UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192021
☐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 CORPORATIONCORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 20-1480589 | ||||||||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | ||||||||||||||||
| 150 North Riverside Plaza | |||||||||||||||||
| 8th Floor, | Chicago, | Illinois | 60606 | ||||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||||||||
Registrant's telephone number, including area code: (312) (312) 750-1234
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 | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
| 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
At June 28, 2019,30, 2021, the aggregate market value of the registrant's Class A common stock, $0.01 par value, held by non-affiliates of the registrant was approximately $2,838.0$3,095.9 million (based upon the closing sale price of the Class A common stock on June 28, 201930, 2021 on The New York Stock Exchange). The market value of the registrant's Class B common stock is not included in the above value as there is no active market for such stock.
At January 31, 2020,2022, there were 35,841,27750,334,271 shares of the registrant's Class A common stock, $0.01 par value, outstanding and 65,463,27459,653,271 shares of the registrant's Class B common stock, $0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference portions of the registrant's Proxy Statement for its 20202022 Annual Meeting of Stockholders to be held on May 20, 2020.18, 2022.
HYATT HOTELS CORPORATION
TABLE OF CONTENTS
FISCAL YEAR ENDED DECEMBER 31, 20192021
| PART I | |||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 1B. | |||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
Information about our Executive Officers | |||||||||||
| PART II | |||||||||||
| Item 5. | |||||||||||
| Item 6. | |||||||||||
| Item 7. | |||||||||||
| Item 7A. | |||||||||||
| Item 8. | |||||||||||
| Item 9. | |||||||||||
| Item 9A. | |||||||||||
| Item 9B. | |||||||||||
| Item 9C. | |||||||||||
| PART III | |||||||||||
| Item 10. | |||||||||||
| Item 11. | |||||||||||
| Item 12. | |||||||||||
| Item 13. | |||||||||||
| Item 14. | |||||||||||
| PART IV | |||||||||||
| Item 15. | |||||||||||
| Item 16. | |||||||||||
Disclosure Regarding Forward-Looking Statements
This annual 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,performance; the impact of the COVID-19 pandemic and pace of recovery; the amount by which the Company intends to reduce its real estate asset base and the anticipated timeframe for such asset dispositions, prospectsdispositions; and prospective or future events andevents. 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 this annual report set forth under the sections titled "Risk Factors" in Part I, Item 1A and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7;
•risks associated with the acquisition of Apple Leisure Group, including the related incurrence of additional material indebtedness;
•our ability to realize the anticipated benefits of the acquisition of Apple Leisure Group as rapidly or to the extent anticipated, including successfully integrating the Apple Leisure Group business with ours;
•the duration and severity of the COVID-19 pandemic and the pace of recovery following the pandemic, any additional resurgence, or COVID-19 variants;
•the short and long-term effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence;
•the impact of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants, and the impact of actions that governments, businesses, and individuals take in response, on global and regional economies, travel limitations or bans, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending;
•the broad distribution and efficacy of COVID-19 vaccines and treatments, wide acceptance by the general population of such vaccines, and the availability, use, and effectiveness of COVID-19 testing, including at-home testing kits;
•the ability of third-party owners, franchisees, or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic, any additional resurgence, or COVID-19 variants;
•general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth;
•the rate and the pace of economic recovery following economic downturns;
•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 leisuregroup segments as well as consumer confidence;
•declines in occupancy and average daily rate ("ADR");
•limited visibility with respect to future bookings;
•loss of key personnel;
•domestic and international political and geo-political conditions, including political or civil unrest or changes in trade policy;
•hostilities, or fear of hostilities, including future terrorist attacks, that affect travel;
•travel-related accidents;
•natural or man-made disasters such as earthquakes, tsunamis, tornadoes, hurricanes, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases, or fear of such outbreaks, such as the recent coronavirus (COVID-19) outbreak;outbreaks;
•our ability to successfully achieve certain levels of operating profits at hotels that have performance tests or guarantees in favor of our third-party owners;
•the impact of hotel renovations and redevelopments;
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•risks associated with our capital allocation plans, and common stockshare repurchase program, and other formsdividend payments, including a reduction in, or elimination or suspension of, shareholder capital return, including the risk that our common stock repurchase program could increase volatility and fail to enhance shareholder value;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 the introduction of new brand concepts;
•the timing of acquisitions and dispositions and our ability to successfully integrate completed acquisitions with existing operations;
•failure to successfully complete proposed transactions (including the failure to satisfy closing conditions or obtain required approvals);
•our ability to successfully execute on our strategy to expand our management and franchising business while at the same time reducing our real estate asset base within targeted timeframes and at expected values;
•declines in the value of our real estate assets;
unforeseen terminations of our management or franchise agreements;
•changes in federal, state, local, or foreign tax law;
•increases in interest rates, wages, and other operating costs;
•foreign exchange rate fluctuations or currency restructurings;
•lack of acceptance of new brands or innovation;
•general volatility of the capital markets and our ability to access such markets;
•changes in the competitive environment in our industry, including as a result of the COVID-19 pandemic, industry consolidation, and the markets where we operate;
•our ability to successfully grow the World of Hyatt loyalty program 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.
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 could harm our business, financial condition, results of operations, or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent 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.
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Terms Used in this Annual Report
Unless otherwise specified or required by the context, otherwise requires, references in this annual report to "we," "our," "us," "Hyatt," and the "Company" refer to Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries.
As used in this annual report,report:
•"colleagues" refers to approximately 164,000 individuals (of which we directly employ approximately 44,000) working at our corporate and regional offices and our managed, franchised, owned, and leased properties in 70 countries around the term "Pritzkerworld;
•"condominium units" refer to whole ownership residential units (condominium and private residences) that we provide services to and, in some cases management of, the rental programs and/or homeowner associations associated with such units;
•"hospitality ventures" refer 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;
•"Pritzker family business interests" means (1) various lineal descendants of Nicholas J. Pritzker (deceased) and spouses and adopted children of such descendants; (2) various trusts for the benefit of the individuals described in clause (1) and trustees thereof; and (3) various entities owned and/or controlled, directly and/or indirectly, by the individuals and trusts described in (1) and (2).;
•Park Hyatt, Miraval, Grand Hyatt, Alila, Andaz, The Unbound Collection by Hyatt, Destination by Hyatt, Hyatt Regency, Hyatt, Hyatt Ziva, Hyatt Zilara, Thompson Hotels, Hyatt Centric, Caption by Hyatt, Joie de Vivre,JdV by Hyatt, Hyatt House, Hyatt Place, tommie,UrCove, Hyatt Residences Club brands; and
•Secrets Resorts & Spas, Dreams Resorts & Spas, Breathless Resorts & Spas, Zoëtry Wellness & Spa Resorts, Alua Hotels & Resorts, and Exhale brands. Our "worldwide hotel portfolio" includes our full and select service hotels. Our "worldwide property portfolio" includes our wellness and all-inclusive resorts, branded spas and fitness studios, and Sunscape Resorts & Spas brands (collectively, the "AMR Collection");
•"residential vacation, and condominium ownership units in addition to our worldwide hotel portfolio. "Residential ownership 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 the Hyattour portfolio of properties or in unique leisure locations. "Vacationlocations; and
•"vacation ownership units" refer to the fractional and timeshare vacation ownership properties with respect to which we license our trademarks and that are part of the Hyatt Residence Club. "Condominium ownership units" refer to whole ownership residential units (condominium and private residences) that we provide services to and, in some cases management of, the rental programs or homeowner associations associated with such units. "Hospitality ventures" refer to entities in the hospitality industry in which we own less than a 100% equity interest.
Additionally, through strategic relationships, we provide certain reservation and/or loyalty program services to hotels that are unaffiliated with our hotel portfolio and which operate under other tradenames or marks owned by such hotel or licensed by third parties.
Park Hyatt®, Miraval®, Grand Hyatt®,Alila®, Andaz®, The Unbound Collection by Hyatt®,Destination® by Hyatt™, Hyatt Regency®, Hyatt®, Hyatt Ziva™, Hyatt Zilara™, Thompson Hotels®, Hyatt Centric®, JdV by Hyatt™, Caption by Hyatt,Hyatt™, Hyatt House®, Hyatt Place®, tommie™, Hyatt Residence Club®, Hyatt Residences®, Exhale®, World of Hyatt®, Hyatt Resorts™, AMR™ Collection, Secrets® Resorts & Spas, Dreams® Resorts & Spas, Breathless Resorts & Spas®, Zoëtry® Wellness & Spa Resorts, Alua Hotels & Resorts®, Sunscape® Resorts & Spas, ALG Vacations®, Unlimited Vacation Club®, AMSTAR™, Apple Vacations®, Funjet Vacations®, Travel Impressions®, Blue Sky Tours®, CheapCaribbean.com®, BeachBound®, Trisept Solutions®, and related trademarks, logos, trade names, and service marks appearing in this annual report are the property of Hyatt Corporation or another wholly owned subsidiary of Hyatt Hotels Corporation. All other trademarks, trade names, or service marks appearing in this annual report are the property of their respective owners.
3
Part I
Item 1. Business.
Overview
Hyatt Hotels Corporation is a global hospitality company with widely recognized, industry leadingindustry-leading brands and a tradition of innovation developed over our more than sixty-year history. We develop, own, operate, manage, franchise, license, or provide services to a
Hyatt's portfolio of properties consistingconsists of full service hotels, select service hotels, all-inclusive resorts, and other properties, including branded spas and fitness studios, timeshare, fractional, and other forms of residential, vacation, and condominium ownership units. On November 1, 2021, we completed the acquisition of Apple Leisure Group ("ALG" or the "ALG Acquisition"), a leading luxury resort-management services, travel, and hospitality group that offers a paid membership program through the Unlimited Vacation Club. We also offer travel distribution and destination management services through ALG Vacations ("ALG Vacations"). At December 31, 2019,2021, our worldwide hotel portfolio consisted of 9131,162 hotels (223,111and all-inclusive resorts (284,944 rooms). See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview" for a categorized breakdown of our portfolio. Our colleagues and hotel general managers are supported by our regional management teams, located in cities around the world, and our executive management team, headquartered in Chicago.
Our twelve full servicefull-service brands are: Park Hyatt, Miraval, Grand Hyatt, Alila, Andaz, The Unbound Collection by Hyatt, Destination by Hyatt, Hyatt Regency, Hyatt, Thompson Hotels, Hyatt Centric, Joie de Vivre, and tommie.JdV by Hyatt. Our select service brands are Caption by Hyatt, Hyatt House, and Hyatt Place. In addition, we participate in an unconsolidated hospitality venture with a Chinese hospitality company that owns and is developing the UrCove select service brand intended to serveserving the upper-midscale market in Greater China. The Miraval and Exhale brands form a distinct wellness category within our portfolio of brands. Our all-inclusive resort brands are Hyatt Ziva, Hyatt Zilara, Secrets Resorts & Spas, Dreams Resorts & Spas, Breathless Resorts & Spas, Zoëtry Wellness & Spa Resorts, Alua Hotels & Resorts, and Hyatt Zilara.Sunscape Resorts & Spas. We also manage, provide services to, or license our trademarks with respect to residential ownership units that are often adjacent to a Hyatt-branded full servicefull-service hotel. We consult with third parties in the design and development of such mixed-use projects. We license certain of our trademarks with respect to vacation ownership units, which are part of Hyatt Residence Club. Additionally, we provide services and/orand, in some cases, manage the rental programs and/or homeowner associations associated with condominium ownership units.
We primarily derive our revenues from owned and leased hotel operations, management of hotels, andservices, licensing of our portfolio of brands to franchisees.franchisees, owned and leased hotel operations, distribution and destination management services, and a paid membership club offering. For each of the yearsyear ended December 31, 2019 and December 31, 2018,2021, revenues totaled $5.0$3.0 billion, and $4.5 billion, respectively, net incomeloss attributable to Hyatt Hotels Corporation totaled $766$222 million, and $769 million, respectively, and Adjusted EBITDA totaled $754 million and $777 million, respectively.$257 million. See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics Evaluated by Management—Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization ("Adjusted EBITDA") and EBITDA" for our definition of Adjusted EBITDA, why we present it, and for a reconciliation of our net income (loss) attributable to Hyatt Hotels Corporation to consolidated Adjusted EBITDA for the periods presented.
Impact of the COVID-19 Pandemic
The global spread of the COVID-19 pandemic and its impacts are complex and continue to evolve, resulting in significant disruption to our business, the lodging and hospitality industries, and the global economy. The pandemic and its impacts have significantly reduced global travel, demand for hotel rooms, and travel experiences, and have had a material impact on global commercial activity across the travel, lodging, and hospitality industries, which has had, and is expected to continue to have, a material impact on our business, results of operations, cash flows, and financial condition. While demand levels continue to recover from the lowest levels experienced at the onset of the pandemic, demand for hospitality services could continue to be uneven in the near term as there remains uncertainty as to the pace of recovery of demand for lodging and travel-related experiences.
Our Purpose, Vision, Mission, and Values
Our Purpose
We care for people so they can be their best.
Our Vision
A world of understanding and care.
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Our Mission
We deliver distinctive experiences for our guests.
Our Values
Respect, integrity, humility, empathy, creativity, and fun.
Our purpose, vision, mission, and values are brought to life by our colleagues, whom we refer to as the Hyatt family. We believe our colleagues around the world embody our purpose of caring for people, including one another, our guests and customers, property owners, and ultimately, the communities in which our hotelsproperties operate. We are strongly committed to advancing care for all of our stakeholders and creating personal connections thatto increase loyalty and drive results. The management teams at each of our managed properties lead by example, and we provide them with the appropriate autonomy to make operational decisions in the best interests of the hotel and brand. We believe the managers of our franchised properties are experienced operators with high standards who have demonstrated commitment to our values and our approach to caring for guests to enhance guest satisfaction. High levels of guest satisfaction lead to increased guest preference for our brands, which we believe results in a strengthened revenue base over the long term. We also believe engaged colleagues will enhance the efficient operation of our properties, resulting in improved financial results for our owners.results. Sustained adherence to these principles is a basis for our brand reputation and one of the principal factors behind the decisions ofstrongly contributes to our growth as our diverse group of owners and developers choose to invest in the Hyattour portfolio of properties around the world. We work with existing and prospective owners and developers to increase our presence around the world, which we expect will lead to guest satisfaction, brand preference, and new channels of professional growth for our colleagues.
Our Competitive Strengths
We have significant competitive strengths that support our mission to deliver distinctive experiences for our guests and customers, drive growth, and create value for our colleagues, guests, customers, colleagues,owners, and shareholders.
World Class Brands. Inspired by a deep understanding of customer and guest needs, we have developed, and in some cases acquired, a global suite of distinct brands. We believe our widely recognized, industry-leading brands provide us with a competitive advantage in attracting and driving preference. We have consistently received top rankings, awards, and accolades for service and guest experience from independent publications and surveys, including Condé Nast Traveler, Travel and Leisure, Forbes, AAA, and J.D. Power. The diversity and distinctiveness of our brand portfolio and the recognition and strength of our individual brands are key to our ability to drive preference.
Global Platform with Compelling Growth Potential. Our existing global presence is widely distributed, and our hotels operate in some of the most populous urban centers and highly desirable resort destinations around the globe. Weglobe, and we believe our existing hotels, located in key markets, around the globe, provide us with a strong platform from which to selectively pursue new growth opportunities in markets where our brands are less prevalent. Our dedicated development executives in offices around the world apply their experience, market expertise, and knowledge to ensure the Hyatt portfolio of properties enhances preference for our brands. An important aspect of our compelling growth potential is our strong brand presence in higher growth markets such as Greater China and India. The combination of our existing locations and brands, experienced development team, World of Hyatt loyalty program, established third-party relationships, and significant access to capital provides us with a strong foundation for future growth and long-term value creation.
Deep Culture and Experienced Management Teams. Hyatt has a strong culture rooted in values that have supported our past success and form the foundation for our future. The members of the Hyatt family areis united by shared values, a single purpose, and a deep commitment to listening, understanding, and personalizing experiences for our guests and customers – all of which we believe increases loyalty, differentiates us from the competition, and drives business results. Our colleagues at Hyatt properties are guided by experienced and dedicated teams including general managers and regional leadership teams that provide resources, mentorship and coaching, owner support, and other assistance. The general managers at our full service managed hotels have an average tenure of approximately 20 years, and senior operating management has an average of approximately 30 years of experience in the industry. Our seasoned executive management team sets overall policies for our Company, supports our regional teams and our colleagues around the world, provides strategic direction, and leads our global growth initiatives.
Strong Capital Base and Disciplined Financial Approach. Our approach is to maintain appropriate levels of financial leverage through industry cycles and downturns. AtOn December 31, 2019,2021, we had cash and cash equivalents and short-term investments of $961 million$1.2 billion and an available borrowing capacity of approximately $1.5 billion. We believe that as a result of our balance sheet strength we are uniquely positionedpositions us to take advantage of strategic opportunities to expand our presence and continue to grow our business. We may deploy capital through acquisitions of management contracts, hospitality companies, real estate assets or investment in new lines of business. We adhere to a formal investment process to evaluate such opportunities with input from various groups within our global organization.business over time.
Diverse Exposure to Hotel Management, Franchising, Ownership, and Development. We believe our experience as a global multi-brand manager, franchisor, owner, and developer of hotels makes us one of the best positioned hospitality companies in the world. Our mix of managed, franchised, owned, and ownedleased properties provides a broad and diverse base of revenues, profits, and cash flows and gives us flexibility to evaluate growth opportunities across our lines of business.
High-Quality Owned Hotels are Located in Desirable Markets and are a Source of Capital for New Growth Investments. At December 31, 2019, our owned and leased portfolio totaled 38 owned or leased properties (31 of which are owned) and 26 managed or franchised properties that are owned or leased (25 of which are owned) by unconsolidated hospitality ventures. Our owned full service hotels are located primarily in key markets, including major business centers and leisure destinations with strong growth potential, such as Chicago, London, New York, Paris, Miami, and Zurich. Our unconsolidated hospitality ventures include 50% ownership interests in properties in Mumbai and São Paulo. A number of our owned hotels and unconsolidated hospitality venture properties are unique assets with high brand recognition and a strong position in their local markets. We believe our owned assets provide us the opportunity to unlock additional shareholder value through targeted dispositions that provide cash proceeds to pay down debt incurred from the ALG Acquisition, fund additional strategic investments, to expand our presence or provide incremental return of capital to shareholders. We have realized over $3.0 billion in gross proceeds from the disposition of owned assets since our original disposition commitment was made in 2017. In August of 2021, we committed to realize an additional $2.0 billion of proceeds from the disposition of owned assets by the end of 2024.
Our Business Strategy
While recovery from the COVID-19 pandemic is ongoing for our business and the hospitality industry, we remain committed to our long-term strategy. Our strategy to drive long-term sustainable growth and create value for guests, customers, colleagues, owners, and shareholders is focused on the following three areas:
•Maximize Our Core Business: We continue to grow and operate our core business with excellence in order to be best-in-class while aiming to generate profits to fuel our growth. 5 • |
Integrate New Growth Platforms: We seek to identify and integrate new opportunities to advance |
•Optimize Capital Deployment: We take a comprehensive and build long lasting and meaningful relationships with guests. In addition, Hyatt's co-branded Visa credit cards with JP Morgan Chase Bank, N.A. increase the frequency and relevancydisciplined approach to our deployment of member engagement with World of Hyatt.
Description of Brands
| Brand | Segment | Customer Base | December 31, 2019 Rooms (1) | Primary Selected Competitors | Key Locations | |||||||||||
| % of Our Managed and Franchised Properties (1) | Americas Region | ASPAC Region | EAME/SW Asia Region | |||||||||||||
 | Full Service/ Luxury | Individual business and leisure travelers; small meetings | 3% | 1,623 | 3,611 | 2,565 | Four Seasons, Ritz-Carlton, Peninsula, St. Regis, Mandarin Oriental | Bangkok, Buenos Aires, St. Kitts, New York, Paris, Vienna, Milan, Sydney, Washington D.C. | ||||||||
 | Wellness | Individual leisure travelers | <1% | 410 | — | — | Cal-a-vie, Canyon Ranch, Golden Door | Austin, Tucson | ||||||||
 | Full Service/ Luxury | Individual business and leisure travelers; large and small meetings, social events | 13% | 12,278 | 13,710 | 4,035 | Mandarin Oriental, Shangri-La, InterContinental, Fairmont | Beijing, Berlin, Dubai, Hong Kong, Mumbai, Nassau, Rio de Janeiro, San Francisco, Shanghai, Tokyo | ||||||||
 | Full Service/ Upper-Upscale | Individual business and leisure travelers; small and large meetings, weddings, social events | 1% | 59 | 1,434 | 296 | Anantara, Banyan Tree, Como, Six Senses, One & Only | Anji, Bali, Bishangarth, Goa, Jabal Al Akhdar, Koh Russey Island, Surakarta, Wuzhen, Yangshuo | ||||||||
 | Full Service/ Luxury | Individual business and leisure travelers; small meetings | 2% | 2,180 | 1,053 | 1,775 | Rosewood, Langham, Edition, 1 Hotels, W | Abu Dhabi, Amsterdam, Vienna, Munich, Maui, New York, Tokyo | ||||||||
 | Full Service/ Luxury/Upper-Upscale | Individual business and leisure travelers; small meetings | 2% | 3,131 | 644 | 1,484 | Marriott Autograph Collection, Starwood Luxury Collection, Curio Collection by Hilton | Austin, Barcelona, Cannes, Carmelo, Miami Beach, Nashville, New Orleans, Paris, Phoenix | ||||||||
 | Full Service/ Luxury/Upper-Upscale | Business and leisure travelers; large and small meetings, social events, associations | 2% | 3,713 | — | — | Marriott Autograph Collection, Curio Collection by Hilton, Starwood Luxury Collection | Aspen, Charleston, Cle Elum, Maui, Phoenix, Lake Tahoe | ||||||||
 | Full Service/ Upper-Upscale | Conventions, business and leisure travelers; large and small meetings, social events, associations | 39% | 57,427 | 16,476 | 14,179 | Marriott, Sheraton, Hilton, Renaissance, Westin | Boston, Chicago, Delhi, Dubai, Hong Kong, London, Los Angeles, Mexico City, Orlando | ||||||||
| Brand | Segment | Customer Base | December 31, 2021 Rooms (1) | Primary Selected Competitors | Key Locations | |||||||||||||||||||||||||||||||||||||||||||||
| % of Our Managed and Franchised Properties (1) | Americas Region | ASPAC Region | EAME/SW Asia Region | |||||||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; small meetings | 3% | 1,841 | 4,148 | 2,424 | Four Seasons, Mandarin Oriental, Ritz-Carlton, St. Regis, The Peninsula | Auckland, Bangkok, Buenos Aires, Kyoto, Milan, New York, Paris, St. Kitts, Sydney, Tokyo, Vienna, Washington D.C. | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury/Wellness | Leisure | <1% | 357 | — | — | Cal-a-vie, Canyon Ranch, Golden Door | Austin, Berkshires, Tucson | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; large and small meetings, social events | 11% | 11,574 | 15,269 | 4,346 | JW Marriott, Conrad, Fairmont, InterContinental | Abu Dhabi, Beijing, Dubai, Hong Kong, Kochi, Mumbai, Nashville, Nassau, Rio de Janeiro, San Francisco, Shanghai, Singapore, Tokyo, Xian | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; small meetings, social events | <1% | 248 | 1,025 | 408 | One&Only, Six Senses, Aman, Banyan Tree, COMO | Anji, Bali, Big Sur, Bishangarh, Goa, Jabal Al Akhdar, Koh Russey Island, Surakarta, Wuzhen | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; small and medium meetings | 2% | 1,947 | 1,726 | 1,774 | W, Edition, SLS, Viceroy, Pendry | Abu Dhabi, Amsterdam, Delhi, Dubai, London, Maui, Munich, New York, Seoul, Singapore, Tokyo, Vienna, Xiamen | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; small meetings | 2% | 2,462 | 1,456 | 1,724 | Marriott Autograph Collection, Curio Collection by Hilton | Austin, Barcelona, Biarritz, Cannes, Chongqing, London, Miami Beach, Nashville, New Orleans, Paris, Phoenix, Stockholm | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; large and small meetings, social events, associations | 1% | 3,774 | — | 185 | Marriott Autograph Collection, Curio Collection by Hilton, Tapestry Collection by Hilton | Charleston, Cle Elum, Lake Tahoe, Maui, Phoenix, Snowmass, Stowe, Vail | ||||||||||||||||||||||||||||||||||||||||||
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| Brand | Segment | Customer Base | December 31, 2021 Rooms (1) | Primary Selected Competitors | Key Locations | |||||||||||||||||||||||||||||||||||||||||||||
| % of Our Managed and Franchised Properties (1) | Americas Region | ASPAC Region | EAME/SW Asia Region | |||||||||||||||||||||||||||||||||||||||||||||||
 | Upper-Upscale | Business and leisure; large and small meetings, social events, conventions, associations | 33% | 58,878 | 19,617 | 15,746 | Marriott, Sheraton, Hilton, Renaissance, Westin | Cape Town, Chicago, Dubai, Hong Kong, London, Los Angeles, Madrid, Mexico City, Orlando, Paris, Sofia | ||||||||||||||||||||||||||||||||||||||||||
 | Upper-Upscale | Business and leisure; small meetings | 1% | 2,613 | — | 741 | Marriott, Hilton, Westin | New York, Paris, Seattle | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; small meetings, social events | <1% | 2,672 | — | — | Beaches | Cancun, Cap Cana, Montego Bay, Puerto Vallarta, San Jose del Cabo | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; adult-only; small meetings, social events | <1% | 919 | — | — | Sandals | Cancun, Cap Cana, Montego Bay | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury | Leisure and business; small meetings | 1% | 3,147 | — | — | W, Edition, SLS, Pendry, Soho House | Cabo San Lucas, Dallas, Nashville, New York, Seattle, Washington D.C. | ||||||||||||||||||||||||||||||||||||||||||
 | Upper-Upscale | Leisure and business; small meetings | 4% | 7,228 | 1,359 | 1,595 | ACE, AC Hotels, Moxy, Canopy, 25 Hours | Bangalore, Boston, Dublin, Hong Kong, Madrid, Miami, Montevideo, New York, Philadelphia, Tokyo | ||||||||||||||||||||||||||||||||||||||||||
 | Upper- Upscale | Leisure and business; small meetings | 1% | 2,472 | 202 | 313 | Kimpton, Canopy, Marriott Autograph Collection | Baltimore, Beijing Chicago, New York, San Francisco | ||||||||||||||||||||||||||||||||||||||||||
 | Upscale | Extended stay guests; business and leisure; small meetings | 6% | 16,128 | 953 | 749 | Residence Inn by Marriott, Homewood Suites | Austin, Boston, Dallas, Frankfurt, Mexico City, Miami, Paris, San Francisco, Shanghai | ||||||||||||||||||||||||||||||||||||||||||
 | Upscale | Business and leisure; small meetings | 20% | 49,802 | 4,254 | 4,091 | Courtyard by Marriott, Hilton Garden Inn | Atlanta, Chicago, Dubai, Frankfurt, Houston, Hyderabad, London, Miami, Paris, Phoenix, Santiago, Shanghai | ||||||||||||||||||||||||||||||||||||||||||
 | Upper-Midscale | Business and leisure; small meetings | <1% | — | 2,090 | — | ATOUR, Hampton Inn, Mercure | Shanghai | ||||||||||||||||||||||||||||||||||||||||||
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| Brand | Segment | Customer Base | December 31, 2019 Rooms (1) | Primary Selected Competitors | Key Locations | |||||||||||
| % of Our Managed and Franchised Properties (1) | Americas Region | ASPAC Region | EAME/SW Asia Region | |||||||||||||
 | Full Service/ Upper-Upscale | Business and leisure travelers; small meetings | 1% | 1,315 | — | 743 | Marriott, Hilton, InterContinental, Westin, independent and boutique hotels | New York, Paris, Seattle | ||||||||
 | All-Inclusive | Leisure travelers; families; small meetings | 1% | 2,234 | — | — | Beaches, Club Med, Sandals | Cancun, Puerto Vallarta, Rose Hall, San Jose del Cabo | ||||||||
 | All-Inclusive | Leisure travelers; adult-only; small meetings | <1% | 919 | — | — | Beaches, Club Med, Sandals | Cancun, Rose Hall | ||||||||
 | Full Service/ Luxury | Leisure travelers; couples; solo business travelers; small meetings | 1% | 2,205 | — | — | W, Mondrian, The Standard, Edition, Hoxton, The James, Viceroy | Cabo San Lucas, Nashville, New York, Seattle, Washington D.C. | ||||||||
 | Full Service/ Upper-Upscale | Business and leisure travelers; small meetings | 3% | 4,785 | 829 | 1,344 | Canopy, Kimpton, Renaissance, independent and boutique hotels | Boston, Dublin, Madrid, Miami, Montevideo, New York, Tokyo | ||||||||
 | Select Service/ Upscale | Business and leisure travelers; small meetings | —% | — | — | — | AC Hotels, Moxy, Aloft, Motto | — | ||||||||
 | Full Service Upscale / Upper- Upscale | Leisure travelers; couples; families; solo business travelers; small meetings | 1% | 2,237 | 202 | — | Kimpton, Canopy, Marriott Autograph Collection | Baltimore, Beijing Chicago, New York, San Francisco | ||||||||
 | Select Service/ Upscale | Extended stay guests; business and leisure travelers; families; small meetings, trainings | 6% | 13,220 | 937 | 362 | Residence Inn by Marriott, Homewood Suites | Austin, Boston, Dallas, Mexico City, Miami, San Francisco | ||||||||
 | Select Service/ Upscale | Business and leisure travelers; small meetings | 23% | 45,045 | 4,530 | 2,884 | Courtyard by Marriott, Hilton Garden Inn | Atlanta, Chicago, Dubai, Houston, London, Miami, Phoenix, Santiago, Shanghai | ||||||||
 | Full Service/ Upper-Upscale | Leisure travelers; entrepreneurs; solo business travelers; small meetings | —% | — | — | — | Freehand, Mama Shelter, Citizen M, The Line, Ace Hotels | — | ||||||||
Competitors | ||||||||||||||||
Managed and Franchised Properties (1) | ||||||||||||||||
 | Service/ Upper-Midscale | |||||||||||||||
 | Ownership | vacation units, repeat Hyatt business and leisure guests | Club, Marriott Vacation Club | |||||||||||||
 | ||||||||||||||||
| Brand | Segment | Customer Base | December 31, 2021 Rooms (1) | Primary Selected Competitors | Key Locations | |||||||||||||||||||||||||||||||||||||||||||||
| % of Our Managed and Franchised Properties (1) | Americas Region | ASPAC Region | EAME/SW Asia Region | |||||||||||||||||||||||||||||||||||||||||||||||
 | Vacation Ownership | Owners of vacation units, repeat Hyatt business and leisure | —% | — | — | — | Hilton Vacation Club, Marriott Vacation Club | Beaver Creek, Carmel, Key West, Lake Tahoe, Maui, Sedona | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; adult-only; meetings | 2% | 5,903 | — | 739 | Excellence, Sandals, El Dorado, Royalton | Cancun, Papagayo, Cozumel, Fuerteventura, Huatulco, Lanzarote, Los Cabos, Mallorca, Montego Bay, Puerto Vallarta, Punta Cana, St. Martin | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; families, meetings | 4% | 10,432 | — | 1,672 | Paradisus, Palace, Beaches, Royalton, Iberostar | Cancun, Corfu, Guanacaste, Curacao,Huatulco, Lanzarote, Los Cabos, Mallorca, Puerto Vallarta, Punta Cana, Tenerife, Willemstad | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; adult-only; social groups; meetings | <1% | 1,860 | — | — | Hard Rock, Melia, Royalton Chic | Cancun, Los Cabos, Punta Cana | ||||||||||||||||||||||||||||||||||||||||||
 | Luxury All-Inclusive | Leisure; adult-oriented | <1% | 533 | — | 104 | The Reserve at Paradisus, Sivory, Fairmont, Banyan Tree | Cancun, Isla Mujeres, Los Cabos, Mallorca, Montego Bay, Punta Cana, Willemstad | ||||||||||||||||||||||||||||||||||||||||||
 | Upscale All-Inclusive | Leisure | 3% | — | — | 8,090 | Iberostar, Occidental, Viva, RIU | Almeria, Costa del Sol, Crete, Fuerteventura, Ibiza, La Manga, Mallorca, Marbella, Menorca, Tenerife, Zante | ||||||||||||||||||||||||||||||||||||||||||
 | Upper-Upscale All-Inclusive | Leisure | <1% | 2,127 | — | — | Bahia Principe, RIU, Barcelo | Cancun, Cozumel, Ixtapa, Puerto Plata, Puerto Vallarta, Willemstad | ||||||||||||||||||||||||||||||||||||||||||
Park Hyatt
Park Hyatt hotels emphasize luxury and personalization. Located in many of the world's premier destinations, each Park Hyatt hotel is custom designed to combine sophistication with distinctive regional character. Cultured, affluent business and leisure travelers find a home-away-from-home amidst renowned artwork and design. Immersive and rare culinary experiences are designed to create unique and deeply enriching dining occasions for guests.
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Miraval
The Miraval brand is a global leader in wellness resorts and spas. Miraval Arizona Resort & Spa in Tucson pioneered the wellness spa resort category with its comprehensive program of activities, experiences, and personal treatments. The Miraval brand's commitment to helping guests live life in balance joins our Exhale brand asis the cornerstonescornerstone of a distinct wellness categoryoffering within our portfolio of brands. This commitment reflects our focus on serving the high-end traveler by finding new ways to understand and care for them beyond the traditional hotel stay.
Grand Hyatt
Grand Hyatt hotels are distinctive hotels in major gateway cities and resort destinations. With presence around the world and critical mass in Asia, Grand Hyatt hotels provide sophisticated business and leisure travelers with elegant accommodations, extraordinary restaurants, bars, luxury spas, and fitness centers, as well as comprehensive business and meeting facilities. Signature elements of Grand Hyatt hotels include iconic architecture and design, state of the art technology, and facilities for an array of business or social gatherings of all sizes.
Alila
The Alila brand is the combination ofcombines innovative design and luxury in unique locations, set apart by crafted artisanship, personalized hospitality, and bespoke journeys. Alila means "Surprise" in Sanskrit, which suitably describes the refreshing character of this brand. In support of sustainable tourism, Alila hotels and resorts adopt EarthCheck – operating standards, integrating the environments' natural, physical, and cultural elements of their environments.elements. To stay at any Alila hotel or resort is to embark on a destination experience – delighting in the flavors of the local cuisine, enhancing wellbeing through ancient healing arts, or enjoying the thrill of adventure sports.
Andaz
Andaz hotels draw upon surrounding neighborhoods to craft distinctively local experiences, fully immersing guests in each inspiring destination through unique expressions of local culture. Every Andaz hotel is one of a kind in every sense - an elevated reflection of the destination's culture. From locally inspired architecture in the lobby and facades, to the music heard in our signature Andaz Lounges, to the flavors in market-to-table restaurants, distinctive textures in guestrooms, and soothing aromas at Andaz hotel spas, Andaz hotels are designed to reflect their surroundings and feature a unique and innovative service model that creates a barrier-free and non-traditional environment. Guests will experience personalized and unscripted service where they can become inspired by the spirit of the local community.
The Unbound Collection by Hyatt
The Unbound Collection by Hyatt brand is a portfolio of unconventional upper-upscale and luxury properties ranging from historic urban gems to contemporary new build hotels, boutique properties,revitalizing retreats and resorts.modern marvels. Each hotel is one-of-a-kind and offers story-worthy and extraordinary experiences for our guests.property provides thought-provoking environments that inspire guests seeking a sophisticated experience when they travel. The philosophy behind The Unbound Collection by Hyatt brand is to attract owners and developers who want their properties to maintain a distinct character and brand name, but gain the power of Hyatt's robust distribution, operational and marketing resources, award winningaward-winning customer loyalty program, and trusted brand name and reputation.
Destination Hotelsby Hyatt
The Destination Hotelsby Hyatt brand is a diverse collectionportfolio of independentupper-upscale and luxury hotels, resorts, and residences that are individual at heart yet connected by a commitment to draw upon the true spirit of each location. Each property is purposefully crafted to be a place of discovery for guestsand captures the unique essence of each location through immersive discoveries, authentic experiences, unique design, and connections to the local community.welcoming service. The award-winning portfolio features renowned golf courses, indigenous spas, and exceptional food and beverage options including bars, restaurants, cafés, and rooftops. Destination Hotels capture the unique essence of each resort location through diverse by design experiences, immersive programming, and genuine service.rooftop venues. The Destination Residential Management business operates within this brand and provides services to, and in some cases manages, the rental programs and/or homeowner associations related to condominium ownership units.
Hyatt Regency
Hyatt Regency hotels offer a full range of services, amenities, and facilities tailored to serve the needs of meeting and event planners, business travelers, and leisure guests. Hyatt Regency hotels in key urban markets around the world feature flexible meeting and conference facilities of all sizes designed to provide a productive, connected environment. Hyatt Regency hotels in resort locations cater to couples seeking a getaway, families enjoying a vacation together, and corporate groups seeking an atmosphere in which to conduct businessmeetings and meetings.events.
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Hyatt
Hyatt hotels are smaller-sized properties conveniently located in diverse business and leisure areas. These hotels help guests make the most of their stay, whether for an important business meeting or social gathering, to explore a new city, or to reconnect with family and friends.
Hyatt Ziva
Hyatt Ziva all-inclusive resorts are designed for guests of all ages in uniquepremier leisure locations. TheyThese resorts offer a variety of on-site activities and opportunities to experience the local culture and destination. Hyatt Ziva resorts feature a wide array of food and beverage outlets with an emphasis onemphasizing authentic local cuisine and are ablecuisine. In addition to leisure travelers, these resorts cater to social orspecial events and business groups with varied and well-appointed indoor and outdoor meeting and event facilities.
Hyatt Zilara
Hyatt Zilara adult-only all-inclusive resorts are located in sought after, uniquesought-after resort destinations. TheyThese resorts offer a wide array of food and beverage services with a focusfocusing on authentic local and often locally-sourced ingredients.global cuisines. The resorts offer premier spas, social activities, and live entertainment, as well as a variety of meeting and event spaces. The resorts are designed so couples or small groups can enjoy intimate, sophisticated surroundings.
Thompson Hotels
Thompson Hotels is an award-winning hospitalityboutique lifestyle brand that deliverswith a new take oncollection of original properties in urban and resort destinations. A collection for the modern, luxury at the refined edge of travel. Eachsophisticated traveler, each location offers a stunning, carefully layered design reflective of local surroundings, and dynamic urban or resort setting that molds into the surrounding community. With intuitive service, each guest is provided a tailoredthoughtfully curated experience in orderdesigned to enhance personal travel journeysspark conversation and bridge connectionsconnect guests to the local perspective through in-the-know moments and collaborations.world-class culinary offerings.
Hyatt Centric
Hyatt Centric hotels are full service lifestyle hotels located in prime destinations, created for millennial-minded guestscurious leisure travelers who view their hotel as more thanwant to be in the heart of the action, so they never miss a place to stay.moment of adventure. Hyatt Centric hotels help guests discover the world's most compelling destinations like a local. Located in the center of the action, Hyatt Centric hotels bring the best of the outside in and serve as the perfect launch pad for exploring all the hidden gems and hot spots each destination has to offer. Exploration does not end at the door. Hyatt Centric hotels feature artistically curated spaces throughout the hotel, thoughtfully designed to help guests work, relax, and socialize. After a day of exploration, guests can enjoy a selection of artisanal crafted cocktails and local fare in a chic space with a chill vibe. A staff of knowledgeable colleagues is on hand to aid guests in their discovery ofdiscovering their surroundings.
Caption by Hyatt
JdV by Hyatt
A community for the spirited, light-hearted, and young-at-heart, the JdV by Hyatt brand offers a collection of vibrant, independent hotels that are true reflections of the efficiency and flexibility of select service, while creating a compelling lifestyleurban neighborhoods they call home. Each hotel provides an experience that is designedinclusive in spirit and space, effortlessly bringing people together with joy-driven service. Embracing its namesake of "joie de vivre," each property invites guests and locals to be fulfilling for guests, adaptconnect, live in the moment, and celebrate the joy of life. The philosophy behind JdV by Hyatt brand is to attract owners and developers who want their properties to maintain a distinct character and brand name, but gain the needspower of different locationsHyatt's robust distribution, operational and markets,marketing resources, award winning customer loyalty program, and offer a sustainable approach to designtrusted brand name and operations.
Hyatt House
Hyatt House hotels are designed to welcome guests as extended stay residents. Apartment-style suites with fully equipped kitchens and separate living areas remindprovide guests ofwith the conveniences of home. Hyatt House hotels are designed to keep
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guests comfortable longerduring both short and long stays with complimentary hot breakfast, H BAR with a Sip+Snack Menu,food and beverage offerings, and indoor and outdoor communal spaces.
Hyatt Place
Hyatt Place hotels offer a modern, comfortable, and seamless experience, combining style and innovation to create a casual hotel environment for today's multi-tasking traveler. ThoughtfullySpacious, thoughtfully designed guestrooms feature distinct zonesareas for sleep, work, and relaxation. Hyatt Place hotels also offer freshly prepared food around the clock, efficient service, and an easy to navigate experience. From the lobby to the guest rooms to in-hotel dining, every touchpointaspect of the hotel experience is designed with the high value business traveler in mind.
The tommieUrCove brand is designed specifically to be a gathering place that inspires guests to author their own experiences. By focusing on the essentials and providing fun, relevant choices, the tommie brand offers a fresh lens for the youthful and open-minded to explore, connect, and discover.
Hyatt Residence Club
Hyatt Residence Club provides members with vacation ownership opportunities in regionally inspired and designed residential-style properties with the quality of the Hyatt brand. Members pre-purchase time at a Hyatt Residence Club property and have the flexibility of usage, exchange, and rental. Hyatt Residence Club members can choose to occupy their vacation home, exchange time among other Hyatt Residence Club locations, trade their time for World of Hyatt loyalty program bonus points, or travel within the Hyatt system.
Dreams Resorts & Spas
Dreams Resorts & Spas are family-friendly, all-inclusive resorts located in a leading wellness brand,selection of beautiful beach destinations. Guests can participate in on-site activities, including clubs for kids. Gourmet dining options present a variety of worldly cuisines, and themed bars serve top-shelf spirits. Meeting venues cater to business travelers, while private event spaces are perfect for social gatherings and wedding celebrations.
Breathless Resorts & Spas
Breathless Resorts & Spas are adults-only, all-inclusive properties for guests seeking a luxurious beachfront experience in a social setting. These resorts offer modern accommodations, world-class spas, meetings and event spaces, and high-end dining and drink options with elevated levels of service. Entertainment lineups feature themed events, pool parties, live music, and cultural and art experiences. These resorts cater to singles, social groups, and couples looking for a balance of excitement and relaxation.
Zoëtry Wellness & Spa Resorts
Zoëtry Wellness & Spa Resorts cater to those seeking luxury, privacy, and pampering in an all-inclusive, beachfront boutique setting. These resorts offer lavish accommodations, 24-hour concierge, gourmet cuisine, top-shelf spirits, and enrichment experiences. The resorts pay homage to the local cultures, nature, and art through indigenous spa treatments, sustainability practices, and distinguished art collections.
Alua Hotels & Resorts
Alua Hotels & Resorts are designed for all types of travelers seeking an affordable, seaside getaway across Europe's top island destinations, including Spain's Mediterranean coast, the Canary Islands, the Balearic Islands, and more. Guests can enjoy modern amenities, minimalistic-chic rooms, natural spaces, and worldly cuisine surrounded by local culture and enriching activities.
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Sunscape Resorts & Spas
Sunscape Resorts & Spas offers a unique business model that addresses both mind and body through spa+fitness. Dedicated to transformation, mindfulness, and healing, Exhale locationsbudget-conscious vacations focused on family fun. These all-inclusive, family-friendly beachfront resorts in the United StatesMexico and the Caribbean offer dozensprovide a fun and energetic, yet relaxing setting. Each location offers a supervised kids club and teen zone for younger guests, along with an array of proprietary boutique fitness class programsactivities for the entire family. Sunscape provides comfortable accommodations, various dining options, including kid-friendly menus, and award-winning healingexciting features like waterparks and spa therapies.splash zones.
The ALG Vacations business includes Amstar, a destination management business, and Trisept Solutions, a technology platform for travel merchandise and distribution. Amstar provides world-class expertise in destination services, transfers, and excursions to make a tangible impact withinindividuals, travel agencies, groups, corporations, tour operators, and beyond the walls of our hotels.meeting planners throughout eight countries and thirty destinations.
Business Segment, Revenues, and Geographical Information
We manage our business within fourfive reportable segments as described below:
•Owned and leased hotels, which consists of our owned and leased full service and select service hotels and, for purposes of segment Adjusted EBITDA, our pro rata share of the Adjusted EBITDA of our unconsolidated hospitality ventures, based on our ownership percentage of each venture;
•Americas management and franchising ("Americas"), which 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, Latin America, Canada, and the Caribbean, as well as our residential management operations;
•ASPAC management and franchising ("ASPAC"), which consists of our management and franchising of properties located in Southeast Asia, Greater China, Australia, New Zealand, South Korea, Japan, and Micronesia; and
•EAME/SW Asia management and franchising ("EAME/SW Asia"), which consists of our management and franchising of properties located in Europe, Africa, the Middle East, India, Central Asia, and Nepal.Nepal; and
•Apple Leisure Group, which consists of our management and marketing of primarily all-inclusive resorts within the AMR Collection in Latin America, the Caribbean, and Europe; the Unlimited Vacation Club paid membership club offering member benefits exclusively at AMR Collection resorts within Latin America and the Caribbean; and ALG Vacations.
Within corporate and other, we include the results of Miraval and Exhale, Hyatt Residence Club license fees, results related tofrom our co-branded credit cards,card program and unallocated corporate expenses. The results of our owned Miraval resorts are reported in owned and leased hotels revenues and owned and leased hotels expenses on our consolidated statements of income. For information regarding our fourfive reportable business segments, revenues, and geographical information, see Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 19 to our Consolidated Financial Statements."
Hotel Management Agreements
We manage hotels and branded spas and fitness studios worldwide pursuant to management agreements.
Our hotel management agreements typically provide for a two-tiered fee structure that compensates us both for the volume of business we generate for the property as well as for the profitability of hotel operations. In these two-tier fee structures, ourtier one base compensation is a base fee that is usually an agreed-upon percentage of gross revenues from hotel operations. In addition, we are incentivized to improve hotel profitability throughoperations, and tier two is an incentive fee that is typically calculated as a percentage of a hotel profitability measure, such as gross operating profit, adjusted profit, or the amount by which gross operating profit or adjusted profit exceeds a specified threshold. Outside of the United States, some management agreements have feesstructures more dependent on hotel profitability measures, either through a single management fee structure where the entire fee is based on a profitability measure or because our two-tier fee structure is more heavily weighted toward the incentive fee than the base fee.
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advertising, certain marketing and promotional services, human resource services, insurance programs, and other corporate services.
Terms and Renewals
The approximate average remaining term of our hotel management agreements with third-partythird party owners and unconsolidated hospitality ventures (other than for properties currently under development) is 14 years for full service hotels andin all regions, 14 years for select service hotels (other than those currently under development) is as follows:
We also participate in an unconsolidated hospitality venture with a Chinese hospitality company that owns the UrCove select service brand, and the average remaining term of the management agreements pursuant to which the hospitality venture operates the UrCove hotels is approximately 12 years. We license "by Hyatt" to the hospitality venture in connection with such hotel operations pursuant to a master license agreement wherein we are paid fees based upon the cumulative gross operating revenue of the UrCove hotels.
Franchise Agreements
Our franchise agreements grant our franchisees the limited right to use our name, marks, and systemsystems in the operation of franchised Grand Hyatt, Hyatt Regency, Hyatt Ziva, Hyatt Zilara, Thompson Hotels, Hyatt Centric, Caption by Hyatt, Hyatt House,full service hotels, select service hotels, and Hyatt Place properties, and franchised properties operatedall-inclusive resorts under distinct tradenames and affiliated with The Unbound Collection by Hyatt, Destination Hotel, and Joie de Vivre.certain brands. We do not participate in the management of our franchised hotels; however, franchisees are required to operate franchised hotels consistent with our brand standards. We approve the plans for, and the location of, franchised hotels and review the operation of these hotels to ensure our standards are maintained.
