statements of income (loss) and were insignificant for the period from the acquisition date through March 31, 2023.
Our condensed consolidated balance sheet at March 31, 2023 reflects preliminary estimates of the fair value of the assets acquired and liabilities assumed based on available information as of the acquisition date. The fair values of intangible assets acquired are estimated using either discounted future cash flow models or the relief from royalty method, both of which include revenue projections based on the expected contract terms and long-term growth rates, which are primarily Level Three assumptions. The remaining assets and liabilities were recorded at their carrying values, which approximate their fair values.
We will continue to evaluate the contracts acquired and the underlying inputs and assumptions used in our valuation of assets acquired and liabilities assumed. Accordingly, these estimates, along with any related tax impacts, are subject to change during the measurement period, which is up to one year from the date of acquisition.
The following table summarizes the preliminary fair value of the identifiable net assets acquired at the acquisition date:
| Receivables | $ | 1 | |||
| Goodwill (1) | 41 | ||||
| Indefinite-lived intangibles (2) | 33 | ||||
| Management agreement intangibles (3) | 158 | ||||
| Total assets acquired | $ | 233 | |||
| Long-term contract liabilities | $ | 1 | |||
| Total liabilities assumed | $ | 1 | |||
| Total net assets acquired attributable to Hyatt Hotels Corporation | $ | 232 | |||
(1) The goodwill, which is tax deductible and recorded on the Americas management and franchising segment, is attributable to the growth opportunities we expect to realize by expanding our lifestyle offerings and providing global travelers with an increased number of elevated hospitality experiences.
(2) Includes intangible assets related to the Dream Hotels, The Chatwal, and Unscripted Hotels brand names.
(3) Amortized over useful lives of approximately 9 to 22 years, with a weighted-average useful life of approximately 17 years.
We recognized $7 million of transaction costs, primarily related to regulatory, financial advisory, and legal fees, in other income (loss), net on our condensed consolidated statements of income (loss) during the three months ended March 31, 2023 (see Note 18).
7. INTANGIBLES, NET
| March 31, 2023 | |||||||||||||||||||||||
| Weighted- average useful lives in years | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||||||||||||
| Management and franchise agreement intangibles | 15 | $ | 937 | $ | (198) | $ | 739 | ||||||||||||||||
| Brand and other indefinite-lived intangibles | — | 626 | — | 626 | |||||||||||||||||||
| Customer relationships intangibles | 8 | 608 | (169) | 439 | |||||||||||||||||||
| Other intangibles | 5 | 22 | (13) | 9 | |||||||||||||||||||
| Total | $ | 2,193 | $ | (380) | $ | 1,813 | |||||||||||||||||
14
| December 31, 2022 | |||||||||||||||||||||||
| Gross carrying value | Accumulated amortization | Net carrying value | |||||||||||||||||||||
| Management and franchise agreement intangibles | $ | 786 | $ | (184) | $ | 602 | |||||||||||||||||
| Brand and other indefinite-lived intangibles | 593 | — | 593 | ||||||||||||||||||||
| Customer relationships intangibles | 608 | (145) | 463 | ||||||||||||||||||||
| Other intangibles | 22 | (12) | 10 | ||||||||||||||||||||
| Total | $ | 2,009 | $ | (341) | $ | 1,668 | |||||||||||||||||
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Amortization expense | $ | 44 | $ | 60 | |||||||
8. OTHER ASSETS
| March 31, 2023 | December 31, 2022 | ||||||||||
| Management and franchise agreement assets constituting payments to customers (1) | $ | 781 | $ | 699 | |||||||
| Marketable securities held to fund rabbi trusts (Note 4) | 450 | 420 | |||||||||
| Marketable securities held to fund the loyalty program (Note 4) | 418 | 406 | |||||||||
| Deferred costs related to the paid membership program | 129 | 106 | |||||||||
| Common shares in Playa N.V. (Note 4) | 116 | 79 | |||||||||
| Long-term investments (Note 4) | 108 | 77 | |||||||||
| Marketable securities held for captive insurance company (Note 4) | 93 | 93 | |||||||||
| Long-term restricted cash | 38 | 37 | |||||||||
| Other | 110 | 112 | |||||||||
| Total other assets | $ | 2,243 | $ | 2,029 | |||||||
| (1) Includes cash consideration as well as other forms of consideration provided, such as debt repayment or performance guarantees. | |||||||||||
9. DEBT
At March 31, 2023 and December 31, 2022, we had $3,102 million and $3,113 million, respectively, of total debt, which included $648 million and $660 million, respectively, recorded in current maturities of long-term debt on our condensed consolidated balance sheets.
Senior Notes Repurchases—During the three months ended March 31, 2023, we repurchased $13 million of our senior notes due 2023 in the open market.
Revolving Credit Facility—During the three months ended March 31, 2023 and March 31, 2022, we had no borrowings or repayments on our revolving credit facility in effect for each of the respective periods. At both March 31, 2023 and December 31, 2022, we had no balance outstanding. At March 31, 2023, we had $1,496 million of borrowing capacity available under our revolving credit facility, net of letters of credit outstanding.
Fair Value—We estimated the fair value of debt, excluding finance leases, which consists of the notes below (collectively, the "Senior Notes") and other long-term debt.
•$700 million of 1.300% senior notes due 2023
•$750 million of 1.800% senior notes due 2024
•$450 million of 5.375% senior notes due 2025
•$400 million of 4.850% senior notes due 2026
•$400 million of 4.375% senior notes due 2028
•$450 million of 5.750% senior notes due 2030
15
Our Senior Notes are classified as Level Two due to the use and weighting of multiple market inputs in the final price of the security. We estimated the fair value of other debt instruments using a discounted cash flow analysis based on current market inputs for similar types of arrangements. Based on the lack of available market data, we have classified our revolving credit facility, as applicable, and other debt instruments as Level Three. The primary sensitivity in these models is based on the selection of appropriate discount rates. Fluctuations in our assumptions will result in different estimates of fair value.
| March 31, 2023 | |||||||||||||||||||||||||||||
| Carrying value | Fair value | Quoted prices in active markets for identical assets (Level One) | Significant other observable inputs (Level Two) | Significant unobservable inputs (Level Three) | |||||||||||||||||||||||||
| Debt (1) | $ | 3,109 | $ | 3,048 | $ | — | $ | 3,017 | $ | 31 | |||||||||||||||||||
(1) Excludes $6 million of finance lease obligations and $13 million of unamortized discounts and deferred financing fees.
| December 31, 2022 | |||||||||||||||||||||||||||||
| Carrying value | Fair value | Quoted prices in active markets for identical assets (Level One) | Significant other observable inputs (Level Two) | Significant unobservable inputs (Level Three) | |||||||||||||||||||||||||
| Debt (2) | $ | 3,121 | $ | 3,006 | $ | — | $ | 2,976 | $ | 30 | |||||||||||||||||||
(2) Excludes $7 million of finance lease obligations and $15 million of unamortized discounts and deferred financing fees.
10. OTHER LONG-TERM LIABILITIES
| March 31, 2023 | December 31, 2022 | ||||||||||
| Deferred compensation plans funded by rabbi trusts (Note 4) | $ | 450 | $ | 420 | |||||||
| Income taxes payable | 373 | 339 | |||||||||
| Guarantee liabilities (Note 12) | 130 | 124 | |||||||||
| Contingent consideration liability (Note 6) | 107 | — | |||||||||
| Deferred income taxes (Note 11) | 73 | 72 | |||||||||
| Self-insurance liabilities (Note 12) | 68 | 68 | |||||||||
| Other | 54 | 54 | |||||||||
| Total other long-term liabilities | $ | 1,255 | $ | 1,077 | |||||||
11. INCOME TAXES
The provision for income taxes for the three months ended March 31, 2023 and March 31, 2022 was $47 million and $2 million, respectively. The increase in our provision for income taxes for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily due to an increase in earnings and uncertain tax position activity recognized in 2023 related to foreign tax filing positions.
At each reporting date, management considers all evidence, both positive and negative, that could affect its assessment of the future realization of deferred tax assets. At March 31, 2023, we earned out of a three-year cumulative loss position in the U.S. As a result, management determined there is sufficient, objectively verifiable evidence that we will generate sufficient future income in the U.S. to support the realization of our U.S. interest deduction carryforwards, and therefore, we released a significant portion of our valuation allowance and recognized a $9 million benefit during the three months ended March 31, 2023.
We are subject to audits by federal, state, and foreign tax authorities. U.S. tax years 2018 through 2020 are currently under field exam. U.S. tax years 2009 through 2011 are before the U.S. Tax Court concerning the tax treatment of the loyalty program. The U.S. Tax Court trial proceedings occurred during April 2022 and the trial outcome is pending, subject to the U.S. Tax Court Judge's ruling. During the year ended December 31, 2021, we received a Notice of Proposed Adjustment for tax years 2015 through 2017 related to the loyalty program issue. As a result, U.S. tax years 2009 through 2017 are pending the outcome of the issue currently in U.S. Tax Court. If the IRS' position to include loyalty program contributions as taxable income to the Company is upheld, it would result in an income tax payment of $239 million (including $81 million of estimated interest, net of federal tax benefit) for all assessed years. As future tax benefits will be recognized at the reduced U.S. corporate income tax rate, $92 million
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of the tax payment and related interest would have an impact on the effective tax rate, if recognized. We believe we have an adequate uncertain tax liability recorded in connection with this matter.
