Hyatt Hotels Corporation · NYSE:H
Hyatt Hotels — Investor Day (March 2014)
51 slides from Hyatt Hotels's investor day presentation, Mar 14, 2014
Slide 1: Investor Meeting
Investor Meeting March 14, 2014 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements about Hyatt Hotels Corporation’s (“Hyatt” or the “Company”) plans, strategi
Slide 2: Welcome
Welcome Atish Shah Key Themes for the Day Superior Solid Leveraging long-term track record key strengths growth opportunity 4
Slide 3: Agenda for the Day
Agenda for the Day Getting to know Hyatt Tom Pritzker Our goal and track record Mark S. Hoplamazian Key strengths we are leveraging Mark S. Hoplamazian Q&A Break Key strengths we are leveraging Mark S. Hoplamazian Q&A Financial overview Gebhard F. Rainer Delivering superior long-term growth Mark S.
Slide 4: Getting to Know Hyatt: History
Getting to Know Hyatt My Background and Role at Hyatt Hyatt History Building a 21st Century Hospitality Company Enduring Philosophy 7 Key Historical Milestones Jay Pritzker purchases the first Hyatt House hotel, adjacent to LAX Hyatt goes Hyatt Corporation Hyatt Gold Passport international goes priv
Slide 5: Key Historical Milestones
Key Historical Milestones Acquires portfolio Enters all inclusive Hyatt Place Hyatt Hotels Corporation of hotels from segment with brand debuts completes IPO LodgeWorks Hyatt Ziva & Hyatt Zilara 2004 2005 2006 2007 2009 2011 2012 2013 Substantially all Acquires Andaz Hyatt House Acquires and rebrand
Slide 6: Our Goal and Track Record
Our Enduring Philosophy Culture Relationships Value Creation 11 Our Goal and Track Record Mark S. Hoplamazian President and Chief Executive Officer
Slide 7: Our Goal
Our Goal and Track Record Our Goal Our Track Record Since 2009 13 Our Goal To become the most preferred brand in each customer segment that we serve Colleague Guest Owner Preference Preference Preference 14
Slide 8: Significant Earnings Growth
Our Goal and Track Record Our Goal Our Track Record Since 2009 15 Significant Earnings Growth Adjusted EBITDA (Millions) $680 14% CAGR $406 FY 2009 FY 2013 Refer to www.investors.hyatt.com for reconciliation of GAAP to non-GAAP financial measures. 16
Slide 9: Owned Margin Improvement and System Growth
Earnings Growth: Owned Margin Improvement Owned and Leased Hotel Operating Margin 24% +600 bps 18% FY 2009 FY 2013 17 Earnings Growth: Industry Leading System Growth Hotels Rooms 31% 523 21% 399 145,324 120,031 YE 2009 YE 2013 YE 2009 YE 2013 Excludes Hyatt Residence Club. “Industry leading” refers
Slide 10: Earnings Growth Across All Regions
Earnings Growth: Driven by System Growth Across All Regions Americas EAME / SW Asia ASPAC 32% 22% 46% 33% 16% 11% Hotels Rooms Hotels Rooms Hotels Rooms Hyatt Regency Mexico City Hyatt Capital Gate Abu Dhabi Grand Hyatt Shenyang Growth from 2009 to 2013. Excludes Hyatt Residence Club. 19 Earnings Gr
Slide 11: System Growth Expected to Continue to Lead Industry
Earnings Growth: System Growth Expected to Continue to Lead Industry Hotels in Executed Contract Base Rooms in Executed Contract Base 240 54,000 100% 100% 120 27,000 YE 2009 YE 2013 YE 2009 YE 2013 Represents potential entry into more than 100 new markets Excludes Hyatt Residence Club. New markets a
Slide 12: Capital Front and Recycling Capital Case Study
A Very Active Four Years on the Capital Front Deployed significant cash Increased balance sheet leverage Sold assets and realized investments Invested in new and existing hotels Returned significant amount of capital to shareholders 23 Case Study: Recycling Capital Hyatt Regency New Orleans • $275M
Slide 13: Key Strengths We Are Leveraging
IN SUMMARY A Company with a Clear Focus • Committed to our goal to be the Most Preferred Brand • Our track record since IPO demonstrates a consistency of strategy and execution 25 Key Strengths We Are Leveraging Mark S. Hoplamazian President and Chief Executive Officer
Slide 14: Multiple Earnings Tools
Key Strengths We Are Leveraging 1 Multiple Earnings Tools 2 Strong Relationships 3 Powerful Brands 27 Multiple Earnings Tools Our Model Own, Manage and Franchise Our Guest Group and Transient Mix Our Revenue Rooms / Food and Beverage Mix Our tools for driving growth 28