In general, our franchisees pay us an initial application fee and/or technicala design services fees andfee as well as ongoing royalty fees, the amount of which depends on the brand under which the franchised property is licensed. We franchise full service hotels underlicensed as well as the Grandregion where the property is located. Royalty fees are typically a percentage of gross rooms revenue, typically ranging from 2.75% to 5%, or, in some cases, gross room revenue generated through Hyatt Hyatt Regency, Hyatt, Thompson Hotels,reservation and Hyatt Centric brands, all-inclusive resorts under the Hyatt Zivabooking channels, typically 7%, or a combination of a percentage of gross rooms revenues and Hyatt Zilara brands,a percentage of gross food and full service hotels under distinct tradenames and affiliated with The Unbound Collection by Hyatt, Destination Hotel, and Joie de Vivre brands. We franchise select service hotels under the Caption by Hyatt, Hyatt House, and Hyatt Place brands. Our Hyatt Regency, Hyatt, and Thompson Hotels franchiseesbeverage revenues, typically pay us franchise fees calculated as 6% of gross room revenuesrevenue and 3% of gross food and beverage revenues. Our Hyatt Centric franchisees typically pay us franchise fees calculated as 5% of gross room revenues. The Unbound Collection by Hyatt, Destination Hotel, and Joie de Vivre franchisees typically pay us franchise fees calculated as 7% of gross room revenues generated through Hyatt reservation and booking channels. In some cases, our full service franchise fees escalate in the initial few years of the term. Our all-inclusive franchisees typically pay us franchise fees calculated as either 2.75% or 3.25% of gross revenues. Application fees are typically $75,000 plus $500 per guest room in excess of 150 for our Hyatt House and Hyatt Place hotels, $95,000 plus $500 per guest room in excess of 200 for our Caption by Hyatt hotels, and the greater of $100,000 or $400 per guest room for our full service hotels and all-inclusive resorts. Select service franchisees pay continuing franchise fees calculated as a percentage of gross room revenues, which typically are 3% in the first year of operations, 4% in the second year, and 5% through the remainder of the term. In some circumstances, and in particular, outside of the United States and Canada, we have negotiated other fee arrangements, and in some regions outside of the United States, we typically negotiate alternative application fee arrangements.
In addition to our franchise fees, we charge full service and select service hotels and all-inclusive resort franchisees for certain services arranged and, in most cases, provided by us. These activitiesservices may include, without limitation, centralized reservation functions, certain sales functions, digital and technology, digital media, national advertising, certain marketing and promotional services, as well as various revenue management services.
Terms and Renewals
The standard term of our franchise agreements is typically 20 years, with one 10 year10-year renewal option exercisable by the franchisee, assuming the franchisee has complied with franchise agreement requirements and standards. Certain of our franchise agreements have renewal options at Hyatt's option, generally triggered if the franchisee has failed to exercise its renewal option. Certain of our franchise agreements have renewal options upon the mutual agreement of the parties. We have the right to terminate franchise agreements upon specified events of default, including non-payment of fees and non-compliance with brand standards. In the event of early termination for any reason, our franchise agreements typically set forth liquidated damages our franchisees must pay to us upon termination. The bankruptcy of a franchisee or lender foreclosure could result in the termination of the franchise agreement.
The average remaining base term of our franchise agreements for our select service andhotels, full service hotels, and all-inclusive resorts in all regions (other than those currently under development) is approximately 16 years, assuming no renewal options are exercised by either party. Including exercise of extension options in Hyatt's sole discretion, the average remaining term of our franchise agreements for our select service hotels, and full service hotels, and all-inclusive resorts in all regions (other than those currently under development) is approximately 1817 years.
Other Service Agreements
We provide services under the Destination Residential Management business pursuant to rental management agreements with individual property owners and/or homeowners'homeowner associations, whereby the property owners and/or homeowners' associationhomeowner associations participate in our rental program. The agreements typically provide for our receipt of a percentage split of the total gross revenue generated from a property under the rental program, and expenses of the property are paid from such split. The
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agreement terms are typically one or two years.years, and before the expiration of such terms, on average approximately 90% of the agreements are renewed. Additionally, we provide association management services to the various homeowner'shomeowner associations where we manage the properties for a fee.
Sales and Revenue Management, Marketing, and Reservations and Global Contact Centers
Sales and Revenue Management
We deploy a global sales team as well as regional sales teams in our Americas, ASPAC, and EAME/SW Asia regions.regions, along with ALG sales teams in Europe and the Americas. The global team is responsible for our largest and most significant accounts doing business in all three regions.globally. The regional teams are responsible for large accounts that typically do business within one region, but at multiple hotels within the region. The global and regional sales teams coordinate efforts with the hotel sales teams. The in-house sales colleagues are focused on local and regional business opportunities, as well as securing business generated from our key global and regional accounts.
Our corporate sales organizations are focused on growing market share with key accounts, identifying new business opportunities, and maximizing our local customer base. Our key accounts consist of major corporations; national, state, and regional associations; specialty market accounts, (social,including social, government, military, educational, religious, and fraternal);fraternal organizations; travel agency and luxury organizations; and a broad and diverse group of individual consumers. Our global and regional sales teams target multiple brands to key customer accounts within these groups. No single customer is material to our business. Our global and regional teams consist of over 200180 colleagues at global and regional sales offices around the world, who are focused on group business, corporate and leisure traveler accounts, and travel agencies.
Sales colleagues at our regional offices and at many of our full service hotels use our proprietary sales tool to manage the group rooms forecast, maintain an inventory of definite and tentative group rooms booked each day, streamline the process of checking guest room availability and rate quotes, and determine meeting room availability.
We seek to maximize revenues in each hotel we operate through a team of revenue management professionals and also provide revenue management services to franchisees upon request. Our revenue management leaders use a proprietary technology tool to help set appropriate pricing in each hotel. Revenue management has also deployed a self-service analytical tool to better support its constituents. The goal of revenue management is to secure the right customers, on the right date, at the right price. Business opportunities are reviewed and agreed upon by the hotel's management team.
Marketing
We are focused on the high-end traveler, positioning our brands at the top of each segment in which we operate. Our marketing strategy is designed to drive loyalty and community, while meeting the specific business needs of hotel operations. Building and differentiating each of our brands areis critical to increasing Hyatt's brand preference. We are focused on targeting the distinct guest segments that each of our brands serves and supporting the needs of the hotels by thorough analysis and application of data and analytics. The World of Hyatt loyalty program and our digital platforms are also key components of building loyalty and driving revenue. The loyalty program focuses on deepening relationships with members, driving repeat stays, guest satisfaction, recognition, and differential services and experiences for our most loyal guests. Our digital platforms are our primary distribution channels providing guests, customers, and members with an efficient source of information about our hotels, distinct brand experiences, and a seamless booking experience. With a combined focus on increasing brand awareness, building a community of loyalists, and enhancing digital engagement, our marketing is aimed at Hyatt becoming the most preferred hospitality brand.
Reservations and Global Contact Centers
We have a proprietary central reservation system that provides a comprehensive view of inventory, while allowing for local management of rates based on demand. Through this system, we are able to allow bookings and subsequent maintenance of bookings by hotels directly, via telephone through our global contact centers, by travel agents, by corporate clients, and through digital platforms.
We have nineeleven global contact centers that service our global guest, customer, and loyalty member base 24 hours per day, seven days per week and provide reservation and other services in over 1825 languages. While we continue to provide full reservation services via telephone through these global contact centers, we have made significant investments in internet booking capabilities and launched an online chat communication function on Hyatt.com and
mobile platforms. Additionally, we continue to enhance the services and capabilities of our global contact centers to better align with evolving technology and guest preference. Hyatt's global contact centers are expected to serve ALG guests and customers beginning later in 2022.
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ALG operates call center services in the United States and collaborates with third-party call centers in the United States, Latin America, the Caribbean, and Asia to serve AMR Collection resorts as well as ALG Vacations and Unlimited Vacation Club. ALG utilizes both a proprietary and third-party booking engine platform and reservations are managed through a central reservations system. Within the Unlimited Vacation Club organization there are also call center services that support the membership program and its members, including back-office functions, some of which are provided by a third party.
Some of the rooms at hotels and resorts we manage or franchise are booked through internet travel intermediaries, partners, or online travel service providers. We also engage third-party intermediaries who collect fees by charging our hotels and resorts a commission on room revenues, including travel agencies, travel distribution providers, and meeting and event management companies.
World of Hyatt Loyalty Program
Members earn points based on their spend at our properties,properties; by transacting with our strategic loyalty alliances, (e.g.,including American Airlines, Lindblad Expeditions, MGM Resorts International, and SLH),Small Luxury Hotels of the World; or in connection with spend on the World of Hyatt co-branded consumer and business credit cards. Loyalty program points can be redeemed at properties across the majority of our brands, converted into airline miles with numerous participating airlines, and redeemed with our strategic loyalty alliances, and other third parties.
The loyalty program is operated for the benefit of participating properties and is primarily funded through contributions from eligible revenues generated from loyalty program members. These funds are applied to reimburse hotels for room nights when members redeem loyalty program points and pay for administrative expenses and marketing initiatives to support the loyalty program.
At December 31, 2019,2021, the loyalty program had over 22approximately 30 million members, and during 2019,2021, represented approximately 41%39% of total room nights system wide, which includeswith the integrationexclusion of the Alila, Destination, Thompson Hotels,AMR Collection resorts.
Unlimited Vacation Club
ALG's Unlimited Vacation Club is a paid membership program that provides its members with preferred rates and Joie de Vivre brands intobenefits exclusively at AMR Collection resorts within Latin America and the loyalty programCaribbean. Through a variety of membership levels, members purchase the right to receive preferred rates, free hotel nights, discounts on spa and other hotel expenses, and special benefits with third-party travel alliances. The weighted-average term of an Unlimited Vacation Club membership is approximately 30 years, assuming no renewal options are exercised, and fees are paid either upfront or collected over a short contractual financing period of approximately four years. Membership agreements may generally be terminated without penalty within five days of signing, with limited termination rights thereafter. The average early termination rate of memberships sold over the courselast five years is less than 6%. As of 2019.December 31, 2021, the Unlimited Vacation Club program had over 118,000 members, and during 2021, represented approximately 13% of total room nights at properties within the AMR Collection.
Competition
There is intense competition in all areas of the hospitality industry. Competition exists for hotel, resort, spa, fitness studio, and condominium ownership guests,guests; vacation membership customers; management and franchise agreements, andagreements; sales of vacation and branded residential properties.properties; and online travel customers, including leisure and business travelers as well as travel agencies and tour operators. Our principal competitors are other operators of full service, select service, including extended stay, all-inclusive, and wellness properties, including other major hospitality chains with well-established and recognized brands.brands, as well as cruise line operators. We also compete against small chains and independent and local owners and operators. Increasingly, we also face competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model,models, such as Alibaba, search engines such as Google, and peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate the short-term rental of homes and apartments from owners, thereby providing an alternative to hotel rooms, such as Airbnb and HomeAway.
We compete for guests based primarily on brand name recognition and reputation, location, customer satisfaction, room rates, quality of service, health and cleanliness standards, amenities, quality of accommodations, security, and the ability to earn and redeem loyalty program points.
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We compete for management agreements primarily based primarily on the value and quality of our management services,services; our brand name recognition and reputation,reputation; the level of our management fees,fees; the costs of payroll at managed properties where we are the employer,employer; cost associated with system-wide services, including without limitation, sales, reservations, digital and technology, digital media, and marketing services (collectively, "system-wide services"),; and the economic advantages to the property owner of retaining our management services and using our brand name. We compete for franchise agreements primarily based primarily on brand name recognition and reputation, the room rate that can be realized, total revenues we can deliver to the properties, and the cost associated with our system-wide services. Other competitive factors for management and franchise agreements include relationships with property owners and investors, including institutional owners of multiple properties,properties; marketing support,support; reservation and e-commerce system capacity and efficiency,efficiency; and the ability to provide capital that may be necessary to obtain management and franchise agreements.
The number of branded lodging operators with a global reach and depth of product and offerings similar to us is limited. We believe our strong customer base, prominent brand recognition, strategic property locations, and global development team enable us to compete effectively. For additional information, see Part I, Item 1A, "Risk Factors—Risks Related to Our Business—Because we operate in a highly competitive industry, our revenues, profits, or market share could be harmed if we are unable to compete effectively, and new distribution channels, alternatives to traditional hotels, and industry consolidation among our competitors may negatively impact our business."
Seasonality
The hospitality industry is typically seasonal in nature.nature, although the COVID-19 pandemic has disrupted, and may continue to disrupt, seasonality patterns of our business. The periods during which our properties experience higher revenues vary from property to property, depending principally uponon location, the customer base served, and potential impacts due to the timing of certain holidays.
Cyclicality
The hospitality industry is cyclical and generally follows, on a lagged basis, the overall economy. There is a history of increases and decreases in demand for hotel rooms, in occupancy levels, and in rates realized by owners of hotels through economic cycles. Variability of results through some of the cycles in the past has been more severe due to changes in the supply of hotel rooms in given markets or in given categories of hotels. The combinationIn the most recent cycle, the impact of changesthe COVID-19 pandemic drove immediate decreases in demand. Changes in industry demand related to economic conditions, andother factors such as those experienced with the COVID-19 pandemic, or in the supply of hotel rooms, or any combination thereof, can result in significant volatility in results for owners, managers, and franchisors of hotel properties. The costs of running a hotel tend to be more fixed than variable. Because of this, in an environment of declining revenues, the rate of decline in earnings will be higher than the rate of decline in revenues. Conversely, in an environment of increasing demand and room rates, the rate of increase in earnings is typically higher than the rate of increase in revenues.
Intellectual Property
In the highly competitive hospitality industry in which we operate, trademarks, service marks, trade names, and logos are very important in the sales and marketing of our hotels, residential, vacation, condominium units and condominium ownership propertiesservices, our distribution and services.destination management services business, and our paid vacation program. We have a significant number of trademarks, service marks, trade names, logos, and pending registrations and significant resources are expended each year on surveillance, registration, and protection of our trademarks, service marks, trade names, and logos, which we believe have become synonymous in the hospitality industry with a reputation for excellence in service and care. For additional information, see Part I, Item 1A, "Risk Factors—Risks Related to Our Business—Any failure to protect our trademarks and intellectual property could reduce the value of our brand names and harm our business."
Government Regulation
We are subject to numerous foreign, federal, state, and local government laws and regulations, including those relating to employment practices, laws and regulations that govern the offer and sale of franchises, health and safety, competition, anti-bribery and anti-corruption, the preparation and sale of food and beverages, building and zoning requirements, cybersecurity, data privacy, and general business license and permit requirements, in various jurisdictions. In addition, as a result of the COVID-19 pandemic, governmental agencies in various jurisdictions have issued evolving health and safety-related regulations and orders that affect our operations. We manage and own hotels with casino gaming operations as part of or adjacent to such hotels, but third parties manage and operate the casino operations with the exception of one hotel in whichAruba where we develop, own, operate, manage, franchise, license, or provide services to properties. Our ability to develop new hotel properties and to remodel, refurbish, or add to existing properties is also dependent on obtaining permits from local authorities. We are also subject to laws governing our relationships with employees, including minimum wage requirements, overtime, working conditions, hiringthe licensing and firing, non-discriminationregulatory control of the agency responsible for disabilitiessuch license and other individual characteristics, work permits,operations in Aruba because we maintain the casino gaming license and benefit offerings. Federal, state, and provincial laws and regulations require certain registration, disclosure statements, compliance with specific standards of conduct, and other practices with respect tomanage the franchising of hotels.casino. Compliance with these various laws and regulations can affect the revenues
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and profits of properties managed, franchised, licensed, or owned, andour portfolio of the residential, vacation, and condominium ownership businessproperties and could adversely affect our operations.operations or our reputation. We believe our businesses are conducted in substantial compliance with applicable laws and regulations.
Human Capital Resources and Corporate Responsibility Commitment
Our purpose – to care for people so they can be their best – is at the heart of how we care for our guests, customers, and colleagues. We managerecognize that Hyatt's success is dependent on the commitment to genuine service and own hotels with casino gaming operations as partcare that our colleagues deliver to our guests and customers and that our colleagues and culture are at the core of or adjacentour purpose. Therefore, one of our strategic priorities is to cultivate the hotels. However, with the exception of Hyatt Regency Aruba Resort Spabest people and Casino, third parties managefoster a diverse, equitable, and operate the casinos. We holdinclusive culture that prioritizes wellbeing, enables colleagues to reach their fullest potential, and maintain the casino gaming licenseemphasizes development and manage the casino located at Hyatt Regency Aruba Resort Spa and Casino and employ third-party compliance consultants and service providers. As a result, our business operations at Hyatt Regency Aruba Resort Spa and Casino are subject to the licensing and regulatory control of the Departamento pa Asuntonan di Casino (D.A.C.), the regulatory agency responsiblegrowth for gaming licenses and operations in Aruba.all colleagues.
Employees
At December 31, 2019,2021, there were approximately 21%164,000 colleagues working at our corporate and regional offices and our managed, franchised, owned, and leased properties, and we directly employ approximately 44,000 of these colleagues. The remaining colleagues are employed by third-party owners and franchisees of our approximately 55,000properties. Approximately 20% of our employees (approximately 23% of our U.S.-based employees) were either represented by a labor union or had terms of employment that were determined under a labor agreement. We believe relations with our employees and colleagues are good.
World of Care
In 2021, we launched World of Care, a global environmental, social, and governance ("ESG") platform. World of Care builds on Hyatt's more than 60 years of efforts to help address the pressing challenges faced by Hyatt's colleagues, guests, customers, owners, and communities and enact meaningful change within the hospitality industry. The platform includes our commitments to care for the planet, people, and responsible business, and provides an opportunity to further support key milestones and initiatives for Hyatt.
•Caring for the Planet: We are committed to advancing environmental action so that destinations around the world are vibrant for our guests, colleagues, and communities. In 2021, we published actionable, science-based goals to achieve by 2030 as part of a new environmental framework focused on climate change and water conservation, waste and circularity, responsible sourcing, and thriving destinations.
•Caring for People: We care for the wellbeing of our colleagues, guests, customers, owners, and communities and are committed to advancing a culture of opportunity for all.
•Caring for Responsible Business: We embrace our responsibility to create fair, ethical, and transparent business practices. Our approach to responsible business spans policies and procedures around ethics, security, supplier and partner diversity, and corporate governance globally.
Diversity, Equity, and Inclusion
We have a long history of focusing on diversity, equity, and inclusion, and we are committed to holding ourselves accountable for continued change holistically across Hyatt's business. In 2021, we published our first Diversity, Equity, and Inclusion report which summarizes current workforce data and describes our Change Starts Here commitments that were introduced in 2020 and include actionable goals to accelerate our diversity, equity, and inclusion efforts by 2025. These 2025 goals include: (i) doubling representation for women and people of color groups in key leadership roles, including doubling the representation of Black leaders; (ii) achieving 45% Black RiseHY hires – a global program providing career pathways for young people aged 16-24 who are disconnected from the economy either by not working or not going to school – in the United States from 2021-2025; (iii) providing 1,000 hours of pro bono or volunteer support in Black communities in Chicago; and (iv) achieving 10% of Black spend as a percentage of all minority- and women-owned supplier spend. In addition, the Hyatt Hotels Foundation plans on making financial contributions totaling $1 million in support of strengthening Black communities in the United States by 2025. We also maintain a Global Diversity, Equity & Inclusion Council, chaired by our CEO, to shape and drive our diversity and inclusion strategy, and we sponsor eight colleague-led Diversity Business Resource Groups with chapters around the globe to provide career development programs and support workforce diversity. Hyatt colleagues are eager to learn, participate, and impact this space. To address this interest, Hyatt provides a Leading Inclusively training for all people managers at both the corporate and hotel-level. This training provides an opportunity for colleagues to reflect on potential biases and assumptions that may create barriers to practicing inclusion, seeking out and engaging in diverse perspectives, and collaborating to solve problems.
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To support our colleagues' physical, mental, and emotional wellbeing, we prioritize offerings and opportunities for them to practice self-care, including providing complimentary access to the Headspace meditation and mindfulness mobile application available for colleagues wherever they are, as well as opportunities for continual learning, such as tuition reimbursement and training courses. Our Colleague Wellbeing Council helps evaluate and shape how we can continue to energize and engage colleagues through feedback collected from colleagues around the world. As an extension of our purpose of care and as part of our ongoing commitment to colleague wellbeing, we utilize a mental wellbeing assessment tool — Hyatt Well-Check — to support our colleagues. The confidential and anonymous assessment tool can help colleagues better understand the state of their own mental wellbeing and point them toward resources that can help address any needs.
Environmental Matters
In connection with our ownership, management, and development of properties, we are subject to various foreign, federal, state, and local laws, ordinances, and regulations relating to environmental protection. Under some of these laws, a current or former owner or operator of real property may be held liable for the costs of investigating or remediating hazardous or toxic substances or wastes on, under or in such real property, as well as third-party sites where the owner or operator sent wastes for disposal. Such laws may impose liability without regard to whether the owner or operator knew, or was at fault in connection with, the presence or release of such hazardous substances or wastes. Although we are not aware of any current material obligations for investigating or remediating hazardous substances or wastes at our owned properties, the future discovery of substances or wastes at any of our owned properties, or the failure to remediate such contaminated property properly, could adversely affect our ability to develop or sell such real estate, or to borrow using such real estate as collateral. In addition, the costs of investigating or remediating contamination at our properties or at properties where we sent substances or wastes for disposal, may be substantial.
We are also subject to various requirements, including those contained in environmental permits required for our operations, governing air emissions, effluent discharges, the use, management, and disposal of hazardous substances and wastes, and health and safety. From time to time, we may be required to manage, abate, or remove mold, lead, or asbestos-containing materials at our properties. We believe our properties and operations are in compliance, in all material respects, with all foreign, federal, state, and local environmental laws and ordinances. However, additional operating costs and capital expenditures could be incurred if additional or more stringent requirements are enacted in the future.
Insurance
Properties that the Company manages, franchises, licenses,we manage, franchise, license, own, and ownslease outright or through hospitality ventures are insured under different insurance programs depending on whether the property participates in our insurance programs or in the insurance programs of the property owner, (includingincluding hospitality ventures),ventures, franchisee, or licensee. We maintain insurance coverage for hotels owned and leased by the Company under our insurance programs for liability, property, workers compensation, and other risks with respect to our business. Our liability insurance provides coverage for most claims, including claims related to terrorism, resulting from our operations, goods and services, and automobiles.automobiles, but does not provide coverage for certain losses, including pandemics and/or epidemics. Our property insurance provides coverage for all risks to our properties including fire, windstorm, flood, earthquake, and terrorism. Property insurance also includes business interruption coverage.coverage, but does not provide coverage for certain losses, including pandemics and/or epidemics. Our workers compensation insurance provides coverage for employee injuries in the course and scope of employment. Hotels owned by hospitality ventures, hotels managed by the Company, and certain franchises are permitted to participate in our insurance programs by mutual agreement with our hospitality venture partners or third-party hotel owners.owners and franchisees. The majority of hotels owned by hospitality ventures and managed hotels owned by third parties participate in our insurance programs. Our hospitality venture agreements and management agreements require hotels owned by hospitality ventures and managed hotels owned by third parties that do not participate in our insurance programs to be insured at coverage levels generally consistent with the coverage levels under our insurance programs, including liability, property, business interruption, workers compensation, and other insurance. Our franchise and license agreements require our franchisees and licensees to maintain liability, property, business interruption, workers compensation, and other insurance at our franchised or licensed properties. We are typically covered under insurance policies held by third-party property owners, franchisees, or licensees to the extent necessary and reasonable. We also maintain cyber-risk insurance for systems and data controlled by the Company. Cyber-risk insurance generally covers all Company-controlled systems and Company-controlled data in properties that the Company manages, franchises, licenses, owns, and owns,leases, outright or through hospitality ventures.
We believe the Company's insurance policies, as well as those maintained by third-party owners and franchisees, including hospitality ventures, are adequate for foreseeable losses and on terms and conditions that are reasonable and customary with solvent insurance carriers. We also self-insure some of our risks generally through the use of deductibles and retentions. We believe these deductibles and retentions are reasonable and customary for our industry and our size. However,
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there are losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. We use a U.S.-based and licensed captive insurance companiescompany that areis a wholly owned subsidiariessubsidiary of the Company to generally insure our deductibles and retentions, but excludes most property insurance deductibles and retentions.
Stockholder Agreements
The following is a summary of the provisions of the Amended and Restated Global Hyatt Agreement, the Amended and Restated Foreign Global Hyatt Agreement, and the Global Hyatt Corporation 2007 Stockholders' Agreement (the "2007 Stockholders' Agreement"). The following descriptions of these agreements do not purport to be complete and are subject to, and qualified in their entirety by, the Amended and Restated Global Hyatt Agreement, Amended and Restated Foreign Global Hyatt Agreement, and 2007 Stockholders' Agreement, copies of which have been filed with the Securities and Exchange Commission ("SEC") and are incorporated by reference herein. For additional information regarding these agreements, please also refer to Part I, Item 1A, "Risk Factors—Risks Related to Share Ownership and Other Stockholder Matters."
Amended and Restated Global Hyatt Agreement
The trustees of the U.S. situs trusts for the benefit of certain lineal descendants of Nicholas J. Pritzker, deceased, that own, directly or indirectly, shares of our common stock, and the adult beneficiaries of such trusts, including Mr. Thomas J. Pritzker, our executive chairman, and Mr. Jason Pritzker, one of our directors, and any of their successors that own, directly or indirectly, shares of our common stock, have entered into the Amended and Restated Global Hyatt Agreement pursuant to which they have agreed to, among other things, certain voting agreements and limitations on the sale of shares of our common stock. At January 31, 2020,2022, Pritzker family business interests own, directly or indirectly, 63,461,87857,638,225 shares, or 62.6%52.4%, of our total outstanding common stock and control approximately 91.6%88.8% of our total voting power. Specifically, such parties have agreed that until the date upon which more than 75% of the Company's fully diluted shares of common stock is owned by persons other than Pritzker family members and spouses (including any U.S. or non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of Pritzker family members and spouses), all Pritzkers (and their successors in interest, if applicable), but not the transferees by sale (other than Pritzkers who purchase directly from other Pritzkers), will vote all of their voting securities consistent with the recommendations of our board of directors with respect to all matters assuming agreement as to any such matter by a majority of a minimum of three independent directors (excluding for such purposes any Pritzker) or, in the case of transactions involving us and an affiliate, assuming agreement of all of such minimum of three independent directors (excluding for such purposes any Pritzker). All Pritzkers have agreed to cast and submit by proxy to us their votes in a manner consistent with the foregoing voting agreement at least five business days prior to the scheduled date of any annual or special meeting of stockholders.
In addition, such parties have agreed that until the date upon which more than 75% of the Company's fully diluted shares of common stock is owned by persons other than Pritzker family members and spouses (including any U.S. or non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of any Pritzker family members and spouses), all Pritzker family members and spouses (including U.S. and non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of any Pritzker family members and spouses or affiliates of any thereof) in a "beneficiary group" (including trusts only to the extent of the then current benefit of members of such beneficiary group) may sell up to 25% of their aggregate holdings of our common stock, measured as of November 4, 2009, the date of effectiveness of the registration statement on Form S-1 (File No. 333-161068) relating to our initial public offering of our Class A common stock, in each 12-month period following the date of effectiveness of such registration statement (without carry-overs), and shall not sell more than such amount during any such period. Upon the unanimous affirmative vote of our independent directors (excluding for such purposes any Pritzker), such 25% limitation may, with respect to each such 12 month period, be increased to a higher percentage or waived entirely. Sales of our common stock, including Class A common stock and Class B common stock, between and among Pritzkers is permitted without regard to the sale restrictions described above and such sales are not counted against the 25% sale limitation.
All shares of our common stock owned by each beneficiary group (including trusts only to the extent of the then current benefit of members of such beneficiary group) are freely pledgeable to an institutional lender and such institutional lender will not be subject to the sale restrictions described above upon default and foreclosure.
The Amended and Restated Global Hyatt Agreement may be amended, modified, supplemented, or restated by the written agreement of the successors to Mr. Thomas J. Pritzker, Mr. Marshall E. Eisenberg, and Mr. Karl J. Breyer, solely in their capacity as co-trustees of the Pritzker family U.S. situs trusts, 75% of the adult beneficiaries named below and a majority of the other adult beneficiaries party to the agreement. Each of Thomas J. Pritzker, Nicholas J. Pritzker, Jennifer N. Pritzker, John A. Pritzker, Linda Pritzker, Karen L. Pritzker, Penny Pritzker, Daniel F. Pritzker, Anthony N. Pritzker, Gigi Pritzker Pucker, and Jay Robert Pritzker, and their respective lineal descendants and current spouse, if relevant, make up a "beneficiary group."
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Disputes that relate to the subject matter of the Amended and Restated Global Hyatt Agreement are subject to arbitration pursuant to the terms of the agreement. The exclusive requirement to arbitrate under the Amended and Restated Global Hyatt Agreement shall not apply with respect to the manner in which Hyatt's operations are conducted to the extent the parties (in their capacities as stockholders) and non-Pritzker public stockholders are affected comparably; provided, however, that a party may participate in and benefit from any shareholder litigation initiated by a non-party to the agreement. A party to the agreement may not solicit others to initiate or be a named plaintiff in such litigation (i) unless two thirds of the independent directors (excluding for such purposes any Pritzker) of a board of directors having at least three independent directors (excluding for such purposes any Pritzker) do not vote in favor of the matter that is the subject of the litigation or (ii) in the case of affiliated transactions reviewed by our board of directors, unless at least one independent director (excluding for such purposes any Pritzker) did not approve the transaction.
Amended and Restated Foreign Global Hyatt Agreement
The trustees of the non-U.S. situs trusts for the benefit of certain lineal descendants of Nicholas J. Pritzker, deceased, that own, directly or indirectly, shares of our common stock, and the adult beneficiaries of such trusts, including Mr. Thomas J. Pritzker and Mr. Jason Pritzker, and any of their successors that own, directly or indirectly, shares of our common stock, have entered into the Amended and Restated Foreign Global Hyatt Agreement pursuant to which they have agreed to, among other things, certain voting agreements and limitations on the sale of shares of our common stock. At January 31, 2020,2022, Pritzker family business interests own, directly or indirectly, 63,461,87857,638,225 shares, or 62.6%52.4%, of our total outstanding common stock and control approximately 91.6%88.8% of our total voting power. Specifically, such parties have agreed that until the date upon which more than 75% of the Company's fully diluted shares of common stock is owned by persons other than Pritzker family members and spouses (including any U.S. or non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of any Pritzker family members and spouses), all Pritzkers (and their successors in interest, if applicable), but not the transferees by sale (other than Pritzkers who purchase directly from other Pritzkers), will vote (or cause to be voted) all of the voting securities held directly or indirectly by them consistent with the recommendations of our board of directors with respect to all matters assuming agreement as to any such matter by a majority of a minimum of three independent directors (excluding for such purposes any Pritzker) or, in the case of transactions involving us and an affiliate, assuming agreement of all of such minimum of three independent directors (excluding for such purposes any Pritzker). All Pritzkers have agreed to cast and submit by proxy to us their votes in a manner consistent with the foregoing voting agreement at least five business days prior to the scheduled date of any annual or special meeting of stockholders.
In addition, such parties have agreed that until the date upon which more than 75% of the Company's fully diluted shares of common stock is owned by persons other than Pritzker family members and spouses (including any U.S. or non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of any Pritzker family members and spouses), all Pritzker family members and spouses (including U.S. and non-U.S. situs trusts for the current or future, direct or indirect, vested or contingent, benefit of any Pritzker family members and spouses and/or affiliates of any thereof) in a "beneficiary group" (including trusts only to the extent of the then current benefit of members of such beneficiary group) may sell up to 25% of their aggregate holdings of our common stock, measured as of November 4, 2009, the date of effectiveness of the registration statement on Form S-1 (File No. 333-161068) relating to our initial public offering of our Class A common stock, in each 12-month period following the date of effectiveness of such registration statement (without carry-overs), and shall not sell more than such amount during any such period. Upon the unanimous affirmative vote of our independent directors (excluding for such purposes any Pritzker), such 25% limitation may, with respect to each such 12 month period, be increased to a higher percentage or waived entirely. Sales of our common stock, including Class A common stock and Class B common stock, between and among Pritzkers is permitted without regard to the sale restrictions described above and such sales are not counted against the 25% sale limitation.
All shares of our common stock owned directly or indirectly by each beneficiary group (including trusts only to the extent of the then current benefit of members of such beneficiary group) are freely pledgeable to an institutional lender and such institutional lender will not be subject to the sale restrictions described above upon default and foreclosure.
The Amended and Restated Foreign Global Hyatt Agreement may be amended, modified, supplemented, or restated by the written agreement of 75% of the adult beneficiaries named below and a majority of the other adult beneficiaries party to the agreement. Each of Thomas J. Pritzker, Nicholas J. Pritzker, Jennifer N. Pritzker, John A. Pritzker, Linda Pritzker, Karen L. Pritzker, Penny Pritzker, Daniel F. Pritzker, Anthony N. Pritzker, Gigi Pritzker Pucker, and Jay Robert Pritzker, and their respective lineal descendants and current spouse, if relevant, make up a "beneficiary group."
Disputes that relate to the subject matter of the Amended and Restated Foreign Global Hyatt Agreement are subject to arbitration pursuant to the terms of the agreement. The exclusive requirement to arbitrate under the Amended and Restated Foreign Global Hyatt Agreement shall not apply with respect to the manner in which Hyatt's operations are conducted to the extent the parties (in their capacities as stockholders) and non-Pritzker public stockholders are affected comparably; provided,
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however, that a party may participate in and benefit from any shareholder litigation initiated by a non-party to the agreement. A party to the agreement may not solicit others to initiate or be a named plaintiff in such litigation (i) unless two thirds of the independent directors (excluding for such purposes any Pritzker) of a board of directors having at least three independent directors (excluding for such purposes any Pritzker) do not vote in favor of the matter that is the subject of the litigation or (ii) in the case of affiliated transactions reviewed by our board of directors, unless at least one independent director (excluding for such purposes any Pritzker) did not approve the transaction.
2007 Stockholders' Agreement
In connection with the issuance and sale of 100,000 shares of our Series A Convertible Preferred Stock to GS Sunray Holdings, L.L.C. ("GSSH") and GS Sunray Holdings Parallel, L.L.C. ("GSSHP" and collectively with GSSH, the "Goldman Sachs Funds"), affiliates of Goldman, Sachs & Co., and the execution of a Subscription Agreement in August 2007, we entered into the 2007 Stockholders' Agreement with Madrone GHC, LLC and affiliates (collectively, "Madrone"), the Goldman Sachs Funds, and an additional investor that provides for certain rights and obligations of these stockholders, as described below.
In May 2009, the shares of our Series A Convertible Preferred Stock held by the Goldman Sachs Funds were converted into shares of common stock. Such shares of common stock, along with shares of common stock purchased by the Goldman Sachs Funds and Madrone in May 2009 pursuant to the Subscription Agreement and in the May 2009 private placement transaction, and any other shares of common stock held by the parties to the 2007 Stockholders' Agreement prior to our initial public offering, were reclassified into shares of our Class B common stock upon the filing of our Amended and Restated Certificate of Incorporation on November 4, 2009, the date of our initial public offering. At January 31, 2020,2021, the Goldman Sachs Funds and Madrone no longer held any shares of common stock subject to the 2007 Stockholders' Agreement as a result of sales into the public market subject to applicable securities laws. At January 31, 2020,2021, the additional investor party to the 2007 Stockholders' Agreement held 2,270,395 shares of Class B common stock.
Transfer Restrictions
No stockholder party to the 2007 Stockholders' Agreement may transfer (1) the legal or beneficial ownership of any common stock held by such stockholder unless such acquiring person's ownership of common stock is not reasonably likely to jeopardize any licensing from a governmental authority, as determined by our board of directors in its reasonable discretion, (2) any common stock to an aggregator (meaning a person who is required to file a Schedule 13D under the Exchange Act disclosing an interest other than for investment), (3) any common stock to a competitor of ours engaged in one or more of the hospitality, lodging, and/or gaming industries or (4) any common stock that would cause a stockholder to violate any provision of the agreement. Such restrictions are qualified by the "actual knowledge" of the transferring stockholder in the case of transfers pursuant to an underwritten public offering or a broad distribution sale.
All other transfer restrictions set forth in the 2007 Stockholders' Agreement expired in May 2015. However, all shares held by such stockholders remain subject to the rights of first refusal (except as described below with respect to shares held by Madrone) and "drag along" rights described below.
Right of First Refusal
In the event that the number of shares of common stock proposed to be transferred by a stockholder party to the 2007 Stockholders' Agreement and its affiliates together with any shares of common stock then proposed to be transferred by the other stockholders party to the 2007 Stockholders' Agreement and their affiliates exceeds 2% of the then outstanding shares of common stock, then prior to consummating the sale of common stock to a third-party purchaser, such stockholder or stockholders shall offer to transfer the common stock to us at the applicable market value (as defined in the 2007 Stockholders' Agreement). If we do not accept the offer within a specified period of time, such stockholder or stockholders may transfer the shares of common stock to the third-party purchaser as long as such transfer occurs within the time periods specified in the 2007 Stockholders' Agreement and on terms and conditions no more favorable in the aggregate than those offered to us. We waived all rights of first refusal with respect to shares held by the Goldman Sachs Funds and Madrone in connection with the sales into the public market by such entities.
"Drag-Along" Right
In connection with a "change of control" (as defined in the 2007 Stockholders' Agreement) transaction, we have the right to require each stockholder party to the 2007 Stockholders' Agreement to participate in such change of control transaction on the same terms, conditions, and price per share of common stock as those applicable to the other holders of our common stock. In addition, upon our request, the stockholders party to the 2007 Stockholders' Agreement have agreed to vote in favor of such change of control transaction or similar transaction, and we have the right to require each stockholder party to the 2007 Stockholders' Agreement to vote for, consent to, and raise no objection to any such transaction.
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"Tag-Along" Right
Subject to the fiduciary duties of our board of directors, we have agreed that we will not agree to consummate a change of control transaction with respect to which the stockholders party to the 2007 Stockholders' Agreement are not given the right to participate on the same terms, conditions, and price per share of common stock as those applicable to the other holders of our common stock.
Preemptive Rights
Each stockholder party to the 2007 Stockholders' Agreement has the right to purchase such stockholder's pro rata share of any new shares of common stock, or any other equity securities, that we may propose to sell and issue on comparable terms by making an election within the time periods specified in the 2007 Stockholders' Agreement, subject to certain excluded securities issuances described in the 2007 Stockholders' Agreement, including shares issued pursuant to equity compensation plans adopted by our board of directors and the issuance of shares of our common stock in a public offering. If not all stockholders elect to purchase their full preemptive allocation of new securities, then we will notify the fully-participating stockholders and offer them the right to purchase the unsubscribed new securities.
Voting Agreement
Until the date that Mr. Thomas J. Pritzker is no longer our chairman, each stockholder party to the 2007 Stockholders' Agreement has agreed to vote all of their shares of common stock consistent with the recommendations of a majority of our board of directors with respect to all matters. At January 31, 2020,2021, the stockholders party to the 2007 Stockholders' Agreement own in the aggregate 2,270,395 shares of Class B common stock or approximately 3.5%3.8% of our Class B common stock, approximately 2.2%2.1% of the total outstanding shares of our common stock and approximately 3.3%3.5% of the total voting power of our outstanding common stock.
Standstill
Under the 2007 Stockholders' Agreement, each stockholder party to the 2007 Stockholders' Agreement agreed that, subject to certain limited exceptions, so long as such stockholder owns shares of common stock, neither such stockholder nor any of its related persons will in any manner, directly or indirectly:
•effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or cause or participate in or in any way assist, facilitate, or encourage any other person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (a) any acquisition of any of our or our subsidiaries' securities (or beneficial ownership thereof) (except through the proper exercise of preemptive rights granted under the 2007 Stockholders' Agreement), or rights or options to acquire any of our or our subsidiaries' securities (or beneficial ownership thereof), or any of our or our subsidiaries' or affiliates' assets, indebtedness, or businesses, (b) any tender or exchange offer, merger, or other business combination involving us or any of our subsidiaries or affiliates or any assets constituting a significant portion of our consolidated assets, (c) any recapitalization, restructuring, liquidation, dissolution, or other extraordinary transaction with respect to us or any of our subsidiaries or affiliates, or (d) any "solicitation" of "proxies" (as such terms are used in the proxy rules under the Exchange Act) or written consents with respect to any of our or our affiliates' voting securities. For this purpose, the term "affiliates" means our affiliates primarily engaged in the hospitality, lodging, and/or gaming industries;
•form, join, or in any way participate in a "group" (within the meaning of Section 13(d) of the Exchange Act) with respect to us where such group seeks to acquire any of our equity securities;
•otherwise act, alone or in concert with others, to seek representation on or to control or influence our or our subsidiaries' management, board of directors, or policies;
•take any action which would or would reasonably be expected to force us to make a public announcement regarding any of the types of matters set forth in the first bullet point above;
•own more than 12% of the issued and outstanding common stock, unless such ownership arises as a result of any action not taken by or on behalf of such stockholder or a related person of such stockholder; or
•request that we or any of our representatives, directly or indirectly, amend or waive any of the foregoing provisions.
Each stockholder party to the 2007 Stockholders' Agreement has also agreed that, if at any time during the period such stockholder is subject to the foregoing provisions, such stockholder is approached by any third party concerning its participation in any transaction or proposed transaction involving the acquisition of all or any portion of the assets, indebtedness, or
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securities of, or any business of, ours or any of our subsidiaries, such stockholder will promptly inform us of the nature of such transaction and the parties involved.
Termination
The 2007 Stockholders' Agreement terminates (1) with respect to any individual stockholder, on the first date when such stockholder no longer holds any shares of common stock and (2) in its entirety, upon the first to occur of all of our equity
securities being owned by a single person or the agreement in writing by us and each stockholder party to the 2007 Stockholders' Agreement.
Our Website and Availability of SEC Reports and Other Information
The Company maintains a website at the following address: www.hyatt.com. The information on the Company's website is not incorporated by reference in, or otherwise to be regarded as part of, this annual report.
We make available on or through our website certain reports and amendments to those reports we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
Investors and others should note that we routinely announce material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts, and the Hyatt Investor Relations website. We use these channels as well as social media channels (e.g., the Hyatt Facebook account (facebook.com/hyatt); the Hyatt Instagram account (instagram.com/hyatt); the Hyatt Twitter account (twitter.com/hyatt); the Hyatt LinkedIn account (linkedin.com/company/hyatt); and the Hyatt YouTube account (youtube.com/user/hyatt)) as a means of disclosing information about our business to our guests, customers, colleagues, investors, and the public. While not all of the information that we post to the Hyatt Investor Relations website or on our social media channels is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in Hyatt to review the information that we share at the Hyatt Investor Relations website and on our social media channels. The information on the Hyatt Investor Relations website and the Company's social media channels is not incorporated by reference in, or otherwise to be regarded as part of, this annual report.
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Item 1A. Risk Factors.
In addition to the other information set forth in this annual report, you should consider carefully the risks and uncertainties described below, which could materially adversely affect our business, financial condition, results of operations, and cash flows.
Risk Factors Summary
The following is a summary of the principal risks and uncertainties described in more detail in this annual report:
•The COVID-19 pandemic has had, and could continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations.
•We may not realize the anticipated benefits from the ALG Acquisition, our integration process may take longer or be more difficult than anticipated, and we expect to incur additional integration expenses related to the acquisition.
•Global economic conditions and the cyclical nature of the hospitality industry could adversely affect demand for travel and lodging, and hospitality-related businesses, and, as a result, our revenues, profitability, and future growth.
•Risks relating to natural or man-made disasters, contagious diseases, such as the COVID-19 pandemic, terrorist activity, and war could reduce the demand for lodging and hospitality-related businesses, which may adversely affect our financial condition and results of operations.
•We operate in a highly competitive industry and our revenues, profits, or market share could be harmed if we are unable to compete effectively.
•New distribution channels, alternatives to traditional hotels, significant increases in the volume of sales made through third-party internet travel intermediaries, and industry consolidation among our competitors could have an adverse impact on consumer loyalty to our brands and hospitality-related businesses and may negatively impact our business.
•If we are unable to establish and maintain key distribution arrangements for our properties and hospitality-related businesses, the demand for our rooms, hospitality-related services, and revenues could decrease.
•Because we derive a portion of our revenues from operations outside the United States, we are subject to various risks of doing business internationally.
•If we are unable to successfully operate the World of Hyatt loyalty program or further evolve the development and implementation of our digital platforms, loyalty for our brands, and our revenues, could be negatively impacted.
•The success of the Unlimited Vacation Club membership program is dependent on offering preferred rate hotel inventory, providing members unique engagement experiences and benefits, as well as access to on-site sale opportunities and other key sales locations, and could be negatively impacted by lack of resort inventory, member terminations, or a failure to collect membership fees.
•Adverse incidents at, or adverse publicity concerning, our businesses or our corporate responsibilities could harm our brands and reputation, as well as adversely affect our market share, business, financial condition, or results of operations.
•Labor shortages could restrict our ability to operate our properties or grow our business or result in increased labor costs that could reduce our profits.
•If we are unable to maintain good relationships with third-party property owners and franchisees and/or if our management or franchise agreements terminate, our revenues could decrease and our costs could increase.
•Our growth strategy depends upon attracting third-party owners and franchisees to our platform, and future arrangements with these third parties may be less favorable to us, depending on the terms offered by our competitors.
•Some of our existing development pipeline may not be developed into new hotels or may not open on the anticipated timeline, which could affect our growth prospects.
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•If we or our third-party owners or franchisees are not able to maintain our brand standards or develop, redevelop, or renovate properties successfully, our business, profitability, and ability to compete effectively could be harmed.
•We may be unable to sell selected owned properties at acceptable terms and conditions, if at all, or within targeted timeframes, and are exposed to risks resulting from significant investments in owned and leased real estate.
•We may seek to expand our business through acquisitions of and investments in other businesses and properties, or through alliances, and these activities may be unsuccessful or divert our management's attention.
•If we or our third-party owners, franchisees, or development partners are unable to repay or refinance loans secured by the mortgaged properties, access the capital necessary to fund current operations or implement our plans for growth, our revenues, profits, and capital resources could be reduced and our business could be harmed.
•If we become liable for losses related to loans we have provided or guaranteed to third parties or contractual arrangements with third-party owners and franchisees, our profits could be reduced.
•Cyber risk and the failure to maintain the integrity of customer, colleague, or Company data could adversely affect our business, harm our reputation, and/or subject us to costs, fines, penalties, investigations, enforcement actions, or lawsuits.
•Information technology system failures, delays in the operation of our information technology systems, or system enhancement failures could reduce our revenues and profits and harm the reputation of our brands and our business.
•We have a limited ability to manage third-party risks associated with our hospitality venture investments, which could reduce our revenues, increase our costs, lower our profits, and/or increase our liabilities.
•Our debt service obligations may adversely affect our cash flow and reduce our operational flexibility, and we are exposed to counterparty and credit risk and fluctuations in the market values of our investment portfolio.
•Our failure, or the failure by third-party owners, franchisees, or hospitality venture partners, to comply with applicable laws and regulations may increase our costs, reduce our profits, or limit our growth.
•Adverse judgments or settlements resulting from legal proceedings in which we may be involved could reduce our profits or limit our ability to operate our business.
•Changes in federal, state, local, or foreign tax law, interpretations of existing tax law, or agreements or disputes with tax authorities could affect our profitability and financial condition by increasing our tax costs.
•Any failure to protect our trademarks and intellectual property could reduce the value of our brand names and harm our business.
•There can be no assurance that we will declare or pay dividends in the future or that we will repurchase shares pursuant to our share repurchase program consistent with historical amounts or at all.
•Anti-takeover provisions in our organizational documents and Delaware law, as well as agreements with our major stockholders, may discourage or prevent a change of control transaction or any attempt by stockholders to replace or remove our board of directors or management.
•Pritzker family business interests have substantial control over us and have the ability to control the election of directors and other matters submitted to stockholders for approval.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has had, and could continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations, and these impacts may persist for an extended period of time or become more pronounced over time.
The COVID-19 pandemic has been and continues to be a complex and evolving situation and has resulted in significant disruption and additional risks to our business; the lodging, hospitality, and travel industries; and the global economy. The COVID-19 pandemic has led governments and other authorities around the world to impose or recommend, at various times and to varying degrees, measures intended to control its spread, including restrictions on large gatherings of people; travel or transportation bans and restrictions; border closings and restrictions; closures of, or occupancy or other operating limitations on,
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work facilities, lodging facilities, food and beverage establishments, schools, public buildings and businesses; quarantines; shelter-in-place orders; and social distancing measures. As a result, the COVID-19 pandemic and its consequences have significantly reduced global travel and demand for hotel rooms and travel-related experiences and have had a material detrimental impact on global commercial activity across the lodging, hospitality, and travel industries, all of which has had, and could continue to have, a material adverse impact on our business, operations, and financial results.