At March 31, 2023 and December 31, 2022, total unrecognized tax benefits recorded in other long-term liabilities on our condensed consolidated balance sheets were $278 million and $253 million, respectively, of which $114 million and $102 million, respectively, would impact the effective tax rate if recognized. While it is reasonably possible that the amount of uncertain tax benefits associated with the U.S. treatment of the loyalty program could significantly change within the next 12 months, at this time, we are not able to estimate the range by which the reasonably possible outcomes of the pending litigation could impact our uncertain tax benefits within the next 12 months.
12. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, we enter into various commitments, guarantees, surety and other bonds, and letter of credit agreements.
Commitments—At March 31, 2023, we are committed, under certain conditions, to lend, provide certain consideration to, or invest in various business ventures up to $386 million, net of any related letters of credit.
Performance Guarantees—Certain of our contractual agreements with third-party hotel owners require us to guarantee payments to the owners if specified levels of operating profit are not achieved by their hotels. Except as described below, at March 31, 2023, our performance guarantees had $119 million of remaining maximum exposure and expire between 2023 and 2042.
Through acquisitions, we acquired certain management agreements with performance guarantees expiring between 2023 and 2045. The performance guarantees are based on annual performance levels. Contract terms within certain management agreements limit our exposure, and therefore, we are unable to reasonably estimate our maximum potential future payments.
At March 31, 2023 and December 31, 2022, we had $109 million and $108 million, respectively, of total performance guarantee liabilities, which included $94 million and $96 million, respectively, recorded in other long-term liabilities and $15 million and $12 million, respectively, recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.
Additionally, we enter into certain management contracts where we have the right, but not an obligation, to make payments to certain hotel owners if their hotels do not achieve specified levels of operating profit. If we choose not to fund the shortfall, the hotel owner has the option to terminate the management contract. At both March 31, 2023 and December 31, 2022, we had an insignificant amount recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets related to these performance cure payments.
Debt Repayment Guarantees—We enter into various debt repayment guarantees in order to assist third-party owners, franchisees, and unconsolidated hospitality ventures in obtaining third-party financing or to obtain more favorable borrowing terms.
| Geographical region | Maximum potential future payments (1) | Maximum exposure net of recoverability from third parties (1) | Other long-term liabilities recorded at March 31, 2023 | Other long-term liabilities recorded at December 31, 2022 | Year of guarantee expiration | ||||||||||||||||||||||||||||||||||||||||||
| United States (2), (3) | $ | 110 | $ | 39 | $ | 6 | $ | 3 | various, through 2027 | ||||||||||||||||||||||||||||||||||||||
| All foreign (2), (4) | 200 | 180 | 30 | 25 | various, through 2031 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 310 | $ | 219 | $ | 36 | $ | 28 | |||||||||||||||||||||||||||||||||||||||
(1) Our maximum exposure is generally based on a specified percentage of the total principal due upon borrower default.
(2) We have agreements with our unconsolidated hospitality venture partners or the respective third-party owners or franchisees to recover certain amounts funded under the debt repayment guarantee; the recoverability mechanism may be in the form of cash or HTM debt security.
(3) Certain agreements give us the ability to assume control of the property if defined funding thresholds are met or if certain events occur.
(4) Under certain debt repayment guarantees associated with hotel properties in India, we have the contractual right to recover amounts funded from an unconsolidated hospitality venture, which is a related party, and therefore, we expect our maximum exposure for these guarantees to be approximately $84 million, taking into account our partner's 50% ownership interest in the unconsolidated hospitality venture. Under certain events or conditions, we have the right to force the sale of the properties in order to recover amounts funded.
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At March 31, 2023, we are not aware, nor have we received any notification, that our unconsolidated hospitality ventures, third-party owners, or franchisees are not current on their debt service obligations where we have provided a debt repayment guarantee.
Guarantee Liabilities Fair Value—We estimated the fair value of our guarantees to be approximately $137 million and $124 million at March 31, 2023 and December 31, 2022, respectively. Based on the lack of available market data, we have classified our guarantees as Level Three in the fair value hierarchy.
Insurance—We obtain commercial insurance for potential losses from general liability, property, automobile, workers' compensation, employment practices liability, crime, cyber, and other miscellaneous risks. A portion of the risk is retained through a U.S.-based and licensed captive insurance company that is a wholly owned subsidiary of Hyatt and generally insures our deductibles and retentions. Reserve requirements are established based on actuarial projections of ultimate losses. Reserves for losses in our captive insurance company to be paid within 12 months are $39 million at both March 31, 2023 and December 31, 2022 and are recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets. Reserves for losses in our captive insurance company to be paid in future periods are $68 million at both March 31, 2023 and December 31, 2022 and are recorded in other long-term liabilities on our condensed consolidated balance sheets (see Note 10).
Collective Bargaining Agreements—At March 31, 2023, approximately 21% of our U.S.-based employees were covered by various collective bargaining agreements, generally providing for basic pay rates, working hours, other conditions of employment, and orderly settlement of labor disputes. Certain employees are covered by union-sponsored, multi-employer pension and health plans pursuant to agreements between various unions and us. Generally, labor relations have been maintained in a normal and satisfactory manner, and we believe our employee relations are good.
Surety and Other Bonds—Surety and other bonds issued on our behalf were $47 million at March 31, 2023 and primarily relate to our insurance programs, taxes, licenses, construction liens, and utilities for our lodging operations.
Letters of Credit—Letters of credit outstanding on our behalf at March 31, 2023 were $267 million, which primarily relate to our ongoing operations, collateral for customer deposits associated with ALG Vacations, collateral for estimated insurance claims, and securitization of our performance under certain debt repayment guarantees, which are only called on if the borrower defaults on its obligations or we default on our guarantees. Of the letters of credit outstanding, $4 million reduces the available capacity under our revolving credit facility (see Note 9).
Capital Expenditures—As part of our ongoing business operations, expenditures are required to complete renovation projects that have been approved.
Other—We act as general partner of various partnerships owning hotel properties that are subject to mortgage indebtedness. These mortgage agreements generally limit the lender's recourse to security interests in assets financed and/or other assets of the partnership(s) and/or the general partner(s) thereof.
In conjunction with financing obtained for our unconsolidated hospitality ventures and certain managed or franchised hotels, we may provide standard indemnifications to the lender for loss, liability, or damage occurring as a result of our actions or actions of the other unconsolidated hospitality venture partners or the respective third-party hotel owners or franchisees.
As a result of certain dispositions, we have agreed to provide customary indemnifications to third-party purchasers for certain liabilities incurred prior to sale and for breach of certain representations and warranties made during the sales process, such as representations of valid title, authority, and environmental issues that may not be limited by a contractual monetary amount. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed upon contract terms expire.
We are subject, from time to time, to various claims and contingencies related to lawsuits, taxes, and environmental matters, as well as commitments under contractual obligations. Many of these claims are covered under our current insurance programs, subject to deductibles. Although the ultimate liability for these matters cannot be determined at this point, based on information currently available, we do not expect the ultimate resolution of such claims and litigation to have a material effect on our condensed consolidated financial statements.
During the year ended December 31, 2018, we received a notice from the Indian tax authorities assessing additional service tax on our operations in India. We appealed this decision and do not believe a loss is probable,
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and therefore, we have not recorded a liability in connection with this matter. At March 31, 2023, our maximum exposure is not expected to exceed $18 million.
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13. EQUITY
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of insignificant tax impacts, were as follows:
| Balance at January 1, 2023 | Current period other comprehensive income (loss) before reclassification | Amount reclassified from accumulated other comprehensive loss | Balance at March 31, 2023 | ||||||||||||||||||||
| Foreign currency translation adjustments | $ | (202) | $ | 15 | $ | — | $ | (187) | |||||||||||||||
| AFS debt securities unrealized fair value adjustments | (11) | 3 | — | (8) | |||||||||||||||||||
| Derivative instrument adjustments (1) | (29) | — | 1 | (28) | |||||||||||||||||||
| Accumulated other comprehensive loss | $ | (242) | $ | 18 | $ | 1 | $ | (223) | |||||||||||||||
| (1) The amount reclassified from accumulated other comprehensive loss included realized losses recognized in interest expense related to the settlement of interest rate locks. We expect to reclassify $6 million of losses over the next 12 months. | |||||||||||||||||||||||
| Balance at January 1, 2022 | Current period other comprehensive income (loss) before reclassification | Amount reclassified from accumulated other comprehensive loss | Balance at March 31, 2022 | ||||||||||||||||||||
| Foreign currency translation adjustments | $ | (206) | $ | 21 | $ | — | $ | (185) | |||||||||||||||
| AFS debt securities unrealized fair value adjustments | (1) | (7) | — | (8) | |||||||||||||||||||
| Pension liabilities adjustment | (4) | (1) | (1) | (6) | |||||||||||||||||||
| Derivative instrument adjustments (2) | (34) | — | 2 | (32) | |||||||||||||||||||
| Accumulated other comprehensive loss | $ | (245) | $ | 13 | $ | 1 | $ | (231) | |||||||||||||||
| (2) The amount reclassified from accumulated other comprehensive loss included realized losses recognized in interest expense related to the settlement of interest rate locks. | |||||||||||||||||||||||
Share Repurchases—During 2019, our board of directors authorized the repurchase of up to $750 million of our common stock. These repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an accelerated share repurchase transaction, at prices we deem appropriate and subject to market conditions, applicable law, and other factors deemed relevant in our sole discretion. The common stock repurchase program applies to our Class A and Class B common stock. The common stock repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock, and the program may be suspended or discontinued at any time.