Slide 15: Ownership, Management and Franchising Tools
Three Tools: Ownership, Management and Franchising Adjusted EBITDA Composition (2) Management and Owned and Leased Franchising(1) 41% 59% Year ended December 31, 2013. (1) Includes Americas, EAME/SWA and ASPAC management and franchising segments. (2) Excludes corporate and other. 29 Ownership Tool:
Slide 16: Ownership and Management Tools
Ownership Tool: Operating Leverage, Owner Preference and Recycling Operating Leverage Owner Preference Recycling Increased brand Margin Contract presence in growth base expansion targeted areas and investment returns 31 Management Tool: Hyatt’s DNA Maintain brand quality and Rooms Mix guest experi
Slide 17: Management and Franchising Tools
Management Tool: Upside Incentive Fee Potential Total Incentive Management Fees 25% below prior peak 66% % of Hotels Paying Incentive Management Fees (11 points below prior peak) % of Hotels Opened Since 2009 Paying 50% Incentive Management Fees Strong upside to incentive management fees from existi
Slide 18: Multiple Earnings Tools
Multiple Earnings Tools Our Model Own, Manage and Franchise Our Guest Group and Transient Mix Our Revenue Rooms / Food and Beverage Mix Our tools for driving growth 35 Group Tool: Strong Earnings Driver • Strong group position and share Global Room Revenue Mix • Strong base of business Other provide
Slide 19: Group Tool
Group Tool: Well Positioned for Evolution of Global Group Business Americas EAME / SWA ASPAC 5% 5% 15% 21% 14% 55% 40% 74% 71% Transient Group Other Group business represents 42% of U.S. revenue and provides Hyatt a strong experience base as group business expands outside the U.S. Year ended Decembe
Slide 20: Multiple Earnings Tools
Multiple Earnings Tools Our Model Own, Manage and Franchise Our Guest Group and Transient Mix Our Revenue Rooms / Food and Beverage Mix Our tools for driving growth 39 Food and Beverage Tool: Provides Opportunity as Business Evolves Americas EAME / SWA ASPAC F&B F&B F&B Revenue 61% Revenue 59% Reven
Slide 21: Food and Beverage in Asia Pacific
Case Study: Food and Beverage in Asia Pacific • Leadership position • 300 restaurants or bars • Driver of guest and owner • Average of 5 restaurants or bars preference per hotel • Significant local guest mix • 20% of restaurants or bars earned more than $1M in profit • 30%+ margins Year ended Decemb
Slide 22: Food and Beverage in Asia Pacific
Case Study: Food and Beverage in Asia Pacific Park Hyatt Shanghai Grand Hyatt Beijing 100 Century Avenue Restaurant Made in China 43 Case Study: Food and Beverage in Asia Pacific Park Hyatt Sydney Grand Hyatt Erawan Bangkok The Dining Room The Campus Cafeteria 44
Slide 23: Key Strengths We Are Leveraging
Key Strengths We Are Leveraging 1 Multiple Earnings Tools 2 Strong Relationships 3 Powerful Brands 45 Q&A
Slide 24: Powerful Brands: Ten Brands for High End Travelers
Key Strengths We Are Leveraging 1 Multiple Earnings Tools 2 Strong Relationships 3 Powerful Brands 47 Powerful Brands: Ten Brands – All Focused on High End Travelers % of Systemwide Rooms Luxury 21% Upper 54% Upscale Upscale 23% Other 2% Industry leading luxury mix Year ended December 31, 2013. Chai
Slide 25: Powerful Brands: Strong Rate Profile
Powerful Brands: Strong Rate Profile Average Daily Rate (ADR) $343 $281 $240 $169 $168 $124 $102 Highest systemwide ADR ($175) in the industry Year ended December 31, 2013 for comparable locations. 49 Positioning • Marquee global locations Enriching • 33 hotels Uncommon • 6,535 rooms Sophisticated •
Slide 26: Brand Positioning and Growth Outlook
Positioning • Urban and resort locations • 11 hotels • 2,269 rooms • 5 countries • Significant room growth since launch in 2007 • Recent resort openings in Maui and Costa Rica Growth Outlook Inspiring • Executed contracts = ~70% room growth Indigenous • 2014 expected openings include: Tokyo Unscript
Slide 27: Brand Positioning and Growth Outlook