The extent, duration, and magnitude of the COVID-19 pandemic's effects will depend on various factors, all of which are highly uncertain and difficult to predict, including, but not limited to, the impact of the pandemic on global and regional economies, travel, and economic activity, as well as actions taken by governments, businesses, and individuals in response to the pandemic, any additional resurgence, or COVID-19 variants. These factors include the impact of the COVID-19 pandemic on unemployment rates and consumer discretionary spending; governmental or regulatory orders that impact our business and our industry; the demand for travel and transient and group business; levels of consumer confidence; the ability of our third-party owners, franchisees, or hospitality venture partners to successfully navigate the effects of the pandemic; the broad distribution and efficacy of COVID-19 vaccines and treatments and the wide acceptance by the general population of such vaccines; the availability, use, and effectiveness of COVID-19 testing, including at-home testing kits, and treatments; and the pace and consistency of the ongoing recovery. In addition, as the COVID-19 pandemic evolves, differing actions taken by governments around the world with respect to travel bans or restrictions or economic activity could result in varying impacts to the results of operations of our reportable segments.
The COVID-19 pandemic has subjected our business, operations, and financial condition to a number of significant risks:
•Revenues and Expenses: The effects of the pandemic have materially adversely affected, and could continue to materially adversely affect the revenues and profitability of our owned and leased properties and hospitality-related businesses, and revenues may be insufficient to offset certain fixed costs, such as insurance and property taxes. In addition, uncertain or fluctuating real estate valuations and the inability for third-party purchasers to obtain capital may prevent us from selling properties on acceptable terms or prevent us from selling properties within our previously announced timeframes.
In addition, the amount of management and franchise fee revenues we are able to generate from our managed and franchised properties has been materially adversely affected, and could continue to be materially adversely affected, by the COVID-19 pandemic. The economic impact of the pandemic has also made it difficult for certain third-party owners or franchisees to meet working capital needs, and could make it difficult for them to service debt obligations or obtain financing on favorable terms, or at all, which could have a significant impact on the overall level, cost, and pace of our future development and, therefore, our ability to increase revenue. The impact of the pandemic could cause third-party owners or franchisees to declare bankruptcy or cause their lenders to declare a default, accelerate the related debt or foreclose on the property. Such bankruptcies, sales or foreclosures could, in some cases, result in the termination of our management or franchise agreements and impact our anticipated income and cash flows. Additionally, third-party owners or franchisees may be, and in limited cases, have been, unable or unwilling to pay us amounts that we are entitled to receive on a timely basis or at all, which has adversely affected, and may continue to adversely affect, our revenues and liquidity.
The COVID-19 pandemic has caused us, and could continue to cause us, to incur additional expenses. For example, as a result of the COVID-19 pandemic and resulting deterioration in hotel operating performance, we may be, and in limited cases, have been, required to fund shortfalls in operating profit under performance tests or guarantees we have entered into in favor of some third-party owners and franchisees. Moreover, our third-party owners and hospitality venture partners could fail to reimburse us for any payments we may be required to make to third-party lenders to whom we made financial guarantees for the timely repayment of all or a portion of the third-party owners' or hospitality ventures' debt related to hotels that we manage or franchise. We have, in limited cases, found it necessary or in the interest of our business to provide financial or other types of support to certain of these parties, and may continue to do so in the future, which could increase our expenses and affect cash flows. While governments have and may continue to implement various stimulus and relief programs, it is uncertain whether and to what extent we or our third-party owners or franchisees will be eligible to participate in, or successfully access, such programs, whether conditions or restrictions imposed under such programs will be acceptable, and whether such programs will be effective in avoiding or significantly mitigating the financial impacts of the COVID-19 pandemic. Further, even after the COVID-19 pandemic subsides, we or our third-party hotel owners and franchisees could experience other short or long-term impacts on our costs, including, for example, the need for enhanced health and hygiene standards or certifications, social distancing requirements, or other precautionary measures in response to the health and safety challenges presented by the COVID-19 pandemic. These effects could impact our ability to generate profits even after revenues improve.
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•Operations: As a result of the COVID-19 pandemic and its impact on travel and demand across our system, we took actions and continue to evaluate spending to manage operating expenses and optimize our financial resources. We have received, and may continue to receive, demands or requests from labor unions that represent our colleagues, whether in the course of our periodic renegotiation of our collective bargaining agreements or otherwise, for additional compensation, healthcare benefits, or other terms that could increase costs, and we could experience labor disputes or disruptions. Some actions we have taken, or that we may take in the future, to reduce costs for us or our third-party owners or franchisees may cause us to experience operational challenges, and may negatively impact guest loyalty, owner preference, or our ability to attract and retain colleagues, and our reputation and market share may suffer as a result. Further, we expect the ongoing recovery period to be extended and that certain operational changes, particularly with respect to enhanced health and safety measures and global care and cleanliness certifications as well as new processes, procedures, and controls, will be necessary over the long-term as a result to changes in our business environment. The challenges of the current operating environment may also adversely impact our ability to maintain brand standards across our portfolio as third-party owners or franchisees may be unwilling or unable to incur the cost of complying with such standards.
•Financial Condition, Indebtedness, and Liquidity: As we manage through the effects of the pandemic, our level of indebtedness has increased and may continue to increase. To enhance our liquidity profile and cash position in response to the COVID-19 pandemic, we amended our revolving credit facility and raised capital by issuing debt securities, and we continue to manage operating expenses and cash flows consistent with business needs and demand levels. A default under our revolving credit facility would enable the lenders to terminate their commitments thereunder and could trigger a cross-default, acceleration, or other consequences under our other indebtedness or financial instruments. There is no guarantee that debt financings will be available in the future to fund our obligations or will be available on terms consistent with our expectations. The impact of the COVID-19 pandemic on the financial markets could adversely affect our ability to raise equity financing. Changes in the credit ratings of our debt, including our revolving credit facility and outstanding senior notes, could have an adverse impact on our interest expense. Our credit ratings have been downgraded, and if our ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our credit rating levels, our industry, or our Company, our access to capital and the cost of debt financing would be negatively impacted. Further, the global stock markets have experienced, and may continue to experience, significant volatility as a result of the COVID-19 pandemic, which may from time to time impact the price of our common stock.
•Growth: The COVID-19 pandemic has impacted, and could continue to impact, the pace and timing of our growth. The current environment has resulted in, and could continue to result in, difficulties for certain third-party hotel owners and franchisees to obtain commercially viable financing. The commitments of third-party owners, franchisees, and developers with whom we have agreements are subject to numerous conditions, and the eventual development and completion of construction of our pipeline properties is subject to numerous risks, including, in certain cases, obtaining adequate financing. In addition, we are experiencing construction and opening delays as a result of business activity restrictions, supply chain interruptions, and rising costs of construction-related labor and materials. As a result some portion, or all, of our current development pipeline may not be completed and developed into new hotels and those hotels may not open when anticipated or at all, which would impact our net rooms growth. Further, our development pipeline may not grow at the same rate as in the past, and properties in our existing system-wide inventory may exit as a result of the COVID-19 pandemic, which would also negatively impact our net rooms growth. Even if we are able to successfully grow our pipeline, consumer demand for our rooms may remain depressed or improve at a slower rate than our pipeline growth, resulting in over-supply. In addition, if we cannot access the capital we need to fund our operations or implement our growth strategy, we may need to postpone or cancel planned renovations or developments, which could impair our ability to compete effectively and harm our business.
The COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the COVID-19 pandemic, any additional resurgence, or COVID-19 variants could precipitate, aggravate, or impact the other risk factors included in this annual report, which in turn could further materially adversely affect our business, financial condition, liquidity, results of operations, and profitability, including in ways that are not currently known to us or that we do not currently consider to present significant risks.
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Risks Related to the Hospitality Industry
We are subject to macroeconomic and other factors beyond our control as well as the business, financial, operating, and other risks of the hospitality industry, all of which may adversely affect our financial results and growth.
Macroeconomic and other factors beyond our control as well as the business, financial, operating, and other risks of the hospitality industry can adversely affect demand for hospitality products and services. This includes demand for rooms and services at the portfolio of properties that we develop, own, operate, manage, franchise, provide services to, and license. These factors include:
•changes and volatility in general economic conditions and the impact on consumer discretionary spending, including the severity and duration of any economic downturn in the U.S., Americas, Europe, Asia Pacific, or global economy and financial markets;
•war, political conditions or uncertainty, civil unrest, protests, terrorist activities or threats, and heightened travel security measures instituted in response to these events;
•global outbreaks of pandemics or contagious diseases, such as the COVID-19 pandemic, or fear of such outbreaks, such as the recent coronavirus (COVID-19) outbreak;outbreaks;
•climate change and resource scarcity, such as water and energy scarcity;
•natural or man-made disasters, such as earthquakes, tsunamis, tornadoes, hurricanes, floods, wildfires, oil spills, and nuclear incidents;
•changes in the desirability of particular locations or travel patterns of customers;
•decreased corporate budgets and spending and cancellations, deferrals, or renegotiations of group business;
•decreased demand for business-related travel for in-person meetings due to technological advancements in, and consumer acceptance and adaptation to, virtual meetings and conferences and/or changes in guest and consumer preferences;
•increased in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business;
•low consumer confidence, high levels of unemployment, and depressed housing prices;
•the financial condition of the airline, automotive, and other transportation-related industries and its impact on travel;
•decreased airline capacities and routes;
•increasing awareness around sustainability, the impact of air travel on climate change and the impact of over-tourism;
•travel-related accidents;
•oil prices and travel costs;
•statements, actions, or interventions by governmental officials related to travel and corporate travel-related activities and the resulting negative public perception of such travel and activities;
•domestic and international political and geo-political conditions, including changes in trade policy;
•changes in taxes and governmental regulations that influence or set wages, prices, interest rates, or construction and maintenance procedures and costs;
•the costs and administrative burdens associated with compliance with applicable laws and regulations;
•changes in operating costs, including, but not limited to, labor (including minimum wage increases), energy, food, workers' compensation, benefits, insurance, and unanticipated costs resulting from force majeure events;
•significant increases in cost for healthcare coverage for employees and potential government regulation with respect to health coverage;
•the lack of availability, or increase in the cost, of capital for us or our existing and potential property owners;
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•the attractiveness of our properties and services to consumers and potential owners and competition from other hotels and alternative lodging marketplaces, including online accommodation search and/or reservation services, and wellness-relatedhospitality-related businesses;
•cyclical over-building in the hotel, all-inclusive, and vacation ownership industries; and
•organized labor activities, which could cause a diversion of business from hotels involved in labor negotiations and loss of group business for our hotels generally as a result of certain labor tactics.
These factors, and the reputational repercussions of these factors, can adversely affect, and from time to time have adversely affected, individual properties, particular regions, or our business as a whole. How we manage any one or more of these factors, or any crisis, could limit or reduce demand for the services we provide or the rates our portfolio of properties are able to charge for rooms or services, which could adversely affect our financial results and growth. These factors can also increase our costs or affect our ability to develop new properties or maintain and operate our existing portfolio of properties.
The hospitality industry is cyclical and adverse global economic conditions or low levels of economic growth could adversely affect our revenues and profitability as well as cause a decline in or limitation of our future growth.
Consumer demand for our products and services is closely linked to the performance of the general economyglobal and regional economic conditions and is sensitive to business and personal discretionary spending levels. DeclinesChanges in consumer demand dueand general business cycles can subject, and have subjected, our revenues to adversesignificant volatility. Adverse general economic conditions, health and safety concerns, risks or restrictions affecting or reducing travel patterns, lower consumer confidence, high unemployment, or adverse political conditions can result in a decline in consumer demand, which can lower the revenues and profitability of our owned and leased properties, and the amount of management and franchise fee revenues we are able to generate from our managed and franchised properties.properties, Unlimited Vacation Club, and ALG Vacations. In addition, expenses associated with managing, franchising, licensing, owning, or owningleasing hotels branded spas and fitness studios, andas well as residential, vacation, and condominium ownership units are relatively fixed. These costs include personnel costs, interest, rent, property taxes, insurance, and utilities, all of which may increase at a greater rate than our revenues and/or may not be able to be reduced at the same rate as declining revenues. Where cost-cutting efforts are insufficient to offset declines in revenues, we could experience a material decline in margins and reduced or negative cash flows. If we are unable to decrease costs significantly or rapidly when demand for our hotels and other properties decreases, the decline in our revenues could have a particularly adverse impact on our net cash flows and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth. Economic downturns generally affect the results derived from owned and leased properties more significantly than those derived from managed and franchised properties givendue to the high fixed costs associated with operating an owned or leased property and the greater exposure owners have to the properties' performance. Our proportion of owned and leased properties, compared to the number of properties we manage or franchise for third-party owners and franchisees, is larger than that of many of our competitors and, as a result, an economic downturnenvironment of depressed demand, like the current one resulting from the COVID-19 pandemic, could have a greater adverse effect on our results of operations. As a result, changes in consumer demand and general business cycles can subject, and have subjected, our revenues, earnings, and results of operations to significant volatility.
Uncertainty regarding the future rate and pace of economic growth in different regions of the world makes it difficult to predict future profitability levels. Additionally, if economic weakness were to affect any particular regions of the world, it could have an adverse impact on our revenues and negatively affect our profitability.
Risks relating to natural or man-made disasters, contagious diseases, such as the recent coronavirus (COVID-19) outbreak,COVID-19 pandemic, terrorist activity, and war could reduce the demand for lodging, which may adversely affect our financial condition and results of operations.
Hurricanes, earthquakes, tsunamis, wildfires, and other man-made or natural disasters, as well as the spread or fear of spread of contagious diseases in locations where we own, lease, manage, or franchise significant properties and areas of the world from which we draw a large number of guests, could cause a decline in the level of business and leisure travel in certain regions or as a whole and reduce the demand for lodging, which may adversely affect our financial and operating performance.performance, as has been the case with the COVID-19 pandemic.See also "Risks Related to the COVID-19 Pandemic— The COVID-19 pandemic has had, and could continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations, and these impacts may persist for an extended period of time or become more pronounced over time." Actual or threatened war, terrorist activity, political unrest, civil strife, and other geopolitical uncertainty could have a similar effect on our financial condition or our growth strategy. Any one or more of these events may reduce the overall
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demand for hotel rooms or limit the prices we can obtain for them, both of which could adversely affect our profits and financial results.
Risks Related to Our Business
ALG Acquisition Risks
We may not realize the anticipated benefits from the ALG Acquisition, and our integration process may take longer or be more difficult than anticipated.
The success of the ALG Acquisition will depend, in part, on our ability to realize the anticipated benefits from successfully integrating our and ALG's businesses. We plan on devoting management attention and resources to integrating our and ALG's business practices so that we can fully realize the anticipated benefits of the ALG Acquisition. Nonetheless, the business and assets acquired may not be successful or may require greater resources and investments than originally anticipated. The ALG Acquisition could also result in the assumption of unknown or contingent liabilities, and because ALG operates in the same sector that we do, the ALG Acquisition could also exacerbate a number of risks that currently apply to us.
Potential difficulties we may encounter include the following:
•the inability to successfully combine our and ALG's businesses in a manner that permits us to realize the anticipated benefits of the ALG Acquisition in the time frame currently anticipated, or at all;
•difficulties resulting from developments of the COVID-19 pandemic, including the emergence of new virus variants or limits in the effectiveness of vaccination programs, which could cause us to slow, cease, or reevaluate the focus of integration efforts or impair the value of our and/or ALG's assets;
•the failure to integrate and or interface internal systems, programs, and internal controls;
•the application of different accounting policies, assumptions, or judgments to ALG's operational results than ALG applied in the past;
•the inability to successfully realize the anticipated value from ALG's assets or the expected benefits and added value from the World of Hyatt loyalty program and ALG's Unlimited Vacation Club paid membership program;
•loss of sales and other commercial relationships;
•the complexities associated with managing the combined company and the additional complexities of combining two companies with different histories, markets, strategies, and customer bases;
•the failure to retain key employees of either of the two companies that may be difficult to replace;
•the disruption of each company's ongoing businesses or inconsistencies in services, standards, controls, procedures, and policies;
•potential unknown liabilities and unforeseen increased expenses, delays, or regulatory conditions associated with the ALG Acquisition; and
•performance shortfalls at one or both of the two companies as a result of the diversion of management's attention caused by completing the ALG Acquisition and integrating our and ALG's operations.
A significant portion of the purchase price for the ALG Acquisition was allocated to goodwill and intangible assets. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis and at an interim date, if indicators of impairment exist. We evaluate definite-lived intangible assets for impairment on a quarterly basis. If our acquisition of ALG does not yield expected returns, we may be required to record impairment losses, which could materially adversely affect our reported results.
Any of these risks could adversely affect our ability to maintain relationships with guests, customers, vendors, colleagues, and other commercial relationships or adversely affect our or ALG's future operational results. As a result, the anticipated benefits of the ALG Acquisition may not be realized at all or may take longer to realize or may cost more than expected, which could adversely affect our business, financial condition, results of operations, and growth prospects. In addition, changes in laws and regulations could adversely impact our business, financial condition, results of operations, and growth prospects after the ALG Acquisition.
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We incurred additional expenses and indebtedness related to the ALG Acquisition and expect to incur additional integration expenses.
We expect to incur additional expenses in integrating aspects of the business, practices, policies, and procedures of ALG in connection with the ALG Acquisition. While we have assumed that a certain level of integration expenses will be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Also, we incurred additional indebtedness to fund the ALG Acquisition, which increases our debt service obligations and the risk of a downgrade of our credit ratings by credit rating agencies. On November 3, 2021, Standard & Poor's Financial Services, LLC, a subsidiary of McGraw Hill Financial, Inc. ("S&P") lowered our credit rating to BB+ from BBB-. We cannot assure you that these additional expenses or indebtedness will not have an adverse effect on us or our results of operations or will not result in a future downgrade.
Competition Risks
Because we operate in a highly competitive industry, our revenues, profits, or market share could be harmed if we are unable to compete effectively, and new distribution channels, alternatives to traditional hotels, and industry consolidation among our competitors may negatively impact our business.
The segments of the hospitality industry in which we operate are subject to intense competition. Our principal competitors are other operators of full service, select service, including extended stay, all-inclusive, and wellnessall-inclusive properties, including other major hospitality chains with well-established and recognized brands.brands, as well as cruise line operators. Some of these major hospitality chains are larger than we are based on the number of properties or rooms they manage, franchise, own, or ownlease or based on the number of geographic locations in which they operate. Some of our competitors also have significantly more members participating in their loyalty programs or paid vacation programs which may enable them to attract more customers and more effectively retain such guests. Our competitors may also have greater financial and marketing resources than we do, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could adversely affect our ability to compete for guests effectively. In addition to these competitors, we also compete against smaller hotel chains and independent and local hotel owners and operators.
Increasingly, we also face competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model, such as Alibaba, search engines such as Google, and peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate the short-term rental of homes and apartments from their owners, thereby providing an alternative to hotel rooms, such as Airbnb and HomeAway.
The hospitality industry has experienced significant consolidation, and we expect this trend may continue as companies attempt to strengthen or hold their market positions in a highly competitive and evolving industry. Consolidation by our competitors willwould give them increased scale and may enhance their capacity, abilities, and resources and lower their cost structure, causing us to be at a competitive disadvantage. If we lose market share or are not able to successfully attract third-party hotel owners to our brands as a result of this consolidation, our results of operations, cash flow, business, and overall financial condition could be materially adversely affected.
Significant increases in the volume of sales made through third-party internet travel intermediaries could have an adverse impact on consumer loyalty to our brand and could negatively affect our revenues and profits.
We expect to continue to derive most of our business from traditional channels of distribution and our digital platforms. However, consumers worldwide routinely use internet travel intermediaries such as Expedia.com, Priceline.com, Booking.com, Travelocity.com, and Orbitz.com, as well as lesser-known online travel service providers, to book travel. These intermediaries initially focused on leisure travel, but now also provide offerings for corporate travel and group meetings. Some of these intermediaries are attempting to increase the importance of generic quality indicators (such as "four-star downtown hotel") at the expense of brand identification. These intermediaries hope that consumers will eventually develop brand loyalties to their reservation systems rather than to our brands. Some of these intermediaries have launched their own loyalty programs to further develop loyalties to their reservation systems. In addition, these intermediaries typically obtain higher commissions or other potentially significant contract concessions, increasing the overall cost of these third-party distribution channels. If the volume of sales made through internet travel intermediaries continues to increase, consumers may develop stronger loyalties to these intermediaries rather than to our brands, our distribution costs could increase significantly, and our business revenues and profits could be harmed.
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If we are unable to establish and maintain key distribution arrangements for our properties or hospitality-related businesses, the demand for our rooms, hospitality-related services, and our revenues could fall.decrease.
Increasingly, the rooms at hotels and resorts that we manage, franchise, own, or ownlease are booked through third-party internet travel intermediaries and online travel service providers. We also engage third-party intermediaries, including travel agencies and meeting and event management companies, who collect fees by charging our hotels and resorts a commission on room revenues. A failure by our distributors to attract or retain their customer bases could lower demand for hotel rooms and, in turn, reduce our revenues. In addition, some of our distribution agreements are not exclusive, are short term, are terminable at will, or are subject to early termination provisions. The loss of distributors, increased distribution costs, or the renewal of distribution agreements on less favorable terms could adversely impact our business.
We collect, use, and retain large volumes of customer data, including payment card numbers and other personal informationcompete for business, marketing, and other purposes, and our various information technology systems capture, process, summarize, and report such data. We also maintain personal information and other data about our colleagues. We store and process such customer, colleague, and company data both at onsite facilities and at third-party owned facilities including, for
We compete for guests at our hotels and our resorts and for customers of our services and paid vacation program, based primarily on brand name recognition and reputation, location, customer satisfaction, room rates, quality of service, amenities, quality of accommodations, security, our cancellation policy, and the ability to earn and redeem loyalty program points.
We compete for management agreements based primarily on the value and quality of our management services, our brand name recognition and reputation, the level of our management fees, room rate expectations, the cost of our system-wide services, the terms of our management agreements, (includingincluding compared to the terms our competitors offer),offer, and the economic advantages to the property owner of retaining our management services and using our brand name. We compete for franchise agreements primarily based primarily on brand name recognition and reputation, the room rate that can be realized, the cost of our system-wide services, and the royalty fees charged. Other competitive factors for management and franchise agreements are relationships with property owners and investors, availability and affordability of financing, marketing support, loyalty programs, reservation and e-commerce system capacity and efficiency, distribution channels, limitations on the expansion of one or more of our brands in certain geographic areas due to restrictions previously agreed to in order to secure management and franchise opportunities, and the ability to provide capital that may be necessary to obtain management and franchise agreements.
The residential, vacation, and condominium ownership propertiesunits which we manage, own, or to which we provide services or license our trademarks compete with other hotel and resort properties principally on the basis of location, quality of accommodations, price, financing terms, quality of service, terms of property use, opportunity to exchange for time at other vacation properties, as applicable, and brand name recognition and reputation. In addition, our residential and condominium ownership propertiesunits compete with peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate the short-term rental of homes and apartments from owners, such as Airbnb, Vrbo, and Vacasa, and residential projects affiliated with branded hospitality companies. Our vacation ownership business also competes with national and independent vacation ownership club operators and owners reselling their interests in these properties, which could reduce demand or prices for new vacation ownership properties.
The ALG Acquisition will only magnify the general operational risks that we face.
The acquired ALG business is subject to many of the same operational risks as our business prior to the ALG Acquisition, as described in the risk factors included in this annual report. Given the substantial size of the ALG business and associated complexities, many of the risk factors that we faced prior to the ALG Acquisition will only become more magnified and substantial and the expanded business will only pose additional challenges for management, including those that relate to management and monitoring of new operations.
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The risks of doing business internationally, or in a particular country or region, could lower our revenues, increase our costs, reduce our profits, or disrupt our business.
Our operations outside the United States represented approximately 24% of our revenues for the year ended December 31, 2021. Our properties outside of the United States represent approximately 48% of the rooms in our system-wide inventory at December 31, 2021. Over the long term, we expect our international operations may account for an increasing portion of our total revenues and rooms.
As a result, we are subject to the risks of doing business outside the United States, including:
•the costs of complying with laws, regulations, and policies, including taxation policies, of foreign governments relating to investments and operations; the costs or desirability of complying with local practices and customs; and the impact of various anti-corruption and other laws affecting the activities of U.S. companies abroad;
•currency exchange rate fluctuations or currency restructurings;
•evolving local data residency requirements that require data to be stored only in and, in some cases, also to be accessed only from within, a certain jurisdiction;
•U.S. taxation of income earned abroad;
•limitations on the redeployment of non-U.S. earnings;
•import and export licensing requirements and regulations, as well as unforeseen changes in regulatory requirements, including imposition of tariffs or embargoes, export regulations, controls, and other trade restrictions;
•political and economic instability;
•health and safety protocols, including global care and cleanliness certifications, at our portfolio of properties;
•the complexity of managing an organization doing business in many jurisdictions;
•uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional requirements for onerous contract clauses; and
•rapid changes in government, economic, and political policies; political or civil unrest; acts of terrorism; or the threat of international boycotts or U.S. anti-boycott legislation.
While these factors and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, affect our operations, increase our costs, reduce our profits, or disrupt our business. For example, our financial results have been materially adversely affected by the COVID-19 pandemic.
In addition, conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates, currency devaluations, or restructurings that could have a negative impact on our financial results. Our exposure to foreign currency exchange rate fluctuations or currency restructurings is expected to continue to grow if the relative contribution of our operations outside the United States increases.
We occasionally enter into foreign exchange hedging agreements with financial institutions to reduce certain of our exposures to fluctuations in currency exchange rates. However, these hedging agreements may not eliminate foreign currency risk entirely and involve costs and risks of their own, such as ongoing management time and expertise and external costs related to executing hedging agreements.
The World of Hyatt loyalty program and our digital platforms build loyalty for our brands and drive hotel revenue which could be negatively impacted if we are unable to successfully operate the World of Hyatt loyalty program or further evolve the development and implementation of our digital platforms.
The World of Hyatt loyalty program is a platform for engagement with our most loyal guests, providing increased benefits and recognition as they continue to engage with Hyatt. We believe World of Hyatt will continue to develop loyalty by fostering personal relationships and creating emotional connections that inspire brand preference. The success of our business depends in part on attracting new consumers, enhancing digital platforms that are preferred by loyalty members, and driving continued participation in the loyalty program by loyalty members. If guests, third-party owners, or franchisees do not accept the loyalty program or if we are unable to operate the loyalty program successfully, our business could be adversely impacted. Further, our
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digital platforms are focused on driving outstanding guest experiences that differentiate Hyatt and drive revenue through direct bookings, but may not deliver all or part of the expected benefits. If our digital platforms do not evolve in a way that is able to adapt to future technology or keep pace with changes in consumer preferences, our hotel performance could become increasingly challenged.
In addition, as part of the ALG Acquisition, we are identifying ways in which the World of Hyatt loyalty program and the Unlimited Vacation Club membership program will continue to offer added value and unique benefits to loyalty members and Unlimited Vacation Club members. The expected benefits and added value from the two programs, however, may not be realized at all, may take longer to realize, or may require additional resources than originally expected, which could adversely affect our relationships with guests, customers, Unlimited Vacation Club members, and third-party owners or franchisees, as well as our business, financial condition, or results of operations.
The Unlimited Vacation Club is a paid membership program that is dependent on offering preferred rate hotel inventory, and access to key sales locations including on-site sale opportunities and could be negatively impacted by lack of resort inventory, member terminations, or a failure to collect membership fees.
Unlimited Vacation Club memberships are sold onsite at AMR Collection resorts and other select locations and the failure to maintain good relationships with third-party owners to continue selling Unlimited Vacation Club memberships onsite and negotiate other favorable sales locations could have a material adverse effect on the success and future growth of the Unlimited Vacation Club membership program. In addition, if future sales efforts are not successful, if third-party owners do not accept the Unlimited Vacation Club program, or if we are unable to operate the program successfully, our business could be adversely impacted.
Unlimited Vacation Club memberships are generally long-term in nature with membership fees being paid either upfront or collected over time, and are subject to certain termination rights. If new members are not enrolled, memberships are not renewed, memberships are cancelled, or we are unable to timely collect membership fees, our business, financial condition, or results of operations could be negatively impacted.
Adverse incidents at, or adverse publicity concerning, our propertiesbusinesses or our corporate responsibilities could harm our brands and reputation, as well as adversely affect our market share, business, financial condition, or results of operations.
Our brands and our reputation are among our most important assets. Our ability to attract and retain guests and colleagues depends,reputational value is based, in part, uponon the external perceptions of Hyatt, the quality of our hotels and services, and our corporate and management integrity. An incident involving the potential safety or security of our guests, customers, or colleagues, orcolleagues; adverse publicity regarding safety or security of travel destinations around the globe or at our competitors' properties, or in respect of our third-party vendors or owners and the industry, andindustry; or any media coverage resulting therefrom, may harm our brands and reputation, cause a loss of consumer confidence in Hyatt and the industry, and negatively impact our results of operations.
Additionally, our reputation could be harmed if we fail to, or are perceived to, not comply with various regulatory requirements or if we fail to act responsibly or are perceived as not acting responsibly in a number of areas such as health, safety and security, data security, diversity and inclusion, group events with controversial groups or speakers, sustainability, responsible tourism, environmental stewardship, supply chain management, climate change, human rights, and philanthropy and support for local communities. communities, and corporate governance. We manage a broad range of ESG and corporate responsibility matters, taking into consideration their expected impact on the sustainability of our business over time, and the potential impact of our business on society and the environment. Adverse incidents with respect to our corporate responsibility efforts could impact the value of our brands or our reputation, the cost of our operations, and relationships with investors and stakeholders, all of which could adversely affect our business and results of operations.
The continued expansion in the use and influence of social media has compounded the potential scope of the negative publicity that could be generated, and could increase our costs, lead to litigation or governmental investigations, or result in negative publicity that could damage our reputation. Adverse incidents have occurred in the past and may occur in the future. Negative incidents could lead to tangible adverse effects on our business, including lost sales, boycotts, reduced enrollment and/or participation in the loyalty program, or paid membership program, disruption of access to our digital platforms, loss of development opportunities, or reduced colleague retention and increased recruiting difficulties. Any decline in the reputation or perceived quality of our brands or corporate image could adversely affect our market share, business, financial condition, or results of operations.
Labor shortages could restrict our ability to operate our properties or grow our business or result in increased labor costs that could reduce our profits.
Our success depends in large part on the ability to attract, retain, train, manage, and engage our colleagues. Our properties are staffed 24 hours a day, seven days a week by thousands of colleagues around the world. If we and our third-party owners or
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franchisees are unable to attract, retain, train, and engage skilled colleagues, the ability to manage and staff properties adequately could be impaired, which could reduce customer satisfaction and limit our ability to grow and expand our business.
We have experienced challenges hiring for certain on-property and corporate positions due to various factors, such as competition for labor from other industries, and these circumstances could continue or worsen in the future to an extent and for durations that we are not able to predict. Labor shortages have resulted and could continue to result in higher wages and initial hiring costs, increasing our labor costs at our hotels, which could reduce our revenues and profits. The impact of the COVID-19 pandemic on the hospitality industry has adversely affected and may in the future continue to adversely affect our ability to attract and retain colleagues.
Management, Franchising, Ownership, Development, and Financing Risks
If we are unable to maintain good relationships with third-party property owners and franchisees and/or if we terminate agreements with defaulting third-party property owners and franchisees, our revenues could decrease and we may be unable to maintain or expand our presence.
We earn fees for managing and franchising hotels and other properties and expect franchise ownership to continue to increase over time. The viability of our management and franchising business depends on our ability to establish and maintain good relationships with third-party property owners and franchisees. Third-party developers, property owners, and franchisees are focused on maximizing the value of their investment and working with a management company or franchisor that can help them be successful. The effectiveness of our management, the value of our brands, and the rapport we maintain with our third-party property owners and franchisees impact renewals of existing agreements and are also important factors for existing or new third-party property owners or franchisees considering doing business with us. Our relationships with these third parties generate additional property developmentmanagement and franchise agreement expansion opportunities that support our growth. As such, if we are unable to maintain good relationships with these third parties, our revenues could decrease or we may be unable to maintain or expand our presence. In addition, if third-party property owners or franchisees breach the terms of our agreements with them, we may elect to exercise our termination rights, which would eliminate our revenues from these properties and cause us to incur expenses related to terminating these relationships. These risks become more pronounced during economic downturns.downturns, such as the current downturn resulting from the COVID-19 pandemic.
Contractual and other disagreements with third-party property owners or franchisees could make us liable to them or result in litigation costs or other expenses, which could lower our profits.
Our management and franchise agreements require us and third-party property owners or franchisees to comply with operational and performance conditions that are subject to interpretation and could result in disagreements. Additionally, some courts have applied principles of agency law and related fiduciary standards to managers of third-party hotel properties like us, which means, among other things, that property owners may assert the right to terminate management agreements even where the agreements do not expressly provide for termination. In the event of any such termination, we may need to enforce our right to damages or negotiate damages that may not equal expected profitability over the term of the agreement.
We generally seek to resolve any disagreements with our third-party property owners or franchisees amicably. Formal dispute resolution occurs through arbitration, if provided under the applicable management or franchise agreement, or through litigation. We cannot predict the outcome of any such arbitration or litigation, the effect of any adverse judgment of a court or arbitrator against us, or the amount of any settlement we may enter into with any third party.
If our management or franchise agreements terminate prematurely or we elect to make cure payments due to failures to meet performance tests or upon the occurrence of other stated events, our revenues could decrease and our costs could increase.
Our management and franchise agreements may terminate prematurely in certain cases. Some of our management agreements provide early termination rights to owners of the hotels we manage upon the occurrence of a stated event, such as the sale of the hotel or our failure to meet a specified performance test.test, and some of our management agreements grant hotel owners the right to terminate the hotel management agreement and convert the hotel to a Hyatt franchise.
Generally, termination rights under performance tests are based uponon the property's individual performance, its performance when compared to a specified set of competitive hotels branded by other hotel operators, or both. Some
agreements require a failure of one test, and other agreements require a failure of more than one test, before termination rights are triggered. These termination rights are usually triggered if we do not meet the performance tests over multiple years. Generally, we have the option to cure performance failures by making an agreed-upon cure payment. However, our cure rights may be limited, in some cases, and the failure to meet the performance tests may result in the termination of our management agreement. In the past we have (1) failed performance tests, received notices of termination, and elected to make cure payments, (2) failed performance tests and negotiated an alternative resolution, and (3) failed performance tests and elected not to make a cure payment. When any
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termination notice is received, we evaluate all relevant facts and circumstances at the time in deciding whether to cure. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements" for more information related to performance test payments. In addition, some of our management agreements give third-party property owners the right to terminate upon payment of a termination fee to us after a certain period of time, upon sale of the property, or another stated event. Our franchise agreements typically require franchisees to pay a fee to us before terminating. In addition, if an owner files for bankruptcy, our management and franchise agreements may be terminable under applicable law. If a management or franchise agreement terminates, we would lose the revenues we derive from that agreement and could incur costs related to ending our relationship with the third party and exiting the property.
Our growth strategy depends upon attracting third-party owners and franchisees to our platform, and future arrangements with these third parties may be less favorable to us, depending on the terms offered by our competitors.
Our growth strategy includes entering into and maintaining various arrangements with property owners. The terms of our management agreements and franchise agreements are influenced by contract terms offered by our competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future arrangements, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today.
Some of our existing development pipeline may not be developed into new hotels or may not open on the anticipated timeline, which could materially adversely affect our growth prospects.
At December 31, 2021, our executed contract base consisted of approximately 540 hotels, or approximately 113,000 rooms. The commitments of owners and developers with whom we have agreements are subject to numerous conditions, and the eventual development and construction of our pipeline not currently under construction is subject to numerous risks, including, in certain cases, obtaining governmental and regulatory approvals and adequate financing. As a result, we cannot assure you that our entire development pipeline will be completed and developed into new hotels or that those hotels will open when anticipated, which may impact our net rooms growth. We also cannot assure you that consumer demand will meet the new supply as hotels open. The COVID-19 pandemic has resulted in, and could continue to result in, difficulties for certain hotel owners and franchisees to obtain commercially viable financing, which may negatively impact our future development pipeline. See also "Risks Related to the COVID-19 Pandemic— The COVID-19 pandemic has had, and could continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations, and these impacts may persist for an extended period of time or become more pronounced over time."
If we or our third-party owners or franchisees are not able to maintain our current brand standards or we are not able to develop new initiatives, including new brands, successfully, our business and profitability could be harmed.
We manage and franchise properties owned by third parties under the terms of management and franchise agreements and expect franchise ownership to continue to increase significantly over time. These agreements require third-party property owners or franchisees to comply with standards that are essential to maintaining our brand integrity and reputation. We depend on third-party property owners or franchisees to comply with these requirements by maintaining and improving properties through investments, including investments in furniture, fixtures, amenities, and personnel. If our third-party property owners or franchisees fail to make investments necessary to maintain or improve the properties we manage or franchise, our brand preference and reputation could suffer. Moreover, third-party owners or franchisees may be unwilling or unable to incur the cost of complying with brand standards for new and existing brands as such brands may evolve from time to time. This could result in poor hotel performance, force us to absorb costs to ensure that brand standards come to market in a timely fashion, or exert resources to terminate agreements with such third-party owners or franchisees. Moreover, as we continue to increase our franchised hotel presence, our ability to maintain brand standards may become increasingly challenging.Our ability to implement and maintain brand standards across our portfolio of properties is more challenging in the current operating environment as a result of the COVID-19 pandemic.
In addition, we are continually evaluating and executing new initiatives, including new brands or marketing programs. We have invested capital and resources in owned and leased real estate, property development, brand development, and brand promotion. If such initiatives are not well received by our colleagues, guests, and owners, they may not have the intended effect. We may not be able to recover the costs incurred in developing and launching new brands or other initiatives or to realize their intended or projected benefits, which could lower our profits.
Certain of our contractual arrangements with third-party owners require us to guarantee payments to the owners if specified levels of operating profit are not achieved by their hotels.
The terms of certain guarantees to hotel owners may require us to fund shortfalls if the hotels do not attain specified levels of operating profit. This guaranteed funding to hotel owners may not be recoverable to us and could lower our profits and
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reduce our cash flows. As an example,We continue to review and evaluate contractual obligations in 2013, we entered into management agreements for four managed hotels in France ("the four managed hotels in France") and a related performance guarantee for the first seven years of the management agreements pursuant to which we have had to make payments toacquired in the ownerALG Acquisition, and expect to make payments throughany contractual guarantee obligations, if identified, could be material and may increase our liabilities assumed in the term of the guarantee which expires on April 30, 2020. The performance guarantee stipulated a maximum performance guarantee commitment of €377 million, which is reduced by annual payments made under the guarantee. While neither the cumulative payments to date nor expected payments under this or other guarantees have been or are expected to be significant to our liquidity, future payments under these performance guarantees may adversely affect our financial performance and results of operations.ALG Acquisition. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements" for more information related to our guarantees.
We are exposed to the risks resulting from significant investments in owned and leased real estate, which could increase our costs, reduce our profits, limit our ability to respond to market conditions, or restrict our growth strategy.
Our proportion of owned and leased properties, compared to the number of properties that we manage or franchise for third-party owners and franchisees, is larger than that of many of our competitors. Real estate ownership and leasing is subject to risks not applicable to managed or franchised properties which could adversely affect our results of operations, cash flow, business, and overall financial condition, including:
•governmental regulations relating to real estate ownership;
•real estate, insurance, zoning, tax, environmental, and eminent domain laws;
•the ongoing need for owner funded capital improvements and expenditures to maintain or upgrade properties;
•risks associated with mortgage debt, including the possibility of default, fluctuating interest rate levels, and the availability of replacement financing;
•risks associated with the possibility that cost increases will outpace revenue increases and that in the event of an economic slowdown, the high proportion of fixed costs will make it difficult to reduce costs to the extent required to offset declining revenues;
•fluctuations in real estate values or potential impairments in the value of our assets; and
•the relative illiquidity of real estate compared to some other assets.
We plan to sell selected properties; however, we may be unable to sell our selected owned properties at acceptable terms and conditions, if at all.all, or within targeted timeframes.
As part of our capital strategy, including our additional commitment announced planin August 2021 to sell $1.5realize $2.0 billion inof proceeds from the sale of owned assets by MarchDecember 31, 2022,2024, we plan, from time to time, to sell certain properties, subject to a management or franchise agreement, with the primary purpose of reinvesting the proceeds to support the growth of our business. As we actively market and look to sell selected properties, general economic conditions, along withimpacts of the COVID-19 pandemic, and/or property-specific issues may negatively affect the value of our properties, or prevent us from selling the property on acceptable terms, or prevent us from selling properties within our previously announced timeframe. We cannot guarantee that we will be able to consummate any such sales on commercially reasonable terms or at all, or that we will realize any anticipated benefits from such sales. Real estate investments often cannot be sold quickly. Dispositions of real estate assets can be particularly difficult in a challenging economic environment as financing alternatives are often limited for potential buyers. As a result, economic conditions may prevent potential purchasers from obtaining financing on acceptable terms, if at all, thereby delaying or preventing our ability to sell the properties selected for disposition. Our inability to sell assets, or to sell such assets at attractive prices, could have an adverse impact on our ability to realize proceeds for reinvestment, or the return of capital to shareholders, and ultimately torepay our debt, and/or execute on our long-term strategy. In addition, even if we are successful in consummating sales of selected properties, such dispositions may result in losses. Further, as we continue to manage through the effects of the COVID-19 pandemic, our level of indebtedness has increased and may continue to increase, and proceeds from asset sales may be used to repay indebtedness.
We may seek to expand our business through acquisitions of and investments in other businesses and properties, or through alliances, and these activities may be unsuccessful or divert our management's attention.
We consider strategic and complementary acquisitions of and investments in other businesses, properties, brands, or other assets as part of our growth strategy. For example, in 2018, we acquired Two Roads and in 2017, we acquired Miraval and Exhale. We may also pursue opportunities in alliance with existing or prospective owners of managed or franchised properties. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do. Acquisitions of or investments in hospitality companies, businesses, properties, brands, or assets, as well as these alliances, are subject to risks that could affect our business, including risks related to:
•spending cash and incurring debt;
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•assuming contingent liabilities;
•contributing properties or related assets to hospitality ventures that could result in recognition of losses;
•creating additional transactional and operating expenses; or
•issuing shares of stock that could dilute the interests of our existing shareholders.
We cannot assure you that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we will realize any anticipated benefits from such acquisitions, investments, or alliances. There may be high barriers to entry in many key markets and scarcity of available development and investment opportunities in desirable locations. Similarly, we cannot assure you that we will be able to obtain financing for acquisitions or investments on attractive terms or at all, or that the ability to obtain financing will not be restricted by the terms of our revolving credit facility or other indebtedness we may incur.
The success of any such acquisitions or investments will also depend, in part, on our ability to integrate the acquisition or investment with our existing operations. Inability to integrate completed acquisitions in an efficient and timely manner could result in reputational harm or have an adverse impact on our results of operations. Integration efforts may also take longer than we anticipate and involve unexpected costs. If we are unable to successfully integrate an acquired business, we may not realize the benefits that were expected at the time of acquisition. We may experience difficulty with integrating acquired businesses, properties, or other assets, including difficulties relating to:
•coordinating sales, distribution, loyalty, membership, and marketing functions;
effectively and efficiently integrating information technology and other systems;
•issues not discovered as part of the transactional due diligence process and/or unanticipated liabilities or contingencies of acquired businesses, including with respect to commercial disputes or cyber incidents and information technology failures or other matters; and
•preserving the important licensing, distribution, marketing, owner, customer, labor, and other relationships of the acquired assets.
In addition, as a result of any acquisition activity, we may assume management and franchise agreements with terms that are not as favorable as other agreements within our portfolio and may result in loss of business over time. Any such acquisitions, investments, or alliances could also demand significant attention from our management team that would otherwise be available for our regular business operations, which could harm our business.
See also "Risks Related to Our Business—Acquisition Risks—We may not realize the anticipated benefits from the ALG Acquisition and our integration process may take longer or be more difficult than anticipated."
Timing, budgeting, and other risks could result in delays or cancellations of our efforts to develop, redevelop, or renovate the properties that we own or lease, or make these activities more expensive, which could reduce our profits or impair our ability to compete effectively.
We must maintain and renovate the properties that we own and lease in order to remain competitive, maintain the value and brand standards of our properties, and comply with applicable laws and regulations. We also selectively undertake ground-up construction of properties together with hospitality venture partners in an effort to expand our brand presence. These efforts are subject to a number of risks, including:
•construction delays or cost overruns, including labor and materials, that may increase project costs;
•obtaining zoning, occupancy, and other required permits or authorizations;
•changes in economic conditions that may result in weakened or lack of demand or negative project returns;
•governmental restrictions on the size or kind of development;
•multi-year urban redevelopment projects, including temporary hotel closures, that may significantly disrupt hotel profits;
•force majeure events, including earthquakes, tornadoes, hurricanes, floods, wildfires, tsunamis, or pandemics; and
•design defects that could increase costs.
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Additionally, developing new properties typically involves lengthy development periods during which significant amounts of capital must be funded before the properties begin to operate and generate revenue. If the cost of funding new development exceeds budgeted amounts and/or the time period for development is longer than initially anticipated, our profits could be reduced. Further, due to the lengthy development cycle, intervening adverse economic conditions may alter or impede our development plans, thereby resulting in incremental costs to us or potential impairment charges. Moreover, during the early stages of operations, charges related to interest expense and depreciation may substantially detract from, or even outweigh, the profitability of certain new property investments.
Similarly, the cost of funding renovations and capital improvements may exceed budgeted amounts. Additionally, the timing of renovations and capital improvements can affect, and historically has affected, property performance, including occupancy and ADR, particularly if we need to close a significant number of rooms or other facilities, such as ballrooms, meeting spaces, or restaurants. Moreover, the investments that we make may fail to improve the performance of the properties in the manner that we expect.
Economic and other conditions may adversely impact the valuation of our assets resulting in impairment charges that could have a material adverse impact on our results from operations.
We hold significant amounts of goodwill, intangible assets, property and equipment, and investments. On a regular basis, we evaluate our assets for impairment based on various factors, including actual operating results, trends of projected revenues and profitability, and potential or actual terminations of underlying management and franchise agreements. During times of economic distress, declining demand and declining earnings often result in declining asset values. As a result, we have incurred impairment charges, and may incur charges in the future, which could be material and may adversely affect our earnings.
If our third-party property owners and franchisees, including our hospitality venture partners, are unable to repay or refinance loans secured by the mortgaged properties, our revenues, profits, and capital resources could be reduced and our business could be harmed.
Many of the properties owned by third-parties, franchisees, or our hospitality ventures are pledged as collateral for mortgage loans entered into when such properties were purchased or refinanced. If our third-party property owners, franchisees, or our hospitality venture partners are unable to repay or refinance maturing indebtedness on favorable terms or at all, the lenders could declare a default, accelerate the related debt, and repossess the property. Any sales or repossessions could, in certain cases, result in the termination of our management or franchise agreements and eliminate anticipated income and cash flows, which could negatively affect our results of operations.
If we or our third-party owners, franchisees, or development partners are unable to access the capital necessary to fund current operations or implement our plans for growth, our profits could be reduced and our ability to compete effectively could be diminished.
The hospitality industry is a capital-intensive business requiring significant capital expenditures to develop, operate, maintain, and renovate properties. Access to the capital that we or our third-party owners, franchisees, or development partners need to finance the construction of new properties or to maintain and renovate existing properties is critical to the continued growth of our business and our revenues.
The availability of capital or the conditions under which we or our third-party owners, franchisees, or development partners can obtain capital can have a significant impact on the overall level, cost, and pace of future development and therefore, the ability to grow our revenues. The most recent economic downturn caused credit markets to experience significant disruption severely reducing liquidity and credit availability, and the COVID-19 pandemic has resulted in, and could continue to result in, difficulties for certain third-party hotel owners and franchisees to obtain commercially viable financing. Such disruptions may diminish the ability and desire of existing and potential development partners to access capital necessary to develop properties. Our ability to access additional capital could also be limited by the terms of our revolving credit facility, which restricts our ability to incur debt under certain circumstances. Additionally, if one or more of the financial institutions that support our revolving credit facility fail, we may not be able to find a replacement, which would reduce the availability of funds that we can borrow under the facility.