During the three months ended March 31, 2023, we repurchased 1,018,931 shares of Class A common stock. The shares of common stock were repurchased at a weighted-average price of $104.50 per share for an aggregate purchase price of $106 million, excluding insignificant related expenses. The shares repurchased included the repurchase of 106,116 shares for $9 million, which was initiated prior to December 31, 2022 and settled during the three months ended March 31, 2023. At December 31, 2022, the $9 million share repurchase liability was recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet. The shares repurchased during the three months ended March 31, 2023 represented approximately 1% of our total shares of common stock outstanding at December 31, 2022. The shares of Class A common stock repurchased in the open market were retired and returned to the status of authorized and unissued shares. At March 31, 2023, we had $453 million remaining under the share repurchase authorization.
In addition to the aforementioned share repurchases, we initiated the repurchase of 73,368 shares prior to March 31, 2023, but did not settle the repurchases until April 2023. At March 31, 2023, we had a $8 million liability recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet related to these shares. At April 30, 2023, we had $445 million remaining under the share repurchase authorization.
During the three months ended March 31, 2022, we did not repurchase common stock.
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14. STOCK-BASED COMPENSATION
As part of our Long-Term Incentive Plan ("LTIP"), we award time-vested stock appreciation rights ("SARs"), time-vested restricted stock units ("RSUs"), and performance-vested restricted stock units ("PSUs") to certain employees and non-employee directors. In addition, non-employee directors may elect to receive their annual fees and/or annual equity retainers in the form of shares of our Class A common stock. Compensation expense and unearned compensation presented below exclude amounts related to employees of our managed hotels and other employees whose payroll is reimbursed, as these expenses have been, and will continue to be, reimbursed by our third-party hotel owners and are recognized in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties and costs incurred on behalf of managed and franchised properties on our condensed consolidated statements of income (loss). Stock-based compensation expense recognized in selling, general, and administrative expenses and distribution and destination management expenses on our condensed consolidated statements of income (loss) related to these awards was as follows:
| Three Months Ended March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| SARs | $ | 11 | $ | 10 | ||||||||||
| RSUs | 17 | 16 | ||||||||||||
| PSUs | 4 | 2 | ||||||||||||
| Total | $ | 32 | $ | 28 | ||||||||||
SARs—During the three months ended March 31, 2023, we granted 284,912 SARs to employees with a weighted-average grant date fair value of $48.54. During the three months ended March 31, 2022, we granted 344,202 SARs to employees with a weighted-average grant date fair value of $37.71.
RSUs—During the three months ended March 31, 2023, we granted 405,464 RSUs to employees and non-employee directors with a weighted-average grant date fair value of $111.70. During the three months ended March 31, 2022, we granted 414,466 RSUs to employees and non-employee directors with a weighted-average grant date fair value of $95.00.
PSUs—During the three months ended March 31, 2023 and March 31, 2022, we did not grant any PSUs under our LTIP.
Our total unearned compensation for our stock-based compensation programs at March 31, 2023 was $4 million for SARs, $46 million for RSUs, and $19 million for PSUs, which will be recognized in selling, general, and administrative expenses and distribution and destination management expenses over a weighted-average period of 2 years.
15. RELATED-PARTY TRANSACTIONS
In addition to those included elsewhere in the Notes to our condensed consolidated financial statements, related-party transactions entered into by us are summarized as follows:
Legal Services—A partner in a law firm that provided services to us throughout the three months ended March 31, 2023 and March 31, 2022 is the brother-in-law of our Executive Chairman. During the three months ended March 31, 2023 and March 31, 2022, we incurred $4 million and $2 million, respectively, of legal fees with this firm. At March 31, 2023 and December 31, 2022, we had $2 million and insignificant amounts, respectively, due to the law firm.
Equity Method Investments—We have equity method investments in entities that own, operate, manage, or franchise properties for which we receive management, franchise, or license fees. We recognized $6 million and $4 million of fees during the three months ended March 31, 2023 and March 31, 2022, respectively. In addition, in some cases we provide loans (see Note 5) or guarantees (see Note 12) to these entities. During each of the three months ended March 31, 2023 and March 31, 2022, we recognized $2 million of income related to these guarantees. At March 31, 2023 and December 31, 2022, we had $37 million and $33 million, respectively, of net receivables due from these properties, inclusive of $24 million and $21 million, respectively, classified as financing receivables on our condensed consolidated balance sheets. Our ownership interest in these unconsolidated hospitality ventures varies from 24% to 50%.
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In addition to the aforementioned fees, we provide system-wide services on behalf of owners of managed and franchised properties and administer the loyalty program for the benefit of Hyatt's portfolio of properties. These expenses have been, and will continue to be, reimbursed by our third-party hotel owners and are recognized in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties and costs incurred on behalf of managed and franchised properties on our condensed consolidated statements of income (loss).
Class B Share Conversion—During the three months ended March 31, 2022, 635,522 shares of Class B common stock were converted on a share-for-share basis into shares of Class A common stock, $0.01 par value per share. The shares of Class B common stock that converted into shares of Class A common stock during the three months ended March 31, 2022 were retired subsequent to March 31, 2022, thereby reducing the shares of Class B common stock authorized and outstanding.
16. SEGMENT INFORMATION
Our reportable segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by the chief operating decision maker ("CODM") to assess performance and make decisions regarding the allocation of resources. Our CODM is our President and Chief Executive Officer. Effective January 1, 2023, we changed the strategic and operational oversight for our properties located in the Indian subcontinent. Revenues associated with these properties are now reported in the ASPAC management and franchising segment. The segment changes have been reflected retrospectively for the three months ended March 31, 2022. We define our reportable segments as follows:
•Owned and leased hotels—This segment derives its earnings from owned and leased hotel properties located predominantly in the United States but also in certain international locations, and for purposes of segment Adjusted EBITDA, includes our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA, based on our ownership percentage of each venture. Adjusted EBITDA includes intercompany expenses related to management fees paid to the Company's management and franchising segments, which are eliminated in consolidation. Intersegment revenues relate to promotional award redemptions earned by our owned and leased hotels related to our co-branded credit card programs and are eliminated in consolidation.
•Americas management and franchising—This segment derives its earnings primarily from a combination of hotel management services and licensing of our portfolio of brands to franchisees located in the United States, Canada, the Caribbean, Mexico, Central America, and South America, as well as revenues from residential management operations. This segment's revenues also include the reimbursement of costs incurred on behalf of managed and franchised properties. These reimbursed costs relate primarily to payroll at managed properties where the Company is the employer, as well as costs associated with sales, reservations, digital and technology, digital media, and marketing services (collectively, "system-wide services") and the loyalty program operated on behalf of owners of managed and franchised properties. The intersegment revenues relate to management fees earned from the Company's owned and leased hotels and are eliminated in consolidation.
•ASPAC management and franchising—This segment derives its earnings primarily from a combination of hotel management services and licensing of our portfolio of brands to franchisees located in Greater China, East and Southeast Asia, the Indian subcontinent, and Oceania. This segment's revenues also include the reimbursement of costs incurred on behalf of managed and franchised properties. These reimbursed costs relate primarily to system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties.
•EAME management and franchising—This segment derives its earnings primarily from a combination of hotel management services and licensing of our portfolio of brands to franchisees located in Europe, Africa, the Middle East, and Central Asia. This segment's revenues also include the reimbursement of costs incurred on behalf of managed and franchised properties. These reimbursed costs relate primarily to system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties. The intersegment revenues relate to management fees earned from the Company's owned and leased hotels and are eliminated in consolidation.
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•Apple Leisure Group ("ALG")—This segment derives its earnings from distribution and destination management services offered through ALG Vacations; management and marketing services primarily for all-inclusive ALG resorts located in Mexico, the Caribbean, Central America, South America, and Europe; and through a paid membership program offering benefits exclusively at ALG resorts in Mexico, the Caribbean, and Central America. This segment's revenues also include the reimbursement of costs incurred on behalf of managed and franchised properties. These reimbursed costs relate to certain system-wide services provided on behalf of owners of ALG resorts.
Our CODM evaluates performance based on owned and leased hotels revenues; management, franchise, license, and other fees revenues; distribution and destination management revenues; other revenues; and Adjusted EBITDA. Adjusted EBITDA, as we define it, is a non-GAAP measure. We define 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 interest expense; benefit (provision) for income taxes; depreciation and amortization; amortization of management and franchise agreement assets and performance cure payments, which constitute 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 that we intend to recover over the long term; equity earnings (losses) from unconsolidated hospitality ventures; stock-based compensation expense; gains (losses) on sales of real estate and other; asset impairments; and other income (loss), net.
The table below shows summarized consolidated financial information by segment. Included within corporate and other are results related to our co-branded credit card programs and unallocated corporate expenses.