Positioning • Popular destinations Inviting • Transient greater than 70% of room revenue Witty • Key locations in NYC, Chicago, Key West, Charming Paris and India • 38 hotels • 8,609 rooms • 4 countries Growth Outlook • Executed contracts = ~20% room growth • 2014 expected openings include: Atlanta
Slide 28: Brand Positioning and Growth Outlook
Positioning • Select service focused on today’s multi-tasking traveler Uncomplicated • Focused on expanding in urban locations Stylish • New urban locations in 2013: NYC, Chicago, Minneapolis, Approachable Nashville, Omaha and Austin • 192 hotels • 25,575 rooms • 5 countries Growth Outlook • Execute
Slide 29: Ability to Roll Out New Brands
Positioning • First multi-brand company to enter all inclusive segment • Hyatt Zilara: Adult only • Hyatt Ziva: Guests of all ages • 2 resorts • 925 rooms • 1 country Growth Outlook Spontaneous • Large market potential Carefree • Focused on growing in the Caribbean basin Spirited • 2014 expected ope
Slide 30: Increased Gold Passport Penetration
Powerful Brands: Increased Gold Passport Penetration Gold Passport Penetration (Total Room Nights) 34% 24% FY 2009 FY 2013 59 Case Study: Powerful Brands 15 of the hotels acquired in 2011 were converted to Hyatt House Hyatt House San Jose/Silicon Valley Hyatt House Charlotte/City Center Hyatt House
Slide 31: Case Study: Powerful Brands
Case Study: Powerful Brands 15 of the hotels acquired in 2011 were converted to Hyatt House Comparable Corporate Group Gold Passport RevPAR Index Meetings Penetration 8 points 50% 60% 0% Change from 2011 to 2013. RevPAR index as reported by STR. 61 IN SUMMARY Hyatt: A Differentiated Hospitality Comp
Slide 32: Financial Overview
Q&A Financial Overview Gebhard F. Rainer Executive Vice President, Chief Financial Officer
Slide 33: Executing a Successful Business Model
Agenda Our Business Model Three-Year Earnings Potential Based on STR RevPAR Forecast Capital Allocation 65 Executing a Successful Business Model Increased Owned Increased New Strong and Leased fees hotels Strong Adjusted margins operating EBITDA cash flow growth 66
Slide 34: Strong Track Record Since 2009
Strong Track Record Since 2009 Owned and Leased Management and Franchising Total Segment Adjusted EBITDA Segments Adjusted EBITDA (1) Adjusted EBITDA (2) (Millions) (Millions) (Millions) 12% 17% 14% CAGR CAGR CAGR $680 $471 $406 $302 $323 $175 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2
Slide 35: Earnings Potential Based on STR RevPAR Forecast
Earnings Potential Based on STR RevPAR Forecast Cautionary Note The three-year earnings potential is a scenario based on RevPAR estimates from STR. The STR estimate for U.S. industry RevPAR growth in 2014 is 5.3%. This RevPAR growth estimate was applied to Hyatt’s global business over the next three
Slide 36: Earnings Potential and Sensitivities
Earnings Potential Based on STR RevPAR Forecast Owned and Leased Segment Management and Franchising Adjusted EBITDA Segments Adjusted EBITDA (1) (Millions) (Millions) ~ $675 ~13% CAGR $471 ~ $475 ~14% CAGR $302 $323 $175 2009 2010 2011 2012 2013 2016E 2009 2010 2011 2012 2013 2016E (1) Includes Amer
Slide 37: Record of Disciplined Capital Deployment
Agenda Our Business Model Three-Year Earnings Potential Based on STR RevPAR Forecast Capital Allocation 73 Record of Disciplined Capital Deployment (2010-2013) Operating Maintenance CapEx Cash Flow $0.4B $1.8B Cash from Asset Sales Deployed Investments in New and Realized Investments Capital and Exi
Slide 38: Use of Balance Sheet and Return of Capital
A Closer Look: Improved Use of Balance Sheet Total Net Debt Total Net Debt / Adjusted (Millions) EBITDA $1,487 2.2x $31 0.1x YE 2009 YE 2013 YE 2009 YE 2013 • Utilized existing cash for investments in key priorities and return of capital • Expanded balance sheet and availability • Balance sheet rema
Slide 39: Operating Cash Flow Potential and Capital Allocation Framework
Operating Cash Flow Potential Based on STR RevPAR Forecast Illustration ~14% Adjusted ~$1.9B of EBITDA Cumulative CAGR Based on Operating Cash STR RevPAR Flow Potential Forecast Earnings potential predicated on assumptions on slide 69. 77 Capital Allocation Framework 1 Invest • Expand to serve guest