If we are forced to spend larger than anticipated amounts of cash from operating activities to operate, maintain, or renovate existing properties, then our ability to use cash for other purposes, including acquisition or development of other businesses, properties, brands, or other assets could be limited and our profits could be reduced. Similarly, if we cannot access the capital we need to fund our operations or implement our growth strategy, we may need to postpone or cancel planned renovations or developments, which could impair our ability to compete effectively and harm our business.
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If we become liable for losses related to loans we have provided or guaranteed to third parties, our profits could be reduced.
At times, we make loans to our third-party hotel owners, franchisees or hospitality venture partners, and in other circumstances, we may provide senior secured financing or subordinated forms of financing to third-party owners or franchisees. We could suffer losses if third-party property owners or franchisees default on loans we provide. Additionally, we may provide financial guarantees to third-party lenders related to the timely repayment of all or a portion of the associated debt on certain properties. The guarantees may be for the full amount of the debt or may be limited to a portion of the debt. We typically obtain reimbursement agreements from our hospitality venture partners or other third parties with the intent to limit our exposure to our share of the debt. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 6 to our Consolidated Financial Statements" for more information related to our loans and other financing arrangements and "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements" for more information related to our guarantees.
We are exposed to counterparty and credit risk and fluctuations in the market values of our investment portfolio.
Cash balances not required to fund our daily operating activities are invested in interest-bearing investments with a greater focus placed on capital preservation than on investment return. The majority of our cash and cash equivalent balances are held on deposit with high quality financial institutions that hold long-term ratings of at least BBB or Baa from S&P or Moody's Investors Service, Inc. ("Moody's"), respectively, and in AAA-rated money market funds. As such, we are exposed to counterparty risk on our cash and cash equivalent balances. We also have established investment accounts for purposes of investing portions of cash resources for the World of Hyatt loyalty program, certain benefit programs, and our captive insurance company. Although we have not recognized any significant losses to date on these investments, any significant declines in their market values could materially adversely affect our financial condition and results. Credit ratings and pricing of these investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors. As a result, the value and liquidity of our investments could decline and result in impairments, which could materially adversely affect our financial condition and results.
Technology and Information Systems Risks
Cyber risk and the failure to maintain the availability or security of our systems or customer, colleague, or Company data could adversely affect our business, harm our reputation, and/or subject us to costs, fines, penalties, investigations, enforcement actions, or lawsuits.
We collect, use, and retain large volumes of customer data, including payment card numbers and other personal information for business, marketing, and other purposes, and our various information technology systems capture, process, summarize, and report such data. We also maintain personal information and other data about our colleagues. We store and process such customer, colleague, and Company data both at onsite facilities and at third-party owned facilities including, for example, in third-party hosted cloud environments. We also rely on the availability of information technology systems to operate our business, including communications; reservations; digital platforms, including the loyalty program and paid membership program; guest services; payments; and other general operations. The availability and protection of customer, member, colleague, and Company data, as well as the continuous operation of our systems, are critical to our business. Our customers and colleagues expect we, as well as our third-party owners, franchisees, licensees, hospitality venture partners, and service providers, will adequately protect their personal information and that our services will be continuously available.
The regulations and contractual obligations applicable to security and privacy are increasingly demanding, both in the United States and in other jurisdictions where we operate, and cyber threat actors regularly target the hospitality industry. In addition, the scope and complexity of the cyber-threat landscape could affect our ability to adapt to and comply with changing regulatory obligations and expectations. Because of the scope and complexity of our information technology structure, our reliance on third party hardware, software, and services to support and protect our structure and data, and the constantly evolving cyber-threat landscape, our systems may be vulnerable to disruptions, failures, unauthorized access, cyber-terrorism, human error, negligence, fraud, or other misuse. Moreover, our systems, colleagues, and customers may be targeted by social engineering attacks or account takeover tactics that may, among other things, aim to obtain funds or information fraudulently. These or similar occurrences, whether accidental or intentional, could result in an interruption in the operation of our systems or theft, unauthorized access, disclosure, loss, and fraudulent or unlawful use of customer, colleague, or Company data, all of which could impact our business, result in operational inefficiencies or loss of business, create negative publicity, cause harm to our reputation, or subject us to remedial and other costs, fines, penalties, investigations, enforcement actions, or lawsuits. Additionally, we increasingly rely on third-party owners, franchisees, licensees, and hospitality venture partners who operate their own networks and systems and engage with their own service providers, and a security incident involving such networks or systems could lead to an interruption in, or other adverse effects on, our business, resulting in operational inefficiencies, potential exposure to fines or litigation, or loss of business, and negative publicity and reputational harm.
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In addition, we may be subject to data risks and cyber security vulnerabilities as part of the ALG Acquisition. Our due diligence and post-acquisition assessments of ALG's cyber security controls and procedures and information technology systems may not be sufficient to detect current or prior security incidents that have not yet been detected or to identify security measures that are not sufficient to appropriately address security risks to data and business continuity. Any such security incidents may pose material cyber security risks, including risks of theft, unauthorized access, disclosure, loss, and fraudulent use of customer colleague, or Company data.
We have previously detected and disclosed prior incidents involving cyber threat actors who have attacked our systems, as well as those operated by third-parties. We expect ongoing attempts to gain access to our systems and those operated by our third-party owners, franchisees, licensees, hospitality venture partners, and vendors. We also may be victims of current or future software supply-chain incidents, even if those incidents are not directly targeted at Hyatt. We continue to use an evolving privacy and security risk management framework utilizing risk assessments to identify priorities for enhancements. While we implement security measures designed to safeguard our systems and data and have business continuity measures, and intend to continue implementing additional measures in the future, our implementation efforts may be incomplete or our measures may not be sufficient to maintain the confidentiality, security, or availability of the data we collect, store, and use to operate our business. We work to continuously evaluate our security posture throughout our business and make appropriate changes to our operating processes and improve our defenses. Although we carry cyber insurance that is designed to protect us against certain losses related to cyber risks, that insurance coverage may not be sufficient or available to cover all expenses or other losses (including fines) or all types of claims that may arise in connection with cyberattacks, security compromises, and other related incidents. Any future occurrences could result in costs and business impacts that may not be covered or may be in excess of any available insurance that we, or our third-party owners, franchisees, licensees, or hospitality venture partners, may have arranged. Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all. As a result, future incidents could have a material impact on our business and adversely affect our financial condition and results of operations.
Information technology system failures, delays in the operation of our information technology systems, or system enhancement failures could reduce our revenues and profits and harm the reputation of our brands and our business.
Our success depends on the efficient and uninterrupted operation of our information technology systems and technology services delivered to Hyatt by third-party or cloud providers. For example, we depend on our central reservation system, which allows bookings by hotels directly, via telephone through our global contact centers, by travel agents, through our digital platforms, and through our online reservations partners. In addition, we depend on information technology to run our day-to-day operations, including, among others, hotel services and amenities such as guest check-in and check-out, housekeeping and room service, and systems for tracking and reporting our financial results and the financial results of our hotels.
Our information technology systems and technology services delivered to Hyatt by third-party or cloud providers are vulnerable to damage or interruption from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, and similar events. The occurrence of any of these natural or man-made disasters or unanticipated problems at any of our information technology facilities or any of our global contact centers or at our third-party or cloud providers could cause interruptions or delays in our business, loss of data, or render us unable to process reservations.
In addition, if our information technology systems or technology services delivered to Hyatt by third-party or cloud providers are unable to provide the information communications capacity that we need or if these information technology systems suffer problems caused by installing system enhancements, we could experience similar failures or interruptions. If our information technology systems or technology services delivered to Hyatt by third-party or cloud providers fail and redundant systems or disaster recovery plans are not adequate to address such failures or if our property and business interruption insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced and the reputation of our brands and our business could be harmed.
If we fail to stay current with developments in technology necessary for our business, our operations could be harmed and our ability to compete effectively could be diminished.
Sophisticated information technology and other systems are instrumental for the hospitality industry, including systems used for our central reservations, revenue management, property management, and global loyalty program, as well as technology systems that we make available to our guests. These information technology and other systems must be refined, updated, or replaced with more advanced systems on a regular basis. Developing and maintaining these systems may require significant capital. If we are unable to replace or introduce information technology and other systems as quickly as our competitors or within budgeted costs or schedules when these systems become outdated or require replacement or if we are unable to achieve the intended benefits of any new information technology or other systems, our operations could be harmed and our ability to compete effectively could be diminished.
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Hospitality Venture Risks
We have a limited ability to manage third-party risks associated with our hospitality venture investments, which could reduce our revenues, increase our costs, lower our profits, andand/or increase our liabilities.
We participate in numerous hospitality ventures with third parties. We may also buy and develop properties in hospitality ventures with the sellers of the properties, affiliates of the sellers, developers, or other third parties. Our hospitality venture partners may have shared or majority control over the operations of our hospitality ventures. As a result, our investments in hospitality ventures involve risks that are different from the risks involved in investing in real estate independently. These risks include the possibility that our hospitality ventures or our partners:
•go bankrupt or otherwise are unable to meet their capital contribution obligations;obligations, especially in times of adverse economic conditions;
•have economic or business interests or goals that are or become inconsistent with our business interests or goals;
•are in a position to take action contrary to our instructions, our requests, our policies, our objectives, or applicable laws;
•subject the property to liabilities exceeding those contemplated;
•take actions that reduce our return on investment; or
•take actions that harm our reputation or restrict our ability to run our business.
For these and other reasons, it could be more difficult for us to sell our interest in any hospitality venture or to pursue the venture's activities, which could reduce our ability to address any problems we may have with those properties or respond to market conditions in the future and could lead to impairments of such investments. As a result, our investments in hospitality ventures could lead to impasses with our partners or situations that could harm the hospitality venture, which could reduce our revenues, increase our costs, and lower our profits.
In addition, in conjunction with financing obtained for our hospitality ventures, we may provide completion guarantees, debt repayment guarantees, or standard indemnifications to lenders for loss, liability, or damage occurring as a result of our actions or actions of the other hospitality venture owners.
If our hospitality ventures fail to provide accurate and/or timely information that is required to be included in our financial statements, we may be unable to accurately report our financial results.
Preparing our financial statements requires us to have access to information regarding the results of operations, financial position, and cash flows of our hospitality ventures. Any deficiencies in our hospitality ventures' internal controls over financial reporting may affect our ability to report our financial results accurately or prevent fraud. Such deficiencies could also result in restatements of, or other adjustments to, our previously reported or announced financial results, which could diminish investor confidence and reduce the market price for our shares. Additionally, if our hospitality ventures are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or file our periodic reports in a timely manner.
Cash distributions from our hospitality ventures could be limited by factors outside our control that could reduce our return on investment and our ability to generate liquidity from these hospitality ventures.
Although our hospitality ventures may generate positive cash flow, in some cases, these hospitality ventures may be unable to distribute that cash to the hospitality venture partners. Additionally, in some cases, our hospitality venture partners control distributions and may choose to leave capital in the hospitality venture rather than distribute it. Because our ability to generate liquidity from our hospitality ventures depends on the hospitality ventures' ability to distribute capital to us, tax considerations or decisions of our hospitality venture partners could reduce our return on these investments. We include our pro rata share of Adjusted EBITDA attributable to our unconsolidated owned and leased hospitality ventures Adjusted EBITDA andin our consolidated Adjusted EBITDA regardless of whether the cash flow of those ventures is, or can be, distributed to us.
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Indebtedness Risks
Our indebtedness exposes us to a numbervariety of risks, including:
The terms of the indenture governing our Senior Notes (as defined in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements") and those of our revolving credit facility subject us to the following:
•a risk that cash flow from operations will be insufficient to meet required payments of principal and interest;
•restrictive covenants, including covenants related to certain financial ratios. See Part II, Item 7, "Management's Discussionratios; and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for further information related to restrictions under our financial covenants; and
the risk that any increase in the interest rate applicable to any borrowings under our revolving credit facility or under our Senior Notes that bear interest at a floating rate could reduce our cash flows available for other corporate purposes, including investments in our portfolio, could limit our ability to refinance existing debt when it matures, or could increase interest costs on any debt that is refinanced.
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for further information related to restrictions under our financial covenants, and Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements" for a description of the terms of the indenture governing our Senior Notes.
Although we anticipate we will be able to repay or refinance our existing indebtedness when it matures, there can be no assurance we will be able to do so, or that the terms of such refinancing will be favorable.
A substantial decrease in operating cash flow, consolidated EBITDA (asas defined in our revolving credit facility),facility, or a substantial increase in our expenses may make it difficult for us to meet our existing debt service requirements and restrictive covenants. As a result, we could be forced to sell assets and/or modify our operations. Our existing leverage may also impair our ability to obtain additional financing for acquisitions, working capital, capital expenditures, or other purposes, if necessary, or require us to accept terms otherwise unfavorable to us.
Rating agency downgrades may increase our cost of capital.
The interest rate on borrowings and the facility fee under our revolving credit facility are determined by a pricing grid, which is dependent in part on our credit ratings by Standard & Poor's Financial Services, LLC, a subsidiary of McGraw Hill Financial, Inc. ("S&P"),&P, and Moody's Investors Service, Inc. ("Moody's").Moody's. Lower ratings result in a higher cost of funds. Therefore, if these independent rating agencies were to downgrade our credit ratings or if we no longer have a credit rating from either agency, the cost of our borrowing and the amount of the facility fee under our revolving credit facility will increase as specified in the pricing grid. Additionally, anyIn 2021, S&P downgraded us from BBB- to BB+, which had a negative impact on our cost of borrowing. Any future downgrade of our credit ratings by the rating agencies could reduce or limit our access to capital and further increase our cost of capital.
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Risks Related to Laws, Regulations, and Insurance
Our failure, or the failure by third-party owners, franchisees, or hospitality venture partners, to comply with applicable laws and regulations may increase our costs, reduce our profits, or limit our growth.
Our businesses, properties, and colleagues are subject to a variety of laws and regulations around the globe. Generally, these laws and regulations address our sales and marketing and advertising efforts, our handling of privacy issues and customer data, our anti-corruption efforts, our ability to obtain licenses for business operations such as sales of food and liquor, and matters relating to immigration, the environment, health and safety, health care, gaming, competition, and trade, among other things. Regulations related to our Unlimited Vacation Club business varies by jurisdictions and future regulations or changes to existing regulations may affect the business and the growth prospects of the Unlimited Vacation Club membership program.
Our collection and use of personal data are governed by privacy laws and regulations, and privacy law is an area that changes often and varies significantly by jurisdiction. Increasingly, there is potential for increased exposure to fines, penalties, and civil judgments as a result of new privacy regulations. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our properties and services to our guests.
Our franchising and licensing businesses and our international operations are also subject to laws and regulations affecting those businesses:
Franchising Business
Our franchising business is subject to various laws, as well as to regulations enacted by the Federal Trade Commission ("FTC"). The FTC also regulates the manner and substance of our disclosures to prospective franchisees. In addition, a number of U.S. states and foreign countries require franchisors to register the franchise offering with the applicable governmental body and/or to make extensive disclosures to potential franchisees in connection with offers and sales of franchises in those states and countries. Further, a number of U.S. states and countries have "franchise relationship laws" or "business opportunity laws" that, among other restrictions, limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of agreements. Failure to comply with those laws, where applicable, can limit a franchisor's ability to enter into new franchise agreements or enforce the terms of existing franchise agreements and may create liability for fines, penalties, and civil judgments.
Vacation Ownership
Our licensed vacation ownership properties are subject to extensive state regulation in both the state in which the property is located and the states in which the property is marketed and sold. Marketing for these properties is also subject to federal regulation of certain marketing practices, including federal telemarketing regulations.
International Operations
Our business operations in countries outside the United States are subject to a number of U.S. federal laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act ("FCPA") as well as trade sanctions administered by the Office of Foreign Assets Control ("OFAC") and the Commerce Department. The FCPA is intended to prohibit bribery of foreign officials or parties and requires public companies in the United States to keep books and records that accurately and fairly reflect those companies' transactions. OFAC and the Commerce Department administer and enforce economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations, and individuals. Some of our business operations are also subject to the laws and regulations of non-U.S. jurisdictions, including the U.K. Bribery Act and anti-corruption legislation in the countries in which we conduct operations.
If we, our hospitality ventures, or our third-party owners fail to comply with these laws and regulations, we could be exposed to claims for damages, financial penalties, reputational harm, incarceration of our colleagues, or franchisees are not ablerestrictions on our operation or ownership of hotels and other properties, including the termination of our management, franchise, and ownership rights. These restrictions could increase our costs of operations, reduce our profits, or cause us to maintainforgo development opportunities that would otherwise support our current brand standardsgrowth.
Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit our ability to operate our business.
In the normal course of our business, we are not ableoften involved in various legal proceedings. The outcome of these proceedings cannot be predicted. If any of these proceedings were to develop new initiatives, including new brands, successfully, our business and profitabilitybe determined adversely to us or a settlement involving a payment of a material sum of money were to occur, there could be harmed.
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third-party property owners or franchisees, to comply with standards that are essential to maintainingguests who use our brand integrityproperties, our employees, our investors, or regulators. Any significant adverse judgments or settlements would reduce our profits and reputation. We depend on third-party property owners or franchisees to comply with these requirements by maintaining and improving properties through investments, including investments in furniture, fixtures, amenities, and personnel. If our third-party property owners or franchisees fail to make investments necessary to maintain or improve the properties we manage or franchise, our brand preference and reputation could suffer. Moreover, third-party owners or franchisees may be unwilling or unable to incur the cost of complying with brand standards for new and existing brands as such brands may evolve from time to time. This could result in poor hotel performance or force us to absorb costs to ensure that brand standards come to market in a timely fashion or exert resources to terminate agreements with such third-party owners or franchisees. Moreover, as we continue to increase our franchised hotel presence, our ability to maintain brand standards may become increasingly challenging.
Changes in federal, state, local, or growforeign tax law, interpretations of existing tax law, or agreements or disputes with tax authorities could affect our profitability and financial condition by increasing our tax costs.
Our global operations subject us to income and non-income based taxes such as sales, use, value added, goods and services, payroll, property, and franchise taxes in numerous jurisdictions. Our future tax expenses and liabilities could be affected by changes in tax laws or the interpretation of the tax laws, as well as changes in our business operations. Our future tax expense could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes to our global transfer pricing methodologies, changes in the valuation of our deferred tax assets and liabilities, including net operating losses, or changes in determinations regarding the jurisdictions in which we are subject to tax. From time to time, the U.S. federal, state, local, and foreign governments make substantive changes to tax rules and the application thereof, such as the Base Erosion and Profit Shifting project ("BEPS") being undertaken by the Organization for Economic Cooperation and Development. Legislative and tax treaty changes and the interpretation thereof could result in increased labor costs thatmaterially higher corporate taxes than would be incurred under existing tax law or interpretation and could reduceadversely impact profitability. As tax authorities increase their efforts to increase revenue, changes in tax laws and the frequency of tax audits could increase our profits.future tax liabilities.
Negotiations of collective bargaining agreements, attempts by labor organizations to organize additional groups of our colleagues, or changes in labor laws could disrupt our operations, increase our labor costs, or interfere with the ability of our management to focus on executing our business strategies.
Certain of our properties are subject to collective bargaining agreements, similar agreements, or regulations enforced by governmental authorities. If relationships with our colleagues, other field personnel, or the unions that represent them become adverse, the properties we manage, own, or ownlease could experience labor disruptions such as strikes, lockouts, and public demonstrations. Labor disruptions, which are generally more likely when collective bargaining agreements are being renegotiated, could harm our relationship with our colleagues or cause us to lose guests. Further, adverse publicity in the marketplace related to union messaging could further harm our reputation and reduce customer demand for our services. Labor regulation, including minimum wage legislation, could lead to higher wage and benefit costs, changes in work rules that raise operating expenses, legal costs, and limitations on our ability or the ability of our third-party property owners and franchisees to take cost saving measures during economic downturns. Collective bargaining agreements may also limit our ability to make timely staffing or labor changes in response to declining revenues.
We and our third-party property owners and franchisees may also become subject to additional collective bargaining agreements in the future. Potential changes in the federal regulatory scheme could make it easier for unions to organize groups of our colleagues. If such changes take effect, more of our colleagues or other field personnel could be subject to increased organizational efforts, which could potentially lead to disruptions or require more of our management's time to address unionization issues. These or similar agreements, legislation, or changes in regulations could disrupt our operations, hinder our ability to cross-train and cross-promote our colleagues due to prescribed work rules and job classifications, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies.
Our franchisees and their hotel operators also currently may be or may become subject to collective bargaining agreements. Labor disruptions, labor regulation, and negotiation of labor agreements may be disruptive to a franchisee's operations which could impact our franchised fee income or harm our reputation. We do not have the ability to control the negotiations of collective bargaining agreements covering unionized labor employed by third-party property owners and franchisees.
Any failure to protect our trademarks and intellectual property could reduce the value of our brand names and harm our business.
The reputation and perception of our brands are critical to our success in the hospitality industry. We regularly apply to register our trademarks in the United States and other countries. However, we cannot assure you that those trademark registrations will be granted or that the steps we take to protect our trademarks or intellectual property in the United States and other countries will be adequate to prevent others, including third parties or former colleagues, from copying or using our trademarks or intellectual property without authorization. Our intellectual property is also vulnerable to unauthorized use in some countries outside the United States, where we may not be adequately protected by local law. If our trademarks or intellectual property are copied or used without authorization, the value of our brands, their reputation, our competitive advantages, and our goodwill could be harmed.
Monitoring the unauthorized use of our intellectual property is difficult. We may need to resort to litigation to enforce our intellectual property rights. Litigation of this type could be costly, force us to divert our resources, lead to counterclaims or other claims against us, or otherwise harm our business.
Third-party claims that we infringe their intellectual property rights could subject us to damages and other costs and expenses.
Third parties may make claims against us for infringing their intellectual property rights. Any such claims, even those without merit, could:
•be expensive and time consuming to defend;
•force us to stop providing products or services that use the intellectual property that is being challenged;
•force us to redesign or rebrand our products or services;
•divert our management's attention and resources;
•force us to enter into royalty or licensing agreements to obtain the right to use a third-party's intellectual property; or
•force us to pay significant damages.
In addition, we may be required to indemnify third-party owners and franchisees of the hotels we manage or franchise for any losses they incur as a result of any such third-party infringement claims. Any necessary royalty or licensing agreements may not be available to us on acceptable terms. Any costs, lost revenues, changes to our business, or management attention related to intellectual property claims against us, whether successful or not, could impact our business.
Our operations and properties are subject to time, the U.S.extensive environmental laws and regulations of various federal, state, local, and foreign governments, make substantive changes to tax rulesincluding requirements addressing:
•health and safety;
•the application thereof,use, management, storage, and disposal of hazardous substances and wastes;
•discharges of waste materials into the environment, such as refuse or sewage;
•water discharge and supply; and
•air emissions.
We could be subject to liability under some of these laws for the Tax Cutscosts of investigating or remediating hazardous substances or wastes on, under, or in real property we currently or formerly manage, own, or develop, or third-party sites where we sent hazardous substances or wastes for disposal. We could be held liable under these laws regardless of whether we knew of, or were at fault in connection with, the presence or release of any such hazardous or toxic substances or wastes. Some of these laws make each covered person responsible for all of the costs involved, even if more than one person may have been responsible for the contamination. Furthermore, a person who arranges for hazardous substances or wastes to be transported, disposed of, or treated offsite, such as at disposal or treatment facilities, may be liable for the costs of removal or remediation if
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those substances are released into the environment by third parties at such disposal or treatment facilities. The presence or release of hazardous or toxic substances or wastes, or the failure to properly clean up such materials, could cause us to incur significant costs, or jeopardize our ability to develop, use, sell, or rent real property we own, lease, or operate or to borrow using such property as collateral.
Other laws and Jobs Actregulations require us to manage, abate, or remove materials containing hazardous substances such as mold, lead, or asbestos during demolitions, renovations, or remodeling at properties that we manage, own, lease, or develop or to obtain permits for certain of 2017 ("2017 Tax Act")our equipment or operations. The costs of such management, abatement, removal, or permitting could be substantial. Further, we may be subject to common law claims by third parties based on damages and costs resulting from violations of environmental regulations or from contamination associated with one or more of our properties. Complying with these laws and regulations, or addressing violations arising under them, could increase our environmental costs and liabilities, reduce our profits, or limit our ability to run our business. Existing environmental laws and regulations may be revised or reinterpreted or new more stringent laws and regulations related to global climate change, air quality, or other environmental, health, and safety concerns may be adopted or become applicable to us. The identification of new areas of contamination, a change in the Base Erosionextent or known scope of contamination, a change in cleanup requirements, or the adoption of new requirements governing our operations could have a material adverse effect on our results or operations, financial condition, and Profit Shifting project ("BEPS") being undertaken bybusiness.
If the Organizationinsurance that we, our third-party owners, hospitality ventures, franchisees, or licensees carry does not sufficiently cover damage or other potential losses or liabilities involving properties that we own, lease, manage, or franchise, our profits could be reduced.
We, our third-party owners, hospitality ventures, franchisees, and licensees carry insurance from solvent insurance carriers that we believe is adequate for Economic Cooperationforeseeable losses and Development. Legislativewith terms and tax treaty changesconditions that are reasonable and customary. Nevertheless, market forces beyond our control could limit the interpretation thereofscope of the insurance coverage that we, our third-party owners, hospitality ventures, franchisees, or licensees can obtain or restrict our ability, our third-party owners', our hospitality ventures', our franchisees', or our licensees' ability to buy insurance coverage at reasonable rates. In the event of a substantial loss, the insurance coverage that we, our third-party owners, hospitality ventures, franchisees, or licensees carry may not be sufficient to pay the full value of our financial obligations, our liabilities, or the replacement cost of any lost investment or property loss. In addition, there are other risks or losses, such as those related to the COVID-19 pandemic, that may fall outside of the general coverage limits of our policies, may be uninsurable, or with respect to which the cost of insurance is too expensive to justify. In some cases, these factors could result in materially higher corporate taxes than wouldcertain losses being completely uninsured. As a result, we could lose some or all of the capital we have invested in a property as well as the anticipated future revenues, profits, management fees, franchise fees, or license fees from the property, we could remain obligated for performance guarantees in favor of third-party property owners and franchisees or for their debt or other financial obligations, we could suffer an uninsured or underinsured property loss, or we may not have sufficient insurance to cover awards or damages resulting from our liabilities. If the insurance that we, our third-party owners, hospitality ventures, franchisees, or licensees carry does not sufficiently cover damages or other losses or liabilities, our profits could be incurred under existing tax law or interpretationadversely affected.
The Iran Threat Reduction and Syria Human Rights Act of 2012 could adversely impact profitability. For example, the 2017 Tax Act and related interpretive guidance, including Treasury regulationsresult in both proposed and final form, have significantly changedinvestigations by the U.S. federal income taxationGovernment against our Company and couldharm our reputation and brands.
The Iran Threat Reduction and Syria Human Rights Act of U.S. corporations. The interpretation2012 ("ITRSHR Act") expanded sanctions against Iran and Syria. In addition, the ITRSHR Act instituted disclosure requirements in annual and quarterly reports for public companies engaged in, or affiliated with an entity engaged in certain activities involving the Government of this legislation remains unclear in some respectsIran, involving other entities and continuespersons targeted under certain OFAC sanctions, or otherwise involving specified activities under the ITRSHR Act. A company subject to Section 219 of the ITRSHR Act must make detailed disclosures about certain activities knowingly conducted by it or any of its affiliates. We did not identify any 2021 activities required to be subjectdisclosed. In the event Hyatt were to technical corrections and interpretive guidance. State and local tax authorities have also increased their efforts to increase revenues through changesengage in tax law and audits. Such changes and proposals, if enacted, could increase our future effective income tax rates.
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Risks Related to Share Ownership and Other Stockholder Matters
Our stock price has been and is likely to continue to be volatile, and holders of Class A common stock may not be able to resell shares at or above the price paid.
The stock market in general, and hospitality companies in particular, including us, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the underlying businesses. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of shares of our Class A common stock in spite of our operating performance. In addition, companies that own or lease a greater proportion of properties have at times experienced disproportionate volatility and price and volume fluctuations, and we expect this dynamic to continue. These broad market and industry factors may seriously harm the market price of our Class A common stock, regardless of our actual operating performance.
In addition to the risks described in this section, several factors that could cause the price of our Class A common stock in the public market to fluctuate significantly include, among others, the following:
•quarterly variations in our operating results compared to market expectations;
•annual variations in our operating results compared to our guidance;
•withdrawals or suspensions of our guidance;
•announcements of acquisitions of or investments in other businesses and properties or dispositions;
•announcements of new services or products or significant price reductions by us or our competitors;
•size of our public float;
•future conversions to and sales of our Class A common stock by current holders of Class B common stock in the public market, or the perception in the market that the holders of a large number of shares of Class B common stock intend to sell shares;
•stock price performance of our competitors;
•fluctuations in stock market prices and volumes in the U.S.United States and abroad;
•low investor confidence;
•default on our indebtedness or foreclosure of our properties;
•changes in senior management or key personnel;
•downgrades or changes in financial estimates by securities analysts or negative reports published by securities analysts about our business or the hospitality industry in general;
•negative earnings or other announcements by us or other hospitality companies;
downgrades in our credit ratings or the credit ratings of our competitors;
•issuances or repurchases of equity or debt securities;
•a decision to pay or not to pay dividends;
•cyber incidents and information technology failures;
•terrorist activities or threats of such activities, civil or political unrest, or war; and
•global economic, legal, and regulatory factors unrelated to our performance.
Volatility in the market price of our Class A common stock may prevent investors from being able to sell their Class A common stock at or above the price at which they purchased the stock. As a result, investors may suffer a loss on their investment.
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Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities. This litigation, if instituted against us, could result in substantial costs, reduce our profits, divert our management's attention and resources, and harm our business.
There can be no assurance that we will continue to declare or pay dividends in the future or that we will continue to repurchase shares pursuant to our share repurchase program consistent with historical amounts or at all.
Reports published by securities or industry analysts, including projections in those reports that exceed our actual results, could adversely affect our stock price and trading volume.
Securities research analysts have established and publish their own quarterly projections for our business. These projections may vary widely from one another and may not accurately predict the results we actually achieve. Our stock price may decline if our actual results do not match securities research analysts' projections. Similarly, if one or more of the analysts who writes reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, or the hospitality industry in general, our stock price could decline. If one or more of these analysts cease coverage of our companyCompany or fail to publish reports on us regularly, our stock price or trading volume could decline.
Anti-takeover provisions in our organizational documents and Delaware law, as well as agreements with our major stockholders, may discourage or prevent a change of control, even if a sale of Hyatt would be beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our current board of directors or management.
Our amended and restated certificate of incorporation and bylaws, as well as agreements with our major stockholders, contain provisions that may make it difficult to remove our board of directors and management and may discourage or delay "change of control" transactions that certain stockholders may view as beneficial or could involve the payment of a premium over prevailing market prices for our Class A common stock. These provisions include, among others:
Our amended and restated certificate of incorporation provides for a dual class ownership structure, in which our Class B common stock is entitled to ten votes per share and our Class A common stock is entitled to one vote per share. As a result of this structure, our major stockholders have significant influence or actual control over matters requiring stockholder approval.
•Voting agreements entered into with or among our major stockholders require these stockholders to vote their shares consistent with the recommendation of our board of directors, assuming in certain instances that a majority of a minimum of three independent directors (excluding for such purposes any Pritzker) or, in the case of transactions involving us and an affiliate, all of such minimum of three independent directors (excluding for such purposes any Pritzker) agree with the recommendation. While the voting agreements are in effect, they may provide our board of directors with effective control over matters requiring stockholder approval.
•Lock-up agreements entered into with stockholders party to our 2007 Stockholders' Agreement limit the ability of these stockholders to sell their shares to any person who would be required to file a Schedule 13D with the SEC disclosing an intent to acquire the shares other than for investment purposes and, in certain instances, to competitors of ours in the hospitality, lodging, or gaming industries.
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•Stockholders party to our 2007 Stockholders' Agreement have agreed, subject to certain limited exceptions, to "standstill" provisions that prevent the stockholders from acquiring additional shares of our common stock, making or participating in acquisition proposals for us, or soliciting proxies in connection with meetings of our stockholders, unless the stockholders are invited to do so by our board of directors.
•Our board of directors is divided into three classes, with each class serving for a staggered three-year term, which prevents stockholders from electing an entirely new board of directors at an annual meeting.
•Our directors may be removed only for cause, which prevents stockholders from being able to remove directors without cause other than those directors who are being elected at an annual meeting.
•Our amended and restated certificate of incorporation does not provide for cumulative voting in the election of directors. As a result, holders of our Class B common stock will control the election of directors and the ability of holders of our Class A common stock to elect director candidates will be limited.
•Vacancies on our board of directors, and any newly created director positions created by the expansion of the board of directors, may be filled only by a majority of remaining directors then in office.
•Actions to be taken by our stockholders may only be effected at an annual or special meeting of our stockholders and not by written consent.
•Special meetings of our stockholders can be called only by the Chairman of the Board or by our corporate secretary at the direction of our board of directors.
•Advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors and propose matters to be brought before an annual meeting of our stockholders may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.Company.
•Our board of directors may, without stockholder approval, issue series of preferred stock, or rights to acquire preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock or could also be used as a method of discouraging, delaying, or preventing a change of control.
•An affirmative vote of the holders of at least 80% of the voting power of our outstanding capital stock entitled to vote is required to amend any provision of our certificate of incorporation or bylaws.
Pritzker family business interests have substantial control over us and have the ability to control the election of directors and other matters submitted to stockholders for approval, which will limit your ability to influence corporate matters or result in actions that you do not believe to be in our interests or your interests.
Our Class B common stock is entitled to ten votes per share and our Class A common stock is entitled to one vote per share. At January 31, 2020,2022, Pritzker family business interests beneficially own, in the aggregate, 63,192,87957,382,876 shares, or approximately 96.5%96.2%, of our Class B common stock, and 268,999255,349 shares, or 0.8%0.5%, of Class A common stock, representing approximately 62.6%52.4% of the outstanding shares of our common stock and approximately 91.6%88.8% of the total voting power of our outstanding common stock. As a result, consistent with the voting agreements contained in the Amended and Restated Global Hyatt Agreement and the Amended and Restated Foreign Global Hyatt Agreement, Pritzker family business interests will be able to exert a significant degree of influence or actual control over our management and affairs and over matters requiring stockholder approval, including the election of directors, a merger, consolidation, or sale of all or substantially all of our assets and any other significant transaction. While the voting agreements are in effect, they may provide our board of directors with the effective control over matters requiring stockholder approval. Because of our dual class ownership structure, Pritzker family business interests will continue to exert a significant degree of influence or actual control over matters requiring stockholder approval, even if they own less than 50% of the outstanding shares of our common stock. This concentrated control will limit your ability to influence corporate matters, and the interests of Pritzker family business interests may not coincide with our interests or your interests. As a result, we may take actions that you do not believe to be in our interests or your interests and that could depress our stock price. See also "—Voting agreements entered into with or among our major stockholders, including Pritzker family business interests, will result in a substantial number of our shares being voted consistent with the recommendation of our board of directors, and may limit your ability to influence the election of directors and other matters submitted to stockholders for approval."
In addition, the difference in the voting rights between our Class A common stock and Class B common stock could diminish the value of the Class A common stock to the extent that investors or any potential future purchasers of our common stock ascribe value to the superior voting rights of the Class B common stock.
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Disputes among Pritzker family members and among Pritzker family members and the trustees of the Pritzker family trusts may result in significant distractions to our management, disrupt our business, have a negative effect on the trading price of our Class A common stock, and/or generate negative publicity about Hyatt and the Pritzker family.
In the past, disputes have arisen between and among certain Pritzker family members, and between and among beneficiaries of the Pritzker family trusts and the trustees of such trusts, with respect to, among other things, the ownership, operation, governance, and management of certain Pritzker family business interests. In connection with certain of these disputes, claims were alleged, and in certain cases, proceedings were initiated, against certain Pritzker family members, including Thomas J. Pritzker, our executive chairman, and other Pritzker family members, some of whom have been or are our directors, and against the trustees, including Thomas J. Pritzker in his former capacity as a co-trustee of the Pritzker family U.S. situs trusts. Such past allegations related to, among others, trust management and administration and violations of certain trustee duties, including fiduciary duties. Some of these disputes led to significant negative publicity for the Pritzker family. These disputes were resolved with no admissions or finding of any misconduct.
Disputes among Pritzker family members, and between and among beneficiaries of the Pritzker family trusts and the trustees of such trusts, including with respect to Hyatt, may arise or continue in the future. If such disputes occur, they may result in significant distractions to our management, disrupt our business, have a negative effect on the trading price of our Class A common stock, and/or generate negative publicity about Hyatt and Pritzker family members, including Pritzker family members involved with Hyatt.
Voting agreements entered into with or among our major stockholders, including Pritzker family business interests, will result in a substantial number of our shares being voted consistent with the recommendation of our board of directors, and may limit your ability to influence the election of directors and other matters submitted to stockholders for approval.
Pritzker family business interests, which beneficially own at January 31, 2020,2022, directly or indirectly, 63,461,87857,638,225 shares, or 62.6%52.4% of our total outstanding common stock and control approximately 91.6%88.8% of our total voting power, have entered into a voting agreement with respect to all shares of common stock beneficially owned by Pritzker family business interests. During the term of the voting agreement, which expires on the date upon which more than 75% of the Company's fully diluted shares of common stock is owned by non-Pritzker family business interests, Pritzker family business interests have agreed to vote their shares of our common stock consistent with the recommendation of our board of directors with respect to all matters (assumingassuming agreement as to any such matter by a majority of a minimum of three independent directors (excluding for such purposes any Pritzker)) or, in the case of transactions involving us and an affiliate, assuming agreement of all of such minimum of three independent directors (excluding for such purposes any Pritzker). In addition, at January 31, 2020,2022, the stockholders party to the 2007 Stockholder's Agreement beneficially own, in the aggregate, approximately 3.5%3.8% of our outstanding Class B common stock, representing approximately 3.3%3.5% of the total voting power of our outstanding common stock. Pursuant to the 2007 Stockholder's Agreement, the stockholders party thereto have entered into a voting agreement with us, with respect to the shares of common stock that they beneficially own, and have agreed to vote their shares of common stock consistent with the recommendation of our board of directors, without any separate requirement that our independent directors agree with the recommendation. These voting agreements expire on the date that Thomas J. Pritzker is no longer chairman of our board of directors. See Part I, Item 1, "Business—Stockholder Agreements."
While the voting agreements are in effect, they may provide our board of directors with effective control over matters requiring stockholder approval, including the election of directors, a merger, consolidation, or sale of all or substantially all of our assets and any other significant transaction. This is because the number of our shares that are required by the voting agreements to be voted consistent with the recommendation of our board of directors will be sufficient to determine the outcome of the election of directors and other matters submitted to stockholders for approval. This will limit your ability to influence the election of directors and other matters submitted to stockholders for approval, even if you do not believe those actions to be in our interests or your interests. For instance, the voting agreements may have the effect of delaying or preventing a transaction that would result in a change of control, if our board of directors does not recommend that our stockholders vote in favor of the transaction, even if you or some or all of our major stockholders believe that the transaction is in our interests or your interests. On the other hand, the voting agreements may result in our stockholders approving a transaction that would result in a change of control, if our board of directors recommends that our stockholders vote in favor of the transaction, even if you or some or all of our major stockholders believe that the transaction is not in our interests or your interests.
A significant number of shares of Class A common stock issuable upon conversion of Class B common stock could be sold into the market, which could depress our stock price even if our business is doing well.
Future sales in the public market of Class A common stock issuable upon conversion of Class B common stock, or the perception in the market that the holders of a large number of shares of Class B common stock intend to sell shares, could
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reduce the market price of our Class A common stock. At January 31, 2020,2022, we had 35,841,27750,334,271 shares of Class A common stock outstanding and 65,463,27459,653,271 shares of Class B common stock outstanding.
At January 31, 2020, 34,094,7942022, 50,236,625 shares of Class A common stock are freely tradable in the public market without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act") unless these shares are held by any of our "affiliates," as that term is defined in Rule 144 under the Securities Act ("Rule 144"). The remaining 1,746,48397,646 outstanding shares of Class A common stock and 65,463,27459,653,271 outstanding shares of Class B common stock are deemed "restricted securities," as that term is defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act ("Rule 701"). Of these restricted securities, 2,270,395 shares of Class B common stock are held by shareholders party to the 2007 Stockholders' Agreement and are otherwise eligible to be sold at any time, subject to the applicable rights of first refusal, "drag along" rights and other restrictions contained in the 2007 Stockholders' Agreement. See Part I, Item 1, "Business—Stockholder Agreements—2007 Stockholders' Agreement." Another 1,494,7223,896 shares of Class A common stock that are deemed restricted securities are otherwise eligible to be sold at any time.
The rest of the restricted securities, consisting of 63,192,87957,382,876 shares of Class B common stock and 251,76193,750 shares of Class A common stock, together with 17,238161,599 shares of Class A common stock previously registered, are subject to contractual lock-up and certain other restrictions contained in the Amended and Restated Global Hyatt Agreement and the Amended and Restated Foreign Global Hyatt Agreement as described in Part I, Item 1, "Business—Stockholder Agreements." These contractual restrictions may be amended, waived, or terminated by the parties to those agreements in accordance with the terms
of such agreements without our consent and without notice; the 25% limitation on sales of our common stock may, with respect to each 12 month period, be increased to a higher percentage or waived entirely by the unanimous affirmative vote of our independent directors (excluding for such purposes any Pritzker). All such shares of Class A common stock, including shares of Class A common stock issuable upon conversion of shares of Class B common stock, will be eligible for resale in compliance with Rule 144 or Rule 701 to the extent the lock-up restrictions contained in the Amended and Restated Global Hyatt Agreement or the Amended and Restated Foreign Global Hyatt Agreement, as applicable, are waived or terminated with respect to such shares.
Assuming the lock-up restrictions contained in the Amended and Restated Global Hyatt Agreement and the Amended and Restated Foreign Global Hyatt Agreement are not amended, waived, or terminated and that there are no transfers of shares amongst Pritzker family stockholders, and further assuming the parties to these agreements sell the maximum amount permitted to be sold during the first time period that such shares are eligible to be sold as set forth below, and subject to any applicable restrictions contained in such agreements and the provisions of Rule 144 and/or Rule 701, the securities eligible to be sold by Pritzker family stockholders under the Amended and Restated Global Hyatt Agreement and the Amended and Restated Foreign Global Hyatt Agreement will be available for sale in the public market as follows:
| Time Period | Number of Shares* | ||||
| During the 12 month period from November 5, 2021 through November 4, 2022 | |||||
| During the 12 month period from November 5, 2022 through November 4, 2023 | |||||
| During the 12 month period from November 5, 2023 through November 4, 2024 | |||||
| During the 12 month period from November 5, 2024 through November 4, 2025 | |||||
| During the 12 month period from November 5, 2025 through November 4, 2026 | |||||
| During the 12 month period from November 5, 2026 through November 4, 2027 | 6,271,290 | ||||
| During the 12 month period from November 5, 2027 through November 4, 2028 | 3,147,502 | ||||
*The foregoing numbers are based on information at January 31, 20202022 and assume that the maximum number of shares permitted to be sold during each period set forth above are, in fact, sold during each such period. To the extent any shares are not sold during the first time period that such shares are eligible to be sold as described above, the number of shares that may be sold in subsequent time periods may change.
In addition, at December 31, 2019, 2,651,1112021, 6,220,091 shares of our Class A common stock were reserved for issuance under the ThirdFourth Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan ("LTIP"(as amended, the "LTIP"). These shares of Class A common stock will become eligible for sale in the public market once those shares are issued or awarded under our LTIP, subject to provisions of various award agreements and Rule 144, as applicable. In addition, 339,498871,857 shares of our Class A common stock were reserved for issuance under the Hyatt Hotels Corporation Second Amended and Restated Employee Stock Purchase Plan ("ESPP"), 1,169,195 shares of our Class A common stock remained available for issuance pursuant to the Amended and Restated Hyatt Corporation Deferred Compensation Plan ("DCP"), and 300,000 shares of Class A common stock remained available for issuance pursuant to the Hyatt International Hotels Retirement Plan, (commonlycommonly known as the Field Retirement Plan)Plan ("FRP").
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If any of these holders causes a large number of securities to be sold in the public market, the sales could reduce the trading price of our Class A common stock. These sales also could impede our ability to raise future capital. See also "—If holders of shares of our Class B common stock convert their shares of Class B common stock into shares of Class A common stock and exercise their registration rights, a significant number of shares of our Class A common stock could be sold into the market, which could reduce the trading price of our Class A common stock and impede our ability to raise future capital."
We also may issue shares of our Class A common stock from time to time as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of shares that we may issue may in turn be significant.
If holders of shares of our Class B common stock convert their shares of Class B common stock into shares of Class A common stock and exercise their registration rights, a significant number of shares of our Class A common stock could be sold into the market, which could reduce the trading price of our Class A common stock and impede our ability to raise future capital.
Holders of 65,463,27459,653,271 shares of our Class B common stock (or 64.6%or 54.2% of our total outstanding shares of common stock at January 31, 2020),2022, including Pritzker family business interests, have rights, subject to certain conditions, to require us to file registration statements registering sales of shares of Class A common stock acquired upon conversion of such Class B common stock or to include sales of such shares of Class A common stock in registration statements that we may file for ourselves or for other stockholders. In order to exercise such registration rights, the holder must be permitted to sell shares of its common stock under applicable lock-up restrictions. See "—A significant number of shares of Class A common stock issuable upon conversion of Class B common stock could be sold into the market, which could depress our stock price even if our business is doing well" and Part I, Item 1, "Business—Stockholder Agreements" for additional information with respect to these lock-up provisions. Subject to compliance with applicable lock-up agreements, shares of Class A common stock sold under the registration statements can be freely sold in the public market. In the event such registration rights are exercised and a large number of shares of Class A common stock issuable upon conversion of shares of Class B common stock are sold in the public market, such sales could reduce the trading price of our Class A common stock. These sales also could impede our ability to raise future capital. Additionally, we will bear all expenses in connection with any such registrations (otherother than underwriting discounts).discounts.
Following our decision in May 20172020 to file a shelf registration statement on Form S-3 pursuant to Rule 415 of the Securities Act, certain stockholders party to the Registration Rights Agreement, dated as of August 28, 2007, as amended, among us and the stockholders party to the 2007 Stockholders' Agreement, elected to exercise their "piggyback" registration rights with respect to 12,654,050 shares of Class A common stock issuable upon conversion of shares of Class B common stock, and certain stockholders party to the Registration Rights Agreement, dated as of October 12, 2009, among Hyatt and the Pritzker family business interests party thereto, elected to exercise their piggyback registration rights with respect to 8,470 shares of Class A common stock and 15,607,76113,347,885 shares of Class A common stock issuable upon conversion of shares of Class B common stock. On May 22, 2017,21, 2020, the Company filed an automatic effective shelf registration statement with the SEC to register the resale of such aggregate 28,270,28113,347,885 shares. In connection with such registration, all other holders of registration rights, including trustees of trusts for the benefit of Thomas J. Pritzker and his lineal descendants, (includingincluding Jason Pritzker),Pritzker, elected not to exercise their piggyback registration rights.
The sale of shares registered under the registration statement in the public market, or the perception that such sales may occur could reduce the trading price of our Class A common stock or impede our ability to raise future capital.
Non-U.S. holders who own more than 5% of our Class A common stock or substantial amounts of our Class B common stock may be subject to U.S. federal income tax on gain realized on the disposition of such stock.
Because we have significant U.S. real estate holdings, we may be a "United States real property holding corporation" ("USRPHC") for U.S. federal income tax purposes, but we have made no determination to that effect. There can be no assurance that we do not currently constitute or will not become a USRPHC. As a result, a "non-U.S. holder" may be subject to U.S. federal income tax on gain realized on a disposition of our Class A common stock if such non-U.S. holder has owned, actually or constructively, (throughthrough certain family members, related entities, and options),options, more than 5% of our Class A common stock at any time during the shorter of (a) the five-year period ending on the date of disposition and (b) the non-U.S. holder's holding period in such stock.