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| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Owned and leased hotels | |||||||||||||||||||||||
| Owned and leased hotels revenues | $ | 322 | $ | 277 | |||||||||||||||||||
| Intersegment revenues (1) | 8 | 6 | |||||||||||||||||||||
| Adjusted EBITDA | 74 | 54 | |||||||||||||||||||||
| Depreciation and amortization | 46 | 52 | |||||||||||||||||||||
| Americas management and franchising | |||||||||||||||||||||||
| Management, franchise, license, and other fees revenues | 133 | 95 | |||||||||||||||||||||
| Contra revenue | (6) | (6) | |||||||||||||||||||||
| Other revenues | 41 | 38 | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 640 | 461 | |||||||||||||||||||||
| Intersegment revenues (1) | 13 | 9 | |||||||||||||||||||||
| Adjusted EBITDA | 119 | 85 | |||||||||||||||||||||
| Depreciation and amortization | 6 | 5 | |||||||||||||||||||||
| ASPAC management and franchising | |||||||||||||||||||||||
| Management, franchise, license, and other fees revenues | 38 | 16 | |||||||||||||||||||||
| Contra revenue | (1) | (1) | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 35 | 32 | |||||||||||||||||||||
| Adjusted EBITDA | 25 | 7 | |||||||||||||||||||||
| EAME management and franchising | |||||||||||||||||||||||
| Management, franchise, license, and other fees revenues | 19 | 13 | |||||||||||||||||||||
| Contra revenue | (3) | (2) | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 22 | 18 | |||||||||||||||||||||
| Intersegment revenues (1) | 1 | 1 | |||||||||||||||||||||
| Adjusted EBITDA | 12 | 4 | |||||||||||||||||||||
| Apple Leisure Group | |||||||||||||||||||||||
| Management, franchise, license, and other fees revenues | 39 | 30 | |||||||||||||||||||||
| Distribution and destination management revenues | 328 | 246 | |||||||||||||||||||||
| Other revenues | 41 | 34 | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 32 | 29 | |||||||||||||||||||||
| Adjusted EBITDA | 79 | 56 | |||||||||||||||||||||
| Depreciation and amortization | 40 | 55 | |||||||||||||||||||||
| Corporate and other | |||||||||||||||||||||||
| Revenues | 22 | 14 | |||||||||||||||||||||
| Intersegment revenues (1) | — | (1) | |||||||||||||||||||||
| Adjusted EBITDA | (42) | (38) | |||||||||||||||||||||
| Depreciation and amortization | 6 | 7 | |||||||||||||||||||||
| Eliminations | |||||||||||||||||||||||
| Revenues (1) | (22) | (15) | |||||||||||||||||||||
| Adjusted EBITDA | 1 | 1 | |||||||||||||||||||||
| TOTAL | |||||||||||||||||||||||
| Revenues | $ | 1,680 | $ | 1,279 | |||||||||||||||||||
| Adjusted EBITDA | 268 | 169 | |||||||||||||||||||||
| Depreciation and amortization | 98 | 119 | |||||||||||||||||||||
| (1) Intersegment revenues are included in management, franchise, license, and other fees revenues, owned and leased hotels revenues, and other revenues and eliminated in Eliminations. | |||||||||||||||||||||||
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The table below provides a reconciliation of our net income (loss) attributable to Hyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to our consolidated Adjusted EBITDA:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 58 | $ | (73) | |||||||||||||||||||
| Interest expense | 33 | 40 | |||||||||||||||||||||
| Provision for income taxes | 47 | 2 | |||||||||||||||||||||
| Depreciation and amortization | 98 | 119 | |||||||||||||||||||||
| EBITDA | 236 | 88 | |||||||||||||||||||||
| Contra revenue | 10 | 9 | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | (729) | (540) | |||||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | 749 | 556 | |||||||||||||||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | 2 | 9 | |||||||||||||||||||||
| Stock-based compensation expense (Note 14) | 32 | 28 | |||||||||||||||||||||
| Asset impairments | 2 | 3 | |||||||||||||||||||||
| Other (income) loss, net (Note 18) | (48) | 10 | |||||||||||||||||||||
| Pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA | 14 | 6 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 268 | $ | 169 | |||||||||||||||||||
17. EARNINGS (LOSSES) PER SHARE
The calculation of basic and diluted earnings (losses) per share, including a reconciliation of the numerator and denominator, is as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income (loss) | $ | 58 | $ | (73) | |||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | — | |||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 58 | $ | (73) | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Basic weighted-average shares outstanding (1) | 106,389,110 | 110,172,487 | |||||||||||||||||||||
| Stock-based compensation | 2,541,102 | — | |||||||||||||||||||||
| Diluted weighted-average shares outstanding (1) | 108,930,212 | 110,172,487 | |||||||||||||||||||||
| Basic Earnings (Losses) Per Share: | |||||||||||||||||||||||
| Net income (loss) | $ | 0.55 | $ | (0.67) | |||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | — | |||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 0.55 | $ | (0.67) | |||||||||||||||||||
| Diluted Earnings (Losses) Per Share: | |||||||||||||||||||||||
| Net income (loss) | $ | 0.53 | $ | (0.67) | |||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | — | |||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 0.53 | $ | (0.67) | |||||||||||||||||||
| (1) The computations reflect a reduction in shares outstanding at March 31, 2023 for the repurchases of 73,368 shares that were initiated prior to March 31, 2023, but settled in April 2023. | |||||||||||||||||||||||
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The computations of diluted net earnings (losses) per share for the three months ended March 31, 2023 and March 31, 2022 do not include the following shares of Class A common stock assumed to be issued as stock-settled SARs and RSUs because they are anti-dilutive.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| SARs | 7,000 | 1,655,500 | |||||||||||||||||||||
| RSUs | 1,400 | 679,000 | |||||||||||||||||||||
18. OTHER INCOME (LOSS), NET
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Unrealized gains (losses), net (Note 4) | $ | 43 | $ | (10) | |||||||||||||||||||
| Interest income | 17 | 6 | |||||||||||||||||||||
| Depreciation recovery | 4 | 4 | |||||||||||||||||||||
| Transaction costs (Note 6) | (7) | (1) | |||||||||||||||||||||
| Guarantee expense (Note 12) | (11) | (7) | |||||||||||||||||||||
| Other, net | 2 | (2) | |||||||||||||||||||||
| Other income (loss), net | $ | 48 | $ | (10) | |||||||||||||||||||
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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; 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 the SEC, including our Annual Report on Form 10-K; 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; global supply chain constraints and interruptions, rising costs of construction-related labor and materials, and increases in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business; risks affecting the luxury, resort, and all-inclusive lodging segments; levels of spending in business, leisure, and group 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, weather and climate-related events, such as earthquakes, tsunamis, tornadoes, hurricanes, droughts, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases, or fear of such outbreaks; the pace and consistency of recovery following the COVID-19 pandemic and the long-term effects of the pandemic, additional resurgence, or COVID-19 variants, including with respect to global and regional economic activity, travel limitations or bans, the demand for travel, transient and group business, and levels of consumer confidence; 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 or other pandemics, epidemics or other health crises; 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 the capital necessary to fund current operations or implement our plans for growth; risks associated with potential acquisitions and dispositions and our ability to successfully integrate completed acquisitions with existing operations, including with respect to our acquisition of Apple Leisure Group and Dream Hotel Group and the successful integration of each business; 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, wages, and other operating costs; foreign exchange rate fluctuations or currency restructurings; risks associated with the introduction of new brand concepts, including 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 and Unlimited Vacation Club paid membership program; cyber incidents and information technology failures; outcomes of legal or administrative proceedings; and violations of regulations or laws related to our franchising business and licensing businesses and our international operations.
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 could also 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
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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 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
Our portfolio of properties consists of full service hotels and resorts, select service hotels, all-inclusive resorts, and other properties, including timeshare, fractional, and other forms of residential, vacation, and condominium units.
At March 31, 2023, our hotel portfolio consisted of 1,279 hotels (306,494 rooms), including:
•482 managed properties (144,254 rooms), all of which we operate under management and hotel services agreements with third-party property owners;
•612 franchised properties (102,722 rooms), all of which are owned by third parties that have franchise agreements with us and are operated by third parties;
•114 all-inclusive resorts (36,676 rooms), including 100 owned by third parties (32,244 rooms) and operated under management or marketing services agreements, 8 owned by a third party in which we hold common shares (3,153 rooms) and are operated under franchise agreements, and 6 operating leased properties (1,279 rooms);
•23 owned properties (10,187 rooms), 1 finance leased property (171 rooms), and 4 operating leased properties (1,697 rooms), all of which we manage;
•19 managed properties and 2 franchised properties owned or leased by unconsolidated hospitality ventures (7,150 rooms); and
•22 franchised properties (3,637 rooms) operated by an unconsolidated hospitality venture in connection with a master license agreement by Hyatt; 6 of these properties (1,254 rooms) are leased by the unconsolidated hospitality venture.
Our property portfolio also included:
•22 vacation units under the Hyatt Residence Club brand and operated by third parties;
•39 residential units, 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
•39 condominium units 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 hotels or licensed by third parties. We also offer travel distribution and destination management services through ALG Vacations and a paid membership program through the Unlimited Vacation Club.
We report our consolidated operations in U.S. dollars. Amounts are reported in millions, unless otherwise noted. Percentages may not recompute due to rounding, and percentage changes that are not meaningful are presented as "NM." Constant currency disclosures 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 five reportable segments as described below:
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•Owned and leased hotels consist of our owned and leased full service and select service hotels and, for purposes of segment Adjusted EBITDA, our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA, based on our ownership percentage of each venture;
•Americas management and franchising ("Americas") consists of our management and franchising of properties, including all-inclusive resorts under the Hyatt Ziva and Hyatt Zilara brand names, located in the United States, Canada, the Caribbean, Mexico, Central America, and South America, as well as our residential management operations;
•ASPAC management and franchising ("ASPAC") consists of our management and franchising of properties located in Greater China, East and Southeast Asia, the Indian subcontinent, and Oceania;
•EAME management and franchising ("EAME") consists of our management and franchising of properties located in Europe, Africa, the Middle East, and Central Asia; and
•Apple Leisure Group consists of distribution and destination management services offered through ALG Vacations; management and marketing of primarily all-inclusive ALG resorts in Mexico, the Caribbean, Central America, South America, and Europe; and the Unlimited Vacation Club paid membership program, which offers benefits exclusively at ALG resorts primarily within Mexico, the Caribbean, and Central America.
Within corporate and other, we include the results from our co-branded credit card programs and unallocated corporate expenses.
Effective January 1, 2023, our EAME and ASPAC segments have been geographically realigned. See Part I, Item 1 "Financial Statements—Note 16 to our Condensed Consolidated Financial Statements" for further discussion of our segment structure.