Slide 40: Invest to Grow and Maintain Strong Balance Sheet
1 Invest to Grow Identified Investments and Identified Investments Identified ROI CapEx (%) (excluding ~$400M of Maintenance CapEx) (Millions) ~$1,100 Other 5% ROI CapEx ~$200 Resorts 30% Select Service Hotels (primarily urban) 25% Identified ~$900 Investments Key Gateway City Hotels 40% 2014-16 201
Slide 41: Return of Capital Illustration
3 Return of Capital Illustration 2014-2016 Potential Available Cash Based on STR RevPAR Forecast = ~ $1.2B Return of Capital New Investments Earnings potential predicated on assumptions on slide 69. 81 Illustrative Metrics 2014-2016 Based on STR RevPAR Forecast Adjusted EBITDA Growth ~ 50% Operating
Slide 42: Delivering Superior Long-Term Growth
I N S U M M A RY: Key Messages Executing Successful Model Strong Track Record of Execution Disciplined Capital Allocation 83 Delivering Superior Long-Term Growth Mark S. Hoplamazian President and Chief Executive Officer
Slide 43: Strong Foundation for Growth
Strong Foundation for Growth Superior Long-Term Growth Owned and Leased Executed Hotels Contract Base 97 Hotels 240 Hotels 28,039 Rooms 54,000 Rooms Leveraging Key Strengths • Multiple Earnings Tools • Relationships • Powerful Brands As of December 31, 2013. 85 The Hyatt Difference: High Mix of Luxu
Slide 44: Owned Hotels: Markets and Embedded Value
Well Positioned in High Quality Markets and Locations Top Markets by Country Top United States Markets % of Owned and Leased Adjusted EBITDA 69% • New York, NY • Atlanta, GA • San Francisco / San Mateo, CA 5% 5% • Orlando, FL 4% 4% 3% • San Jose / Santa Cruz, CA United Switzerland South Mexico Canad
Slide 45: Expect Owned Portfolio to Evolve
Expect Owned Portfolio to Evolve Less More • Upscale • Upper upscale and luxury • United States • Outside the United States • Secondary and tertiary markets • Key gateway cities and resorts • Legacy assets • Institutional quality • Expect a significant level of disposition activity per year, conting
Slide 46: Successful Approach to Asset Recycling
Case Study: Demonstrating our Successful Approach to Asset Recycling Rebranded to: Sold Returns Sold 11 of 23 hotels, with 11% annualized return, management agreements, unlevered and exclusive for more than $400M of fees going forward Acquired 23 hotels in 2011 for more than Kept Future $725M 12 rem
Slide 47: High Quality Executed Contract Base
High Quality Executed Contract Base Luxury 24% Upper Upscale / 39% All Inclusive Upscale 37% As of December 31, 2013. Chain scale defined by STR. Statistics based on executed contract base rooms. 93 Executed Contract Base Composition: Large Growth Opportunity with Limited Hyatt Capital Under constru
Slide 48: Deliver High Quality, Durable Fees
Deliver High Quality, Durable Fees Contract Profile Fees • Typical management and franchise • Strong base and contract: >20 year term incentive fee structure • Stabilized fees • New contracts are additive as existing > $150M per year contract expirations minimal 95 Strong Foundation for Growth Super
Slide 49: Looking Ahead: Hyatt 3-5 Years Out
Looking Ahead: Hyatt 3-5 Years Out Growth Quality Return of Capital • Industry leading system size • Best locations in key markets • Return capital out of growth rate operating cash flow and • Evolution to higher quality additional balance sheet • Continued executed contract owned portfolio base exp
Slide 50: Concluding Remarks
Concluding Remarks Tom Pritzker Executive Chairman Concluding Remarks Aligned in Creating Value Thesis Based on Multiple Earnings Tools Colleague, Guest and Owner Preference 100
Slide 51: Glossary and Non-GAAP Reconciliation
Investor Meeting Glossary Non-GAAP Reconciliation In this presentation, management has referred to Adjusted EBITDA, which is not presented in accordance with US GAAP. The Company defines consolidated Adjusted EBITDA as net income attributable to Hyatt Hotels Corporation plus our pro-rata share of un