If we were or were to become a USRPHC, a non-U.S. holder may be subject to U.S. federal income tax on gain realized on the disposition of our Class B common stock. Such tax would apply if on the date such non-U.S. holder actually or constructively acquired Class B common stock, and on any date on which such non-U.S. holder acquires additional Class B common stock, the aggregate fair market of the Class B common stock it actually and constructively owns is greater than 5% of the fair market value of our Class A common stock on such date. Certain dispositions of substantial amounts of Class B common stock by non-U.S. holders may be subject to withholding under section 1445 of the Internal Revenue Code.
The loss of our senior executives or key field personnel, such as our general managers, could significantly harm our business.
Our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior executives. We have entered into employment letter agreements with certain of our senior executives. However, we cannot guarantee that these individuals will remain with us. Finding suitable replacements for our senior executives could be difficult. We currently do not have a life insurance policy or key person insurance policy with respect to any of our senior executives. Losing the services of one or more of these senior executives could adversely affect our strategic relationships, including relationships with our third-party property owners, franchisees, hospitality venture partners, and vendors, and limit our ability to execute our business strategies.
We also rely on the general managers to run daily operations and oversee our colleagues. These general managers are trained professionals in the hospitality industry and have extensive experience in many markets worldwide. The failure to retain, train, or successfully manage our general managers, either by us or our third-party owners or franchisees, could negatively affect our operations.
Item 1B. Unresolved Staff Comments.
None.
54
Item 2. Properties:
The following table sets forth a description of each owned or leased property in the Hyattour portfolio of properties excluding branded spas and fitness studios, at December 31, 2019.2021.
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | ||||||||||||||||||||||
| Owned and Leased Hotels | ||||||||||||||||||||||||||
| Full Service | ||||||||||||||||||||||||||
| Americas Owned: | ||||||||||||||||||||||||||
| Park Hyatt Chicago | Chicago, IL | 198 | 100 | % | ||||||||||||||||||||||
| Park Hyatt New York | New York, NY | 210 | 100 | % | ||||||||||||||||||||||
| Miraval Arizona Resort and Spa | Tucson, AZ | 145 | 100 | % | ||||||||||||||||||||||
| Miraval Austin Resort and Spa | Austin, TX | 117 | 100 | % | ||||||||||||||||||||||
| Miraval Berkshires Resort and Spa | Lenox, MA | 95 | 100 | % | ||||||||||||||||||||||
| Wyndhurst Manor & Club | Lenox, MA | 43 | 100 | % | ||||||||||||||||||||||
| Hyatt Grand Central New York (2) | New York, NY | 1,298 | 100 | % | ||||||||||||||||||||||
| Grand Hyatt Rio de Janeiro | Rio de Janeiro, Brazil | 436 | 100 | % | ||||||||||||||||||||||
| Grand Hyatt San Antonio River Walk (2) | San Antonio, TX | 1,003 | 100 | % | ||||||||||||||||||||||
| Grand Hyatt São Paulo | São Paulo, Brazil | 467 | 100 | % | ||||||||||||||||||||||
| The Confidante Miami Beach | Miami Beach, FL | 339 | 100 | % | ||||||||||||||||||||||
| The Driskill (2) | Austin, TX | 189 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Aruba Resort Spa and Casino (2) | Palm Beach, Aruba, Dutch Caribbean | 359 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Baltimore Inner Harbor (2) | Baltimore, MD | 488 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Green Bay | Green Bay, WI | 241 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Greenwich | Old Greenwich, CT | 373 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Indian Wells Resort & Spa | Riverside-San Bernardino, CA | 530 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Long Beach (2) | Long Beach, CA | 531 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency O'Hare Chicago | Rosemont, IL | 1,095 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Orlando | Orlando, FL | 1,641 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency Phoenix | Phoenix, AZ | 693 | 100 | % | ||||||||||||||||||||||
| Hyatt Regency San Antonio Riverwalk (2) | San Antonio, TX | 630 | 100 | % | ||||||||||||||||||||||
| Hyatt Centric The Pike Long Beach (2) | Long Beach, CA | 138 | 100 | % | ||||||||||||||||||||||
| Americas Owned | 11,259 | 23 | ||||||||||||||||||||||||
55
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | |||||||
| Owned and Leased Hotels | |||||||||||
| Full Service | |||||||||||
| Americas Owned: | |||||||||||
| Park Hyatt Chicago | Chicago, IL | 198 | 100 | % | |||||||
| Park Hyatt New York | New York, NY | 211 | 100 | % | |||||||
| Grand Hyatt New York (4) | New York, NY | 1,298 | 100 | % | |||||||
| Grand Hyatt Rio de Janeiro | Rio de Janeiro, Brazil | 436 | 100 | % | |||||||
| Grand Hyatt San Antonio (4) | San Antonio, TX | 1,003 | 100 | % | |||||||
| Hyatt Regency Aruba Resort Spa and Casino (4) | Palm Beach, Aruba, Dutch Caribbean | 359 | 100 | % | |||||||
| Hyatt Regency Baltimore Inner Harbor (4) | Baltimore, MD | 488 | 100 | % | |||||||
| Hyatt Regency Green Bay | Green Bay, WI | 241 | 100 | % | |||||||
| Hyatt Regency Greenwich | Old Greenwich, CT | 373 | 100 | % | |||||||
| Hyatt Regency Indian Wells Resort & Spa | Riverside-San Bernadino, CA | 530 | 100 | % | |||||||
| Hyatt Regency Lake Tahoe Resort, Spa and Casino | Incline Village, NV | 422 | 100 | % | |||||||
| Hyatt Regency Long Beach (4) | Long Beach, CA | 528 | 100 | % | |||||||
| Hyatt Regency Lost Pines Resort and Spa | Lost Pines, TX | 491 | 100 | % | |||||||
| Hyatt Regency Miami (4) | Miami, FL | 615 | 100 | % | |||||||
| Hyatt Regency O'Hare Chicago | Rosemont, IL | 1,095 | 100 | % | |||||||
| Hyatt Regency Orlando | Orlando, FL | 1,641 | 100 | % | |||||||
| Hyatt Regency Phoenix | Phoenix, AZ | 693 | 100 | % | |||||||
| Hyatt Regency San Antonio Riverwalk (4) | San Antonio, TX | 630 | 100 | % | |||||||
| Hyatt Centric The Pike Long Beach (4) | Long Beach, CA | 138 | 100 | % | |||||||
| The Confidante Miami Beach | Miami Beach, FL | 354 | 100 | % | |||||||
| The Driskill (4) | Austin, TX | 189 | 100 | % | |||||||
| Americas Owned | 11,933 | 21 | |||||||||
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | ||||||||||||||||||||||
| Americas Leased: | ||||||||||||||||||||||||||
| Andaz West Hollywood (3) (4) | West Hollywood, CA | 240 | — | % | ||||||||||||||||||||||
| Hyatt Regency San Francisco (3) (4) | San Francisco, CA | 821 | — | % | ||||||||||||||||||||||
| Americas Leased | 1,061 | 2 | ||||||||||||||||||||||||
| Total Americas Owned and Leased Hotels | 12,320 | 25 | ||||||||||||||||||||||||
| EAME/SW Asia Owned: | ||||||||||||||||||||||||||
| Park Hyatt Paris-Vendôme | Paris, France | 156 | 100 | % | ||||||||||||||||||||||
| Park Hyatt Zurich (2) | Zurich, Switzerland | 138 | 100 | % | ||||||||||||||||||||||
| Andaz London Liverpool Street (5) | London, England | 267 | 100 | % | ||||||||||||||||||||||
| EAME/SW Asia Owned | 561 | 3 | ||||||||||||||||||||||||
| EAME/SW Asia Leased: | ||||||||||||||||||||||||||
| Hyatt Regency Cologne (3) (4) | Cologne, Germany | 306 | — | % | ||||||||||||||||||||||
| Hyatt Regency Mainz (3) (4) | Mainz, Germany | 268 | — | % | ||||||||||||||||||||||
| EAME/SW Asia Leased | 574 | 2 | ||||||||||||||||||||||||
| Total EAME/SW Asia Owned and Leased Hotels | 1,135 | 5 | ||||||||||||||||||||||||
| Total Full Service Owned and Leased Hotels | 13,455 | 30 | ||||||||||||||||||||||||
56
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | |||||||
| Americas Leased: | |||||||||||
| Hyatt Regency San Francisco (3) (6) | San Francisco, CA | 821 | — | % | |||||||
| Andaz West Hollywood (3) (6) | West Hollywood, CA | 239 | — | % | |||||||
| Americas Leased | 1,060 | 2 | |||||||||
| Total Americas Owned and Leased Hotels | 12,993 | 23 | |||||||||
| EAME/SW Asia Owned: | |||||||||||
| Park Hyatt Paris - Vendôme | Paris, France | 155 | 100 | % | |||||||
| Park Hyatt Zurich (4) | Zurich, Switzerland | 138 | 100 | % | |||||||
| Hyatt Regency Baku | Baku, Azerbaijan | 159 | 100 | % | |||||||
| Hyatt Regency Bishkek (4) | Bishkek, Kyrgyz Republic | 178 | 98 | % | |||||||
| Andaz London Liverpool Street (7) | London, England | 267 | 100 | % | |||||||
| EAME/SW Asia Owned | 897 | 5 | |||||||||
| EAME/SW Asia Leased: | |||||||||||
| Hyatt Regency Cologne (3) (6) | Cologne, Germany | 306 | — | % | |||||||
| Hyatt Regency Mainz (3) (6) | Mainz, Germany | 268 | — | % | |||||||
| Andaz Amsterdam Prinsengracht (3) (6) | Amsterdam, The Netherlands | 122 | — | % | |||||||
| EAME/SW Asia Leased | 696 | 3 | |||||||||
| Total EAME/SW Asia Owned and Leased Hotels | 1,593 | 8 | |||||||||
| Total Full Service Owned and Leased Hotels | 14,586 | 31 | |||||||||
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | ||||||||||||||||||||||
| Select Service | ||||||||||||||||||||||||||
| Owned: | ||||||||||||||||||||||||||
| Hyatt Place Macaé | Macaé, Brazil | 141 | 100 | % | ||||||||||||||||||||||
| Hyatt Place Sao Jose do Rio Preto | São José do Rio Preto, Brazil | 152 | 100 | % | ||||||||||||||||||||||
| Select Service Owned: | 293 | 2 | ||||||||||||||||||||||||
| Leased: | ||||||||||||||||||||||||||
| Hyatt Place Amsterdam Airport (3) (4) | Amsterdam, The Netherlands | 330 | — | % | ||||||||||||||||||||||
| Hyatt Place Atlanta/Buckhead (6) | Atlanta, GA | 171 | — | % | ||||||||||||||||||||||
| Select Service Leased: | 501 | 2 | ||||||||||||||||||||||||
| Total Select Service Owned and Leased Hotels | 794 | 4 | ||||||||||||||||||||||||
| All-Inclusive Leased (7) | ||||||||||||||||||||||||||
| Leased: | ||||||||||||||||||||||||||
| Alua Calas de Mallorca Resort (3) (4) | Mallorca, Spain | 478 | — | % | ||||||||||||||||||||||
| Alua Illa de Menorca (3) (4) | Menorca, Spain | 228 | — | % | ||||||||||||||||||||||
| Alua Soul Menorca (3) (4) | Menorca, Spain | 131 | — | % | ||||||||||||||||||||||
| Alua Sun Mediterraneo (3) (4) | Menorca, Spain | 72 | — | % | ||||||||||||||||||||||
| All-Inclusive Leased: | 909 | 4 | ||||||||||||||||||||||||
| Total All-Inclusive Owned and Leased Hotels | 909 | 4 | ||||||||||||||||||||||||
| Unconsolidated Hospitality Venture Hotels | ||||||||||||||||||||||||||
| Full Service | ||||||||||||||||||||||||||
| Americas Unconsolidated Hospitality Ventures: | ||||||||||||||||||||||||||
| Andaz Mayakoba Resort Riviera Maya | Playa del Carmen, Mexico | 214 | 40 | % | ||||||||||||||||||||||
| Hyatt Regency Andares Guadalajara | Zapopan, Mexico | 257 | 50 | % | ||||||||||||||||||||||
| Hyatt Regency Columbus (2) | Columbus, OH | 633 | 24 | % | ||||||||||||||||||||||
| Hyatt Regency Crystal City at Reagan National Airport | Arlington, VA | 686 | 50 | % | ||||||||||||||||||||||
| Hyatt Regency Huntington Beach Resort and Spa | Huntington Beach, CA | 517 | 40 | % | ||||||||||||||||||||||
| Hyatt Regency Jersey City on the Hudson | Jersey City, NJ | 351 | 50 | % | ||||||||||||||||||||||
| Hyatt Regency Miami (2) | Miami, FL | 615 | 50 | % | ||||||||||||||||||||||
| Hyatt Centric Buckhead Atlanta | Atlanta, GA | 218 | 50 | % | ||||||||||||||||||||||
| Hyatt Centric Downtown Nashville | Nashville, TN | 252 | 40 | % | ||||||||||||||||||||||
| Hyatt Centric Center City Philadelphia | Philadelphia, PA | 332 | 42 | % | ||||||||||||||||||||||
| Americas Unconsolidated Hospitality Ventures | 4,075 | 10 | ||||||||||||||||||||||||
| EAME/SW Asia Unconsolidated Hospitality Ventures: | ||||||||||||||||||||||||||
| Park Hyatt Hamburg (3) (8) | Hamburg, Germany | 252 | — | % | ||||||||||||||||||||||
| Park Hyatt Milan | Milan, Italy | 106 | 30 | % | ||||||||||||||||||||||
| Grand Hyatt Mumbai Hotel & Residences | Mumbai, India | 548 | 50 | % | ||||||||||||||||||||||
| Andaz Delhi (2) | New Delhi, India | 401 | 50 | % | ||||||||||||||||||||||
57
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | |||||||
| Select Service | |||||||||||
| Owned: | |||||||||||
| Hyatt Place Macaé | Macaé, Brazil | 141 | 100 | % | |||||||
| Hyatt Place São José do Rio Preto | São José do Rio Preto, Brazil | 152 | 100 | % | |||||||
| Select Service Owned: | 293 | 2 | |||||||||
| Leased: | |||||||||||
| Hyatt Place Amsterdam Airport (3) (6) | Amsterdam, The Netherlands | 330 | — | % | |||||||
| Hyatt Place Atlanta / Buckhead (2) | Atlanta, GA | 171 | — | % | |||||||
| Select Service Leased: | 501 | 2 | |||||||||
| Total Select Service Owned and Leased Hotels | 794 | 4 | |||||||||
| Wellness | |||||||||||
| Miraval Austin Resort and Spa | Austin, TX | 117 | 100 | % | |||||||
| Cranwell Spa & Golf Resort | Lenox, MA | 148 | 100 | % | |||||||
| Miraval Arizona Resort and Spa | Tucson, AZ | 145 | 100 | % | |||||||
| Total Wellness Owned and Leased | 410 | 3 | |||||||||
| Unconsolidated Hospitality Venture Hotels | |||||||||||
| Full Service | |||||||||||
| Americas Unconsolidated Hospitality Ventures: | |||||||||||
| Grand Hyatt São Paulo | São Paulo, Brazil | 467 | 50 | % | |||||||
| Hyatt Regency Andares Guadalajara | Zapopan, Mexico | 257 | 50 | % | |||||||
| Hyatt Regency Columbus (4) | Columbus, OH | 633 | 24 | % | |||||||
| Hyatt Regency Crystal City at Reagan National Airport | Arlington, VA | 686 | 50 | % | |||||||
| Hyatt Regency Huntington Beach Resort and Spa | Huntington Beach, CA | 517 | 40 | % | |||||||
| Hyatt Regency Jersey City on the Hudson | Jersey City, NJ | 351 | 50 | % | |||||||
| Andaz Mayakoba Resort Riviera Maya | Playa del Carmen, Mexico | 214 | 40 | % | |||||||
| Americas Unconsolidated Hospitality Ventures | 3,125 | 7 | |||||||||
| EAME/SW Asia Unconsolidated Hospitality Ventures: | |||||||||||
| Park Hyatt Hamburg (3) (5) | Hamburg, Germany | 252 | — | % | |||||||
| Park Hyatt Milan | Milan, Italy | 106 | 30 | % | |||||||
| Grand Hyatt Mumbai & Residences | Mumbai, India | 548 | 50 | % | |||||||
| Hyatt Regency Ahmedabad | Ahmedabad, India | 209 | 50 | % | |||||||
| Andaz Delhi | New Delhi, India | 401 | 50 | % | |||||||
| Andaz Vienna Am Belvedere | Vienna, Austria | 303 | 50 | % | |||||||
| EAME/SW Asia Unconsolidated Hospitality Ventures | 1,819 | 6 | |||||||||
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | ||||||||||||||||||||||
| Andaz Vienna Am Belvedere | Vienna, Austria | 303 | 50 | % | ||||||||||||||||||||||
| Hyatt Regency Ahmedabad | Ahmedabad, India | 208 | 50 | % | ||||||||||||||||||||||
| EAME/SW Asia Unconsolidated Hospitality Ventures | 1,818 | 6 | ||||||||||||||||||||||||
| ASPAC Unconsolidated Hospitality Ventures: | ||||||||||||||||||||||||||
| Grand Hyatt Bali | Bali, Indonesia | 636 | 10 | % | ||||||||||||||||||||||
| Andaz Bali | Bali, Indonesia | 149 | 10 | % | ||||||||||||||||||||||
| Hyatt Regency Bali | Bali, Indonesia | 363 | 10 | % | ||||||||||||||||||||||
| ASPAC Unconsolidated Hospitality Ventures | 1,148 | 3 | ||||||||||||||||||||||||
| Total Full Service Unconsolidated Hospitality Ventures | 7,041 | 19 | ||||||||||||||||||||||||
| Select Service Unconsolidated Hospitality Ventures | ||||||||||||||||||||||||||
| Hyatt House Denver/Downtown | Denver, CO | 113 | 50 | % | ||||||||||||||||||||||
| Hyatt Place Atlanta/Centennial Park | Atlanta, GA | 175 | 50 | % | ||||||||||||||||||||||
| Hyatt Place Boston/Seaport District (2) | Boston, MA | 297 | 50 | % | ||||||||||||||||||||||
| Hyatt Place Denver/Downtown | Denver, CO | 248 | 50 | % | ||||||||||||||||||||||
| Hyatt Place Panama City/Downtown | Panama City, Panama | 165 | 29 | % | ||||||||||||||||||||||
| Total Select Service Unconsolidated Hospitality Ventures | 998 | 5 | ||||||||||||||||||||||||
| Total Unconsolidated Hospitality Ventures (9) | 8,039 | 24 | ||||||||||||||||||||||||
(1) Unless otherwise indicated, ownership percentages include both the property and the underlying land.
(2) Our ownership interest in the property is subject to a third-party ground lease on the land.
(3) Property is accounted for as an operating lease.
(4) We own a 100% interest in the entity that is the operating lessee.
(5) Our ownership interest is derived through a long leasehold interest in the hotel building, with a nominal annual rental payment.
(6) Property is accounted for as a finance lease.
(7) Certain resorts in Europe operate under a hybrid all-inclusive model, which includes various all-inclusive package options as well as rooms-only options.
(8) We own a 50% interest in an unconsolidated hospitality venture that is the operating lessee
(9) Excludes four UrCove hotels where we own a 49% interest in an unconsolidated hospitality venture that is the operating lessee.
58
| Hotel Property | Location | Rooms | # of Hotels | Ownership (1) | |||||||
| ASPAC Unconsolidated Hospitality Ventures: | |||||||||||
| Grand Hyatt Bali | Bali, Indonesia | 636 | 10 | % | |||||||
| Hyatt Regency Bali | Bali, Indonesia | 363 | 10 | % | |||||||
| ASPAC Unconsolidated Hospitality Ventures | 999 | 2 | |||||||||
| Total Full Service Unconsolidated Hospitality Ventures | 5,943 | 15 | |||||||||
| Select Service Unconsolidated Hospitality Ventures | |||||||||||
| Hyatt Place Atlanta / Centennial Park | Atlanta, GA | 175 | 50 | % | |||||||
| Hyatt Place Celaya | Celaya, Mexico | 145 | 50 | % | |||||||
| Hyatt Place Denver / Downtown | Denver, CO | 248 | 50 | % | |||||||
| Hyatt Place Glendale / Los Angeles | Los Angeles/Long Beach, CA | 179 | 40 | % | |||||||
| Hyatt Place Los Cabos | San Jose del Cabo, Mexico | 157 | 50 | % | |||||||
| Hyatt Place Panama City / Downtown | Panama City, Panama | 165 | 29 | % | |||||||
| Hyatt Place San Jose Airport | San Jose, CA | 190 | 40 | % | |||||||
| Hyatt Place Tijuana | Tijuana, Mexico | 145 | 50 | % | |||||||
| Hyatt House Denver / Downtown | Denver, CO | 113 | 50 | % | |||||||
| Hyatt House Nashville at Vanderbilt | Nashville, TN | 201 | 50 | % | |||||||
| Hyatt House San Jose Airport | San Jose, CA | 165 | 40 | % | |||||||
| Total Select Service Unconsolidated Hospitality Ventures | 1,883 | 11 | |||||||||
| Total Unconsolidated Hospitality Ventures | 7,826 | 26 | |||||||||
Below is a summary of our Hyatt managed and franchised hotels, including owned and leased hotels, by segment for all periods presented.
| December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
| Properties | Rooms | Properties | Rooms | Properties | Rooms | ||||||||||||||||||||||||||||||
| Americas Management and Franchising | |||||||||||||||||||||||||||||||||||
| Full Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 172 | 72,932 | 164 | 72,278 | 160 | 71,807 | |||||||||||||||||||||||||||||
| Franchised | 85 | 24,409 | 73 | 21,544 | 67 | 20,356 | |||||||||||||||||||||||||||||
| Full Service Hotels | 257 | 97,341 | 237 | 93,822 | 227 | 92,163 | |||||||||||||||||||||||||||||
| Select Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 46 | 6,780 | 55 | 8,132 | 62 | 9,054 | |||||||||||||||||||||||||||||
| Franchised | 424 | 59,150 | 391 | 53,912 | 356 | 49,211 | |||||||||||||||||||||||||||||
| Select Service Hotels | 470 | 65,930 | 446 | 62,044 | 418 | 58,265 | |||||||||||||||||||||||||||||
| ASPAC Management and Franchising | |||||||||||||||||||||||||||||||||||
| Full Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 125 | 41,649 | 116 | 39,327 | 110 | 36,026 | |||||||||||||||||||||||||||||
| Franchised | 10 | 3,153 | 8 | 2,520 | 6 | 1,933 | |||||||||||||||||||||||||||||
| Full Service Hotels | 135 | 44,802 | 124 | 41,847 | 116 | 37,959 | |||||||||||||||||||||||||||||
| Select Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 29 | 5,053 | 29 | 5,378 | 29 | 5,307 | |||||||||||||||||||||||||||||
| Franchised | 13 | 2,244 | 6 | 1,169 | 1 | 160 | |||||||||||||||||||||||||||||
| Select Service Hotels | 42 | 7,297 | 35 | 6,547 | 30 | 5,467 | |||||||||||||||||||||||||||||
| EAME/SW Asia Management and Franchising | |||||||||||||||||||||||||||||||||||
| Full Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 101 | 25,457 | 97 | 24,678 | 95 | 24,323 | |||||||||||||||||||||||||||||
| Franchised | 22 | 3,799 | 13 | 2,454 | 11 | 2,098 | |||||||||||||||||||||||||||||
| Full Service Hotels | 123 | 29,256 | 110 | 27,132 | 106 | 26,421 | |||||||||||||||||||||||||||||
| Select Service Hotels | |||||||||||||||||||||||||||||||||||
| Managed | 21 | 3,429 | 17 | 2,749 | 17 | 2,803 | |||||||||||||||||||||||||||||
| Franchised | 6 | 1,411 | 5 | 1,131 | 2 | 443 | |||||||||||||||||||||||||||||
| Select Service Hotels | 27 | 4,840 | 22 | 3,880 | 19 | 3,246 | |||||||||||||||||||||||||||||
| Total Full Service and Select Service Hotels (a) | 1,054 | 249,466 | 974 | 235,272 | 916 | 223,521 | |||||||||||||||||||||||||||||
| Americas | |||||||||||||||||||||||||||||||||||
| All-inclusive Hotels | 68 | 24,873 | 8 | 3,153 | 8 | 3,153 | |||||||||||||||||||||||||||||
| EAME/SW Asia (b) | |||||||||||||||||||||||||||||||||||
| All-inclusive Hotels | 40 | 10,605 | — | — | — | — | |||||||||||||||||||||||||||||
| Total All-inclusive Hotels | 108 | 35,478 | 8 | 3,153 | 8 | 3,153 | |||||||||||||||||||||||||||||
| Total Managed and Franchised | 1,162 | 284,944 | 982 | 238,425 | 924 | 226,674 | |||||||||||||||||||||||||||||
(a) Figures do not include vacation ownership, residential, or condominium units.
(b) Certain resorts in Europe operate under a hybrid all-inclusive model, which includes various all-inclusive package options as well as rooms-only options.
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| December 31, 2019 | December 31, 2018 | December 31, 2017 | |||||||||||||||
| Properties | Rooms | Properties | Rooms | Properties | Rooms | ||||||||||||
| Americas Management and Franchising | |||||||||||||||||
| Full Service Hotels | |||||||||||||||||
| Managed | 157 | 71,397 | 169 | 72,217 | 118 | 61,154 | |||||||||||
| Franchised | 67 | 20,356 | 57 | 17,981 | 52 | 15,636 | |||||||||||
| Full Service Hotels | 224 | 91,753 | 226 | 90,198 | 170 | 76,790 | |||||||||||
| Select Service Hotels | |||||||||||||||||
| Managed | 62 | 9,054 | 58 | 8,393 | 64 | 9,137 | |||||||||||
| Franchised | 356 | 49,211 | 325 | 44,753 | 293 | 40,607 | |||||||||||
| Select Service Hotels | 418 | 58,265 | 383 | 53,146 | 357 | 49,744 | |||||||||||
| ASPAC Management and Franchising | |||||||||||||||||
| Full Service Hotels | |||||||||||||||||
| Managed | 110 | 36,026 | 102 | 33,570 | 80 | 29,173 | |||||||||||
| Franchised | 6 | 1,933 | 4 | 1,591 | 3 | 1,286 | |||||||||||
| Full Service Hotels | 116 | 37,959 | 106 | 35,161 | 83 | 30,459 | |||||||||||
| Select Service Hotels | |||||||||||||||||
| Managed | 29 | 5,307 | 23 | 3,903 | 15 | 2,533 | |||||||||||
| Franchised | 1 | 160 | — | — | — | — | |||||||||||
| Select Service Hotels | 30 | 5,467 | 23 | 3,903 | 15 | 2,533 | |||||||||||
| EAME/SW Asia Management and Franchising | |||||||||||||||||
| Full Service Hotels | |||||||||||||||||
| Managed | 95 | 24,323 | 81 | 21,602 | 76 | 20,654 | |||||||||||
| Franchised | 11 | 2,098 | 6 | 1,215 | 2 | 148 | |||||||||||
| Full Service Hotels | 106 | 26,421 | 87 | 22,817 | 78 | 20,802 | |||||||||||
| Select Service Hotels | |||||||||||||||||
| Managed | 17 | 2,803 | 16 | 2,531 | 14 | 2,134 | |||||||||||
| Franchised | 2 | 443 | 2 | 451 | 2 | 451 | |||||||||||
| Select Service Hotels | 19 | 3,246 | 18 | 2,982 | 16 | 2,585 | |||||||||||
| Total Full and Select Service Hotels | 913 | 223,111 | 843 | 208,207 | 719 | 182,913 | |||||||||||
| Americas Management and Franchising - All-inclusive | |||||||||||||||||
| All-inclusive | |||||||||||||||||
| Franchised | 8 | 3,153 | 6 | 2,401 | 6 | 2,401 | |||||||||||
| All-inclusive | 8 | 3,153 | 6 | 2,401 | 6 | 2,401 | |||||||||||
| Corporate and other | |||||||||||||||||
| Wellness | |||||||||||||||||
| Managed | 3 | 410 | 3 | 410 | 3 | 399 | |||||||||||
| Wellness | 3 | 410 | 3 | 410 | 3 | 399 | |||||||||||
| Total Managed and Franchised | 924 | 226,674 | 852 | 211,018 | 728 | 185,713 | |||||||||||
Included in the summary above are the following owned and leased hotels:
| December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
| Properties | Rooms | Properties | Rooms | Properties | Rooms | ||||||||||||||||||||||||||||||
| Owned and Leased Hotels | |||||||||||||||||||||||||||||||||||
| Full Service Hotels | |||||||||||||||||||||||||||||||||||
| United States | 22 | 11,058 | 25 | 12,607 | 24 | 12,608 | |||||||||||||||||||||||||||||
| Other Americas | 3 | 1,262 | 2 | 795 | 2 | 795 | |||||||||||||||||||||||||||||
| EAME/SW Asia (a) | 5 | 1,135 | 7 | 1,435 | 8 | 1,593 | |||||||||||||||||||||||||||||
| Select Service Hotels | |||||||||||||||||||||||||||||||||||
| United States | 1 | 171 | 1 | 171 | 1 | 171 | |||||||||||||||||||||||||||||
| Other Americas | 2 | 293 | 2 | 293 | 2 | 293 | |||||||||||||||||||||||||||||
| EAME/SW Asia | 1 | 330 | 1 | 330 | 1 | 330 | |||||||||||||||||||||||||||||
| Total Full Service and Select Service Hotels | 34 | 14,249 | 38 | 15,631 | 38 | 15,790 | |||||||||||||||||||||||||||||
| All-inclusive Hotels (b) | 4 | 909 | — | — | — | — | |||||||||||||||||||||||||||||
| Total Owned and Leased Hotels (c) | 38 | 15,158 | 38 | 15,631 | 38 | 15,790 | |||||||||||||||||||||||||||||
| December 31, 2019 | December 31, 2018 | December 31, 2017 | |||||||||||||||
| Properties | Rooms | Properties | Rooms | Properties | Rooms | ||||||||||||
| Owned and Leased Hotels | |||||||||||||||||
| Full Service Hotels | |||||||||||||||||
| United States | 21 | 12,198 | 22 | 13,440 | 23 | 13,641 | |||||||||||
| Other Americas | 2 | 795 | 2 | 795 | 3 | 1,548 | |||||||||||
| ASPAC | — | — | 1 | 615 | 1 | 601 | |||||||||||
| EAME/SW Asia | 8 | 1,593 | 8 | 1,591 | 9 | 1,933 | |||||||||||
| Select Service Hotels | |||||||||||||||||
| United States | 1 | 171 | 1 | 171 | 2 | 320 | |||||||||||
| Other Americas | 2 | 293 | 2 | 293 | — | — | |||||||||||
| EAME/SW Asia | 1 | 330 | 1 | 330 | 1 | 330 | |||||||||||
| Total Full and Select Service Hotels | 35 | 15,380 | 37 | 17,235 | 39 | 18,373 | |||||||||||
| Wellness | 3 | 410 | 3 | 410 | 3 | 399 | |||||||||||
| Total Owned and Leased | 38 | 15,790 | 40 | 17,645 | 42 | 18,772 | |||||||||||
(b) Certain resorts in Europe operate under a hybrid all-inclusive model, which includes various all-inclusive package options as well as rooms-only options.
(c) Figures do not include unconsolidated hospitality ventures.
Corporate Headquarters and Regional Offices
Our corporate headquarters are located at 150 North Riverside Plaza, Chicago, Illinois,IL, pursuant to an operating lease. At December 31, 2019,2021, we lease approximately 262,000 square feet.
In addition to our corporate headquarters, we lease space for our regional offices, service centers, data centers, and sales offices in multiple domestic and international locations, including Amsterdam, The Netherlands; Atlanta, Georgia; Austin, Texas; Beijing,Bayside, WI; Cancún, Mexico; Chandler, AZ; Franklin Park, IL; Hong Kong, Shanghai, and Shenzhen, People's Republic of China; Bensenville, Illinois; Chandler, Arizona; Coral Gables, Florida; Denver, Colorado; Dubai, United Arab Emirates; Franklin Park, Illinois; Gurgaon and Mumbai, India; Jakarta, Indonesia; Johannesburg, South Africa; London, United Kingdom; Los Angeles, California; Mainz, Germany; Marion, Illinois; Maui, Hawaii; Melbourne, Australia; Mexico City, Mexico; Moscow, Russia; Moore, Oklahoma; New York, New York; Paris, France; Plano, Texas; Opfikon, Switzerland; San Francisco, California; São Paulo, Brazil; Scottsdale, Arizona; Seoul, South Korea; Singapore; Tokyo, Japan;OK; Newtown Square, PA; Omaha, NE; and Toronto, Canada.Zurich, Switzerland.
We believe our existing office properties are in good condition and are sufficient and suitable for the conduct of our business. In the event we need to expand our operations, we believe suitable space will be available on commercially reasonable terms.
Item 3. 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 recognizerecord 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.
Item 4. Mine Safety Disclosures.
Not Applicable.applicable.
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Information about our Executive Officers.
The following chart names each of the Company's executive officers and their ages and positions at February 20, 2020.17, 2022. Also included below is biographical information relating to each of the Company's executive officers. Each of the executive officers is elected by and serves at the pleasure of the board of directors.
Name | Age | Position | ||||||||||||
| Thomas J. Pritzker | Executive Chairman of the Board | |||||||||||||
| Mark S. Hoplamazian | President, Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||||
| Joan Bottarini | Executive Vice President, Chief Financial Officer (Principal Financial Officer) | |||||||||||||
| Margaret C. Egan | Executive Vice President, General Counsel and Secretary | |||||||||||||
| H. Charles Floyd | Executive Vice President, Global President of Operations | |||||||||||||
| Peter Fulton | Executive Vice President, Group President—EAME/SW Asia | |||||||||||||
| Malaika L. Myers | Executive Vice President, Chief Human Resources Officer | |||||||||||||
| Alejandro Reynal | 48 | Executive Vice President, Chief Executive Officer of Apple Leisure Group | ||||||||||||
| Peter J. Sears | Executive Vice President, Group President—Americas | |||||||||||||
| David Udell | Executive Vice President, Group President—ASPAC | |||||||||||||
| Mark R. Vondrasek | Executive Vice President, Chief Commercial Officer | |||||||||||||
Thomas J. Pritzker has been a member of our board of directors since August 2004 and our Executive Chairman since August 2004. Mr. Pritzker served as our Chief Executive Officer from August 2004 to December 2006. Mr. Pritzker was appointed President of Hyatt Corporation in 1980 and served as Chairman and Chief Executive Officer of Hyatt Corporation from 1999 to December 2006. Mr. Pritzker is Chairman and Chief Executive Officer of The Pritzker Organization, LLC ("TPO"), the principal financial and investment advisor to certain Pritzker family business interests. Mr. Pritzker also servesserved as a Director of Royal Caribbean Cruises Ltd. until May 2020. He served as a Director of TransUnion Corp., a credit reporting service company, until June 2010 and as Chairman of Marmon Holdings, Inc. until March 2014. Mr. Pritzker is Chairman of the Board of Trustees of the Center for Strategic & International Studies; Director and Vice President of The Pritzker Foundation, a charitable foundation; Director and President of the Pritzker Family Philanthropic Fund, a charitable organization; and Director, Chairman and President of The Hyatt Foundation, a charitable foundation which established The Pritzker Architecture Prize.
Mark S. Hoplamazian was appointed to the Board of Directors in November 2006 and named President and Chief Executive Officer of Hyatt Hotels Corporation in December 2006. Prior to being appointed to his present position, Mr. Hoplamazian served as President of TPO. During his 17 year tenure with TPO, he served as advisor to various Pritzker family-owned companies, including Hyatt Hotels Corporation and its predecessors. He previously worked in international mergers and acquisitions at The First Boston Corporation in New York. Mr. Hoplamazian served as Chairman of the American Hotel & Lodging Association from January 2021 to December 2021, and serves on the Board of Directors and as a member of the Talent & Compensation and Finance committees of the Board of Directors of VF Corporation. He also serves on the Board of Directors of VF CorporationBrand USA and serves on the Council on the University of Chicago Booth School of Business,Skills for Chicagoland's Future, the Executive Committee of the Board of Directors of World Business Chicago, the Board of Directors of Brand USA, Skills for Chicagoland's Future, and the Chicago Council on Global Affairs, and the Board of Trustees of the Aspen Institute and of the Latin School of Chicago. Mr. Hoplamazian is a member of the World Travel & Tourism Council, the Commercial Club of Chicago, and the Discovery Class of the Henry Crown Fellowship.
Joan Bottarini was appointed as Executive Vice President, Chief Financial Officer in November 2018. In this role, Ms. Bottarini is responsible for the global finance function, including financial reporting, planning, treasury, tax, investor relations, internal audit, asset management, global construction, shared services, and procurement. Ms. Bottarini previously served as the Company's Senior Vice President, Finance—Americas since 2016. Prior to that position, Ms. Bottarini served as Vice President, Hotel Finance—Asia Pacific (Hong Kong) of the Company from 2014 to 2016 and as Vice President, Strategic Financial Planning and Analysis of the Company from 2007 to 2014. Prior to her roles at Hyatt, Ms. Bottarini served as the Controller - Development at Essex Property Trust and an Assurance Manager at KPMG LLP.
Margaret C. Egan was appointed as Executive Vice President, General Counsel and Secretary in January 2018. Ms. Egan is responsible for Hyatt's global legal and corporate secretarial services. Ms. Egan served as interim General Counsel and Secretary of the Company from October 2017 to January 2018 and previously served as Senior Vice President and Associate General Counsel at Hyatt from March 2013 to January 2018 overseeing the Company's legal global transactions teams. From October 2003 to March 2013, Ms. Egan held a series of increasingly responsible positions at Hyatt. Prior to entering the hospitality industry, Ms. Egan practiced law in the litigation practice group of DLA Piper in Chicago, Illinois from 1996 to
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2000 and again from 2002 to 2003 and also held a position as Attorney Advisor with the United States Department of Justice in London, United Kingdom from January 2001 to January 2002.
H. Charles Floyd was appointed Executive Vice President, Global President of Operations in August 2014. In this role, Mr. Floyd leads and develops Hyatt's shared operation services organization known as the Global Operations Center ("GOC") and is responsible for the successful operation of Hyatt's hotels globally. The Group Presidents for each of Hyatt's three regions, as well as hotel business development and product and design, report to Mr. Floyd. Prior to his current role, Mr. Floyd was Executive Vice President, Group President—Global Operations Center from October 2012 to August 2014. Mr. Floyd has been with us since 1981. Mr. Floyd served as our Chief Operating Officer—North America from January 2006 until October 2012. In this role he was responsible for management of our full service hotels and resorts as well as the Hyatt Place and the Hyatt House brands in the United States, Canada, and the Caribbean. In addition, he oversaw Hyatt Residential Group, Inc. (formerly known as Hyatt Vacation Ownership, Inc.) and the Franchise Owner Relations Group, which supports both full service, and select service, and extended stay franchisees. He also oversaw various corporate functions for North America, including sales, human resources, product and design, rooms, food and beverage, and engineering. Since joining Hyatt, Mr. Floyd served in a number of senior positions, including Executive Vice President—North America Operations and Senior Vice President of Sales, as well as various managing director and general manager roles. Mr. Floyd served on the Board of Directors of Playa Hotels & Resorts N.V. and its predecessors from February 2016 to August 2021 and serves on the Board of Directors and as a member of the Compensation Committee of the Board of Directors of Kohl's Corporation and Playa Hotels & Resorts N.V.Corporation.
Peter Fulton was appointed Executive Vice President, Group President—EAME/SW Asia in October 2012. Mr. Fulton is responsible for overseeing hotels in Europe, Africa, the Middle East, India, Central Asia, and Nepal. In 1983, Mr. Fulton embarked on his career with Hyatt International as Food & Beverage Manager at Hyatt Regency Kingsgate Auckland. For the next nine years, he filled senior food and beverage positions at Hyatt properties in Dubai, Canberra, and Macau before receiving his first appointment as Manager at Hyatt Regency Acapulco. In 1994, Mr. Fulton was appointed General Manager of the same hotel. Three years later, Mr. Fulton was appointed General Manager at Hyatt Regency Delhi, where he remained until assuming the position of General Manager of Grand Hyatt Dubai. From 2001 until February 2008, Mr. Fulton oversaw Grand Hyatt Dubai, the largest 5-star hotel in the region, which opened in March 2003. From February 2008 until October 2012, Mr. Fulton was the Managing Director—South WestSouthwest Asia. Prior to Hyatt, Mr. Fulton worked for Travelodge in Christchurch and Auckland, New Zealand, Claridges Hotel in London, and Le Beau Rivage Palace Hotel in Lausanne, Switzerland. Mr. Fulton serves on the Senior Advisory Council of the Sustainable Hospitality Alliance.
Malaika L. Myers was selected as Executive Vice President, Chief Human Resources Officer in September 2017. In this role, Ms. Myers is responsible for setting and implementing Hyatt's global human resources enterprise strategy worldwide. Ms. Myers joined Hyatt with over 25 years of experience in human resources across a diverse group of industries. Prior to assuming her role at Hyatt, Ms. Myers most recently served as Senior Vice President, Human Resources for Jarden Corporation, a $10 billion global consumer products company, where she was responsible for the effectiveness of human resources strategies and programs for Jarden Corporation worldwide. Prior to Jarden, Ms. Myers served as Chief Human Resources Officer for Arysta LifeScience, a global agricultural chemical company. Malaika served in various senior management roles at Diageo PLC, PepsiCo, including Frito-Lay, Pepsi-Cola, and the PepsiCo Corporate Organization. Ms. Myers began her career with FMC Corporation. Ms. Myers serves on the Board of Directors of Skills for Chicagoland's Future, Cielo, Inc., and HR Policy Association.
Alejandro Reynal was appointed Executive Vice President, Chief Executive Officer of Apple Leisure Group upon Hyatt's acquisition of Apple Leisure Group on November 1, 2021. Mr. Reynal joined Apple Leisure Group as President and Chief Executive Officer in 2019. Prior to Apple Leisure Group, Mr. Reynal was the Chief Executive Officer of Atento, a company dedicated to global customer relationship management and business process outsourcing services. Mr. Reynal also previously held strategic management positions at Telefonica, The Coca-Cola Company, and The Gap, Inc.
Peter J. Sears was appointed Executive Vice President, Group President—Americas in September 2014. Mr. Sears is responsible for the growth and successful operation of Hyatt's portfolio in the United States, Latin America, Canada, and the Caribbean. Prior to his current role, he was the Senior Vice President—Operations, Asia Pacific. Mr. Sears began his career with Hyatt as a corporate traineeCorporate Management Trainee at Hyatt Regency San Antonio in 1987 and went on to hold numerous positions of increasing operational responsibility. These positions included serving as general manager of five full service hotels in North America at properties located in San Francisco, Orange County, and Lake Tahoe. In 2006, he became Senior Vice President of Field Operations for the Central Region, and in 2009, he became Senior Vice President, Operations for North America.
David Udell was appointed as Executive Vice President, Group President—ASPAC in July 2014. Mr. Udell is responsible for overseeing hotels in Southeast Asia, Greater China, Australia, South Korea, Japan, and Micronesia. Prior to his current role, Mr. Udell was the Senior Vice President, Operations for the GOC. Mr. Udell has also served as Senior Vice President—Operations, Asia Pacific, where he was responsible for overseeing the operation of 55 hotels within the region. Over the last 32 years, Mr. Udell has held senior management positions in Hyatt properties in Bangkok, Seoul, Hong Kong, and
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Tokyo. In 1992, he was appointed opening General Manager of Park Hyatt Tokyo and in 1996, General Manager of Grand Hyatt Hong Kong. He began his career with Hyatt as a Corporate Management Trainee at Hyatt Regency Singapore in 1982. Mr. Udell serves as Chairman of the Hotel, Catering and Tourism Board in Hong Kong.
Mark R. Vondrasek was selected as Executive Vice President, Chief Commercial Officer in March 2018. In this role, Mr. Vondrasek oversees global sales, revenue management, distribution strategy, corporate marketing, brands, communications, digital, consumer insights, global contact centers, information technology, and the World of Hyatt loyalty platform. He is also charged with integrating and scaling new business opportunities, products, and services, including Exhale.services. Mr. Vondrasek joined Hyatt in September 2017 with 15 years of hospitality leadership experience at Starwood Hotels and Resorts, where he most recently served in a similar role as Senior Vice President, Commercial Services Officer. Prior to entering the hospitality industry, he spent 10 years in the Financial Services industry, overseeing operational teams at Fidelity Investments and Kemper Financial Services.
Pursuant to our employment letter with Mr. Thomas J. Pritzker, we have agreed that so long as he is a member of our board of directors we will use our commercially reasonable efforts to appoint him as our executive chairman provided he is willing and able to serve in that office. If he is not re-appointed as executive chairman, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment was terminated by us without cause.
Pursuant to our employment letter with Mr. Mark S. Hoplamazian, we have agreed that so long as he is the president and chief executive officer of Hyatt, we will use our commercially reasonable efforts to nominate him for re-election as a director prior to the end of his term. If he is not re-elected to the board of directors, he will be entitled to terminate his employment with the rights and entitlements available to him under our severance policies as if his employment was terminated by us without cause.
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Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. |
Market Information
On November 5, 2009, our Class A common stock began trading publicly on the New York Stock Exchange under the symbol "H". Prior to that time, there was no public market for our Class A common stock. At January 31, 2020,2022, our Class A common stock was held by approximately 25 shareholders of record and there were 35,841,27750,334,271 shares of Class A common stock outstanding. This stockholder figure does not include a substantially greater number of "street name" holders or beneficial holders of our Class A common stock whose shares are held of record by banks, brokers, and other financial institutions.
There is no established public trading market for our Class B common stock. At January 31, 2020,2022, our Class B common stock was held by approximately 8078 shareholders, and there were 65,463,27459,653,271 shares of Class B common stock outstanding.
Dividends
We currentlyamended our revolving credit facility during the year ended December 31, 2021, which included terms restricting our ability to pay a quarterly cash dividend and expect to continue paying regular dividends on a quarterly basis.until the first quarter of 2022. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments, and such other factors as our board of directors deems relevant. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 16 to our Consolidated Financial Statements" for further detail.
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Performance Graph
The following performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
The following graph compares the cumulative total stockholder return since December 31, 2014,2016, with the S&P 500 Index ("S&P 500") and the Russell 1000 Hotel/Motel Index (the "Russell 1000 Hotel"). The graph assumes the value of the investment in our Class A common stock and each index was $100 at December 31, 20142016 and all dividends and other distributions were reinvested.
| 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | |||||||||||||||
| Hyatt Hotels Corporation | 100.0 | 78.1 | 91.8 | 122.1 | 113.2 | 151.7 | Hyatt Hotels Corporation | 100.0 | 133.1 | 123.3 | 165.3 | 137.1 | 177.1 | |||||||||||||
| S&P 500 | 100.0 | 101.4 | 113.5 | 138.3 | 132.2 | 173.8 | S&P 500 | 100.0 | 121.8 | 116.5 | 153.1 | 181.3 | 233.3 | |||||||||||||
| Russell 1000 Hotel | 100.0 | 84.0 | 106.1 | 169.9 | 134.8 | 194.3 | Russell 1000 Hotel | 100.0 | 160.2 | 127.1 | 183.2 | 173.8 | 229.2 | |||||||||||||
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of shares of Class A common stock during the quarter ended December 31, 2019:2021:
| 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 | |||||||||||||||||||||||
| October 1 to October 31, 2021 | — | $ | — | — | $ | 927,760,966 | ||||||||||||||||||||
| November 1 to November 30, 2021 | — | — | — | $ | 927,760,966 | |||||||||||||||||||||
| December 1 to December 31, 2021 | — | — | — | $ | 927,760,966 | |||||||||||||||||||||
| Total | — | $ | — | — | ||||||||||||||||||||||
| 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 | |||||||||||
| October 1 to October 31, 2019 | 604,499 | $ | 71.34 | 604,499 | $ | 345,087,566 | ||||||||
| November 1 to November 30, 2019 | 318,821 | 76.01 | 318,821 | $ | 320,854,869 | |||||||||
| December 1 to December 31, 2019 | 868,534 | 84.63 | 868,534 | $ | 997,351,204 | |||||||||
| Total | 1,791,854 | $ | 78.61 | 1,791,854 | ||||||||||
Item 6. Selected Financial Data.(Removed and Reserved).