Overview of Financial Results
Consolidated revenues increased $401 million, or 31.3%, during the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022. The increases in owned and leased hotels revenues; management, franchise license, and other fees revenues; and revenues for the reimbursement of costs incurred on behalf of managed and franchised properties of $43 million, $77 million, and $189 million, respectively, were driven by improved operating performance as compared to the prior year, largely driven by increased demand and ADR. Distribution and destination management revenues increased $82 million, compared to 2022, due to higher departure volume and pricing. Additionally, the results for three months ended March 31, 2022 were negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
Comparable system-wide hotels revenue per available room ("RevPAR") for the quarter ended March 31, 2023 was $131, which represented a significant improvement of 42.9% compared to the quarter ended March 31, 2022. The increase was primarily driven by increased demand and ADR across all segments and the continued recovery from the COVID-19 pandemic. See "—Segment Results" for discussion of RevPAR by segment.
During the three months ended March 31, 2023, compared to the quarter ended March 31, 2022, leisure transient travel was strong each month of the quarter and business transient demand continued to improve. We also experienced a significant improvement in group travel, as system-wide group rooms revenues increased 69% compared to the quarter ended March 31, 2022.
For the quarter ended March 31, 2023, we reported net income attributable to Hyatt Hotels Corporation of $58 million, compared to net loss attributable to Hyatt Hotels Corporation of $73 million for the quarter ended March 31, 2022, representing an increase of $131 million. Our consolidated Adjusted EBITDA for the quarter ended March 31, 2023 was $268 million, an increase of $99 million compared to the quarter ended March 31, 2022, primarily driven by increased management and franchise fees across the portfolio and improved performance at our owned and leased hotels. 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 income (loss) attributable to Hyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA.
During the quarter ended March 31, 2023, we returned $106 million of capital to our stockholders through share repurchases, and during April 2023, we returned an additional $8 million of capital to our stockholders through share repurchases.
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Results of Operations
Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022
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. 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 following financial statement line items and had no impact on net income (loss): revenues for the reimbursement of costs incurred on behalf of managed and franchised properties; owned and leased hotels expenses; selling, general, and administrative expenses; costs incurred on behalf of managed and franchised properties; and net gains (losses) and interest income from marketable securities held to fund rabbi trusts.
Owned and leased hotels revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | Currency Impact | ||||||||||||||||||||||||||
| Comparable owned and leased hotels revenues | $ | 310 | $ | 209 | $ | 101 | 48.9 | % | $ | (1) | |||||||||||||||||||
| Non-comparable owned and leased hotels revenues | 4 | 62 | (58) | (93.7) | % | — | |||||||||||||||||||||||
| Total owned and leased hotels revenues | $ | 314 | $ | 271 | $ | 43 | 16.0 | % | $ | (1) | |||||||||||||||||||
Comparable owned and leased hotels revenues increased during the three months ended March 31, 2023, compared to the same period in the prior year, driven by increased demand, which contributed to increased rooms and food and beverage revenues, as well as higher ADR across the portfolio. The three months ended March 31, 2022 were also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
The decrease in non-comparable owned and leased hotels revenues during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by disposition activity in 2022.
Management, franchise, license, and other fees revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Base management fees | $ | 91 | $ | 60 | $ | 31 | 51.2 | % | |||||||||||||||
| Incentive management fees | 57 | 40 | 17 | 43.2 | % | ||||||||||||||||||
| Franchise, license, and other fees | 83 | 54 | 29 | 54.2 | % | ||||||||||||||||||
| Management, franchise, license, and other fees | $ | 231 | $ | 154 | $ | 77 | 50.2 | % | |||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||||||||||||||||||||||||||
| Management, franchise, license, and other fees | $ | 231 | $ | 154 | $ | 77 | 50.2 | % | |||||||||||||||||||||||||||||||||||||||
| Contra revenue | (10) | (9) | (1) | (24.4) | % | ||||||||||||||||||||||||||||||||||||||||||
| Net management, franchise, license, and other fees | $ | 221 | $ | 145 | $ | 76 | 51.7 | % | |||||||||||||||||||||||||||||||||||||||
The increase in management fees during the three months ended March 31, 2023, compared to the same period in the prior year, was due to increased demand and ADR across the portfolio. Additionally, the three months ended March 31, 2022 were negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
The increase in franchise, license, and other fees revenues for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily driven by franchise fees in the Americas management and franchising segment due to increased demand and ADR in the United States and increased
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license fees related to our co-branded credit card programs. The increase in franchise fees was also driven by the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
Distribution and destination management revenues. During the three months ended March 31, 2023, distribution and destination management revenues increased $82 million, compared to the three months ended March 31, 2022, driven by higher departure volume and pricing as well as the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
Other revenues. During the three months ended March 31, 2023, other revenues increased $11 million, compared to the three months ended March 31, 2022, primarily driven by the Unlimited Vacation Club paid membership program due to increased contract sales.
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | $ | 729 | $ | 540 | $ | 189 | 34.9 | % | |||||||||||||||
| Less: rabbi trust impact (1) | (9) | 15 | (24) | (162.9) | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties, excluding rabbi trust impact | $ | 720 | $ | 555 | $ | 165 | 29.8 | % | |||||||||||||||
| (1) The change is driven by the market performance of the underlying invested assets and offsets with the rabbi trust impact within costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties increased during the three months ended March 31, 2023, compared to the same period in the prior year, primarily driven by higher reimbursements for payroll and related expenses at managed properties where we are the employer and reimbursements for costs related to system-wide services provided to managed and franchised properties. The higher reimbursements for expenses were due to improved hotel operating performance driven by increased demand and ADR, as well as the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
Owned and leased hotels expenses.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||||||||
| Comparable owned and leased hotels expenses | $ | 230 | $ | 173 | $ | (57) | (32.8) | % | |||||||||||||||||||||
| Non-comparable owned and leased hotels expenses | 8 | 40 | 32 | 80.0 | % | ||||||||||||||||||||||||
| Rabbi trust impact | 2 | (3) | (5) | (149.2) | % | ||||||||||||||||||||||||
| Total owned and leased hotels expenses | $ | 240 | $ | 210 | $ | (30) | (14.3) | % | |||||||||||||||||||||
The increase in comparable owned and leased hotels expenses during the three months ended March 31, 2023, compared to the same period in the prior year, was primarily due to higher variable expenses driven by increased demand across the portfolio and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
The decrease in non-comparable owned and leased hotels expenses during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by disposition activity in 2022.
Distribution and destination management expenses. During the three months ended March 31, 2023, distribution and destination management expenses increased $64 million, compared to the three months ended March 31, 2022, driven by higher departure volume as the beginning of 2022 was negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant.
Depreciation and amortization expenses. Depreciation and amortization expenses decreased $21 million during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by dispositions of owned hotels as well as the use of an accelerated amortization method for certain ALG intangible assets, which resulted in increased amortization expense in 2022.
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Other direct costs. During the three months ended March 31, 2023, other direct costs increased $31 million, compared to the same period in the prior year, primarily driven by the Unlimited Vacation Club paid membership program and our co-branded credit card programs. The increase in the Unlimited Vacation Club paid membership program was due to increased contract sales, and the increase in our co-branded credit card programs was driven by a higher volume of point transfers.
Selling, general, and administrative expenses.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Selling, general, and administrative expenses | $ | 161 | $ | 111 | $ | 50 | 45.1 | % | |||||||||||||||
| Less: rabbi trust impact | (16) | 28 | (44) | (160.1) | % | ||||||||||||||||||
| Less: stock-based compensation expense | (31) | (28) | (3) | (9.9) | % | ||||||||||||||||||
| Adjusted selling, general, and administrative expenses | $ | 114 | $ | 111 | $ | 3 | 2.9 | % | |||||||||||||||
Selling, general, and administrative expenses increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by the improved market performance of the underlying investments in marketable securities held to fund our deferred compensation plans through rabbi trusts.
Adjusted selling, general, and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. 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 March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | $ | 749 | $ | 556 | $ | 193 | 34.6 | % | |||||||||||||||
| Less: rabbi trust impact (1) | (9) | 15 | (24) | (162.9) | % | ||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties, excluding rabbi trust impact | $ | 740 | $ | 571 | $ | 169 | 29.6 | % | |||||||||||||||
| (1) The change is driven by the market performance of the underlying invested assets and offsets with the rabbi trust impact within revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
Costs incurred on behalf of managed and franchised properties increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by increased payroll and related expenses at managed properties where we are the employer and expenses related to system-wide services provided to managed and franchised properties. The higher expenses were due to improved hotel operating performance driven by increased demand and ADR, as well as the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Rabbi trust gains (losses) allocated to selling, general, and administrative expenses | $ | 16 | $ | (28) | $ | 44 | 160.1 | % | |||||||||||||||
| Rabbi trust gains (losses) allocated to owned and leased hotels expenses | 2 | (3) | 5 | 149.2 | % | ||||||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | $ | 18 | $ | (31) | $ | 49 | 158.9 | % | |||||||||||||||
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts increased during the three months ended March 31, 2023, compared to the same period in the prior year, driven by the performance of the underlying invested assets.
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Equity earnings (losses) from unconsolidated hospitality ventures. During the three months ended March 31, 2023, equity earnings (losses) from unconsolidated hospitality ventures increased $7 million, compared to the same period in the prior year, driven by a decrease in Hyatt's share of unconsolidated hospitality venture losses, primarily due to improved hotel performance.
Interest expense. Interest expense decreased $7 million during the three months ended March 31, 2023, compared to the same period in the prior year, driven by repurchases and redemptions of certain of our senior notes in 2023 and 2022. See Part I, Item 1, "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements" for additional information.