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| Year Ended December 31, | |||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Consolidated statements of income data: | |||||||||||||||||||
| Total revenues | $ | 5,020 | $ | 4,454 | $ | 4,462 | $ | 4,265 | $ | 4,328 | |||||||||
| Direct and selling, general, and administrative expenses | 4,823 | 4,122 | 4,202 | 3,997 | 4,005 | ||||||||||||||
| Net income | 766 | 769 | 390 | 206 | 124 | ||||||||||||||
| Net income attributable to Hyatt Hotels Corporation | 766 | 769 | 389 | 206 | 124 | ||||||||||||||
| Net income per share—basic | $ | 7.33 | $ | 6.79 | $ | 3.13 | $ | 1.55 | $ | 0.87 | |||||||||
| Net income per share—diluted | $ | 7.21 | $ | 6.68 | $ | 3.09 | $ | 1.53 | $ | 0.86 | |||||||||
| Cash dividends declared per share | $ | 0.76 | $ | 0.60 | $ | — | $ | — | $ | — | |||||||||
| At December 31, | |||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Consolidated balance sheets data: | |||||||||||||||||||
| Total assets | $ | 8,417 | $ | 7,643 | $ | 7,572 | $ | 7,661 | $ | 7,591 | |||||||||
| Long-term debt (1) | 1,623 | 1,634 | 1,451 | 1,564 | 1,370 | ||||||||||||||
| Redeemable noncontrolling interest in preferred shares of a subsidiary | — | — | 10 | — | — | ||||||||||||||
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part II, Item 6, "Selected Financial Data" and Part IV, Item 15, "Exhibits and Financial Statement Schedule—Schedule—Consolidated Financial Statements." For our discussion and analysis of our financial condition and results of operations for the year ended December 31, 20182020 compared to the year ended December 31, 2017,2019, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 20182020 Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, operations, and financial performance based on current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in "Disclosure Regarding Forward-Looking Statements" and Part I, Item 1A, "Risk Factors" included elsewhere in this annual report.
Overview
At December 31, 2019,2021, our worldwide hotel portfolio consisted of 913 full and select service1,162 hotels (223,111(284,944 rooms), including:
•28 owned properties (13,123(12,113 rooms) (including 1 consolidated hospitality venture), 1 finance leased property (171 rooms), and 65 operating leased properties (2,086(1,965 rooms), all of which we manage; and
•15 vacation ownership properties under the Hyatt Residence Club brand and operated by third parties;
•36 residential properties, which consist of branded residences and serviced apartments. We manage all of the serviced apartments and those branded residential units that participate in a rental program with an adjacent Hyatt-branded hotel; and
We believe our business model allows us to pursue more diversified revenue and income streams balancing both the advantages and risks associated with these lines of business. Our expertise and experience in each of these areas gives us the flexibility to evaluate growth opportunities across theseour lines of business. Growth in the number of management and franchise agreements and earnings therefrom typically results in higher overall returns on invested capital because the capital investment under a typical management or franchise agreement is not significant. The capital required to build and maintain hotels we manage or franchise for third-party owners and franchisees is typically provided by the owner of the respective property with minimal capital required by us as the manager or franchisor. In certain instances, Hyatt has provided funding to owners for the acquisition and development of hotels that Hyatt will manage or franchise in the form of cash, debt repayment or performance guarantees, preferred equity, or mezzanine debt. During periods of increasing demand, we do not share fully in the incremental profits of hotel operations for hotels we manage for third-party owners as our fee arrangements generally include a base amount that is, typically, a percentage of revenue from the subject hotel and an incentive fee that is, typically, a percentage of hotel
profits after satisfying certain financial return thresholds to be earned by the owner, depending on the structure and terms of the management agreement. We do not share in the benefits of increases in profits from franchised properties because franchisees
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pay us an initial application fee and ongoing royalty fees that are calculated as a percentage of gross room revenues, and also at times, as a percentage of food and beverage revenues, with no fees based on profits. Disputes or disruptions may arise with third-party owners and franchisees of hotels we manage, franchise, or license to and these disputes can result in termination of the relevant agreement.
With respect to property ownership, we believe ownership of selected hotels in key markets enhances our ability to control our brand presence in these markets. Ownership of hotels allows us to capture the full benefit of increases in operating profits during periods of increasing demand and room rates. The cost structure of a typical hotel is moreincludes substantial fixed than variable,costs, so as demand and room rates increase over time, the rate of growth in operating profits typically is higher than the rate of growth of revenues. Hotel ownership is, however, more capital intensive than managing or franchising hotels for third-party owners, as we are responsible for the costs and all capital expenditures for our owned hotels. The profits realized from our owned and leased hotels are generally more significantly affected by economic downturns and declines in revenues than the management and franchise fees earned from our managed and franchised properties. This is because we absorb the full impact of declining profits for our owned and leased hotels whereas our management and franchise fees do not have the same level of downside exposure to declining hotel profitability. Hotel ownership is more capital intensive than managing or franchising hotels for third-party owners and franchisees, as we are responsible for the costs and all capital expenditures for our owned and leased hotels. See also "—Principal Factors Affecting Our Results of Operations—Expenses—Factors Affecting Our Costs and Expenses—Fixed nature of expenses.Expenses." and Part I, Item 1A, "Risk Factors—Risks Related to Our Business—We are exposed to the risks resulting from significant investments in owned and leased real estate, which could increase our costs, reduce our profits, limit our ability to respond to market conditions, or restrict our growth strategy."
For the years ended December 31, 20192021 and December 31, 2018, 82.5%2020, 76.3% and 80.5%83.7% of our revenues, respectively, were derived from operations in the United States, respectively.States. At December 31, 20192021 and December 31, 2018, 80.6%2020, 53.6% and 81.1%80.4% of our long-lived assets, respectively, were located in the United States, respectively.States.
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"."NM." Constant currency disclosures throughout Management's Discussion and Analysis of Financial Condition and Results of Operations are non-GAAP measures. See "—Key Business Metrics Evaluated by Management—Constant Dollar Currency" below for further discussion of constant currency disclosures. We manage our business within fourfive reportable segments, see Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 19 to our Consolidated Financial Statements."
Overview of the Financial Impact of the COVID-19 Pandemic
The COVID-19 pandemic and its impacts have significantly reduced global travel, demand for hotel rooms, and travel experiences, and have had a material impact on global commercial activity across the travel, lodging, and hospitality industries, all of which has had, and is expected to continue to have, a material impact on our business, results of operations, cash flows, and financial condition. While demand levels continue to recover from the lowest levels experienced at the onset of the pandemic, we expect demand for hospitality services could continue to be uneven in the near term as there remains uncertainty as to the pace of recovery for lodging and travel-related experiences. To the extent cases of COVID-19 persist in various regions around the globe, new COVID-19 variants emerge, and/or restrictions remain or are put in place in certain markets, we expect to experience demand volatility.
Our segment revenues, comparable RevPAR, and Adjusted EBITDA during the year ended December 31, 2021 continue to be impacted by the COVID-19 pandemic, and performance remains significantly below pre-COVID-19 pandemic results. In addition, the COVID-19 pandemic has created worldwide challenges related to rising costs for certain labor and supply chain expenses, and these increased costs may not be fully offset by increases in revenues in our business.
While uncertainty surrounding the ongoing recovery progression remains, we are optimistic about the continued global recovery which is led by robust leisure demand and growing momentum for business transient and group travel. Leisure demand improved sequentially over the course of 2021, and the fourth quarter of 2021 exceeded 2019 levels. Throughout 2021, we have seen group bookings production improve compared to 2020 at our full service managed hotels in the Americas, including owned and leased hotels, with the fourth quarter net bookings for current and future years at the highest level since the onset of the COVID-19 pandemic, though still significantly lower than pre-COVID-19 pandemic levels.
Although the recovery of global lodging demand is underway, we continue to expect demand to be varied and uneven in the current environment and expect that the COVID-19 pandemic will continue to have a material negative impact on our future results for a period of time that we are currently unable to predict.
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Key Business Metrics Evaluated by Management
Revenues
We primarily derive our revenues from owned and leased hotel operations, management of hotels, andservices, licensing of our portfolio of brands to franchisees.franchisees, owned and leased hotel operations, distribution and destination management services, and a paid membership club offering. Management uses revenues to assess the overall performance of our business and to analyze trends such as consumer demand, brand preference, and competition. For a detailed discussion of the factors that affect our revenues,primary revenue sources, see "—Principal Factors Affecting Our Results of Operations—Revenues."
Net Income (Loss) Attributable to Hyatt Hotels Corporation
Net income (loss) attributable to Hyatt Hotels Corporation represents the total earnings or profits generated by our business.business or total loss incurred. Management uses net income (loss) to analyze the performance of our business on a consolidated basis.
Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization ("Adjusted EBITDA")EBITDA and EBITDA
We use the terms Adjusted EBITDA and EBITDA throughout this annual report. Adjusted EBITDA and EBITDA, as we define them, are non-GAAP measures. We define consolidated Adjusted EBITDA as net income (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;
•depreciation and amortization;
•amortization of management and franchise agreement assets constitutingand 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;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;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. See "—Segment Results."
Our board of directors and executive management team focus on Adjusted EBITDA as aone of the key performance and compensation measuremeasures both on a segment and on a consolidated basis. Adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operations both on a segment and on a consolidated basis. Our President and Chief Executive Officer, who is our chief operating decision maker ("CODM"), also evaluates the performance of each of our reportable segments and determines how to allocate resources to those segments, in significant part, by assessing the Adjusted EBITDA of each segment. In addition, the compensation committee of our board of directors determines the annual variable compensation for certain members of our management based in part on consolidated Adjusted EBITDA, segment Adjusted EBITDA, or some combination of both.
We believe Adjusted EBITDA is useful to investors because it provides investors 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 before these items with results from other companies within our industry.
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Adjusted EBITDA excludes certain items that can vary widely across different industries and among companies within the same industry. For instance,industry including interest expense and provisionbenefit (provision) for income taxes, which are dependent uponon company specifics including capital structure, credit ratings, tax policies, and jurisdictions in which they operate, and therefore, can vary significantly across companies. Depreciationoperate; depreciation and amortization as well as Contra revenue,which are dependent on company policies including how the assets are utilized as well as the lives assigned to the assets.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. We exclude stock-based compensation expenseAdjusted EBITDA includes costs incurred on behalf of our managed and franchised properties related to remove the variability amongst companies resultingsystem-wide services and programs that we do not intend to recover from different compensation plans companies have adopted.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 reference toreferencing our GAAP results and using Adjusted EBITDA supplementally. See our consolidated statements of income (loss) in our consolidated financial statements included elsewhere in this annual 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, (includingincluding owned and leased properties)properties, and that are operated for the entirety of the periods being compared and that have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared or for which comparable results are not available. Effective December 31, 2021, hotels that suspended operations due to the COVID-19 pandemic and have not yet re-opened are no longer included in our definition of comparable system-wide hotels. We may use variations of comparable system-wide hotels to specifically refer to comparable system-wide Americas full service orhotels, including our wellness resorts, our select service hotels, or our all-inclusive resorts, for those properties that we manage or franchise within the Americas management and franchising segment, comparable system-wide ASPAC full service or select service hotels for those properties we manage or franchise within the ASPAC management and franchising segment, or comparable system-wide EAME/SW Asia full service or select service hotels for those properties that we manage or franchise within the EAME/SW Asia management and franchising segment. "Comparable owned and leased hotels" represents all properties we own or lease and that are operated and consolidated for the entirety of the periods being compared and have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared or for which comparable results are not available. Comparable system-wide hotels and comparable owned and leased hotels are commonly used as a basis of measurement in our industry. "Non-comparable system-wide hotels" or "non-comparable owned and leased hotels" represent all hotels that do not meet the respective definition of "comparable" as defined above.
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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.
Average Daily Rate
ADR represents hotel room revenues, divided by the total number of rooms sold in a given period. ADR measures the average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in our industry, and we use ADR to assess the pricing levels that we are able to generate by customer group, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.below.
Occupancy
Occupancy represents the total number of rooms sold divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of a hotel's available capacity. We use occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.
RevPAR is the product of the ADR and the average daily occupancy percentage. RevPAR does not include non-room revenues, which consist of ancillary revenues generated by a hotel property, such as food and beverage, parking, and other guest service revenues. Our management uses RevPAR to identify trend information with respect to room revenues from comparable properties and to evaluate hotel performance on a regional and segment basis. RevPAR is a commonly used performance measure in our industry.
RevPAR changes that are driven predominantly by changes in occupancy have different implications for overall revenue levels and incremental profitability than do changes that are driven predominantly by changes in average room rates. For example, increases in occupancy at a hotel would lead to increases in room revenues and additional variable operating costs, including housekeeping services, utilities, and room amenity costs, and could also result in increased ancillary revenues, including food and beverage. In contrast, changes in average room rates typically have a greater impact on margins and profitability as average room rate changes result in minimal impacts to variable operating costs.
Net Package ADR
Net Package ADR represents net package revenues, divided by the total number of rooms sold in a given period. Net Package ADR measures the average room price attained by a hotel, and Net Package ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. Net Package ADR is a commonly used performance measure in our industry, and we use Net Package ADR to assess the pricing levels that we are able to generate by customer group, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.
Net Package RevPAR
Net Package RevPAR is the product of the net package ADR and the average daily occupancy percentage. Net Package RevPAR generally includes revenue derived from the sale of package revenue comprised of rooms revenue, food and beverage, and entertainment, net of compulsory tips paid to employees. Our management uses Net Package RevPAR to identify trend information with respect to room revenues from comparable properties and to evaluate hotel performance on a regional and segment basis. Net Package RevPAR is a commonly used performance measure in our industry.
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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 club contracts and further reduced by an allowance for future estimated uncollectible installments. Net Financed Contract balances are not reported on our consolidated balance sheets as our right to collect future installments is conditional on our ability to provide continuous access to member benefits at AMR Collection 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 December 31, 2021, the Net Financed Contract balance not recorded on our consolidated balance sheet was $133 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 consolidated statements of income (loss) over the customer life, which ranges from 3 to 25 years.
Principal Factors Affecting Our Results of Operations
Our revenues and expenses are affected by a variety of factors. Revenues are principally affected by consumer demand, which is closely linked to economic conditions and is sensitive to business and personal discretionary spending levels. Certain expenses associated with our business, including interest, rent, property taxes, insurance, certain salaries and wages, and utilities costs, are relatively fixed and may increase at a greater rate than our revenues and/or may not be able to be reduced at the same rate as declining revenues. The fixed-cost nature of these expenses limits our ability to offset reductions in revenue through cost-cutting measures, which could adversely affect our net cash flows and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth, and when demand rapidly and significantly decreases, as we experienced with the onset of the COVID-19 pandemic. See Part I, Item 1A, "Risk Factors—Risks Related to the Hospitality Industry," "Risk Factors—Risks Related to Our Business," and "Risk Factors—Risks Related to the COVID-19 Pandemic."
We primarily derive our revenues from the following sources:
Revenues from hotel operations. Represents revenues derived from hotel operations, including room rentals and food and beverage sales and other ancillary revenues at our owned and leased properties. Revenues from the majority of our hotel operations depend heavily on demand from group and transient travelers, as discussed below. Revenues from our owned and leased hotels are primarily derived from hotel operations.
Revenues from room rentals and ancillary revenues are primarily derived from three categories of customers: transient, group, and contract. Transient guests are individual travelers who are traveling for business or leisure. Our group guests are traveling for group events that reserve a minimum of 10 rooms for meetings or social functions sponsored by associations, corporate, social, military, educational, religious, or other organizations. Group business usually includes a block of room accommodations as well as other ancillary services, such as catering and banquet services. Our contract guests are traveling under a contract negotiated for a block of rooms for more than 30 days in duration at agreed-upon rates. Airline crews are typical generators of contract demand for our hotels.
Management, franchise, and other fees. Represents revenues derived from fees earned from hotels and residential ownership units managed worldwide, (usuallyusually under long-term management agreements),agreements; franchise fees received in connection with the franchising of our brands, (usuallyusually under long-term franchise agreements),agreements; termination fees, andfees; license fees received in connection with the licensing of the Hyatt brand names through our co-branded credit card program and vacation ownership properties.properties; and fees from marketing services provided to certain AMR Collection resorts. For a detailed discussion of our management and franchise fees, see Part I, Item 1, "Business—Management Agreements—Hotel Management Agreements Fees" and Part I, Item 1, "Business—Franchise Agreements—Fees.Agreements."
Distribution and destination management revenues. Represents revenues derived from the offering of travel products and services through ALG Vacations. Offerings primarily include some or all of the following: air transportation, hotel
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accommodations primarily provided by third-party resorts, travel insurance, ground transportation, car rental reservations, and excursions provided by third parties.
Other revenues. Represents revenues primarily related to our residential management operations for condominium units, our condominium ownership units,Unlimited Vacation Club paid membership club offering member benefits exclusively at AMR Collection resorts in Latin America and the Caribbean, our co-branded credit cards,card program, and Exhale.the Exhale spa and fitness business, which was sold during the year ended December 31, 2020.
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. Represents revenues for the reimbursement of costs incurred on behalf of thethird-party owners of properties.and franchisees. These reimbursed costs relate primarily to payroll at managed properties where we are the employer, as well as system-wide services and the loyalty program operated on behalf of owners. We recordrecognize these revenues in "Revenuesrevenues for the reimbursement of costs incurred on behalf of managed and franchised properties"properties and the corresponding costs in "Costscosts incurred on behalf of managed and franchised properties" inproperties on our consolidated statements of income (loss).
Intersegment eliminations. Represents management fee revenues and expenses related to our owned and leased hotels and promotional award redemption revenues and expenses related to our co-branded credit cardscard program at our owned and leased hotels, which are eliminated in consolidation.
RevPAR Statistics
| (Comparable locations) | RevPAR | ||||||||
| Year Ended December 31, | |||||||||
| Number of comparable hotels (1) | 2019 | vs. 2018 (in constant $) | |||||||
| System-wide hotels | 703 | $ | 136 | 0.7 | % | ||||
| Owned and leased hotels | 31 | 183 | 1.0 | % | |||||
| Americas full service hotels | 165 | 159 | 1.7 | % | |||||
| Americas select service hotels | 355 | 105 | (2.0 | )% | |||||
| ASPAC full service hotels | 80 | 149 | (0.8 | )% | |||||
| ASPAC select service hotels | 14 | 58 | 8.4 | % | |||||
| EAME/SW Asia full service hotels | 74 | 129 | 3.9 | % | |||||
| EAME/SW Asia select service hotels | 15 | 65 | 3.6 | % | |||||
| (Comparable locations) | RevPAR | ||||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| Number of comparable hotels (1) | 2021 | vs. 2020 (in constant $) | |||||||||||||||
| System-wide hotels | 868 | $ | 78 | 66.5 | % | ||||||||||||
| Owned and leased hotels | 30 | 96 | 94.9 | % | |||||||||||||
| Americas full service hotels | 211 | 89 | 96.4 | % | |||||||||||||
| Americas select service hotels | 406 | 76 | 66.3 | % | |||||||||||||
| ASPAC full service hotels | 110 | 68 | 15.0 | % | |||||||||||||
| ASPAC select service hotels | 25 | 38 | 23.9 | % | |||||||||||||
| EAME/SW Asia full service hotels | 98 | 69 | 72.2 | % | |||||||||||||
| EAME/SW Asia select service hotels | 18 | 40 | 43.3 | % | |||||||||||||
| (1) The number of comparable hotels presented above includes owned and leased hotels. | |||||||||||||||||
System-wide RevPAR increased 0.7% in constant currency66.5% during 20192021, compared to 20182020, driven by increasesincreased demand due to the continued recovery from the COVID-19 pandemic. Leisure demand continues to lead the recovery as travel restrictions have eased in transient demand at full service properties in the Americas and EAME/SW Asia, partially offset by weakened performance at Americas select service properties and ASPAC full service properties.certain markets. See "—Segment Results" for detailed discussion of RevPAR by segment.
Our comparable system-wide hotels RevPAR of $78 and $47 for the years ended December 31, 2021 and December 31, 2020, respectively, remain significantly below pre-COVID-19 pandemic levels of previously reported system-wide hotels RevPAR of $136 for the year ended December 31, 2019. While uncertainty surrounding the shape of the recovery progression remains, we have experienced growing momentum in our business transient and group business, and it is our expectation that both will improve in 2022, but the recovery may continue to be uneven. Leisure transient demand is expected to remain strong, and the fourth quarter of 2021 has exceeded 2019 levels. However, demand may be varied and uneven in the current environment.
Competition. The hospitality industry is highly competitive. While demand has continued to grow over the last several years, we have also seen an increase in supply, particularly in certain key markets. This increasedIncreased supply can put significant pressure on ADR at our properties as well as those of our competitors. Despite this increased supply, our system-wide RevPAR has increased each year since 2009. Increasingly, we also face competition from new channels of distribution in the travel industry, including large companies that offer travel services as part of their business model and peer-to-peer inventory sources, as well as industry consolidation. We believe our brand strength and ability to manage our operations in an efficient manner will help us to continue competing successfully within the hospitality industry.
Agreements with third-party owners and franchisees and relationships with developers. We depend on our long-term management and franchise agreements with third-party owners and franchisees for a significant portion of our management and franchising fee revenues. The viability of our management and franchising business depends on our ability to maintain good relationships with third-party property owners and franchisees. Our relationships with these third parties also generate new relationships with developers and opportunities for property development that can support our growth. We believe we have good relationships with our third-party owners, franchisees, and developers in all of our segments and are committed to the
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continued growth and development of these relationships. These relationships exist with a diverse group of owners, franchisees, and developers and are not heavily concentrated with any particular third party.
Access to capital. The hospitality industry is a capital-intensive business that requires significant amounts of capital expenditures to develop, maintain, and renovate properties. Third-party owners and franchisees are required to fund these capital expenditures for the properties they own in accordance with the terms of the applicable management or franchise agreement. Access to the capital that we or our third-party owners, franchisees, or development partners need to finance the construction of new properties or to maintain and renovate existing properties is critical to the continued growth of our business and our revenues. The availability of capital or the conditions under which we or our third-party owners, franchisees, or development partners can obtain capital can have a significant impact on the overall level, cost, and pace of future development and therefore the ability to grow our revenues.
Expenses
We primarily incur the following expenses:
Owned and leased hotels expenses. Reflects the expenses of our consolidated owned and leased hotels. Expenses to operate our hotels include rooms expenses, food and beverage costs, other support costs, and property expenses. Rooms expenses generally includes compensation costs for housekeeping, laundry, and front desk staff and supply costs for guest room amenities and laundry. Food and beverage costs include costs for wait and kitchen staff and food and beverage products. Other support expenses consist of costs associated with property-level management, (includingincluding deferred compensation plans for certain employees that are funded through contributions to rabbi trusts),trusts, utilities, sales and marketing, hotel spa operations,
parking and other guest recreation, entertainment, and services. Property expenses include property taxes, repairs and maintenance, rent, and insurance.
Distribution and destination management expenses. Consists of expenses related to our ALG Vacations business, primarily costs directly related to the selling of travel products and services such as various distribution expenses, including charter air expenses, credit card fees, commissions, and destination management cost of sales. Additionally, distribution and destination management expenses include compensation expenses, professional fees, sales and marketing expenses, and technology expenses.
Depreciation and amortization expenses. These areRepresents non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures, and equipment at our consolidated owned and leased hotels. Amortization expenseexpenses primarily consists of amortization of management and franchise agreement intangibles.
Other direct costs. Represents expenses primarily related to our residential management operations for our condominium units, co-branded credit card program, and direct costs associated with the Unlimited Vacation Club paid membership club offering member benefits exclusively at AMR Collection resorts in Latin America and the Caribbean. Other direct costs also include the Exhale spa and fitness business, which was sold during the year ended December 31, 2020.
Selling, general, and administrative expenses. Consists primarily of compensation expenses, including deferred compensation plans for certain employees that are funded through contributions to rabbi trusts, for our corporate staff and personnel supporting our business segments, including regional offices that support our management and franchising segments; professional fees, including consulting, audit, and legal fees; travel and entertainment expenses; sales and marketing expenses; bad debt expenses; and office administrative and related expenses, including rent expenses.
Costs incurred on behalf of managed and franchised properties. Represents costs incurred on behalf of third-party owners and franchisees. These reimbursed costs relate primarily to payroll at managed properties where we execute such transactions, we may add depreciable and/or amortizable assets, which would result in an increase in depreciation and/or amortization expenses.are the employer, as well as system-wide services and the loyalty program operated on behalf of owners.
Other Items
Asset impairments
We hold significant amounts of goodwill, intangible assets, property and equipment, operating lease right-of-use ("ROU") assets, and investments. We evaluate these assets on a quarterly basis for impairment as further discussed in "—Critical Accounting Policies and Estimates." These evaluations have, in the past, resulted in impairment charges for certain of these assets based on the specific facts and circumstances surrounding those assets. We may be required to take additional impairment charges to reflect furtherpotential future declines in our asset and/or investment values.
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Acquisitions, divestitures, and significant renovations
From time to time, we may acquire businesses to support our long-term growth strategy. We also routinely acquire, divest, or undertake large scalelarge-scale renovations of hotel properties. The results of operations derived from these properties do not, therefore, meet the definition of "comparable hotels" as defined in "—Key Business Metrics Evaluated by Management." The results of operations from these properties, however, may have a material effect on our results from period to period and are, therefore, addressed separately in our discussion on results of operations when material.
In 2019,2021, we entered into the following key transactions:
•acquired ALG for $2.7 billion, net of cash acquired;
•acquired Alila Ventana Big Sur for $146 million and subsequently sold the shares of the entity which owns Grand Hyatt Seoul and adjacent landproperty to an unrelated third party for approximately $481$148 million and entered into a long-term management agreement for the property upon sale;
•purchased the remaining 50% interest in the entities that owned Grand Hyatt São Paulo for $6 million of cash. Additionally, we repaid the $78 million third-party mortgage loan on the property, and we were released from our debt repayment guarantee;
•sold Hyatt Regency AtlantaLake Tahoe Resort, Spa and Casino for approximately $355$343 million and entered into a long-term management agreement for the property upon sale;
•sold Hyatt Regency Lost Pines Resort and Spa for approximately $268 million and entered into a long-term management agreement for the property upon sale; and
In 2018,2020, we entered into the following key transactions:
•sold Grand Hyatt San Francisco, Andaz Maui at Wailea Resort together with adjacent land, andthe shares of the entities which own Hyatt Regency Coconut Point ResortBaku for approximately $11 million, net of $4 million of cash disposed, closing costs, and Spa as a portfolio for approximately $1 billionproration adjustments, and entered into a long-term management agreementsagreement for the propertiesproperty upon sale;
•sold the shares of the entity which owns the Exhale spa and fitness business for a nominal amount; and
•sold a 58% ownership interest in certain of our subsidiaries that developed Hyatt Regency MexicoCentric City an investment in an unconsolidated hospitality venture,Center Philadelphia and adjacent land, a portion of which will be developed as Park Hyatt Mexico City ("HRMC transaction")parking and retail space for approximately $405$72 million and entered into long-term management agreements for the properties upon sale;
See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 to our Consolidated Financial Statements" for further discussion on these key transactions.
Effect of foreign currency exchange rate fluctuations
A significant portion of our operations are conducted in functional currencies other than our reporting currency, which is the U.S. dollar. As a result, we are required to translate those results from the functional currency into U.S. dollars at market basedmarket-based average exchange rates during the period reported. When comparing our results of operations between periods, there may be material portions of the changes in our revenues or expenses that are derived from fluctuations in exchange rates experienced between those periods. See Part I, Item 1A, "Risk Factors—Risks Related to the Hospitality Industry—Because we derive a portion of our revenues from operations outside the United States, theThe risks of doing business internationally, or in a particular country or region, could lower our revenues, increase our costs, reduce our profits, or disrupt our business."
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Results of Operations
Years Ended December 31, 20192021 and December 31, 20182020
Discussion on Consolidated Results
For additional information regarding our consolidated results, please also refer to our consolidated statements of income (loss) included in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Consolidated Financial Statements." Consolidated results were impacted significantly by the COVID-19 pandemic during the years ended December 31, 2021 and December 31, 2020. The year ended December 31, 2021 was also impacted by the ALG Acquisition which closed on November 1, 2021. 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 recordedrecognized on the various financial statement line items discussed below and had no impact on net income. See "Net gains (losses) and interest income from marketable securities held to fund rabbi trusts" for the allocation of the impact to the various financial statement line items.(loss).
Owned and leased hotels revenues.
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | Currency Impact | ||||||||||||||||||||||||||
| Comparable owned and leased hotels revenues | $ | 688 | $ | 391 | $ | 297 | 75.9 | % | $ | 2 | |||||||||||||||||||
| Non-comparable owned and leased hotels revenues | 150 | 122 | 28 | 22.7 | % | — | |||||||||||||||||||||||
| Total owned and leased hotels revenues | $ | 838 | $ | 513 | $ | 325 | 63.2 | % | $ | 2 | |||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||
| 2019 | 2018 | Better / (Worse) | Currency Impact | |||||||||||||||
| Comparable owned and leased hotels revenues | $ | 1,563 | $ | 1,559 | $ | 4 | 0.3 | % | $ | (11 | ) | |||||||
| Non-comparable owned and leased hotels revenues | 285 | 359 | (74 | ) | (20.8 | )% | (6 | ) | ||||||||||
| Total owned and leased hotels revenues | $ | 1,848 | $ | 1,918 | $ | (70 | ) | (3.7 | )% | $ | (17 | ) | ||||||
For the same periods, non-comparable owned and leased hotels revenues relatedincreased primarily due to transaction activity. See "—Segment Results" for further discussionactivity in 2021 and two properties undergoing renovations during 2020, partially offset by the extended closure of an owned and leased hotels revenues, including further information on acquisition and disposition activity.hotel during 2021.
Management, franchise, and other fees revenues.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||||||||||||||||||||||||||
| Base management fees | $ | 169 | $ | 96 | $ | 73 | 76.0 | % | |||||||||||||||||||||||||||||||||||||||
| Incentive management fees | 58 | 22 | 36 | 159.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Franchise fees | 119 | 63 | 56 | 89.3 | % | ||||||||||||||||||||||||||||||||||||||||||
| Management and franchise fees | 346 | 181 | 165 | 91.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Other fees revenues | 72 | 58 | 14 | 24.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Management, franchise, and other fees | $ | 418 | $ | 239 | $ | 179 | 74.9 | % | |||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Base management fees | $ | 260 | $ | 225 | $ | 35 | 15.7 | % | ||||||
| Incentive management fees | 151 | 148 | 3 | 1.7 | % | |||||||||
| Franchise fees | 141 | 127 | 14 | 11.3 | % | |||||||||
| Management and franchise fees | 552 | 500 | 52 | 10.5 | % | |||||||||
| Other fees revenues | 56 | 52 | 4 | 9.0 | % | |||||||||
| Management, franchise, and other fees | $ | 608 | $ | 552 | $ | 56 | 10.3 | % | ||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | 2021 | 2020 | Better / (Worse) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Management, franchise, and other fees | $ | 608 | $ | 552 | $ | 56 | 10.3 | % | Management, franchise, and other fees | $ | 418 | $ | 239 | $ | 179 | 74.9 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Contra revenue | (22 | ) | (20 | ) | (2 | ) | (11.5 | )% | Contra revenue | (35) | (30) | (5) | (16.7) | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Net management, franchise, and other fees | $ | 586 | $ | 532 | $ | 54 | 10.3 | % | Net management, franchise, and other fees | $ | 383 | $ | 209 | $ | 174 | 83.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
The increase in management and franchise and other fees which included a $7 million net unfavorable currency impact for the year ended December 31, 2019,2021, compared to the same period in 2018,2020, was due to increased demand driven by increasesthe ongoing recovery in base2021, compared to the decreased demand and suspended hotel operations at a number of hotels in 2020 as a result of the COVID-19 pandemic. Additionally, the current year includes the addition of managed and franchised contracts to the portfolio and $15 million of ALG management fees most notablyfrom the acquisition date through December 31, 2021.
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Other fees revenues increased for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily driven by increased license fees related to our co-branded credit cards and fees from marketing services provided by ALG, partially offset by a decrease in license fees in the AmericasASPAC management and franchising segment primarily due to the acquisition of Two Roads, as well as increases in franchise fees driven by the Americas management and franchising segment.
See "—Segment Results" for further discussion.
Distribution and destination management revenues. Distribution and destination management revenues were $115 million for the year ended December 31, 2021, representing ALG Vacations revenues following the ALG Acquisition.
Other revenues. Other revenues increased $77$51 million during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, primarily due to revenues fromdriven by the impact of the COVID-19 pandemic on our residential management operations acquired as part of Two Roads.during the prior year and revenues related to the Unlimited Vacation Club membership program in the current year.
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties.
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Change 2019 vs. 2018 | ||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | $ | 2,461 | $ | 1,956 | $ | 505 | 25.9 | % | ||||||
| Less: rabbi trust impact | (26 | ) | 4 | (30 | ) | (729.8 | )% | |||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties excluding rabbi trust impact | $ | 2,435 | $ | 1,960 | $ | 475 | 24.2 | % | ||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Change | |||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | $ | 1,583 | $ | 1,286 | $ | 297 | 23.1 | % | |||||||||||||||
| Less: rabbi trust impact | (19) | (28) | 9 | 31.6 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties excluding rabbi trust impact | $ | 1,564 | $ | 1,258 | $ | 306 | 24.4 | % | |||||||||||||||
The increase during the acquisitionyear ended December 31, 2021, compared to the year ended December 31, 2020, included a $9 million decrease in the value of Two Roads.the marketable securities held to fund our deferred compensation plans through rabbi trusts due to a decline in market performance.
Owned and leased hotels expenses.
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Better / (Worse) | 2021 | 2020 | Better / (Worse) | ||||||||||||||||||||||||||||||||
| Comparable owned and leased hotels expenses | $ | 1,185 | $ | 1,183 | $ | (2 | ) | (0.2 | )% | Comparable owned and leased hotels expenses | $ | 578 | $ | 457 | $ | (121) | (26.4) | % | |||||||||||||||||||
| Non-comparable owned and leased hotels expenses | 230 | 265 | 35 | 13.1 | % | Non-comparable owned and leased hotels expenses | 142 | 162 | 20 | 12.7 | % | ||||||||||||||||||||||||||
| Rabbi trust impact | 9 | (2 | ) | (11 | ) | (741.7 | )% | Rabbi trust impact | 5 | 8 | 3 | 29.3 | % | ||||||||||||||||||||||||
| Total owned and leased hotels expenses | $ | 1,424 | $ | 1,446 | $ | 22 | 1.5 | % | Total owned and leased hotels expenses | $ | 725 | $ | 627 | $ | (98) | (15.7) | % | ||||||||||||||||||||
The decreaseincrease in comparable owned and leased hotels expenses which included a $14 million net favorable currency impact, during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, was primarily due to higher variable expenses driven primarily by non-comparable ownedincreased demand and leasedhotels re-opening following the suspension of hotel dispositions, partially offset by acquisitions. See "— Segment Results" foroperations at a discussionnumber of hotels in 2020 due to the COVID-19 pandemic.
For the same periods, non-comparable owned and leased hotels transactionexpenses decreased primarily due to the extended closure of an owned hotel and disposition activity, in 2019partially offset by acquisition activity and 2018. Additionally,two properties undergoing renovations during 2020.
Distribution and destination management expenses. Distribution and destination management expenses were $112 million for the impact recognized with respect to our employee benefit programs funded through rabbi trusts was driven byyear ended December 31, 2021, representing ALG Vacations expenses following the performance of the underlying invested assetsALG Acquisition.
Depreciation and amortization expenses. Depreciation and amortization expenses were flat during the year ended December 31, 20192021, compared to the year ended December 31, 2018.2020, as the $22 million increase in amortization expense of intangible assets acquired in the ALG Acquisition was primarily offset by dispositions of owned hotels.
Other direct costs. Other direct costs increased $85$62 million during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018, primarily due to expenses incurred from2020, driven by the impact of the COVID-19 pandemic on our residential management operations acquired as part of Two Roads andduring the growth ofprior year, an increase related to our co-branded credit card program.program from higher cardholder spend and point transfers, and expenses related to the Unlimited Vacation Club membership program, partially offset by decreased expenses due to the sale of the Exhale spa and fitness business during the fourth quarter of 2020.
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Selling, general, and administrative expenses.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Change | |||||||||||||||||||||
| Selling, general, and administrative expenses | $ | 366 | $ | 321 | $ | 45 | 13.7 | % | |||||||||||||||
| Less: rabbi trust impact | (38) | (52) | 14 | 28.5 | % | ||||||||||||||||||
| Less: stock-based compensation expense | (50) | (24) | (26) | (113.7) | % | ||||||||||||||||||
| Adjusted selling, general, and administrative expenses | $ | 278 | $ | 245 | $ | 33 | 13.1 | % | |||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Change 2019 vs. 2018 | ||||||||||||
| Selling, general, and administrative expenses | $ | 417 | $ | 320 | $ | 97 | 30.2 | % | ||||||
| Less: rabbi trust impact | (53 | ) | 9 | (62 | ) | (693.6 | )% | |||||||
| Less: stock-based compensation expense | (35 | ) | (29 | ) | (6 | ) | (19.9 | )% | ||||||
| Adjusted selling, general, and administrative expenses | $ | 329 | $ | 300 | $ | 29 | 9.6 | % | ||||||
See "—Key Business Metrics Evaluated by Management" for further discussion of Adjusted selling, general, and administrative expenses.
Costs incurred on behalf of managed and franchised properties.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Change | |||||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | $ | 1,639 | $ | 1,375 | $ | 264 | 19.2 | % | |||||||||||||||
| Less: rabbi trust impact | (19) | (28) | 9 | 31.6 | % | ||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties excluding rabbi trust impact | $ | 1,620 | $ | 1,347 | $ | 273 | 20.3 | % | |||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Change 2019 vs. 2018 | ||||||||||||
| Costs incurred on behalf of managed and franchised properties | $ | 2,520 | $ | 1,981 | $ | 539 | 27.2 | % | ||||||
| Less: rabbi trust impact | (26 | ) | 4 | (30 | ) | (729.8 | )% | |||||||
| Costs incurred on behalf of managed and franchised properties excluding rabbi trust impact | $ | 2,494 | $ | 1,985 | $ | 509 | 25.6 | % | ||||||
The increase during the acquisitionyear ended December 31, 2021, compared to the year ended December 31, 2020, included a $9 million decrease in the value of Two Roads.the marketable securities held to fund our deferred compensation plans through rabbi trusts due to a decline in market performance.
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts.
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | 2021 | 2020 | Better / (Worse) | ||||||||||||||||||||||||||||||||
| Rabbi trust impact allocated to selling, general, and administrative expenses | $ | 53 | $ | (9 | ) | $ | 62 | 693.6 | % | Rabbi trust impact allocated to selling, general, and administrative expenses | $ | 38 | $ | 52 | $ | (14) | (28.5) | % | |||||||||||||||||||
| Rabbi trust impact allocated to owned and leased hotels expense | 9 | (2 | ) | 11 | 741.7 | % | |||||||||||||||||||||||||||||||
| Rabbi trust impact allocated to owned and leased hotels expenses | Rabbi trust impact allocated to owned and leased hotels expenses | 5 | 8 | (3) | (29.3) | % | |||||||||||||||||||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | $ | 62 | $ | (11 | ) | $ | 73 | 700.2 | % | Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | $ | 43 | $ | 60 | $ | (17) | (28.6) | % | |||||||||||||||||||
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts increaseddecreased during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, driven by the performance of the underlying invested assets.
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Equity earnings (losses) from unconsolidated hospitality ventures.
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Equity earnings (losses) from unconsolidated hospitality ventures | $ | (10 | ) | $ | 8 | $ | (18 | ) | (215.1 | )% | ||||
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||
| Net gains from sales activity related to unconsolidated hospitality ventures (Note 4) | $ | 100 | $ | — | $ | 100 | |||||||||||
| Hyatt's share of unconsolidated hospitality ventures foreign currency net gains (losses) | 4 | (20) | 24 | ||||||||||||||
| Hyatt's share of unconsolidated hospitality ventures net losses excluding foreign currency | (60) | (57) | (3) | ||||||||||||||
| Other | (16) | 7 | (23) | ||||||||||||||
| Equity earnings (losses) from unconsolidated hospitality ventures | $ | 28 | $ | (70) | $ | 98 | |||||||||||
The decreaseincrease in equity earnings (losses) from unconsolidated hospitality ventures during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, was primarily driven by the following activity:
| Year Ended December 31, | |||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | |||||||||
| Impairment charges related to investments in unconsolidated hospitality ventures (Note 4) | $ | (7 | ) | $ | (16 | ) | $ | 9 | |||
| Net gains from sales activity related to unconsolidated hospitality ventures (Note 4) | 8 | 40 | (32 | ) | |||||||
| Foreign currency impact (1) | (3 | ) | (13 | ) | 10 | ||||||
| Other | (8 | ) | (3 | ) | (5 | ) | |||||
| Equity earnings (losses) from unconsolidated hospitality ventures | $ | (10 | ) | $ | 8 | $ | (18 | ) | |||
Interest expense. Interest expense increased $35 million during the year ended December 31, 2021, compared to the year ended December 31, 2020, driven by senior notes issuances in 2020 and 2021. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to the Consolidated Financial Statements" for additional information.
Gains (losses) on sales of real estate.estate and other. During the year ended December 31, 2019,2021, we recognized a $349the following:
•$305 million pre-tax gain related to the sale of Hyatt Regency Lake Tahoe Resort, Spa and Casino; and
•$104 million pre-tax gain related to the sale of Hyatt Regency Lost Pines Resort and Spa.
During the year ended December 31, 2020, we recognized the following:
•$30 million pre-tax loss related to the sale of our shares of the entities which own Hyatt Regency Baku;
•$11 million pre-tax loss related to the sale of our shares of the entity which owns Grand Hyatt Seoulthe Exhale spa and adjacentfitness business;
•$3 million pre-tax loss related to the sale of land a $272and construction in progress;
•$4 million pre-tax gain related to an unrelated third-party's investment in certain of our subsidiaries that developed Hyatt Centric Center City Philadelphia and adjacent parking and retail space; and
•$4 million pre-tax gain for the sale of Hyatt Regency Atlanta, and a $101 million pre-tax gain related the sale of the property adjacent to Grand Hyatt San Francisco and assignment of the Apple store lease.commercial building in Omaha, Nebraska
See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 to the Consolidated Financial Statements" for additional information.
Asset impairments. During the year ended December 31, 2019,2021, we recognized $18$8 million of asset impairment charges related to Two Roads intangible assets primarily as a result of contract terminations. During the year ended December 31, 2018,2020, we recognized $25$38 million of assetgoodwill impairment charges and $24 million of impairment charges related to goodwill primarily in relation to the HRMC transaction. property and equipment, operating lease ROU assets, and intangible assets.
See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 9 to the Consolidated Financial Statements" for additional information.
Other income (loss), net. Other income (loss), net increased $176$73 million duringfrom a $92 million loss for the year ended December 31, 2019 compared2020 to a $19 million loss for the year ended December 31, 2018.2021. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 21 to the Consolidated Financial Statements" for additional information.
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Benefit (provision) for income taxes.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Income (loss) before income taxes | $ | 44 | $ | (960) | $ | 1,004 | 104.6 | % | |||||||||||||||
| Benefit (provision) for income taxes | (266) | 257 | (523) | (203.2) | % | ||||||||||||||||||
| Effective tax rate | 603.5 | % | 26.8 | % | (576.7) | % | |||||||||||||||||
| Year Ended December 31, | |||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs 2018 | |||||||||
| Income before income taxes | $ | 1,006 | $ | 951 | $ | 55 | |||||
| Provision for income taxes | (240 | ) | (182 | ) | (58 | ) | |||||
| Effective tax rate | 23.9 | % | 19.1 | % | (4.8 | )% | |||||
The increasedincome tax provision and increase in the effective income tax rate and provision for income taxes during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018, are2020, is primarily due to a low effectivevaluation allowance recorded on U.S. federal and state deferred tax rate on the HRMC transaction in 2018, which was based on the local country tax laws unique to the transaction.
assets. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 14 to our Consolidated Financial Statements" for further detail.
Segment Results
Our segment revenues, comparable RevPAR, and Adjusted EBITDA during the years ended December 31, 2021 and December 31, 2020 continue to be impacted by the COVID-19 pandemic and performance remains significantly below pre-COVID-19 pandemic results.
On November 1, 2021, we completed the ALG Acquisition, which is currently managed as a separate reportable segment.
Owned and leased hotels segment revenues.
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | Currency Impact | ||||||||||||||||||||||||||
| Comparable owned and leased hotels revenues | $ | 705 | $ | 403 | $ | 302 | 74.7 | % | $ | 2 | |||||||||||||||||||
| Non-comparable owned and leased hotels revenues | 150 | 122 | 28 | 22.7 | % | — | |||||||||||||||||||||||
| Total segment revenues | $ | 855 | $ | 525 | $ | 330 | 62.6 | % | $ | 2 | |||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||
| 2019 | 2018 | Better / (Worse) | Currency Impact | |||||||||||||||
| Comparable owned and leased hotels revenues | $ | 1,546 | $ | 1,541 | $ | 5 | 0.3 | % | $ | (11 | ) | |||||||
| Non-comparable owned and leased hotels revenues | 262 | 348 | (86 | ) | (24.7 | )% | (6 | ) | ||||||||||
| Total segment revenues | $ | 1,808 | $ | 1,889 | $ | (81 | ) | (4.3 | )% | $ | (17 | ) | ||||||
two properties undergoing renovations during 2020, partially offset by the acquisitionsextended closure of Hyatt Regency Indian Wells Resort & Spa and Hyatt Regency Phoenix in 2018.an owned hotel during 2021.
| Year Ended December 31, | ||||||||||||||||||
| RevPAR | Occupancy | ADR | ||||||||||||||||
| 2019 | vs. 2018 (in constant $) | 2019 | vs. 2018 | 2019 | vs. 2018 (in constant $) | |||||||||||||
| Comparable owned and leased hotels | $ | 183 | 1.0 | % | 76.8 | % | (0.1)% pts | $ | 238 | 1.0 | % | |||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||
| 2021 | vs. 2020 (in constant $) | 2021 | vs. 2020 | 2021 | vs. 2020 (in constant $) | ||||||||||||||||||||||||||||||
| Comparable owned and leased hotels | $ | 96 | 94.9 | % | 44.5 | % | 21.4% pts | $ | 215 | 1.3 | % | ||||||||||||||||||||||||
The increase in comparable RevPAR at our comparable owned and leased hotels during the year ended December 31, 2019,2021, compared to the same period in 2018,2020, was primarily driven primarily by improved leisure transient business at certain international hotels as well as strong group business within key Europeandemand across various markets partially offset by decreased group demand in certainthe United States markets.due to continued recovery from the COVID-19 pandemic.
During the year ended December 31, 2019,2021, we removed twosix properties from the comparable owned and leased hotels results as the hotelsthree were sold.sold, one was contributed to an unconsolidated hospitality venture, one was closed for an extended period, and one converted from leased to managed.
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Owned and leased hotels segment Adjusted EBITDA.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Owned and leased hotels Adjusted EBITDA | $ | 77 | $ | (135) | $ | 212 | 156.9 | % | |||||||||||||||
| Pro rata share of unconsolidated hospitality ventures Adjusted EBITDA | 14 | (13) | 27 | 204.1 | % | ||||||||||||||||||
| Segment Adjusted EBITDA | $ | 91 | $ | (148) | $ | 239 | 161.2 | % | |||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Owned and leased hotels Adjusted EBITDA | $ | 337 | $ | 373 | $ | (36 | ) | (9.9 | )% | |||||
| Pro rata share of unconsolidated hospitality ventures Adjusted EBITDA | 50 | 55 | (5 | ) | (8.4 | )% | ||||||||
| Segment Adjusted EBITDA | $ | 387 | $ | 428 | $ | (41 | ) | (9.7 | )% | |||||
Americas management and franchising segment revenues.
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | 2021 | 2020 | Better / (Worse) | ||||||||||||||||||||||||||||||||
| Segment revenues | Segment revenues | ||||||||||||||||||||||||||||||||||||
| Management, franchise, and other fees | $ | 433 | $ | 400 | $ | 33 | 8.2 | % | Management, franchise, and other fees | $ | 277 | $ | 152 | $ | 125 | 83.0 | % | ||||||||||||||||||||
| Contra revenue | (15 | ) | (13 | ) | (2 | ) | (15.5 | )% | Contra revenue | (19) | (18) | (1) | (13.6) | % | |||||||||||||||||||||||
| Other revenues | 89 | — | 89 | NM | Other revenues | 84 | 42 | 42 | 99.7 | % | |||||||||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 2,268 | 1,787 | 481 | 27.0 | % | Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 1,410 | 1,152 | 258 | 22.4 | % | ||||||||||||||||||||||||||
| Total segment revenues | $ | 2,775 | $ | 2,174 | $ | 601 | 27.7 | % | Total segment revenues | $ | 1,752 | $ | 1,328 | $ | 424 | 31.9 | % | ||||||||||||||||||||
The increase in management, franchise, and other fees during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018, included a $25 million increase in management fees related to the acquisition of Two Roads and recently opened hotels. The increase2020, was alsoprimarily driven by an increase in management fees from improved demand during 2021 due to continued recovery from the COVID-19 pandemic, which was led by certain markets in the United States, particularly resort destinations, and increases in franchise fees of $13 million primarily attributable to new and ramping hotels, partially offset by a $5 million decreasefrom select service properties.
The increase in other fees driven by $8 million of legal settlement proceeds received in 2018 related to a franchise agreement termination for an unopened property.
The increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties for the year ended December 31, 2019,2021, compared to the same period in 2020, was primarily driven by higher reimbursements for payroll and related costs and system-wide services provided to managed and franchised properties due to hotels resuming operations after prior year suspensions and improved hotel operating performance.
| (Comparable System-wide Hotels) | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||
| 2021 | vs. 2020 (in constant $) | 2021 | vs. 2020 | 2021 | vs. 2020 (in constant $) | ||||||||||||||||||||||||||||||
| Americas full service | $ | 89 | 96.4 | % | 44.1 | % | 19.9% pts | $ | 202 | 7.9 | % | ||||||||||||||||||||||||
| Americas select service | $ | 76 | 66.3 | % | 61.8 | % | 20.7% pts | $ | 123 | 10.6 | % | ||||||||||||||||||||||||
The RevPAR increases at our comparable system-wide full service and select service hotels during the year ended December 31, 2021, compared to the year ended December 31, 2018, was2020, were primarily driven by higher reimbursements for
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| (Comparable System-wide Hotels) | Year Ended December 31, | |||||||||||||||||
| RevPAR | Occupancy | ADR | ||||||||||||||||
| 2019 | vs. 2018 (in constant $) | 2019 | vs. 2018 | 2019 | vs. 2018 (in constant $) | |||||||||||||
| Americas full service | $ | 159 | 1.7 | % | 74.9 | % | 0.1% pts | $ | 212 | 1.5 | % | |||||||
| Americas select service | $ | 105 | (2.0 | )% | 75.7 | % | (0.6)% pts | $ | 139 | (1.3 | )% | |||||||
During the year ended December 31, 2019, no2021, seven properties were removed from the comparable Americas full service system-wide hotelshotel results as four left the hotel portfolio, two have been closed for an extended period, and one property that leftis undergoing a renovation. During the chain wasyear ended December 31, 2021, ten properties were removed from the comparable Americas select service system-wide hotel results.results as two have been closed for an extended period and eight left the hotel portfolio.
Americas management and franchising segment Adjusted EBITDA.
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Segment Adjusted EBITDA | $ | 376 | $ | 352 | $ | 24 | 6.9 | % | ||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 231 | $ | 90 | $ | 141 | 156.8 | % | |||||||||||||||
Adjusted EBITDA increased during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, primarily driven by the aforementioned increases in management and franchise and other fees, partially offset by incrementalfees. Additionally, Adjusted EBITDA increased due to decreased selling, general, and administrative expenses, primarily resulting from bad debt reserves recorded on certain receivables in the prior year, partially offset by an increase in payroll and related to the acquisitioncosts as a result of Two Roads.cost containment initiatives in 2020.
ASPAC management and franchising segment revenues.
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | 2021 | 2020 | Better / (Worse) | ||||||||||||||||||||||||||||||||
| Segment revenues | Segment revenues | ||||||||||||||||||||||||||||||||||||
| Management, franchise, and other fees | $ | 136 | $ | 127 | $ | 9 | 6.9 | % | Management, franchise, and other fees | $ | 72 | $ | 61 | $ | 11 | 17.2 | % | ||||||||||||||||||||
| Contra revenue | (2 | ) | (2 | ) | — | (4.4 | )% | Contra revenue | (4) | (2) | (2) | (45.0) | % | ||||||||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 113 | 95 | 18 | 19.3 | % | Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 96 | 75 | 21 | 27.2 | % | ||||||||||||||||||||||||||
| Total segment revenues | $ | 247 | $ | 220 | $ | 27 | 12.3 | % | Total segment revenues | $ | 164 | $ | 134 | $ | 30 | 22.4 | % | ||||||||||||||||||||
Management, franchise, and other fees which included a $3 million net unfavorable currency impact, increased duringfor the year ended December 31, 2019,2021, compared to the same period in the prior year, ended December 31, 2018, primarily driven by increasedan increase in management fees relatedin Greater China due to new hotels, dueimproved domestic demand, partially offset by a decrease in part to the acquisition of Two Roads, as well as a $5 million increase in other fees driven by license fees from the sale of branded residential ownership units, partially offset by the impact of political unrest in Hong Kong.
| (Comparable System-wide Hotels) | Year Ended December 31, | |||||||||||||||||
| RevPAR | Occupancy | ADR | ||||||||||||||||
| 2019 | vs. 2018 (in constant $) | 2019 | vs. 2018 | 2019 | vs. 2018 (in constant $) | |||||||||||||
| ASPAC full service | $ | 149 | (0.8 | )% | 74.5 | % | 0.3% pts | $ | 201 | (1.1 | )% | |||||||
| ASPAC select service | $ | 58 | 8.4 | % | 68.5 | % | 8.2% pts | $ | 84 | (4.6 | )% | |||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Segment Adjusted EBITDA | $ | 87 | $ | 78 | $ | 9 | 11.6 | % | ||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Segment revenues | ||||||||||||||
| Management, franchise, and other fees | $ | 83 | $ | 80 | $ | 3 | 4.3 | % | ||||||
| Contra revenue | (5 | ) | (5 | ) | — | (3.2 | )% | |||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 74 | 68 | 6 | 9.3 | % | |||||||||
| Total segment revenues | $ | 152 | $ | 143 | $ | 9 | 6.7 | % | ||||||
The increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, was driven by overall growth of our third-party ownedhigher reimbursements for system-wide services provided to managed and franchised properties due to improved hotel operating performance.
| (Comparable System-wide Hotels) | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||
| 2021 | vs. 2020 (in constant $) | 2021 | vs. 2020 | 2021 | vs. 2020 (in constant $) | ||||||||||||||||||||||||||||||
| ASPAC full service | $ | 68 | 15.0 | % | 42.9 | % | 6.1% pts | $ | 158 | (1.3) | % | ||||||||||||||||||||||||
| ASPAC select service | $ | 38 | 23.9 | % | 53.0 | % | 9.2% pts | $ | 71 | 2.4 | % | ||||||||||||||||||||||||
Comparable system-wide hotels RevPAR increased for year ended December 31, 2021, compared to the same period in the prior year, driven by increased transient demand led by Greater China during 2021 due to continued recovery from the COVID-19 pandemic.
During the year ended December 31, 2021, three properties were removed from the comparable ASPAC full service system-wide hotel results as one is undergoing a renovation, one has been closed for an extended period, and one left the hotel portfolio. During the year ended December 31, 2021, one property left the hotel portfolio and was removed from the comparable ASPAC select service portfolio.system-wide hotel results.
| (Comparable System-wide Hotels) | Year Ended December 31, | |||||||||||||||||
| RevPAR | Occupancy | ADR | ||||||||||||||||
| 2019 | vs. 2018 (in constant $) | 2019 | vs. 2018 | 2019 | vs. 2018 (in constant $) | |||||||||||||
| EAME/SW Asia full service | $ | 129 | 3.9 | % | 70.6 | % | 3.2% pts | $ | 183 | (0.8 | )% | |||||||
| EAME/SW Asia select service | $ | 65 | 3.6 | % | 73.0 | % | 6.5% pts | $ | 89 | (5.7 | )% | |||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 29 | $ | 24 | $ | 5 | 20.6 | % | |||||||||||||||
The increase in comparable full service RevPARAdjusted EBITDA was primarily driven by the increase in management, franchise, and other fees revenues during the year ended December 31, 2019,2021, compared to the same period in the prior year, partially offset by an
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increase in selling, general, and administrative expenses, primarily due to higher payroll and related costs as a result of cost containment initiatives in 2020.
EAME/SW Asia management and franchising segment revenues.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Segment revenues | |||||||||||||||||||||||
| Management, franchise, and other fees | $ | 43 | $ | 23 | $ | 20 | 85.0 | % | |||||||||||||||
| Contra revenue | (12) | (10) | (2) | (16.0) | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 66 | 55 | 11 | 21.5 | % | ||||||||||||||||||
| Total segment revenues | $ | 97 | $ | 68 | $ | 29 | 44.1 | % | |||||||||||||||
The increase in management, franchise, and other fees during the year ended December 31, 2021, compared to the year ended December 31, 2018,2020, was driven by an increase in management fees across the region during 2021 due to continued recovery from the COVID-19 pandemic, with notable increases in Europe and the Middle East led by transient demand.
The increase in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties during year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily driven by higher reimbursements for system-wide services provided to managed and franchised properties due to improved hotel operating performance.
| (Comparable System-wide Hotels) | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| RevPAR | Occupancy | ADR | |||||||||||||||||||||||||||||||||
| 2021 | vs. 2020 (in constant $) | 2021 | vs. 2020 | 2021 | vs. 2020 (in constant $) | ||||||||||||||||||||||||||||||
| EAME/SW Asia full service | $ | 69 | 72.2 | % | 40.8 | % | 16.0% pts | $ | 170 | 4.8 | % | ||||||||||||||||||||||||
| EAME/SW Asia select service | $ | 40 | 43.3 | % | 52.8 | % | 16.8% pts | $ | 76 | (2.4) | % | ||||||||||||||||||||||||
Comparable system-wide hotels RevPAR increased during the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily driven by increased transient performance in certain European markets, including one hotel
During the year ended December 31, 2019, no2021, four properties were removed from the comparable EAME/SW Asia full service system-wide hotel results as three were closed for an extended period and one was undergoing a renovation. During the year ended December 31, 2021, one property that left the chainhotel portfolio and was removed from the comparable EAME/SW Asia select service system-wide hotel results.
EAME/SW Asia management and franchising segment Adjusted EBITDA.
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Segment Adjusted EBITDA | $ | 49 | $ | 46 | $ | 3 | 7.3 | % | ||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Segment Adjusted EBITDA | $ | 17 | $ | (15) | $ | 32 | 211.0 | % | |||||||||||||||
The increase in Adjusted EBITDA during the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, was primarily driven by the aforementioned increase in management, franchise, and other fees.fees coupled with reduced selling, general, and administrative expenses due to bad debt reserves recorded on certain receivables in the prior year.
Apple Leisure Group segment revenues.
We acquired ALG on November 1, 2021, and as a result, our 2021 results include two months of ALG operations. During the period, revenues totaled $166 million, primarily driven by $115 million of distribution and destination management revenues and $21 million of management, franchise, and other fees revenues. Management, franchise, and other fees revenues reflect $188 and $92 of Net Package RevPAR for AMR Collection resorts in Americas, including Latin America and the Caribbean, and Europe, respectively.
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Apple Leisure Group segment Adjusted EBITDA.
For the two months ended December 31, 2021, Adjusted EBITDA was $4 million. During the same period, the sale of new Unlimited Vacation Club membership contracts increased contract liabilities and deferred cost assets by $35 million and $16 million, respectively, resulting in $19 million of Net Deferrals. The increases in contract liabilities and deferred cost assets will increase the revenues and expenses, respectively, that will be recognized in our consolidated statements of income (loss) over the customer life of a membership club member, which ranges from 3 to 25 years. Additionally, during the two-month period, Net Financed Contracts increased $8 million.
Corporate and other.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Better / (Worse) | |||||||||||||||||||||
| Revenues | $ | 41 | $ | 34 | $ | 7 | 19.7 | % | |||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | $ | — | $ | 4 | $ | (4) | (100.0) | % | |||||||||||||||
| Adjusted EBITDA | $ | (116) | $ | (130) | $ | 14 | 11.2 | % | |||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Better / (Worse) 2019 vs. 2018 | ||||||||||||
| Revenues | $ | 140 | $ | 132 | $ | 8 | 6.3 | % | ||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | $ | 6 | $ | 6 | $ | — | (11.9 | )% | ||||||
| Adjusted EBITDA | $ | (146 | ) | $ | (127 | ) | $ | (19 | ) | (14.3 | )% | |||
the COVID-19 pandemic. The aforementioned increase to Adjusted EBITDA by Segment and Non-GAAP Measure Reconciliation
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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:
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | Change | |||||||||||||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | (222) | $ | (703) | $ | 481 | 68.4 | % | |||||||||||||||
| Interest expense | 163 | 128 | 35 | 26.9 | % | ||||||||||||||||||
| (Benefit) provision for income taxes | 266 | (257) | 523 | 203.2 | % | ||||||||||||||||||
| Depreciation and amortization | 310 | 310 | — | 0.1 | % | ||||||||||||||||||
| EBITDA | 517 | (522) | 1,039 | 199.1 | % | ||||||||||||||||||
| Contra revenue | 35 | 30 | 5 | 16.7 | % | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | (1,583) | (1,286) | (297) | (23.1) | % | ||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties | 1,639 | 1,375 | 264 | 19.2 | % | ||||||||||||||||||
| Costs incurred on behalf of managed and franchised properties that we do not intend to recover from hotel owners | — | (45) | 45 | 100.0 | % | ||||||||||||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | (28) | 70 | (98) | (139.4) | % | ||||||||||||||||||
| Stock-based compensation expense | 50 | 24 | 26 | 113.7 | % | ||||||||||||||||||
| (Gains) losses on sales of real estate and other | (414) | 36 | (450) | NM | |||||||||||||||||||
| Asset impairments | 8 | 62 | (54) | (87.3) | % | ||||||||||||||||||
| Other (income) loss, net | 19 | 92 | (73) | (79.2) | % | ||||||||||||||||||
| Pro rata share of unconsolidated owned and leased hospitality ventures Adjusted EBITDA | 14 | (13) | 27 | 204.1 | % | ||||||||||||||||||
| Adjusted EBITDA | $ | 257 | $ | (177) | $ | 434 | 245.3 | % | |||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | Change 2019 vs. 2018 | ||||||||||||
| Net income attributable to Hyatt Hotels Corporation | $ | 766 | $ | 769 | $ | (3 | ) | (0.4 | )% | |||||
| Interest expense | 75 | 76 | (1 | ) | (1.2 | )% | ||||||||
| Provision for income taxes | 240 | 182 | 58 | 32.2 | % | |||||||||
| Depreciation and amortization | 329 | 327 | 2 | 0.7 | % | |||||||||
| EBITDA | 1,410 | 1,354 | 56 | 4.2 | % | |||||||||
| Contra revenue | 22 | 20 | 2 | 11.5 | % | |||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | (2,461 | ) | (1,956 | ) | (505 | ) | (25.9 | )% | ||||||
| Costs incurred on behalf of managed and franchised properties | 2,520 | 1,981 | 539 | 27.2 | % | |||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | 10 | (8 | ) | 18 | 215.1 | % | ||||||||
| Stock-based compensation expense | 35 | 29 | 6 | 19.9 | % | |||||||||
| Gains on sales of real estate | (723 | ) | (772 | ) | 49 | 6.3 | % | |||||||
| Asset impairments | 18 | 25 | (7 | ) | (27.2 | )% | ||||||||
| Other (income) loss, net | (127 | ) | 49 | (176 | ) | (358.6 | )% | |||||||
| Pro rata share of unconsolidated owned and leased hospitality ventures Adjusted EBITDA | 50 | 55 | (5 | ) | (8.4 | )% | ||||||||
| Adjusted EBITDA | $ | 754 | $ | 777 | $ | (23 | ) | (2.9 | )% | |||||
Liquidity and Capital Resources
Overview
We finance our business primarily with existing cash, short-term investments, and cash generated from our operations. As part of our long-term business strategy, we use net proceeds from dispositions to support our acquisitions and new investment opportunities, including acquisitions, as well as return capital to our shareholders. When appropriate,shareholders when appropriate. If we deem it necessary, we borrow cash under our revolving credit facility or from other third-party sources and may also raise funds by issuing debt or equity securities as necessary.securities. We maintain a cash investment policy that emphasizes the preservation of capital.
The COVID-19 pandemic and related travel restrictions and other containment efforts have had a significant impact on the travel and lodging and hospitality industries and, as a result, on our business, results of operations, cash flows, and financial condition. We believe our cash position, short-term investments,have been, and will continue to be, disciplined with respect to managing operating expenses and cash flows consistent with business needs and demand levels.
In alignment with our long-term business strategy, on November 1, 2021, we completed the ALG Acquisition and paid $2.7 billion of cash. The transaction was funded with a combination of cash on hand, $1 billion of proceeds from operations, together with borrowing capacity under ournew debt, $575 million of proceeds from the common stock issuance, and $210 million of borrowings on the revolving credit facility. We repaid the $210 million of borrowings on the revolving credit facility during the year ended December 31, 2021. See part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 and Note 16 to our access to the capital markets, will be adequate to meet all of our funding requirements and capital deployment objectivesConsolidated Financial Statements" for the foreseeable future.additional information.
We may, from time to time, seek to retire or purchase additional amounts of our outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an accelerated share repurchase transaction. Such repurchases or exchanges, if any, will depend on prevailing market conditions, restrictions in our existing or future financing arrangements, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.
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We believe that our cash position, short-term investments, and cash from operations, together with borrowing capacity under our revolving credit facility and our access to the capital markets, will be adequate to meet all of our funding requirements and capital deployment objectives in both the short term and long term.
Recent Transactions Affecting Our Liquidity and Capital Resources
During the years ended December 31, 20192021 and December 31, 2018,2020, various transactions impacted our liquidity. See "—Sources and Uses of Cash."
Sources and Uses of Cash
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2019 | 2018 | 2021 | 2020 | |||||||||||||||
| Cash provided by (used in): | Cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 396 | $ | 341 | Operating activities | $ | 315 | $ | (611) | |||||||||
| Investing activities | 585 | 374 | Investing activities | (1,772) | (736) | |||||||||||||
| Financing activities | (541 | ) | (850 | ) | Financing activities | 1,288 | 1,525 | |||||||||||
| Effect of exchange rate changes on cash | 1 | 5 | Effect of exchange rate changes on cash | (3) | (4) | |||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 441 | $ | (130 | ) | Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | (172) | $ | 174 | ||||||||
Cash Flows from Operating Activities
Cash provided by (used in) operating activities increased $55$926 million in the year ended December 31, 20192021 compared to the year ended December 31, 2018.2020. The increase was primarily due to higher tax payments in 2018improved performance across the portfolio driven by transactionscontinued recovery from the COVID-19 pandemic, which contributed to increased working capital. Cash provided by operating activities in 2021 also includes increased working capital driven by ALG's performance. Additionally, during 2021, we received a $254 million refund from the IRS for a loss carryback claim allowed under the provision of the Coronavirus Aid, Relief, and changes in our working capital.Economic Security ("CARES") Act.
Cash Flows from Investing Activities
•We sold the sharesacquired ALG for $2,679 million of the entity which owns Grand Hyatt Seoulcash, net of $460 million of cash and adjacent land to an unrelated third partycash equivalents and $16 million of restricted cash acquired.
•We acquired Alila Ventana Big Sur for approximately $467$146 million of cash, net of closing costs and proration adjustments.
•We invested $369$111 million in capital expenditures (see "—Capital Expenditures").
•We soldpurchased our partner's interest in the entities that own Grand Hyatt San Francisco, Andaz Maui at Wailea Resort,São Paulo for $6 million of cash, and Hyatt Regency Coconut Point Resort and Spa towe repaid the $78 million third-party mortgage loan on the property.
•We invested $29 million in unconsolidated hospitality ventures.
•We issued $21 million of financing receivables.
•We acquired land from an unrelated third party as a portfolio for approximately $992$7 million of cash.
•We received $447 million of net proceeds from the sale of marketable securities and short-term investments.
•We received $343 million of proceeds, net of closing costs and proration adjustments. Proceedsadjustments, from the sale of Hyatt Regency Coconut PointLake Tahoe Resort, Spa and Spa of $221 million were held as restricted for use in a potential like-kind exchange, of which approximately $198 million were subsequently used for acquisitions and the remaining $23 million were released.Casino.
•We received $360$268 million of proceeds, from the HRMC transaction.
•We received $43$98 million of proceeds from the sales activity related to certain equity method investments.investments and the redemption of held-to-maturity ("HTM") debt securities.
•We acquired Two Roads for cashreceived $3 million of $415 million,proceeds, net of $37 million cash acquired, which was inclusivedisposed, closing costs, and proration adjustments, from the sale of a $36 million paymentour interest in the consolidated hospitality venture that owns Hyatt Regency Bishkek.
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2020 Activity:
•We invested $297$601 million in net purchases of marketable securities and short-term investments.
•We invested $122 million in capital expenditures (see "—Capital Expenditures").
•We acquiredinvested $65 million in unconsolidated hospitality ventures.
•We issued $32 million of financing receivables.
•We received $72 million of proceeds related to the disposition of 58% ownership interest in certain subsidiaries that developed Hyatt Centric Center City Philadelphia and adjacent parking and retail space.
•We sold the shares of the entities which own Hyatt Regency PhoenixBaku for a purchase price of approximately $139$11 million, net of $4 million of cash disposed, closing costs, and proration adjustments.
•We acquired Hyatt Regency Indian Wells Resort & Spa for a purchase pricereceived $6 million of approximately $120 million,proceeds, net of closing costs and proration adjustments.
Periodically, we enter into like-kind exchange agreements upon the disposition or acquisition of certain properties. Pursuant to the terms of these agreements, the proceeds from the sales are placed into an escrow account administered by a qualified intermediary and are unavailable for our use until released. The proceeds are recorded as restricted cash on our consolidated balance sheets and released (i) if they are utilized as part of a like-kind exchange agreement, (ii) if we do not identify a suitable replacement property within 45 days after the agreement date, or (iii) when a like-kind exchange agreement is not completed within the remaining allowable time period.
Cash Flows from Financing Activities
•We repurchased 5,621,281issued senior notes for approximately $1,738 million of net proceeds, after deducting $11 million of underwriting discounts and other offering expenses.
•We issued and sold 8,050,000 shares of Class A common stock and received $575 million of net proceeds, after deducting approximately $25 million of underwriting discounts and other offering expenses (the "common stock issuance").
•We redeemed our outstanding $750 million of three-month LIBOR plus 3.000% senior notes due 2022, for approximately $753 million, inclusive of $3 million of accrued interest.
•We repaid our outstanding $250 million of 5.375% senior notes due 2021 at an issue price of 99.846%, at maturity for approximately $257 million, inclusive of $7 million of accrued interest.
•We borrowed and repaid $210 million on our revolving credit facility.
2020 Activity:
•We issued senior notes for approximately $1,635 million of net proceeds, after deducting $15 million of underwriting discounts and other offering expenses.
•We repurchased 827,643 shares of Class BA common stock for an aggregate purchase price of $421$69 million.
•We paid four quarterly $0.19a first quarter $0.20 per share cash dividendsdividend on Class A and Class B common stock totaling $80$20 million.
•We borrowed and repaid $400 million on our revolving credit facility.
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We define net debt as total debt less the total of cash and cash equivalents and short-term investments. We consider net debt and its components to be an important indicator of liquidity and a guiding measure of capital structure strategy. Net debt is a non-GAAP measure and may not be computed the same as similarly titled measures used by other companies. The following table provides a summary of our debt to capital ratios:
| December 31, 2019 | December 31, 2018 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||
| Consolidated debt (1) | $ | 1,623 | $ | 1,634 | Consolidated debt (1) | $ | 3,978 | $ | 3,244 | ||||||||||||
| Stockholders' equity | 3,962 | 3,670 | Stockholders' equity | 3,563 | 3,211 | ||||||||||||||||
| Total capital | 5,585 | 5,304 | Total capital | 7,541 | 6,455 | ||||||||||||||||
| Total debt to total capital | 29.1 | % | 30.8 | % | Total debt to total capital | 52.8 | % | 50.3 | % | ||||||||||||
| Consolidated debt (1) | 1,623 | 1,634 | Consolidated debt (1) | 3,978 | 3,244 | ||||||||||||||||
| Less: Cash and cash equivalents and short-term investments | (961 | ) | (686 | ) | Less: Cash and cash equivalents and short-term investments | (1,187) | (1,882) | ||||||||||||||
| Net consolidated debt | $ | 662 | $ | 948 | Net consolidated debt | $ | 2,791 | $ | 1,362 | ||||||||||||
| Net debt to total capital | 11.9 | % | 17.9 | % | Net debt to total capital | 37.0 | % | 21.1 | % | ||||||||||||
(1) Excludes approximately $572$581 million and $528$671 million of our share of indebtedness of our unconsolidated hospitality ventures accounted for under the equity method at December 31, 20192021 and December 31, 2018,2020, respectively, substantially all of which is non-recourse to us and a portion of which we guarantee pursuant to separate agreements.
Capital Expenditures
We routinely make capital expenditures to enhance our business. We classify our capital expenditures into maintenance and technology, enhancements to existing properties, and investment in new properties under development or recently opened. We have been, and will continue to be, prudentdisciplined with respect to our capital spending, taking into account our cash flow from operations.
| Year Ended December 31, | ||||||||||||||||||
| Year Ended December 31, | 2021 | 2020 | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||||
| Investment in new properties under development or recently opened | $ | 139 | $ | 79 | ||||||||||||||
| Enhancements to existing properties | 137 | 137 | Enhancements to existing properties | $ | 68 | $ | 60 | |||||||||||
| Maintenance and technology | 93 | 81 | Maintenance and technology | 43 | 26 | |||||||||||||
| Investment in new properties under development or recently opened | Investment in new properties under development or recently opened | — | 36 | |||||||||||||||
| Total capital expenditures | $ | 369 | $ | 297 | Total capital expenditures | $ | 111 | $ | 122 | |||||||||
The increasedecrease in investment in new properties under development or recently opened is primarily driven by the completion of the renovation spend at a Miraval properties and the development of a hotel in Philadelphia, Pennsylvania in 2019.property.
Senior Notes
The table below sets forth the outstanding principal balance of our various series of senior unsecured notes (the(collectively, the "Senior Notes") at December 31, 2019,2021, as described in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements." Interest on the Senior Notes is payable semi-annually.semi-annually or quarterly.
| Principal amount | ||||||||
| $300 million senior unsecured notes maturing in 2023—floating rate notes | $ | 300 | ||||||
| $350 million senior unsecured notes maturing in 2023—3.375% | 350 | |||||||
| $700 million senior unsecured notes maturing in 2023—1.300% | 700 | |||||||
| $750 million senior unsecured notes maturing in 2024—1.800% | 750 | |||||||
| $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% | 400 | |||||||
| $450 million senior unsecured notes maturing in 2030—5.750% | 450 | |||||||
| Total Senior Notes | $ | 3,800 | ||||||
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| Principal amount | ||||
| $250 million senior unsecured notes maturing in 2021—5.375% | $ | 250 | ||
| $350 million senior unsecured notes maturing in 2023—3.375% | 350 | |||
| $400 million senior unsecured notes maturing in 2026—4.850% | 400 | |||
| $400 million senior unsecured notes maturing in 2028—4.375% | 400 | |||
| Total Senior Notes | $ | 1,400 | ||
In the indenture that governs the Senior Notes, we agreed not to:
•create any liens on our principal properties, or on the capital stock or debt of our subsidiaries that own or lease principal properties, to secure debt without also effectively providing that the Senior Notes are secured equally and ratably with such debt for so long as such debt is so secured; or
•enter into any sale and leaseback transactions with respect to our principal properties.
These limitations are subject to significant exceptions.
The indenture also limits our ability to enter into mergers or consolidations or transfer all or substantially all of our assets unless certain conditions are satisfied.
If a change of control triggering event occurs, as defined in the indenture governing the Senior Notes, we will be required to offer to purchase the Senior Notes at a price equal to 101% of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase. WeWith the exception of the 2023 Floating Rate Notes, 2023 Fixed Rate Notes, and 2024 Fixed Rate Notes, as defined below, we may also redeem some or all of the remaining Senior Notes at any time prior to their maturity at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption plus a make-whole amount. The amount of any make-whole payment depends, in part, on the yield of U.S. Treasury securities with a comparable maturity to the respective Senior Notes at the date of redemption. The 2023 Floating Rate Notes are not redeemable at our option at any time before the first anniversary of the issue date of the notes. We may redeem some or all of the 2023 Fixed Rate Notes and 2024 Fixed Rate Notes at any time before the first anniversary of the issue date at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption plus a make-whole amount. At any time on or after the first anniversary of the issue date of the 2023 Floating Rate Notes, 2023 Fixed Rate Notes, and 2024 Fixed Rate Notes, we may redeem some or all of such notes at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.
We are in compliance with all applicable covenants under the indenture governing our Senior Notes at December 31, 2019.2021.
On October 1, 2021, we issued the $700 million of 1.300% senior notes due 2023 (the "2023 Fixed Rate Notes"), $300 million of floating rate senior notes due 2023 (the "2023 Floating Rate Notes"), and $750 million of 1.800% senior notes due 2024 (the "2024 Fixed Rate Notes"). See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements".
Revolving Credit Facility
On August 30, 2021, we entered into the Fourth Revolver Amendment, which became effective substantially concurrently with the ALG Acquisition on November 1, 2021. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements" and our Current Report on Form 8-K filed with the SEC on August 31, 2021, which is incorporated in this annual report by reference, for more information related to the Fourth Revolver Amendment.
Our revolving credit facility, as amended through the Fourth Revolver Amendment, the "Revolving Credit Facility," is intended to provide financing for working capital and general corporate purposes, including commercial paper backup and permitted investments and acquisitions. At December 31, 20192021 and December 31, 2018,2020, we had no loan balance outstanding.outstanding under the Revolving Credit Facility. We had $1$7 million and no$1 million outstanding undrawn letters of credit issued under our revolving credit facility (andRevolving Credit Facility, and reduced availability thereunder)thereunder, at December 31, 20192021 and December 31, 2018, respectively.2020. At December 31, 2019,2021, we had $1,493 million of available borrowing capacity of $1.5 billion under our revolving credit facility,Revolving Credit Facility, net of outstanding
undrawn letters of credit. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements."
All of our borrowings under our revolving credit facilityRevolving Credit Facility are guaranteed by substantially all of our material domestic subsidiaries, as defined in the revolving credit facility.Revolving Credit Facility. All guarantees are guarantees of payment and performance and not of collection. Hotel Investors I, Inc., a wholly owned subsidiary, is an additional borrower under our revolving credit facility.Revolving Credit Facility.
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Interest rates on outstanding borrowings are either LIBOR-based or based on an alternate base rate, with margins in each case based on our credit rating or, in certain circumstances, our credit rating and leverage ratio. Interest rates under our Revolving Credit Facility are subject to a LIBOR floor of 0.250%.
During the Covenant Waiver Period, as defined below, and after the Covenant Waiver Period until April 1, 2023 (the "Covenant Adjustment Period"), as long as we have a credit rating of at least BBB- from S&P or a credit rating of at least Baa3 from Moody's, (a) borrowings under our Revolving Credit Facility bear interest, at our option, at either one, three, or six month LIBOR, subject to the LIBOR floor, plus a margin of 1.550% per annum, plus any mandatory costs, if applicable, or the alternative base rate plus a margin of 0.550% per annum and (b) the Revolving Credit Facility provides for a facility fee of 0.200% of the total commitments of the lenders under the Revolving Credit Facility. The facility fee is charged regardless of the level of borrowings. In the event we no longer have a credit rating of BBB- or better from S&P or a credit rating of Baa3 or better from Moody's, (a) borrowings under our Revolving Credit Facility will bear interest at LIBOR, subject to the LIBOR floor, plus 2.000% per annum or the alternative base rate plus 1.000% per annum and (b) the facility fee will be 0.250%.
At December 31, 2019,2021, the interest rate for a one month LIBOR borrowing under our revolving credit facilityRevolving Credit Facility would have been 2.813%1.800%, or LIBOR of 1.763%0.101% (but subject to a LIBOR floor of 0.250%) plus 1.050%.
After the Covenant Adjustment Period, borrowings under our Revolving Credit Facility and the applicable facility fee will be set at lower rates that vary based on our credit rating or, in certain circumstances, our credit rating and leverage ratio.
We are also required to pay letter of credit fees with respect to each letter of credit equal to the applicable margin for LIBOR on the face amount of each letter of credit. In addition, we must pay a fronting fee to the issuer of each letter of credit of 0.10% per annum on the face amount of such letter of credit.
Our revolving credit facilityRevolving Credit Facility contains a number of affirmative and restrictive covenants including limitations on the ability to place liens on our or our direct or indirect subsidiaries' assets; to merge, consolidate, and dissolve; to sell assets; to engage in transactions with affiliates; to change our or our direct or indirect subsidiaries' fiscal year or organizational documents; and to make restricted payments.
The revolving credit facilityRevolving Credit Facility also contains certain covenants, including financial covenants that limit (a) our maximum leverage, (consistingconsisting of the ratio of Consolidated Adjusted TotalFunded Debt to Consolidated EBITDA, each as defined in the revolving credit facility)Revolving Credit Facility, to not more than 4.5 to 1, except that the maximum leverage ratio covenant was not required to be measured during the period from April 21, 2020 through January 1, 2022 (the "Covenant Waiver Period"), the maximum leverage ratio covenant is not required to be tested for the first quarter of 2022, and limitthe maximum leverage ratio covenant is subject to increased levels, beginning at 7.5 to 1 and stepping down to 5.0 to 1, from the second quarter of 2022 through the first quarter of 2023, (b) our fixed charge coverage ratio, consisting of the ratio of Consolidated EBITDA to Consolidated Fixed Charges, each defined in the Revolving Credit Facility, to not less than 1.25 to 1 solely during the first quarter of 2022, and (c) our Secured Funded Debt Ratio, (consistingconsisting of the ratio of Secured Funded Debt to Property and Equipment, each as defined in the revolving credit facility),Revolving Credit Facility, to not more than 0.30 to 1. When applicable, these financial covenants are measured quarterly. Our Revolving Credit Facility also includes a requirement to maintain Liquidity as defined in the Revolving Credit Facility of at least $450 million during the Covenant Waiver Period. Our outstanding Senior Notes do not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios. We currently satisfy all the covenants in our revolving credit facility and Senior Notes and do not expect the covenants will restrict our ability to meet our anticipated borrowing and guarantee levels or increase those levels should we decide to do so in the future.
Letters of Credit
We issue letters of credit either under the revolving credit facilityRevolving Credit Facility as discussed above or directly with financial institutions. We had $263$276 million and $277$234 million in letters of credit issued directly with financial institutions outstanding at December 31, 20192021 and December 31, 2018,2020, respectively. TheseAt December 31, 2021, these letters of credit had weighted-average fees of approximately 99159 basis points and a range oftypically have maturity dates of up to approximately three yearsone year. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."
Surety and Other Bonds
Surety and other bonds issued on our behalf were $47 million at December 31, 2019.2021 and are generally off-balance sheet arrangements. These primarily relate to workers' compensation, taxes, licenses, construction liens, and utilities related to our lodging operations. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."
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Other Indebtedness and Future Debt Maturities
Excluding the $1,400$3,800 million of Senior Notes, all other third-party indebtedness was $223$178 million, net of $15$29 million of unamortized discounts and deferred financing fees, at December 31, 2019.2021.
At December 31, 2019, $112021, $10 million of our outstanding debt will mature in the following 12 months. We believe we will have adequate liquidity, including our capacity to borrow under our revolving credit facility, and/or the ability to execute on refinancing or newproceeds from recent issuances of debt to meet requirements for scheduled maturities.
Contractual Obligations
Our significant contractual obligations at December 31, 2019:
| Payments Due by Period | |||||||||||||||||||||||||||
| Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | |||||||||||||||||||||
| Debt (1) | $ | 2,117 | $ | 84 | $ | 334 | $ | 70 | $ | 419 | $ | 57 | $ | 1,153 | |||||||||||||
| Finance lease obligations (1) | 14 | 3 | 2 | 2 | 2 | 2 | 3 | ||||||||||||||||||||
| Operating lease obligations | 631 | 47 | 45 | 42 | 39 | 36 | 422 | ||||||||||||||||||||
| Purchase obligations | 80 | 80 | — | — | — | — | — | ||||||||||||||||||||
| Other long-term liabilities (2) | 472 | 2 | 1 | 1 | 1 | 1 | 466 | ||||||||||||||||||||
| Total contractual obligations | $ | 3,314 | $ | 216 | $ | 382 | $ | 115 | $ | 461 | $ | 96 | $ | 2,044 | |||||||||||||
Purchase obligations at December 31, 2019.2021 were $69 million, which are due in the short term and primarily consist of construction and renovation commitments at certain owned and leased properties.
We enter into contracts with certain airlines for commercial air transportation provided by third-party air carriers and chartered air transportation provided by ALG Vacations. Obligations under these contracts are due in the short term and may be renegotiated based on customer demand.
Guarantee Commitments
| Amount of Guarantee Commitments Expiration by Period | |||||||||||||||||||||||||||
| Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | |||||||||||||||||||||
| Performance guarantees (1) | $ | 238 | $ | 180 | $ | 12 | $ | 11 | $ | 6 | $ | 1 | $ | 28 | |||||||||||||
| Debt repayment and other guarantees (2) | 415 | 192 | 36 | 75 | 112 | — | — | ||||||||||||||||||||
| Total guarantee commitments | $ | 653 | $ | 372 | $ | 48 | $ | 86 | $ | 118 | $ | 1 | $ | 28 | |||||||||||||
See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."
Investment Commitments
| Amount of Investment Commitments Expected Funding by Period | |||||||||||||||||||||||||||
| Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | |||||||||||||||||||||
| Investment commitments | $ | 296 | $ | 140 | $ | 41 | $ | 70 | $ | 8 | $ | 8 | $ | 29 | |||||||||||||
2021, we expect to fund commitments of $172 million within the next twelve months and $181 million thereafter. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the related disclosures in our consolidated financial statements and accompanying notes.
A number of our accounting policies, which are described in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 2 to our Consolidated Financial Statements," are critical due to the fact they involve a higher degree of judgment and estimates. Those accounting policies and other critical estimates are included below. As a result, these accounting policies could materially affect our financial position and results of operations. While we have used our best estimates based on the facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period. In addition, changes in the accounting estimates that we use are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations. Although we believe our estimates, assumptions, and judgments are reasonable, they are based uponon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions. Management has discussed the development and selection of these critical accounting policies and estimates with the audit committee of the board of directors.
We enter into performance guaranteesutilize an actuary to assist with the valuation of the deferred revenue liability related to certain hotels we manage. We also enter into debt repaymentthe loyalty program. Changes in the estimates, including the anticipated timing and other guarantees with respect to unconsolidated hospitality ventures, certain managed or franchised hotels, and other properties. We record a liability for the fair value of these guarantees at their inception date. In order tofuture point redemptions and an estimate the fair value, we use a Monte Carlo simulation to model the probability of possible outcomes. The valuation methodology requires that we make certain assumptions and judgments in our determination of the fair value, which are based on our knowledge of the hospitality industry, market conditions, location of the property, and specific information available at the time of the valuation.
Equity Method Investments
We assess investments in unconsolidated hospitality ventures accounted for under the equity method for impairment quarterly. We use judgment to determine whether or not there is an indication that a loss in value has occurred and whether a decline is deemed to be other than temporary. The determination of whether a loss in value has occurredtemporary, and whether such a decline is deemed to be other than temporary is based onwe consider our knowledge of the hospitality industry, historical experience, location of the underlying venture property, market conditions, and venture-specific information available at the time of the assessment. When there is an indication that a loss in value has occurred, judgment is also required in determining the assumptions and estimates to use when calculating the fair value.
Changes in economic and operating conditions impacting these estimates and judgments could result in impairments to our equity method investments in future periods. Historically, changes in estimates used in the impairment assessment process have not resulted in material impairment charges in subsequent periods as a result of changes made to those estimates. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 4 to our Consolidated Financial Statements."
Acquisitions
Assets acquired and liabilities assumed in acquisitions are recorded at fair value as of the acquisition date. We use judgment to determine the fair value of the assets or businesses acquired and to allocate the fair value to identifiable tangible and intangible assets. Generally, tangible assets acquired include property and equipment, and intangible assets acquired may include management and franchise agreement intangible assets, brand intangible assets, customer relationship intangible assets, or goodwill in a business combination. Changes to the significant assumptions or factors used to determine fair value, in particular assumptions related to cash flow projections, inclusive of revenue projections, and the selection of discount rates, could affect the measurement and allocation of fair value. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Notes 7 and 9 to the Consolidated Financial Statements."
Goodwill and Indefinite-Lived Intangible Assets
We evaluate goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year using balances at October 1 and at interim dates if indicators of impairment exist.
We are required to apply judgment when determining whether or not indications of impairment exist. The determination of the occurrence of a triggering event is based on our knowledge of the hospitality industry, historical experience, location of the property or properties, market conditions, and specific information available at the time of the assessment. The results of our analysis could vary from period to period depending on how our judgment is applied and the facts and circumstances available at the time of the analysis. Judgment is also required in determining the assumptions and estimates used when calculating the fair value of the reporting unit or the indefinite-lived intangible asset.
Historically, changes in estimates used in the goodwill and indefinite-lived intangible assets valuations have not resulted in material impairment charges in subsequent periods, and at December 31, 2021, a 10% decline in the underlying cash flows or
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a 1% increase in the discount rates or terminal capitalization rates would not result in an impairment of our goodwill or indefinite-lived intangible assets. In periods which are close to an acquisition, we would expect fair value to approximate carrying value and do not consider this to be indicative of an impairment risk, absent other factors. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 9 to our Consolidated Financial Statements."
Property and Equipment, Operating Lease ROU Assets, and Definite-Lived Intangible Assets
We evaluate property and equipment, operating lease ROU assets, and definite-lived intangible assets for impairment quarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the assets by comparing to the projected undiscounted cash flows of the assets. We use judgment to determine whether indications of impairment exist and consider our knowledge of the hospitality industry, historical experience, location of the property, market conditions, and property-specific information available at the time of the assessment. The results of our analysis could vary from period to period depending on how our judgment is applied and the facts and circumstances available at the time of the analysis. When an indicator of impairment exists, judgment is also required in determining the assumptions and estimates to use within the recoverability analysis and when calculating the fair value of the asset or asset group, if applicable.
Changes in economic and operating conditions impacting the judgments used could result in impairments to our long-lived assets in future periods. Historically, changes in estimates used in the property and equipment and definite-lived intangible assets impairment assessment process have not resulted in material impairment charges in subsequent periods as a result of changes made to those estimates.
As a result of the acquisition of Two Roads Hospitality LLC ("Two Roads") and ALG, we recorded management agreement intangibles for both operating and pipeline hotels. During the years ended December 31, 2021 and December 31, 2020, we recognized $8 million and $9 million of impairment charges, respectively, related to management agreement intangible assets for contracts that terminated. We may incur impairment charges in a future period if agreements terminate, the timing of which is unpredictable. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Notes 7 and 9 to the Consolidated Financial Statements."
Incremental Borrowing Rate and Accounting for Leases
In determining the present value of our operating lease ROU assets and lease liabilities, we estimate an incremental borrowing rate ("IBR") by applying a portfolio approach based on lease terms. Certain of our leases have terms that exceed 30 years. Given the lack of publicly available data for longer-term borrowing rates, determining the IBR for certain of our longer-term leases requires additional judgment. Changes in these estimates could result in a material change to our lease liabilities. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 8 to the Consolidated Financial Statements."
At December 31, 2021, we had $384 million of operating lease liabilities recorded on our consolidated balance sheet. A 1% decrease in our estimated IBR would increase our operating lease liabilities by approximately $31 million.
Guarantees
We enter into performance guarantees related to certain hotels we manage. We also enter into debt repayment guarantees with respect to unconsolidated hospitality ventures and certain managed hotels. We record a liability for the fair value of these guarantees at their inception date. In order to estimate the fair value, we use a Monte Carlo simulation to model the probability of possible outcomes. The valuation methodology requires that we make certain assumptions and judgments in our determination of the fair value, which are based on our knowledge of the hospitality industry, market conditions, location of the property, and specific information available at the time of the valuation.
Income Taxes
Judgment is required in addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws, or interpretations thereof). In addition, we are subject to examination of our income tax returns by the IRS and other tax authorities. A change in the assessment of the outcomes of such matters could materially impact our consolidated financial statements.
We evaluate tax positions taken or expected to be taken on a tax return to determine whether they are "moremore likely than not"not of being sustained, assuming that the tax reporting positions will be examined by taxing authorities with full knowledge of all relevant information, prior to recording the related tax benefit in our consolidated financial statements. If a position drops belowdoes not meet the "moremore likely than not"not standard, the benefit can no longercannot be recognized. Assumptions, judgment, and the use of estimates are required in determining if the "more likely than not" standard has been met when developing the provision for income taxes. A change in the assessment of the "more likely than not" standard with respect to a position could materially impact our
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consolidated financial statements. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 14 to our Consolidated Financial Statements."
We utilize an actuaryassess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when it is more likely than not that some or all of our deferred tax assets are not realizable. This assessment is completed by tax jurisdiction and relies on the weight of both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative pre-tax losses for the three-year period are considered significant objective negative evidence that some or all of our deferred tax assets may not be realizable. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to assistgenerate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective.
We generated significant pre-tax losses in 2020 due to the impact of the COVID-19 pandemic, and during the three months ended March 31, 2021, we entered into a three-year U.S. cumulative loss position. As a result of our three-year U.S. cumulative loss and the scheduling estimates discussed above, we recognized a valuation allowance during the year ended December 31, 2021. When pre-tax income returns to normalized levels, we will consider the pre-tax income as positive evidence weighted within our analysis to evaluate the realizability of our U.S. deferred tax asset balances and determine whether a portion of the valuation allowance can be reversed. However, significant judgment will be required to determine the timing and amount of any reversal of the deferred revenue liability related to the loyalty program. Changesvaluation allowance in the estimates, including the anticipated timing and value of future point redemptions and an estimate of the breakage for points that will not be redeemed, could result in a material change to our liability and the amount of revenue we recognize when redemptions occur.periods. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Notes 2 and 3Note 14 to theour Consolidated Financial Statements."
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk, primarily from changes in interest rates and foreign currency exchange rates. In certain situations, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objectives described above, and we do not use derivatives for trading or speculative purposes. At December 31, 2019,2021, we were a party to hedging transactions, including the use of derivative financial instruments, as discussed below.
Interest Rate Risk
In the normal course of business, we are exposed to the impact of interest rate changes due to our borrowing activities. Our objective is to manage the risk of interest rate changes on the results of operations, cash flows, and the market value of our debt by creating an appropriate balance between our fixed and floating-rate debt. We enter into interest rate derivative transactions from time to time, including interest rate swaps and interest rate locks, in order to maintain a level of exposure to interest rate variability that we deem acceptable.
At December 31, 2019, we had outstanding interest rate locks that hedge a portion of the risk of changes in the benchmark interest rate associated with long-term debt we anticipate issuing in the future. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to the Consolidated Financial Statements." At December 31, 20192021 and December 31, 2018,2020, we did not hold any interest rate swap contracts.
The following table sets forth the contractual maturities and the total fair values at December 31, 20192021 for our financial instruments materially affected by interest rate risk:
| Maturities by Period | Maturities by Period | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total carrying amount (1) | Total fair value | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total carrying amount (1) | Total fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-rate debt | $ | 5 | $ | 255 | $ | 5 | $ | 355 | $ | 6 | $ | 952 | $ | 1,578 | $ | 1,680 | Fixed-rate debt | $ | 5 | $ | 1,056 | $ | 756 | $ | 456 | $ | 407 | $ | 990 | $ | 3,670 | $ | 3,892 | |||||||||||||||||||||||||||||||||||||||||||||
| Average interest rate (2) | 4.51 | % | Average interest rate (2) | 3.54 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Floating-rate debt (3) | $ | 5 | $ | 5 | $ | 5 | $ | 4 | $ | 4 | $ | 26 | $ | 49 | $ | 60 | Floating-rate debt (3) | $ | 4 | $ | 303 | $ | 3 | $ | 3 | $ | 3 | $ | 14 | $ | 330 | $ | 338 | |||||||||||||||||||||||||||||||||||||||||||||
| Average interest rate (2) | 7.54 | % | Average interest rate (2) | 1.68 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes $11$7 million of finance lease obligations and $15$29 million of unamortized discounts and deferred financing fees.