Other income (loss), net. Other income (loss), net increased $58 million during the three months ended March 31, 2023 compared to the same period in the prior year. See Part I, Item 1 "Financial Statements—Note 18 to our Condensed Consolidated Financial Statements" for additional information.
Provision for income taxes.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Income (loss) before income taxes | $ | 105 | $ | (71) | $ | 176 | 249.2 | % | |||||||||||||||
| Provision for income taxes | (47) | (2) | (45) | NM | |||||||||||||||||||
| Effective tax rate | 44.8 | % | (3.7) | % | 48.5 | % | |||||||||||||||||
The increase in provision for income taxes during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily due to an increase in earnings and uncertain tax position activity recognized in 2023 related to foreign tax filing positions. See Part I, Item 1 "Financial Statements—Note 11 to our Condensed Consolidated Financial Statements" for additional information.
Segment Results
As described in Part I, Item 1 "Financial Statements—Note 16 to our Condensed Consolidated Financial Statements," we evaluate segment operating performance using owned and leased hotels revenues; management, franchise, license, and other fees revenues; distribution and destination management revenues; and Adjusted EBITDA. Segment results for the three months ended March 31, 2022 have been adjusted retrospectively to reflect the change in reportable segments effective January 1, 2023.
Owned and leased hotels segment revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | Currency Impact | ||||||||||||||||||||||||||
| Comparable owned and leased hotels revenues | $ | 318 | $ | 215 | $ | 103 | 48.2 | % | $ | (1) | |||||||||||||||||||
| Non-comparable owned and leased hotels revenues | 4 | 62 | (58) | (93.7) | % | — | |||||||||||||||||||||||
| Total segment revenues | $ | 322 | $ | 277 | $ | 45 | 16.1 | % | $ | (1) | |||||||||||||||||||
Comparable owned and leased hotels revenues increased during the three months ended March 31, 2023, compared to the same period in the prior year, driven by increased demand, which contributed to increased rooms and food and beverage revenues, as well as higher ADR across the portfolio. The three months ended March 31, 2022 were also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
Non-comparable owned and leased hotels revenues decreased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, driven by disposition activity in 2022.
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of comparable hotels | 2023 | vs. 2022 (in constant $) | 2023 | vs. 2022 | 2023 | vs. 2022 (in constant $) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable owned and leased hotels | 26 | $ | 192 | 52.9 | % | 69.2 | % | 18.9% pts | $ | 278 | 11.1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The increase in RevPAR at our comparable owned and leased hotels during the three months ended March 31, 2023, compared to the same period in the prior year, was driven by strong ADR as well as group demand, primarily in the United States, and growing momentum in business transient travel. The three months ended March 31, 2022 were also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
During the three months ended March 31, 2023, no properties were removed from the comparable owned and leased hotels results.
Owned and leased hotels segment Adjusted EBITDA.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Owned and leased hotels Adjusted EBITDA | $ | 60 | $ | 48 | $ | 12 | 25.9 | % | |||||||||||||||
| Pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA | 14 | 6 | 8 | 122.7 | % | ||||||||||||||||||
| Segment Adjusted EBITDA | $ | 74 | $ | 54 | $ | 20 | 36.9 | % | |||||||||||||||
Adjusted EBITDA at our owned and leased hotels increased during the three months ended March 31, 2023, compared to the same period in the prior year, driven by increased comparable owned and leased hotels revenues, partially offset by increased comparable owned and leased hotels expenses due to higher variable expenses incurred primarily as a result of higher demand across the portfolio. The increase was also driven by the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
Our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA increased during the three months ended March 31, 2023, compared to the same period in 2022, primarily driven by improved hotel performance internationally.
Americas management and franchising segment revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment revenues | |||||||||||||||||||||||
| Management, franchise, license, and other fees | $ | 133 | $ | 95 | $ | 38 | 39.4 | % | |||||||||||||||
| Contra revenue | (6) | (6) | — | (11.0) | % | ||||||||||||||||||
| Other revenues | 41 | 38 | 3 | 8.3 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) | 640 | 461 | 179 | 38.6 | % | ||||||||||||||||||
| Total segment revenues | $ | 808 | $ | 588 | $ | 220 | 37.1 | % | |||||||||||||||
| (1) See "—Results of Operations" for further discussion regarding the increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
The increase in management, franchise, license, and other fees for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by an increase in management and franchise fees primarily due to improved group demand as well as continued strength in leisure transient travel. The increase in fees was also driven by ADR, which exceeded pre-COVID-19 pandemic levels.
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of comparable hotels | 2023 | vs. 2022 (in constant $) | 2023 | vs. 2022 | 2023 | vs. 2022 (in constant $) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Americas system-wide hotels | 708 | $ | 138 | 31.1 | % | 64.9 | % | 10.4% pts | $ | 213 | 10.1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The RevPAR increase at our comparable Americas system-wide hotels during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by strong demand and ADR in the United States. The three months ended March 31, 2022 were also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
During the three months ended March 31, 2023, we removed three properties from the comparable Americas system-wide hotel results as two properties left the hotel portfolio and one property is undergoing a significant renovation.
Americas management and franchising segment Adjusted EBITDA.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 119 | $ | 85 | $ | 34 | 40.2 | % | |||||||||||||||
Adjusted EBITDA increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by the increase in management and franchise fees.
ASPAC management and franchising segment revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment revenues | |||||||||||||||||||||||
| Management, franchise, license, and other fees | $ | 38 | $ | 16 | $ | 22 | 133.1 | % | |||||||||||||||
| Contra revenue | (1) | (1) | — | 14.9 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) | 35 | 32 | 3 | 10.8 | % | ||||||||||||||||||
| Total segment revenues | $ | 72 | $ | 47 | $ | 25 | 53.5 | % | |||||||||||||||
| (1) See "—Results of Operations" for further discussion regarding the increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
Management, franchise, license, and other fees increased for the three months ended March 31, 2023, compared to the same period in the prior year, due to an increase in management fees across all markets driven by strong demand and ADR. Particularly in Greater China, management fees have increased due to the continued recovery from the COVID-19 pandemic, as well as eased travel restrictions.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of comparable hotels | 2023 | vs. 2022 (in constant $) | 2023 | vs. 2022 | 2023 | vs. 2022 (in constant $) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable ASPAC system-wide hotels | 205 | $ | 108 | 104.9 | % | 64.4 | % | 24.3% pts | $ | 169 | 27.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comparable ASPAC system-wide hotels RevPAR increased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to increased demand and ADR in Greater China, Southeast Asia, and India, with the increase in Greater China primarily driven by domestic travel.
During the three months ended March 31, 2023, no properties were removed from the comparable ASPAC system-wide hotels results.
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ASPAC management and franchising segment Adjusted EBITDA.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 25 | $ | 7 | $ | 18 | 264.2 | % | |||||||||||||||
Adjusted EBITDA increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by the increase in management fees.
EAME management and franchising segment revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment revenues | |||||||||||||||||||||||
| Management, franchise, license, and other fees | $ | 19 | $ | 13 | $ | 6 | 47.2 | % | |||||||||||||||
| Contra revenue | (3) | (2) | (1) | (60.1) | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) | 22 | 18 | 4 | 25.3 | % | ||||||||||||||||||
| Total segment revenues | $ | 38 | $ | 29 | $ | 9 | 32.8 | % | |||||||||||||||
| (1) See "—Results of Operations" for further discussion regarding the increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
The increase in management, franchise, license, and other fees during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by an increase in management fees in Western Europe and the Middle East, due to the continued recovery from the COVID-19 pandemic as well as eased travel restrictions.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of comparable hotels | 2023 | vs. 2022 (in constant $) | 2023 | vs. 2022 | 2023 | vs. 2022 (in constant $) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable EAME system-wide hotels | 96 | $ | 135 | 47.4 | % | 62.5 | % | 15.0% pts | $ | 216 | 12.0 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comparable EAME system-wide hotels RevPAR increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by increased demand and ADR in certain leisure destinations in Western Europe and the Middle East.
During the three months ended March 31, 2023, we removed two properties from the comparable EAME system-wide hotel results as one property left the hotel portfolio and one property is undergoing a significant renovation.
EAME management and franchising segment Adjusted EBITDA.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 12 | $ | 4 | $ | 8 | 256.9 | % | |||||||||||||||
Adjusted EBITDA increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by the increase in management fees.
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Apple Leisure Group segment revenues.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Segment revenues | |||||||||||||||||||||||
| Management, franchise, license, and other fees | $ | 39 | $ | 30 | $ | 9 | 31.1 | % | |||||||||||||||
| Distribution and destination management | 328 | 246 | 82 | 33.1 | % | ||||||||||||||||||
| Other revenues | 41 | 34 | 7 | 23.1 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (1) | 32 | 29 | 3 | 8.8 | % | ||||||||||||||||||
| Total segment revenues | $ | 440 | $ | 339 | $ | 101 | 29.7 | % | |||||||||||||||
| (1) See "—Results of Operations" for further discussion regarding the increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. | |||||||||||||||||||||||
The increase in management, franchise, license, and other fees during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by an increase in base management fees due to increased ADR and occupancy in the Americas. The three months ended March 31, 2022 were also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.
The increase in distribution and destination management revenues during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by higher departure volume and pricing as well as the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Package RevPAR | Occupancy | Net Package ADR | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of comparable hotels | 2023 | vs. 2022 (in constant $) | 2023 | vs. 2022 | 2023 | vs. 2022 (in constant $) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comparable ALG system-wide hotels | 82 | $ | 261 | 29.2 | % | 77.7 | % | 10.6% pts | $ | 336 | 11.5 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Net Package RevPAR increase at our comparable ALG system-wide hotels during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was driven by strong ADR across all markets as well as improved demand. The three months ended March 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of the year.
Apple Leisure Group segment Adjusted EBITDA.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 79 | $ | 56 | $ | 23 | 39.9 | % | |||||||||||||||
| Net Deferral activity | |||||||||||||||||||||||
| Increase in deferred revenue | $ | 58 | $ | 49 | $ | 9 | 17.5 | % | |||||||||||||||
| Increase in deferred costs | (27) | (25) | (2) | (7.6) | % | ||||||||||||||||||
| Net Deferrals | $ | 31 | $ | 24 | $ | 7 | 27.4 | % | |||||||||||||||
| Increase in Net Financed Contracts | $ | 17 | $ | 7 | $ | 10 | 160.5 | % | |||||||||||||||
Adjusted EBITDA increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by the improved margins for ALG Vacations and increased management fees.
During the three months ended March 31, 2023, compared to the three months ended March 31, 2022, Net Deferrals and Net Financed Contracts increased due to the sale of UVC membership contracts.
Net Deferrals represent cash received in the period for both membership down payments and monthly installment payments on financed contracts, less cash paid for costs incurred to sell new contracts, net of revenues and expenses recognized on our condensed consolidated statements of income (loss) during the period.
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Net Financed Contracts represent contractual future cash flows due to the Company over an average term of less than 4 years, less expenses that will be incurred to fulfill the contract, net of monthly cash installment payments received during the period. At March 31, 2023 and December 31, 2022, the Net Financed Contract balance not recorded on our condensed consolidated balance sheets was $203 million and $186 million, respectively.
Corporate and other.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Better / (Worse) | |||||||||||||||||||||
| Revenues | $ | 22 | $ | 14 | $ | 8 | 63.2 | % | |||||||||||||||
| Adjusted EBITDA | $ | (42) | $ | (38) | $ | (4) | (12.2) | % | |||||||||||||||
Revenues increased during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily driven by increased license fee revenues related to our co-branded credit card programs.
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 (losses) on sales of real estate and other;
•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 one of the key performance and compensation measures 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 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.
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We believe Adjusted EBITDA is useful to investors because it provides investors with the same information that we use internally for purposes of assessing our operating performance and making compensation decisions and facilitates our comparison of results 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, including interest expense and benefit (provision) for income taxes, which are dependent on company specifics, including capital structure, credit ratings, tax policies, and jurisdictions in which they operate; depreciation and amortization, which are dependent on company policies including how the assets are utilized as well as the lives assigned to the assets; Contra revenue, which is dependent on company policies and strategic decisions regarding payments to hotel owners; and stock-based compensation expense, which varies among companies as a result of different compensation plans companies have adopted. 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 do not intend to recover from hotel owners. 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 (loss) generated by our business. Our management compensates for these limitations by referencing 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, 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. Comparable system-wide hotels also exclude properties for which comparable results are not available. We may use variations of comparable system-wide hotels to specifically refer to comparable system-wide Americas hotels, including our wellness resorts, or our all-inclusive resorts, for those properties that we manage or franchise within the Americas management and franchising segment, comparable system-wide ASPAC hotels for those properties we manage or franchise within the ASPAC management and franchising segment, comparable system-wide EAME hotels for those properties that we manage or franchise within the EAME management and franchising segment, or comparable system-wide ALG all-inclusive resorts for those properties that we manage within the Apple Leisure Group segment. "Comparable owned and leased hotels" represents all properties we own or lease that are operated and consolidated for the entirety of the periods being compared and have not sustained substantial
39
damage, business interruption, or undergone large-scale renovations during the periods being compared. Comparable owned and leased hotels also excludes properties for which comparable results are not available. Comparable system-wide hotels and comparable owned and leased hotels are commonly used as a basis of measurement in our industry. "Non-comparable system-wide hotels" or "non-comparable owned and leased hotels" represent all hotels that do not meet the respective definition of "comparable" as defined above.
Constant Dollar Currency
We report the results of our operations both on an as-reported basis, as well as on a constant dollar basis. Constant dollar currency, which is a non-GAAP measure, excludes the effects of movements in foreign currency exchange rates between comparative periods. We believe constant dollar analysis provides valuable information regarding our results as it removes currency fluctuations from our operating results. We calculate constant dollar currency by restating prior-period local currency financial results at the current period's exchange rates. These restated amounts are then compared to our current period reported amounts to provide operationally driven variances in our results.
Net Financed Contracts
Net Financed Contracts represent Unlimited Vacation Club contracts signed during the period for which an initial cash down payment has been received and the remaining balance is contractually due in monthly installments over an average term of less than 4 years. The Net Financed Contract balance is calculated as the unpaid portion of membership contracts reduced by expenses related to fulfilling the membership program contracts and further reduced by an allowance for future estimated uncollectible installments. Net Financed Contract balances are not reported on our condensed consolidated balance sheets as our right to collect future installments is conditional on our ability to provide continuous access to member benefits at ALG resorts over the contract term, and the associated expenses to fulfill the membership contracts become liabilities of the Company only after the installments are collected. We believe Net Financed Contracts is useful to investors as it represents an estimate of future cash flows due in accordance with contracts signed in the current period. At March 31, 2023, the Net Financed Contract balance not recorded on our condensed consolidated balance sheet was $203 million.
Net Deferrals
Net Deferrals represent the change in contract liabilities associated with the Unlimited Vacation Club membership contracts less the change in deferred cost assets associated with the contracts. The contract liabilities and deferred cost assets are recognized as revenue and expense, respectively, on our condensed consolidated statements of income (loss) over the customer life, which ranges from 3 to 25 years.
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The table below provides a reconciliation of our net income (loss) attributable to Hyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | 58 | $ | (73) | $ | 131 | 179.4 | % | |||||||||||||||
| Interest expense | 33 | 40 | (7) | (16.9) | % | ||||||||||||||||||
| Provision for income taxes | 47 | 2 | 45 | NM | |||||||||||||||||||
| Depreciation and amortization | 98 | 119 | (21) | (18.5) | % | ||||||||||||||||||
| EBITDA | 236 | 88 | 148 | 166.5 | % | ||||||||||||||||||
| Contra revenue | 10 | 9 | 1 | 24.4 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | (729) | (540) | (189) | (34.9) | % | ||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | 749 | 556 | 193 | 34.6 | % | ||||||||||||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | 2 | 9 | (7) | (83.7) | % | ||||||||||||||||||
| Stock-based compensation expense | 32 | 28 | 4 | 15.3 | % | ||||||||||||||||||
| Asset impairments | 2 | 3 | (1) | (33.6) | % | ||||||||||||||||||
| Other (income) loss, net | (48) | 10 | (58) | (612.2) | % | ||||||||||||||||||
| Pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA | 14 | 6 | 8 | 122.7 | % | ||||||||||||||||||
| Adjusted EBITDA | $ | 268 | $ | 169 | $ | 99 | 58.6 | % | |||||||||||||||
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 pay down debt; support new investment opportunities, including acquisitions; and return capital to our stockholders, when appropriate. If we deem it necessary, we borrow cash under our revolving credit facility or from other third-party sources and raise funds by issuing debt or equity securities. We maintain a cash investment policy that emphasizes the preservation of capital.
In alignment with our long-term business strategy, on February 2, 2023, we completed the Dream Acquisition and paid $125 million using cash on hand. See Part I, Item 1 "Financial Statements—Note 6 to our Condensed Consolidated Financial Statements" for additional information.
We expect to successfully execute our commitment announced in August of 2021 to realize $2.0 billion of proceeds from the disposition of owned assets, net of acquisitions, by the end of 2024. As of May 4, 2023, we have realized $721 million of proceeds from the net disposition of owned assets as part of this commitment.
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 financing arrangements, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. During the three months ended March 31, 2023, we returned $106 million of capital to our stockholders through share repurchases, and during April 2023, we returned an additional $8 million of capital to our stockholders through share repurchases. During the three months ended March 31, 2023, there were no dividend payments.
We believe that our cash position, short-term investments, cash from operations, borrowing capacity under our revolving credit facility, and access to the capital markets will be adequate to meet all of our funding requirements and capital deployment objectives in both the short term and long term.
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Recent Transactions Affecting our Liquidity and Capital Resources
During the three months ended March 31, 2023 and March 31, 2022, various transactions impacted our liquidity. See "—Sources and Uses of Cash."
Sources and Uses of Cash
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | 225 | $ | 180 | |||||||
| Investing activities | (149) | (110) | |||||||||
| Financing activities | (133) | (14) | |||||||||
| Effect of exchange rate changes on cash | (4) | 5 | |||||||||
| Cash, cash equivalents, and restricted cash reclassified to assets held for sale | — | (7) | |||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | (61) | $ | 54 | |||||||
Cash Flows from Operating Activities
Cash provided by operating activities increased $45 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was primarily due to improved performance across the portfolio driven by continued recovery from the COVID-19 pandemic and a decrease in cash paid for interest.
Cash Flows from Investing Activities
During the three months ended March 31, 2023:
•We acquired Dream Hotel Group for $125 million of cash.
•We invested $30 million in capital expenditures (see "—Capital Expenditures").
•We invested $30 million in an convertible debt security.
•We received $51 million of net proceeds from the sale of marketable securities and short-term investments.
During the three months ended March 31, 2022:
•We invested $43 million in capital expenditures (see "—Capital Expenditures").
•We paid $39 million related to the acquisition of ALG for amounts due back to the seller for purchase price adjustments.
•We invested $32 million in net purchases of marketable securities and short-term investments.
Cash Flows from Financing Activities
During the three months ended March 31, 2023:
•We repurchased 1,018,931 shares of Class A common stock for an aggregate purchase price of $106 million, inclusive of the payment of a $9 million liability for the repurchase of 106,116 shares recorded at December 31, 2022.
•We repurchased $13 million of our Senior Notes.
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During the three months ended March 31, 2022:
• We did not have any significant financing activities.
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, 2023 | December 31, 2022 | ||||||||||
| Consolidated debt (1) | $ | 3,102 | $ | 3,113 | |||||||
| Stockholders' equity | 3,693 | 3,699 | |||||||||
| Total capital | 6,795 | 6,812 | |||||||||
| Total debt to total capital | 45.7 | % | 45.7 | % | |||||||
| Consolidated debt (1) | 3,102 | 3,113 | |||||||||
| Less: cash and cash equivalents and short-term investments | (1,051) | (1,149) | |||||||||
| Net consolidated debt | $ | 2,051 | $ | 1,964 | |||||||
| Net debt to total capital | 30.2 | % | 28.8 | % | |||||||
(1) Excludes approximately $534 million and $538 million of our share of unconsolidated hospitality venture indebtedness at March 31, 2023 and December 31, 2022, 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 other. 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Maintenance and technology | $ | 22 | $ | 19 | |||||||
| Enhancements to existing properties | 8 | 21 | |||||||||
| Other | — | 3 | |||||||||
| Total capital expenditures | $ | 30 | $ | 43 | |||||||
The decrease in capital expenditures is primarily driven by renovation spend at certain owned hotels in 2022. Total capital expenditures for the three months ended March 31, 2023 and March 31, 2022 include $6 million and $7 million, respectively, related to ALG. Excluding ALG, our capital expenditures continue to be below pre-COVID-19 pandemic levels, primarily as a result of our net dispositions of owned assets.
Senior Notes
The table below sets forth the outstanding principal balance of our Senior Notes at March 31, 2023, as described in Part I, Item 1 "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements." Interest on the Senior Notes is payable semi-annually.
| Outstanding principal amount | |||||
| $700 million senior unsecured notes maturing in 2023—1.300% | $ | 643 | |||
| $750 million senior unsecured notes maturing in 2024—1.800% | 746 | ||||
| $450 million senior unsecured notes maturing in 2025—5.375% | 450 | ||||
| $400 million senior unsecured notes maturing in 2026—4.850% | 400 | ||||
| $400 million senior unsecured notes maturing in 2028—4.375% | 399 | ||||
| $450 million senior unsecured notes maturing in 2030—5.750% | 440 | ||||
| Total Senior Notes | $ | 3,078 | |||
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We are in compliance with all applicable covenants under the indenture governing our Senior Notes at March 31, 2023.
Revolving Credit Facility
The revolving credit facility is intended to provide financing for working capital and general corporate purposes, including commercial paper backup and permitted investments and acquisitions. At both March 31, 2023 and December 31, 2022, we had no balance outstanding. See Part I, Item 1 "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements."
We are in compliance with all applicable covenants under the revolving credit facility at March 31, 2023.
Letters of Credit
We issue letters of credit either under the revolving credit facility or directly with financial institutions. We had $263 million in letters of credit issued directly with financial institutions outstanding at both March 31, 2023 and December 31, 2022. At March 31, 2023, these letters of credit, which mature on various dates through 2024, had weighted-average fees of approximately 149 basis points. See Part I, Item 1 "Financial Statements—Note 12 to our Condensed Consolidated Financial Statements."
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 complex judgment in their application in our 2022 Form 10-K, with an additional consideration below.
Contingent Consideration
Contingent consideration payable arising from acquisitions is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. Changes in fair value are recognized in other income (loss), net on our condensed consolidated statements of income (loss). In order to estimate the fair value, we generally utilize a Monte Carlo simulation to model the probability of possible outcomes. Changes to the significant assumptions or factors used to determine fair value, in particular assumptions related to the selection of discount rates, probabilities of achieving the contractual milestones, and timing of payments, could affect the fair value measurement upon acquisition and each reporting period thereafter. See Part I, Item 1, "Financial Statements—Note 6 to our Condensed Consolidated Financial Statements."
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk, primarily from changes in interest rates and foreign currency exchange rates. In certain situations, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objectives described above, and we do not use derivatives for trading or speculative purposes. At March 31, 2023, we were a party to hedging transactions, including the use of derivative financial instruments, as discussed below.
Interest Rate Risk
In the normal course of business, we are exposed to the impact of interest rate changes due to our borrowing activities. Our objective is to manage the risk of interest rate changes on the results of operations, cash flows, and the market value of our debt by creating an appropriate balance between our fixed and floating-rate debt. We enter into interest rate derivative transactions from time to time, including interest rate swaps and interest rate locks, in order to maintain a level of exposure to interest rate variability that we deem acceptable.
At both March 31, 2023 and December 31, 2022, we did not hold any interest rate swap or outstanding interest rate lock contracts.
The following table sets forth the contractual maturities and the total fair values at March 31, 2023 for our financial instruments materially affected by interest rate risk:
| Maturities by Period | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total carrying amount (1) | Total fair value (1) | ||||||||||||||||||||||||||||||||||||||||
| Fixed-rate debt | $ | 644 | $ | 746 | $ | 450 | $ | 400 | $ | — | $ | 839 | $ | 3,079 | $ | 3,017 | |||||||||||||||||||||||||||||||
| Average interest rate (2) | 3.58 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Floating-rate debt | $ | 3 | $ | 4 | $ | 4 | $ | 4 | $ | 4 | $ | 11 | $ | 30 | $ | 31 | |||||||||||||||||||||||||||||||
| Average interest rate (2) | 8.02 | % | |||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes $6 million of finance lease obligations and $13 million of unamortized discounts and deferred financing fees.
(2) Average interest rate at March 31, 2023.
Foreign Currency Exposures and Exchange Rate Instruments
We transact business in various foreign currencies and utilize foreign currency forward contracts to offset our exposure associated with the fluctuations of certain foreign currencies. The U.S. dollar equivalents of the notional amount of the outstanding forward contracts, which relate to intercompany transactions, with terms of less than one year, were $155 million at both March 31, 2023 and December 31, 2022.
We intend to offset the gains and losses related to our third-party debt and intercompany transactions with gains or losses on our foreign currency forward contracts such that there is a negligible effect on our annual net income (loss). Our exposure to market risk has not materially changed from what we previously disclosed in our 2022 Form 10-K.
For the three months ended March 31, 2023 and March 31, 2022, the effects of these derivative instruments resulted in $2 million of net losses and $5 million of net gains, respectively, recognized in other income (loss), net on our condensed consolidated statements of income (loss). We offset the gains and losses on our foreign currency forward contracts with gains and losses related to our intercompany loans and transactions, such that there is a negligible effect to our net income (loss). At March 31, 2023 and December 31, 2022, we had $3 million and $1 million, respectively, of liabilities recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets related to derivative instruments.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures. We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this quarterly report, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting.
There has been no change in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, workers' compensation and other employee claims, intellectual property claims, and claims related to our management of certain hotel properties. Most occurrences involving liability, claims of negligence, and employees are covered by insurance, in each case, with solvent insurance carriers. We record a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our consolidated financial position, results of operations, or liquidity.
See Part I, Item 1, "Financial Statements—Note 11 and Note 12 to our Condensed Consolidated Financial Statements" for more information related to tax and legal contingencies.
Item 1A. Risk Factors.
At March 31, 2023, there have been no material changes from the risk factors previously disclosed in response to Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of shares of Class A common stock on a settlement date basis during the quarter ended March 31, 2023:
| Total number of shares purchased (1) | Weighted-average price paid per share | Total number of shares purchased as part of publicly announced plans | Maximum number (or approximate dollar value) of shares that may yet be purchased under the program | |||||||||||||||||||||||
| January 1 to January 31, 2023 | 162,413 | $ | 89.57 | 162,413 | $ | 544,551,167 | ||||||||||||||||||||
| February 1 to February 28, 2023 | — | — | — | $ | 544,551,167 | |||||||||||||||||||||
| March 1 to March 31, 2023 | 856,518 | 107.34 | 856,518 | $ | 452,616,478 | |||||||||||||||||||||
| Total | 1,018,931 | $ | 104.50 | 1,018,931 | ||||||||||||||||||||||
(1)On December 18, 2019, we announced the approval of the expansion of our share repurchase program. Under the approval, we are authorized to purchase up to $750 million of Class A and Class B common stock in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an accelerated share repurchase transaction. The repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the program may be suspended or discontinued at any time and does not have an expiration date. At March 31, 2023, we had approximately $453 million remaining under the share repurchase authorization. During April 2023, we repurchased 73,368 shares of Class A common stock, which were initiated prior to March 31, 2023, but not settled until April 2023. The shares of common stock were repurchased at a weighted-average price of $109.93 for an aggregate purchase price of $8 million, excluding insignificant related expenses. The shares of Class A common stock repurchased in the open market were retired and returned to the status of authorized and unissued shares. At April 30, 2023, we had $445 million remaining under the share repurchase authorization.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
| Exhibit Number | Exhibit Description | ||||
| 3.1 | Amended and Restated Certificate of Incorporation of Hyatt Hotels (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K (File No. 001-34521) filed with the Securities and Exchange Commission on February 16, 2023) | ||||
| 3.2 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Hyatt Hotels Corporation | |||||||||||
| Date: | May 4, 2023 | By: | /s/ Mark S. Hoplamazian | ||||||||
| Mark S. Hoplamazian | |||||||||||
| President and Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
| Hyatt Hotels Corporation | |||||||||||
| Date: | May 4, 2023 | By: | /s/ Joan Bottarini | ||||||||
| Joan Bottarini | |||||||||||
| Executive Vice President, Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
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