(2) Average interest rate at December 31, 2019.2021.
(3) Includes Grand Hyatt Rio de Janeiro construction loan which had a 7.54%7.31% interest rate at December 31, 2019.2021.
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Foreign Currency Exposures and Exchange Rate Instruments
We transact business in various foreign currencies and utilize foreign currency forward contracts to offset our exposure associated with the fluctuations of certain foreign currencies. The U.S. dollar equivalents of the notional amount of the outstanding forward contracts, the majority of which relate to intercompany transactions, with terms of less than one year, were $194$184 million and $210$172 million at December 31, 20192021 and December 31, 2018,2020, respectively.
We intend to offset the gains and losses related to our third-party debt and intercompany transactions with gains or losses on our foreign currency forward contracts such that there is a negligible effect on net income.income (loss). At December 31, 2019,2021, a hypothetical 10% change in foreign currency exchange rates would result in an immaterial change in the fair value of the hedging instruments.
For the years ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 2017,2019, the effects of these derivative instruments resulted in $6 million of net gains, $9 million of net losses, and $3 million of net gains, $15 million of net gains, and $19 million of net losses, respectively, recognized in other income (loss), net on our consolidated statements of income.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 net income.income (loss). At December 31, 2021, we had $2 million recorded in prepaids and other assets on our consolidated balance sheet related to derivative instruments. At December 31, 2020, we had $10 million recorded in accrued expenses and other current liabilities on our consolidated balance sheet related to derivative instruments.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and supplementary data required by Item 8 are contained in Item 15 of this annual report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed 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. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this annual report, an evaluation was carried out under the supervision and with the participation of the Company's management, including its Principal Executive Officer and Principal Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company's Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures, as of the end of the period covered by this annual 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 the Company's management, including the Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Management's Report on Internal Control Over Financial Reporting.
Management's Report on Internal Control Over Financial Reporting is included in Part IV, Item 15 of this annual report.
Attestation Report of Independent Registered Public Accounting Firm.
The Attestation Report of Independent Registered Public Accounting Firm is included in Part IV, Item 15 of this annual report.
Changes in Internal Control.
95
Except as described above, 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.
The scope of management's assessment of the effectiveness of our internal control over financial reporting included all of our consolidated operations, except for ALG which was acquired on November 1, 2021. This exclusion is in accordance with the SEC staff's general guidance that an assessment of a recently acquired business may be omitted from the scope of management's assessment for one year following the acquisition. The business that we acquired in the ALG Acquisition represented approximately 40% of the Company's total assets, 5% of the Company's total revenues, and 13% of the Company's net income (loss) as of December 31, 2021.
Item 9B. Other Information.
Item 9C. Disclosure Regarding Foreign Jurisdictions that any shares of Class B common stock that are converted into shares of Class A common stock be retired and may not be reissued.Prevent Inspections.
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Part III
Item 10.Directors, Executive Officers, and Corporate Governance. |
The information required by this Item 10 is incorporated by reference to the information set forth in the Company's definitive proxy statement, to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 20192021 pursuant to Regulation 14A under the Exchange Act in connection with our 20202022 Annual Meeting of Stockholders.
Information required by this Item 10 appears under the captions: "CORPORATE GOVERNANCE—PROPOSAL 1— ELECTION OF DIRECTORS," "CORPORATE GOVERNANCE—OUR BOARD OF DIRECTORS," "CORPORATE GOVERNANCE," "CORPORATE GOVERNANCE—COMMITTEES OF THE BOARD OF DIRECTORS—Nominating and Corporate Governance Committee," "STOCK OWNERSHIP INFORMATION—DELINQUENT SECTION 16(a) REPORTS," and "CORPORATE GOVERNANCE—COMMITTEES OF THE BOARD OF DIRECTORS—Audit Committee" in the definitive proxy statement. See Part I, "Executive Officers of the Registrant""Information about our Executive Officers" of this annual report for information regarding executive officers of the Company.
Code of Business Conduct and Ethics
The Company has adopted the Hyatt Hotels Corporation Code of Business Conduct and Ethics (the "Code of Ethics"), which is applicable to all of the Hyatt directors, officers, and colleagues, including the Company's President and Chief Executive Officer, Chief Financial Officer, PrincipalChief Accounting Officer or Controller, and other senior financial officers performing similar functions. The Code of Ethics is posted on the Company's website at http://www.hyatt.com. The Company will furnish a copy of the Code of Ethics to any person, without charge, upon written request directed to: Treasurer and Senior Vice President, Investor Relations and Corporate Finance,Financial Planning & Analysis, Hyatt Hotels Corporation, 150 North Riverside Plaza, Chicago, Illinois 60606. In the event that the Company amends or waives any of the provisions of the Code of Ethics that applies to the Company's Chief Executive Officer, Chief Financial Officer, PrincipalChief Accounting Officer or Controller, and other senior financial officers performing similar functions, the Company intends to disclose the subsequent information on its website.
Item 11.Executive Compensation. |
The information required by this Item 11 is incorporated by reference to the information set forth in the Company's definitive proxy statement, to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 20192021 pursuant to Regulation 14A under the Exchange Act in connection with our 20202022 Annual Meeting of Stockholders.
Information related to this Item 11 appears under the captions: "EXECUTIVE COMPENSATION," "CORPORATE GOVERNANCE—TALENT AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," "CORPORATE GOVERNANCE—COMPENSATION OF NON-EMPLOYEE DIRECTORS," "CORPORATE GOVERNANCE—TALENT AND COMPENSATION COMMITTEE REPORT," and "CORPORATE GOVERNANCE—COMMITTEES OF THE BOARD OF DIRECTORS—Talent and Compensation Committee—Compensation Risk Considerations" in the definitive proxy statement.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The information required by this Item 12 is incorporated by reference to the information set forth in the Company's definitive proxy statement, to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 20192021 pursuant to Regulation 14A under the Exchange Act in connection with our 20202022 Annual Meeting of Stockholders.
Information related to this Item 12 appears under the caption "STOCK OWNERSHIP INFORMATION—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the definitive proxy statement.
97
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information at December 31, 20192021 about Class A common stock that may be issued under our existing equity compensation plans:
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | ||||||||||||||||||||||||||||||||||
| Equity Compensation Plans Approved by Security Holders | 5,361,715 | (1) | $55.51 | (2) | 2,990,609 | (3) | Equity Compensation Plans Approved by Security Holders | 6,524,333 | (1) | $ | 58.25 | (2) | 7,091,948 | (3) (4) | |||||||||||||||||||||||||||
| Equity Compensation Plans Not Approved by Security Holders | — | — | 1,469,195 | (4) | Equity Compensation Plans Not Approved by Security Holders | — | — | 1,469,195 | (5) | ||||||||||||||||||||||||||||||||
| Total | 5,361,715 | $55.51 | 4,459,804 | Total | 6,524,333 | $ | 58.25 | 8,561,143 | |||||||||||||||||||||||||||||||||
(1) Includes (a) Stock Appreciation Rightstime-vested stock appreciation rights ("SARs") to purchase 3,844,3574,406,466 shares of Class A common stock issued under the LTIP with a weighted-average exercise price of $55.51$58.25 (calculated on a one-for-one basis), (b) 1,500,7042,105,646 shares of Class A common stock to be issued or retained, as applicable, upon the vesting of Restricted Stock Unitstime-vested restricted stock units ("RSUs") and Performance Share Units ("PSUs")PSUs issued under the LTIP for which no exercise price will be paid (assuming maximum payout of PSU awards), and (c) 16,65412,221 shares of Class A common stock issued pursuant to the ESPP in connection with the October 20192021 to December 20192021 purchase period (for which shares were issued in January and February 2020)2022).
(2) The calculation of weighted-average exercise price only includes outstanding SARs.
(3) Includes (a) 2,651,1116,220,091 shares of Class A common stock that remain available for issuance under the LTIP and (b) 339,498871,857 shares of Class A common stock that remain available for issuance pursuant to the ESPP.
(4) Effective May 20, 2020, the plan's authorized share reserve is based on a fungible unit system, under which full value awards (including RSUs, PSUs, and restricted shares) count as two fungible units for every one share of common stock subject to the award (and each share subject to any such award thus reduces the available reserve by two), while non-full value awards (such as stock options and SARs) count as one fungible unit for every one share of common stock subject to the award (and each share subject to any such award thus reduces the available reserve by one).
(5) Includes (a) 1,169,195 shares of Class A common stock that remain available for issuance pursuant to the DCP and (b) 300,000 shares of Class A common stock that remain available for issuance pursuant to the FRP.
The DCP provides eligible participants employed in the United States with the opportunity to defer a portion of their compensation and receive employer contributions. Compensation deferred under the DCP as well as employer contributions, if any, are credited to a participant's account under the DCP and are held in a rabbi trust on behalf of the participants. A participant may direct the investment of funds in such participant's account in certain investment funds. In 2010, certain participants were offered a one-time election to have up to 15% of certain fully vested and nonforfeitable accounts invested in Class A common stock (with the account balances calculated as of June 1, 2010). In connection with such elections, 30,805 shares of Class A common stock were issued to the trustee of the DCP. The number of shares of Class A common stock to be allocated to each electing participant's account was determined by dividing the dollar amount of such participant's elected percentage of such participant's account balance by the closing price of Class A common stock on June 2, 2010. The shares of Class A common stock held in such accounts are held in the trust on behalf of the participant until distributed upon termination of employment. Participants' accounts under the DCP generally are distributed in cash. However, the portion of the participant's account invested in Class A common stock will be distributed in shares of Class A common stock. The material terms of the FRP are the same as the material terms of the DCP. Participants in the FRP are employees located outside of the United States. Participants in the FRP have not been given an election to invest their accounts in Class A common stock due to international securities law considerations. However, the board of directors has reserved 300,000 shares of Class A common stock for issuance under the FRP in the event that participants in the FRP are given such an election in the future.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 is incorporated by reference to the information set forth in the Company's definitive proxy statement, to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 20192021 pursuant to Regulation 14A under the Exchange Act in connection with our 20202022 Annual Meeting of Stockholders.
Information related to this Item 13 appears under the captions: "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" and "CORPORATE GOVERNANCE—DIRECTOR INDEPENDENCE" in the definitive proxy statement.
98
Item 14.Principal Accountant Fees and Services. |
The information required by this Item 14 is incorporated by reference to the information set forth in the Company's definitive proxy statement, to be filed with the SEC within 120 days after the end of the Company's fiscal year ended December 31, 20192021 pursuant to Regulation 14A under the Exchange Act in connection with our 20202022 Annual Meeting of Stockholders.
Information related to this Item 14 appears under the caption "INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" in the definitive proxy statement.
99
Part IV
Item 15.Exhibits and Financial Statement Schedule. |
The following documents are filed as part of this annual report.
(a) Financial Statements
The following consolidated financial statements are included in this annual report on the pages indicated:
| Page | |||||
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| F- 2 | |||||
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(b) Financial Statement Schedule
The following financial statement schedule is included in this annual report on the page indicated:
| Page | |||||
| SCHII-1 | |||||
(c) Exhibits |
The Exhibit Index follows Schedule II—Valuation and Qualifying Accounts for the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019 and is incorporated herein by reference.
Item 16.Form 10-K Summary. |
Omitted at registrant's option.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 | ||||||||
| By: | ||||||||
| /s/ Mark S. Hoplamazian | ||||||||
| Mark S. Hoplamazian | ||||||||
| President and Chief Executive Officer | ||||||||
| Date: February | ||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Titles | Date | ||||||
| /s/ Mark S. Hoplamazian | President, Chief Executive Officer and Director (Principal Executive Officer) | February | ||||||
| Mark S. Hoplamazian | ||||||||
| /s/ Joan Bottarini | Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | February | ||||||
| Joan Bottarini | ||||||||
| /s/ Thomas J. Pritzker | Executive Chairman of the Board | February | ||||||
| Thomas J. Pritzker | ||||||||
| /s/ Paul D. Ballew | Director | February | ||||||
| Paul D. Ballew | ||||||||
| /s/ Susan D. Kronick | Director | February | ||||||
| Susan D. Kronick | ||||||||
| /s/ Mackey J. McDonald | Director | February | ||||||
| Mackey J. McDonald | ||||||||
| /s/ Cary D. McMillan | Director | February | ||||||
| Cary D. McMillan | ||||||||
| /s/ Pamela M. Nicholson | Director | February | ||||||
| Pamela M. Nicholson | ||||||||
| /s/ Jason Pritzker | Director | February | ||||||
| Jason Pritzker | ||||||||
| /s/ Michael A. Rocca | Director | February | ||||||
| Michael A. Rocca | ||||||||
| /s/ Dion Camp Sanders | Director | February 17, 2022 | ||||||
| Dion Camp Sanders | ||||||||
| /s/ Richard C. Tuttle | Director | February | ||||||
| Richard C. Tuttle | ||||||||
| /s/ James H. Wooten, Jr. | Director | February | ||||||
| James H. Wooten, Jr. | ||||||||
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MANAGEMENT'S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Hyatt Hotels Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Hyatt Hotels Corporation's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Hyatt Hotels Corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Hyatt Hotels Corporation are being made only in accordance with authorizations of Hyatt Hotels Corporation's management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of Hyatt Hotels Corporation that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Hyatt Hotels Corporation's internal control over financial reporting as of December 31, 2019.2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this assessment, management determined that Hyatt Hotels Corporation maintained effective internal control over financial reporting as of December 31, 2019.2021.
The scope of managements' assessment of the effectiveness of our internal control over financial reporting included all of our consolidated operations, except for ALG which was acquired on November 1, 2021. This exclusion is in accordance with the SEC staff's general guidance that an assessment of a recently acquired business may be omitted from the scope of management's assessment for one year following the acquisition. The business that we acquired in the ALG Acquisition represented approximately 40% of the Company's total assets, 5% of the Company's total revenues, and 13% of the Company's net income (loss) as of December 31, 2021.
Deloitte & Touche LLP, the independent registered public accounting firm that has audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on Hyatt Hotels Corporation's internal control over financial reporting as of December 31, 2019.2021. That report is included in Item 15 of this Annual Report on Form 10-K.
| /s/ Mark S. Hoplamazian | ||
Mark S. Hoplamazian President & Chief Executive Officer | ||
| /s/ Joan Bottarini | ||
Joan Bottarini Executive Vice President, Chief Financial Officer | ||
F- 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Hyatt Hotels Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hyatt Hotels Corporation and subsidiaries (the "Company") as of December 31, 20192021 and 2018,2020, the related consolidated statements of income (loss), comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2019,2021, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -— Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2020,17, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Critical Audit Matter Description
The Company operates itsthe loyalty program for the benefit of the Hyatt portfolio of properties.properties during the period of their participation in the loyalty program. The Company's estimate of the value of the deferred revenue liability related to the loyalty program ("the liability") is $671$814 million as of December 31, 20192021 and is actuarially determined based on the anticipated timing and value of future point redemptions, including an estimate of the breakage for points that will nevernot be redeemed. Changes in the estimates used in the determination of the liability could result in a material change to the amount of liability reported.
Given the subjectivity of the Company's breakage assumption, performing audit procedures to evaluate the reasonableness of this estimate involved a higher degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists in performing audit procedures over the liability.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the liability included the following, among others:
F- 2
•We tested the effectiveness of the Company's controls related to the liability, including those over the estimation of the breakage assumption.
•We evaluated the methods and assumptions used by management to estimate the liability by:
•With the assistance of our actuarial specialists, we developed independent estimates of the liability and compared our estimates to management's estimates.estimate.
Acquisitions and Dispositions -– Acquisitions - Two Roads Hospitality, LLC -– Apple Leisure Group – Refer to Note 7 to the financial statements
Intangibles, Net -– Management and Franchise Agreement Intangibles, Brand and Other Indefinite-Lived Intangibles -– Refer to Note 9 to the financial statements
Critical Audit Matter Description
On November 30, 2018,1, 2021, the Company acquired all100% of the outstanding equitylimited partnership interests in Casablanca Global Intermediate Holdings L.P., and 100% of Two Roads Hospitality, LLCthe outstanding shares of Casablanca Global GP Limited, doing business as Apple Leisure Group ("Two Roads"ALG"), in a business combination for a purchase pricetotal consideration of $405approximately $2.7 billion, net of approximately $476 million plus contingent consideration. Accordingly, the total purchase priceof cash acquired. Total consideration was allocated to the assets acquired and liabilities assumed based on their respective fair values, including brand andindefinite-lived intangibles of $516 million, management agreement intangible assetsintangibles of $96$496 million, customer relationships intangibles of $586 million, and $205 million, respectively.other intangibles of $50 million. Management estimated the fair value of these intangible assets using the relief from royalty method and discounted future cash flow models, which included revenue projections and allocations based on the expected contract terms. The preliminary fair value determination of these intangible assets required management to make significant estimates and assumptions related to revenue projections and allocations and the selection of the discount rates. During 2019, the estimated fair values were revised as management refined its analysis of contract terms and renewal assumptions, which affected the underlying revenue projections in the valuation during the one-year measurement period.
Given that the fair value determination of these intangible assets required management to make significant estimates and assumptions related to revenue projections and allocations and the selection of the discount rates, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the revenue projections and allocations and the selection of discount rates for these intangible assets included the following, among others:
•We tested the effectiveness of controls over the valuation of these intangible assets, including management's controls over revenue projections from the management agreementsand allocations and the selection of the discount rates.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the revenue projections and allocations and discount rates by:
◦Assessing the appropriateness of the valuation methodology used to determine the revenue projections and allocations and determination of discount rates.rates, including testing the mathematical accuracy of valuation models.
Testing the source information underlying the determination of the discount rates and testing the mathematical accuracy of the calculations.
◦Developing a range of independent estimates of the discount rates and comparing the discount rates selected by management to the range of independent estimates.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 202017, 2022
We have served as the Company's auditor since 2003.
F- 43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Hyatt Hotels Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Hyatt Hotels Corporation and subsidiaries (the "Company") as of December 31, 2019,2021, based on criteria established inInternal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2019,2021, of the Company and our report dated February 20, 2020,17, 2022, expressed an unqualified opinion on those consolidated financial statements and financial statement scheduleschedule.
As described in Management's Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Apple Leisure Group ("ALG"), which was acquired on November 1, 2021, and included an explanatory paragraph related towhose financial statements constitute 40% of the Company's change in methodtotal assets, 5% of accountingthe Company's total revenues, and 13% of the Company's net income (loss) of the consolidated financial statement amounts as of and for leases on January 1, 2019 due to the adoption of FASB Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) and related ASUs.year ended December 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at ALG.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 202017, 2022
F- 54
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions of dollars, except per share amounts)
| 2021 | 2020 | 2019 | |||||||||||||||
| REVENUES: | |||||||||||||||||
| Owned and leased hotels | $ | 838 | $ | 513 | $ | 1,848 | |||||||||||
| Management, franchise, and other fees | 418 | 239 | 608 | ||||||||||||||
| Contra revenue | (35) | (30) | (22) | ||||||||||||||
| Net management, franchise, and other fees | 383 | 209 | 586 | ||||||||||||||
| Distribution and destination management | 115 | — | — | ||||||||||||||
| Other revenues | 109 | 58 | 125 | ||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 1,583 | 1,286 | 2,461 | ||||||||||||||
| Total revenues | 3,028 | 2,066 | 5,020 | ||||||||||||||
| DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES: | |||||||||||||||||
| Owned and leased hotels | 725 | 627 | 1,424 | ||||||||||||||
| Distribution and destination management | 112 | — | — | ||||||||||||||
| Depreciation and amortization | 310 | 310 | 329 | ||||||||||||||
| Other direct costs | 127 | 65 | 133 | ||||||||||||||
| Selling, general, and administrative | 366 | 321 | 417 | ||||||||||||||
| Costs incurred on behalf of managed and franchised properties | 1,639 | 1,375 | 2,520 | ||||||||||||||
| Direct and selling, general, and administrative expenses | 3,279 | 2,698 | 4,823 | ||||||||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | 43 | 60 | 62 | ||||||||||||||
| Equity earnings (losses) from unconsolidated hospitality ventures | 28 | (70) | (10) | ||||||||||||||
| Interest expense | (163) | (128) | (75) | ||||||||||||||
| Gains (losses) on sales of real estate and other | 414 | (36) | 723 | ||||||||||||||
| Asset impairments | (8) | (62) | (18) | ||||||||||||||
| Other income (loss), net | (19) | (92) | 127 | ||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 44 | (960) | 1,006 | ||||||||||||||
| BENEFIT (PROVISION) FOR INCOME TAXES | (266) | 257 | (240) | ||||||||||||||
| NET INCOME (LOSS) | (222) | (703) | 766 | ||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | — | ||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | (222) | $ | (703) | $ | 766 | |||||||||||
| EARNINGS (LOSSES) PER SHARE—Basic | |||||||||||||||||
| Net income (loss) | $ | (2.13) | $ | (6.93) | $ | 7.33 | |||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | (2.13) | $ | (6.93) | $ | 7.33 | |||||||||||
| EARNINGS (LOSSES) PER SHARE—Diluted | |||||||||||||||||
| Net income (loss) | $ | (2.13) | $ | (6.93) | $ | 7.21 | |||||||||||
| Net income (loss) attributable to Hyatt Hotels Corporation | $ | (2.13) | $ | (6.93) | $ | 7.21 | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| REVENUES: | |||||||||||
| Owned and leased hotels | $ | 1,848 | $ | 1,918 | $ | 2,184 | |||||
| Management, franchise, and other fees | 608 | 552 | 498 | ||||||||
| Amortization of management and franchise agreement assets constituting payments to customers | (22 | ) | (20 | ) | (18 | ) | |||||
| Net management, franchise, and other fees | 586 | 532 | 480 | ||||||||
| Other revenues | 125 | 48 | 36 | ||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | 2,461 | 1,956 | 1,762 | ||||||||
| Total revenues | 5,020 | 4,454 | 4,462 | ||||||||
| DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES: | |||||||||||
| Owned and leased hotels | 1,424 | 1,446 | 1,664 | ||||||||
| Depreciation and amortization | 329 | 327 | 348 | ||||||||
| Other direct costs | 133 | 48 | 31 | ||||||||
| Selling, general, and administrative | 417 | 320 | 377 | ||||||||
| Costs incurred on behalf of managed and franchised properties | 2,520 | 1,981 | 1,782 | ||||||||
| Direct and selling, general, and administrative expenses | 4,823 | 4,122 | 4,202 | ||||||||
| Net gains (losses) and interest income from marketable securities held to fund rabbi trusts | 62 | (11 | ) | 45 | |||||||
| Equity earnings (losses) from unconsolidated hospitality ventures | (10 | ) | 8 | 219 | |||||||
| Interest expense | (75 | ) | (76 | ) | (80 | ) | |||||
| Gains on sales of real estate | 723 | 772 | 236 | ||||||||
| Asset impairments | (18 | ) | (25 | ) | — | ||||||
| Other income (loss), net | 127 | (49 | ) | 42 | |||||||
| INCOME BEFORE INCOME TAXES | 1,006 | 951 | 722 | ||||||||
| PROVISION FOR INCOME TAXES | (240 | ) | (182 | ) | (332 | ) | |||||
| NET INCOME | 766 | 769 | 390 | ||||||||
| NET INCOME AND ACCRETION ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | (1 | ) | |||||||
| NET INCOME ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | 766 | $ | 769 | $ | 389 | |||||
| EARNINGS PER SHARE—Basic | |||||||||||
| Net income | $ | 7.33 | $ | 6.79 | $ | 3.13 | |||||
| Net income attributable to Hyatt Hotels Corporation | $ | 7.33 | $ | 6.79 | $ | 3.12 | |||||
| EARNINGS PER SHARE—Diluted | |||||||||||
| Net income | $ | 7.21 | $ | 6.68 | $ | 3.09 | |||||
| Net income attributable to Hyatt Hotels Corporation | $ | 7.21 | $ | 6.68 | $ | 3.08 | |||||
See accompanying Notes to consolidated financial statements.
F- 65
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions of dollars)
| 2021 | 2020 | 2019 | |||||||||||||||
| Net income (loss) | $ | (222) | $ | (703) | $ | 766 | |||||||||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||||
| Foreign currency translation adjustments, net of tax benefit (provision) of $1, $(2), and $— for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively | (61) | 38 | 8 | ||||||||||||||
| Unrecognized pension benefit (cost), net of tax benefit (provision) of $—, $—, and $1 for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively | 3 | 2 | (4) | ||||||||||||||
| Unrealized gains (losses) on available-for-sale debt securities, net of tax benefit (provision) of $— for the years ended December 31, 2021, December 31, 2020, and December 31, 2019. | (2) | — | 1 | ||||||||||||||
| Unrealized gains (losses) on derivative activity, net of tax benefit (provision) of $—, $8, and $5 for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively | 7 | (23) | (14) | ||||||||||||||
| Other comprehensive income (loss) | (53) | 17 | (9) | ||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | (275) | (686) | 757 | ||||||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | — | ||||||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | (275) | $ | (686) | $ | 757 | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Net income | $ | 766 | $ | 769 | $ | 390 | |||||
| Other comprehensive income (loss), net of taxes: | |||||||||||
| Foreign currency translation adjustments, net of tax (benefit) expense of $-, $(1), and $1 for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively | 8 | 52 | 56 | ||||||||
| Unrecognized pension (cost) benefit, net of tax (benefit) expense of $(1), $1, and $- for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively | (4 | ) | 2 | — | |||||||
| Unrealized gains on available-for-sale debt securities, net of tax expense of $- for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively, and unrealized gains on available-for-sale equity securities, net of tax expense of $23 for the year ended December 31, 2017 | 1 | — | 35 | ||||||||
| Unrealized gains (losses) on derivative activity, net of tax (benefit) expense of $(5), $-, and $- for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively | (14 | ) | (1 | ) | 1 | ||||||
| Other comprehensive income (loss) | (9 | ) | 53 | 92 | |||||||
| COMPREHENSIVE INCOME | 757 | 822 | 482 | ||||||||
| COMPREHENSIVE INCOME AND ACCRETION ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | (1 | ) | |||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO HYATT HOTELS CORPORATION | $ | 757 | $ | 822 | $ | 481 | |||||
See accompanying Notes to consolidated financial statements.
F- 76
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 20192021 and December 31, 20182020
(In millions of dollars, except share and per share amounts)
| 2021 | 2020 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 960 | $ | 1,207 | |||||||
| Restricted cash | 57 | 11 | |||||||||
| Short-term investments | 227 | 675 | |||||||||
| Receivables, net of allowances of $53 and $56 at December 31, 2021 and December 31, 2020, respectively | 633 | 316 | |||||||||
| Inventories | 10 | 9 | |||||||||
| Prepaids and other assets | 149 | 64 | |||||||||
| Prepaid income taxes | 26 | 281 | |||||||||
| Total current assets | 2,062 | 2,563 | |||||||||
| Equity method investments | 216 | 260 | |||||||||
| Property and equipment, net | 2,848 | 3,126 | |||||||||
| Financing receivables, net of allowances of $69 and $114 at December 31, 2021 and December 31, 2020, respectively | 41 | 29 | |||||||||
| Operating lease right-of-use assets | 446 | 474 | |||||||||
| Goodwill | 2,965 | 288 | |||||||||
| Intangibles, net | 1,977 | 385 | |||||||||
| Deferred tax assets | 14 | 207 | |||||||||
| Other assets | 2,034 | 1,797 | |||||||||
| TOTAL ASSETS | $ | 12,603 | $ | 9,129 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Current maturities of long-term debt | $ | 10 | $ | 260 | |||||||
| Accounts payable | 523 | 102 | |||||||||
| Accrued expenses and other current liabilities | 299 | 200 | |||||||||
| Current contract liabilities | 1,178 | 282 | |||||||||
| Accrued compensation and benefits | 187 | 111 | |||||||||
| Current operating lease liabilities | 35 | 29 | |||||||||
| Total current liabilities | 2,232 | 984 | |||||||||
| Long-term debt | 3,968 | 2,984 | |||||||||
| Long-term contract liabilities | 1,349 | 659 | |||||||||
| Long-term operating lease liabilities | 349 | 377 | |||||||||
| Other long-term liabilities | 1,139 | 911 | |||||||||
| Total liabilities | 9,037 | 5,915 | |||||||||
| Commitments and contingencies (see Note 15) | 0 | 0 | |||||||||
| EQUITY: | |||||||||||
| Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of December 31, 2021 and December 31, 2020 | — | — | |||||||||
| Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 50,322,050 issued and outstanding at December 31, 2021, and Class B common stock, $0.01 par value per share, 391,647,683 shares authorized, 59,653,271 shares issued and outstanding at December 31, 2021. Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 39,250,241 issued and outstanding at December 31, 2020, and Class B common stock, $0.01 par value per share, 394,033,330 shares authorized, 62,038,918 shares issued and outstanding at December 31, 2020 | 1 | 1 | |||||||||
| Additional paid-in capital | 640 | 13 | |||||||||
| Retained earnings | 3,167 | 3,389 | |||||||||
| Accumulated other comprehensive loss | (245) | (192) | |||||||||
| Total stockholders' equity | 3,563 | 3,211 | |||||||||
| Noncontrolling interests in consolidated subsidiaries | 3 | 3 | |||||||||
| Total equity | 3,566 | 3,214 | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 12,603 | $ | 9,129 | |||||||
| 2019 | 2018 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS: | |||||||
| Cash and cash equivalents | $ | 893 | $ | 570 | |||
| Restricted cash | 150 | 33 | |||||
| Short-term investments | 68 | 116 | |||||
| Receivables, net of allowances of $32 and $26 at December 31, 2019 and December 31, 2018, respectively | 421 | 427 | |||||
| Inventories | 12 | 14 | |||||
| Prepaids and other assets | 134 | 149 | |||||
| Prepaid income taxes | 28 | 36 | |||||
| Total current assets | 1,706 | 1,345 | |||||
| Equity method investments | 232 | 233 | |||||
| Property and equipment, net | 3,456 | 3,608 | |||||
| Financing receivables, net of allowances | 35 | 13 | |||||
| Operating lease right-of-use assets | 493 | — | |||||
| Goodwill | 326 | 283 | |||||
| Intangibles, net | 437 | 628 | |||||
| Deferred tax assets | 144 | 180 | |||||
| Other assets | 1,588 | 1,353 | |||||
| TOTAL ASSETS | $ | 8,417 | $ | 7,643 | |||
| LIABILITIES AND EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Current maturities of long-term debt | $ | 11 | $ | 11 | |||
| Accounts payable | 150 | 151 | |||||
| Accrued expenses and other current liabilities | 304 | 361 | |||||
| Current contract liabilities | 445 | 388 | |||||
| Accrued compensation and benefits | 144 | 150 | |||||
| Current operating lease liabilities | 32 | — | |||||
| Total current liabilities | 1,086 | 1,061 | |||||
| Long-term debt | 1,612 | 1,623 | |||||
| Long-term contract liabilities | 475 | 442 | |||||
| Long-term operating lease liabilities | 393 | — | |||||
| Other long-term liabilities | 884 | 840 | |||||
| Total liabilities | 4,450 | 3,966 | |||||
| Commitments and contingencies (see Note 15) | |||||||
| EQUITY: | |||||||
| Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of December 31, 2019 and December 31, 2018 | — | — | |||||
| Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 36,109,179 issued and outstanding at December 31, 2019, and Class B common stock, $0.01 par value per share, 397,457,686 shares authorized, 65,463,274 shares issued and outstanding at December 31, 2019. Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 39,507,817 issued and outstanding at December 31, 2018, and Class B common stock, $0.01 par value per share, 399,110,240 shares authorized, 67,115,828 shares issued and outstanding at December 31, 2018 | 1 | 1 | |||||
| Additional paid-in capital | — | 50 | |||||
| Retained earnings | 4,170 | 3,819 | |||||
| Accumulated other comprehensive loss | (209 | ) | (200 | ) | |||
| Total stockholders' equity | 3,962 | 3,670 | |||||
| Noncontrolling interests in consolidated subsidiaries | 5 | 7 | |||||
| Total equity | 3,967 | 3,677 | |||||
| TOTAL LIABILITIES AND EQUITY | $ | 8,417 | $ | 7,643 | |||
See accompanying Notes to consolidated financial statements.
F- 87
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions of dollars)
| 2021 | 2020 | 2019 | ||||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||||||||
| Net income (loss) | Net income (loss) | $ | (222) | $ | (703) | $ | 766 | |||||||||||||||||||||
| 2019 | 2018 | 2017 | ||||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||||
| Net income | $ | 766 | $ | 769 | $ | 390 | ||||||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||||||
| Gains on sales of real estate | (723 | ) | (772 | ) | (236 | ) | ||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||||||||||||
| (Gains) losses on sales of real estate and other | (Gains) losses on sales of real estate and other | (414) | 36 | (723) | ||||||||||||||||||||||||
| Depreciation and amortization | 329 | 327 | 348 | Depreciation and amortization | 310 | 310 | 329 | |||||||||||||||||||||
| Release of contingent consideration liability | (30 | ) | — | — | Release of contingent consideration liability | — | (1) | (30) | ||||||||||||||||||||
| Amortization of share awards | 35 | 28 | 32 | Amortization of share awards | 59 | 28 | 35 | |||||||||||||||||||||
| Amortization of operating lease right-of-use assets | 35 | — | — | Amortization of operating lease right-of-use assets | 27 | 31 | 35 | |||||||||||||||||||||
| Deferred income taxes | 28 | (33 | ) | 56 | Deferred income taxes | 200 | (59) | 28 | ||||||||||||||||||||
| Asset impairments | 18 | 47 | — | Asset impairments | 8 | 62 | 18 | |||||||||||||||||||||
| Equity (earnings) losses from unconsolidated hospitality ventures | 10 | (8 | ) | (219 | ) | Equity (earnings) losses from unconsolidated hospitality ventures | (28) | 70 | 10 | |||||||||||||||||||
| Amortization of management and franchise agreement assets constituting payments to customers | 22 | 20 | 18 | |||||||||||||||||||||||||
| Contra revenue | Contra revenue | 35 | 30 | 22 | ||||||||||||||||||||||||
| Gain on sale of contractual right | (16 | ) | — | — | Gain on sale of contractual right | — | — | (16) | ||||||||||||||||||||
| Realized (gains) losses, net | (2 | ) | 3 | 41 | ||||||||||||||||||||||||
| Unrealized (gains) losses, net | (26 | ) | 47 | (1 | ) | Unrealized (gains) losses, net | (14) | 13 | (26) | |||||||||||||||||||
| Distributions from unconsolidated hospitality ventures | 13 | 17 | 29 | |||||||||||||||||||||||||
| Other | (55 | ) | (25 | ) | 4 | Other | (34) | (4) | (39) | |||||||||||||||||||
| Increase (decrease) in cash attributable to changes in assets and liabilities and other | Increase (decrease) in cash attributable to changes in assets and liabilities and other | |||||||||||||||||||||||||||
| Receivables, net | (29 | ) | 14 | (37 | ) | Receivables, net | (85) | 120 | (26) | |||||||||||||||||||
| Inventories | 1 | — | 12 | |||||||||||||||||||||||||
| Prepaid income taxes | 10 | (5 | ) | 14 | Prepaid income taxes | 255 | (241) | 10 | ||||||||||||||||||||
| Prepaids and other assets | Prepaids and other assets | (54) | (24) | (32) | ||||||||||||||||||||||||
| Accounts payable, accrued expenses, and other current liabilities | 26 | (80 | ) | 102 | Accounts payable, accrued expenses, and other current liabilities | 87 | (256) | (33) | ||||||||||||||||||||
| Contract liabilities | Contract liabilities | 213 | 73 | 133 | ||||||||||||||||||||||||
| Operating lease liabilities | (34 | ) | — | — | Operating lease liabilities | (25) | (23) | (34) | ||||||||||||||||||||
| Accrued compensation and benefits | (1 | ) | 6 | 22 | Accrued compensation and benefits | 33 | (47) | (1) | ||||||||||||||||||||
| Other long-term liabilities | 73 | 51 | 53 | Other long-term liabilities | (25) | (27) | (9) | |||||||||||||||||||||
| Other, net | (54 | ) | (65 | ) | (41 | ) | Other, net | (11) | 1 | (21) | ||||||||||||||||||
| Net cash provided by operating activities | 396 | 341 | 587 | |||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | 315 | (611) | 396 | ||||||||||||||||||||||||
(Continued)
See accompanying Notes to consolidated financial statements.
F- 98
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions of dollars)
| 2019 | 2018 | 2017 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||||||
| Purchases of marketable securities and short-term investments | $ | (350 | ) | $ | (665 | ) | $ | (469 | ) | Purchases of marketable securities and short-term investments | $ | (793) | $ | (1,143) | $ | (350) | |||||||||||||||
| Proceeds from marketable securities and short-term investments | 349 | 624 | 480 | Proceeds from marketable securities and short-term investments | 1,240 | 542 | 349 | ||||||||||||||||||||||||
| Contributions to equity method and other investments | (48 | ) | (60 | ) | (89 | ) | Contributions to equity method and other investments | (29) | (65) | (48) | |||||||||||||||||||||
| Return of equity method and other investments | 28 | 51 | 425 | Return of equity method and other investments | 98 | 5 | 28 | ||||||||||||||||||||||||
| Acquisitions, net of cash acquired | (18 | ) | (678 | ) | (259 | ) | Acquisitions, net of cash acquired | (2,916) | — | (18) | |||||||||||||||||||||
| Capital expenditures | (369 | ) | (297 | ) | (298 | ) | Capital expenditures | (111) | (122) | (369) | |||||||||||||||||||||
| Issuance of financing receivables | (18 | ) | (2 | ) | — | Issuance of financing receivables | (21) | (32) | (18) | ||||||||||||||||||||||
| Proceeds from financing receivables | 46 | — | — | Proceeds from financing receivables | 7 | — | 46 | ||||||||||||||||||||||||
| Proceeds from sales of real estate, net of cash disposed | 940 | 1,382 | 663 | ||||||||||||||||||||||||||||
| Proceeds from sales of real estate and other, net of cash disposed | Proceeds from sales of real estate and other, net of cash disposed | 758 | 85 | 940 | |||||||||||||||||||||||||||
| Proceeds from sale of contractual right | 21 | — | — | Proceeds from sale of contractual right | — | — | 21 | ||||||||||||||||||||||||
| Pre-condemnation proceeds | — | 7 | 15 | ||||||||||||||||||||||||||||
| Other investing activities | 4 | 12 | (11 | ) | Other investing activities | (5) | (6) | 4 | |||||||||||||||||||||||
| Net cash provided by investing activities | 585 | 374 | 457 | ||||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | Net cash provided by (used in) investing activities | (1,772) | (736) | 585 | |||||||||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||||||
| Proceeds from long-term debt, net of issuance costs of $-, $4, and $-, respectively | 400 | 416 | 670 | ||||||||||||||||||||||||||||
| Proceeds from long-term debt, net of issuance costs of $11, $15, and $—, respectively | Proceeds from long-term debt, net of issuance costs of $11, $15, and $—, respectively | 1,949 | 2,035 | 400 | |||||||||||||||||||||||||||
| Repayments of debt | (409 | ) | (231 | ) | (782 | ) | Repayments of debt | (1,218) | (406) | (409) | |||||||||||||||||||||
| Repurchase of common stock | (421 | ) | (946 | ) | (743 | ) | Repurchase of common stock | — | (69) | (421) | |||||||||||||||||||||
| Proceeds from issuance of Class A common stock, net of offering costs of $25, $—, and $—, respectively | Proceeds from issuance of Class A common stock, net of offering costs of $25, $—, and $—, respectively | 575 | — | — | |||||||||||||||||||||||||||
| Contingent consideration paid | (24 | ) | — | — | Contingent consideration paid | — | — | (24) | |||||||||||||||||||||||
| Proceeds from redeemable noncontrolling interest in preferred shares in a subsidiary | — | — | 9 | ||||||||||||||||||||||||||||
| Repayments of redeemable noncontrolling interest in preferred shares in a subsidiary | — | (10 | ) | — | |||||||||||||||||||||||||||
| Dividends paid | (80 | ) | (68 | ) | — | Dividends paid | — | (20) | (80) | ||||||||||||||||||||||
| Other financing activities | (7 | ) | (11 | ) | (12 | ) | Other financing activities | (18) | (15) | (7) | |||||||||||||||||||||
| Net cash used in financing activities | (541 | ) | (850 | ) | (858 | ) | |||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | 1,288 | 1,525 | (541) | |||||||||||||||||||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | 1 | 5 | (7 | ) | EFFECT OF EXCHANGE RATE CHANGES ON CASH | (3) | (4) | 1 | |||||||||||||||||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 441 | (130 | ) | 179 | NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (172) | 174 | 441 | |||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—BEGINNING OF YEAR | 622 | 752 | 573 | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—BEGINNING OF YEAR | 1,237 | 1,063 | 622 | ||||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—END OF PERIOD | $ | 1,063 | $ | 622 | $ | 752 | |||||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—END OF YEAR | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—END OF YEAR | $ | 1,065 | $ | 1,237 | $ | 1,063 | ||||||||||||||||||||||||
(Continued)
See accompanying Notes to consolidated financial statements.
F- 109
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions of dollars)
Supplemental disclosure of cash flow information:
| 2019 | 2018 | 2017 | |||||||||
| Cash and cash equivalents | $ | 893 | $ | 570 | $ | 503 | |||||
| Restricted cash (see Note 2) | 150 | 33 | 234 | ||||||||
| Restricted cash included in other assets (see Note 2) | 20 | 19 | 15 | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | 1,063 | $ | 622 | $ | 752 | |||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Cash and cash equivalents | $ | 960 | $ | 1,207 | $ | 893 | |||||||||||
| Restricted cash (see Note 2) | 57 | 11 | 150 | ||||||||||||||
| Restricted cash included in other assets (see Note 2) | 48 | 19 | 20 | ||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | 1,065 | $ | 1,237 | $ | 1,063 | |||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Cash paid during the period for interest | $ | 145 | $ | 105 | $ | 79 | |||||||||||
| Cash paid (received) during the period for income taxes | $ | (210) | $ | 63 | $ | 175 | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 41 | $ | 42 | $ | 50 | |||||||||||
| Non-cash investing and financing activities are as follows: | |||||||||||||||||
| Non-cash contributions to equity method investments (see Note 4, Note 7, Note 15) | $ | 61 | $ | 35 | $ | 9 | |||||||||||
| Non-cash issuance of financing receivables (see Note 6, Note 7) | $ | 11 | $ | — | $ | 1 | |||||||||||
| Change in accrued capital expenditures | $ | 2 | $ | (12) | $ | (7) | |||||||||||
| Non-cash right-of-use assets obtained in exchange for operating lease liabilities | $ | 16 | $ | 14 | $ | 8 | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Cash paid during the period for interest | $ | 79 | $ | 73 | $ | 80 | |||||
| Cash paid during the period for income taxes | $ | 175 | $ | 292 | $ | 175 | |||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 50 | $ | — | $ | — | |||||
| Non-cash investing and financing activities are as follows: | |||||||||||
| Non-cash contributions to equity method investments (see Note 4, Note 15) | $ | 9 | $ | 61 | $ | 5 | |||||
| Non-cash issuance of financing receivables (see Note 6, Note 7) | $ | 1 | $ | 45 | $ | — | |||||
| Change in accrued capital expenditures | $ | (7 | ) | $ | 13 | $ | 9 | ||||
| Non-cash right-of-use assets obtained in exchange for operating lease liabilities | $ | 8 | $ | — | $ | — | |||||
| Contingent liability (see Note 7) | $ | — | $ | 57 | $ | — | |||||
(Concluded)
See accompanying Notes to consolidated financial statements.
F- 1110
HYATT HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019
(In millions except share and per share amounts)
| Common Shares Outstanding | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests in Consolidated Subsidiaries | Total | |||||||||||||||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—January 1, 2019 | 39,507,817 | 67,115,828 | $ | 1 | $ | — | $ | 50 | $ | 3,819 | $ | (200) | $ | 7 | $ | 3,677 | |||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | — | — | 766 | (9) | — | 757 | ||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | (2) | (2) | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (4,943,897) | (677,384) | — | — | (86) | (335) | — | — | (421) | ||||||||||||||||||||||||||||||||||||||
| Directors compensation | — | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||||||||||||||||||
| Employee stock plan issuance | 79,700 | — | — | — | 5 | — | — | — | 5 | ||||||||||||||||||||||||||||||||||||||
| Share-based payment activity | 490,389 | — | — | — | 29 | — | — | — | 29 | ||||||||||||||||||||||||||||||||||||||
| Class share conversions | 975,170 | (975,170) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Cash dividends of $0.19 share (see Note 16) | — | — | — | — | — | (80) | — | — | (80) | ||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2019 | 36,109,179 | 65,463,274 | $ | 1 | $ | — | $ | — | $ | 4,170 | $ | (209) | $ | 5 | $ | 3,967 | |||||||||||||||||||||||||||||||
| Cumulative effect of accounting changes, net of tax (1) | — | — | — | — | — | (1) | — | — | (1) | ||||||||||||||||||||||||||||||||||||||
| BALANCE—January 1, 2020 | 36,109,179 | 65,463,274 | $ | 1 | $ | — | $ | — | $ | 4,169 | $ | (209) | $ | 5 | $ | 3,966 | |||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | (703) | 17 | — | (686) | ||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | (2) | (2) | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (827,643) | — | — | — | (12) | (57) | — | — | (69) | ||||||||||||||||||||||||||||||||||||||
| Directors compensation | — | — | — | — | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||
| Employee stock plan issuance | 75,763 | — | — | — | 4 | — | — | — | 4 | ||||||||||||||||||||||||||||||||||||||
| Share-based payment activity | 468,586 | — | — | — | 20 | — | — | — | 20 | ||||||||||||||||||||||||||||||||||||||
| Class share conversions | 3,424,356 | (3,424,356) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Cash dividends of $0.20 per share (see Note 16) | — | — | — | — | — | (20) | — | — | (20) | ||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2020 | 39,250,241 | 62,038,918 | $ | 1 | $ | — | $ | 13 | $ | 3,389 | $ | (192) | $ | 3 | $ | 3,214 | |||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | (222) | (53) | — | (275) | ||||||||||||||||||||||||||||||||||||||
| Directors compensation | — | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||||||||||||||||||
| Employee stock plan issuance | 46,311 | — | — | — | 4 | — | — | — | 4 | ||||||||||||||||||||||||||||||||||||||
| Share-based payment activity | 589,851 | — | — | — | 46 | — | — | — | 46 | ||||||||||||||||||||||||||||||||||||||
| Class share conversions | 2,385,647 | (2,385,647) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock | 8,050,000 | — | — | — | 575 | — | — | — | 575 | ||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2021 | 50,322,050 | 59,653,271 | $ | 1 | $ | — | $ | 640 | $ | 3,167 | $ | (245) | $ | 3 | $ | 3,566 | |||||||||||||||||||||||||||||||
| Common Shares Outstanding | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests in Consolidated Subsidiaries | Total | |||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||
| BALANCE—January 1, 2017 | 39,952,061 | 90,863,209 | $ | 1 | $ | — | $ | 1,686 | $ | 2,665 | $ | (277 | ) | $ | 5 | $ | 4,080 | ||||||||||||||
| Total comprehensive income | — | — | — | — | — | 389 | 92 | — | 481 | ||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||
| Repurchase of common stock | (9,096,871 | ) | (3,089,437 | ) | — | — | (743 | ) | — | — | — | (743 | ) | ||||||||||||||||||
| Directors compensation | — | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||
| Employee stock plan issuance | 69,012 | — | — | — | 4 | — | — | — | 4 | ||||||||||||||||||||||
| Share-based payment activity | 287,012 | — | — | — | 18 | — | — | — | 18 | ||||||||||||||||||||||
| Class share conversions | 17,019,935 | (17,019,935 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||
| BALANCE—December 31, 2017 | 48,231,149 | 70,753,837 | $ | 1 | $ | — | $ | 967 | $ | 3,054 | $ | (185 | ) | $ | 6 | $ | 3,843 | ||||||||||||||
| Cumulative effect of accounting changes (1) | — | — | — | — | — | 64 | (68 | ) | — | (4 | ) | ||||||||||||||||||||
| BALANCE—January 1, 2018 | 48,231,149 | 70,753,837 | $ | 1 | $ | — | $ | 967 | $ | 3,118 | $ | (253 | ) | $ | 6 | $ | 3,839 | ||||||||||||||
| Total comprehensive income | — | — | — | — | — | 769 | 53 | — | 822 | ||||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||
| Repurchase of common stock | (10,293,241 | ) | (2,430,654 | ) | — | — | (946 | ) | — | — | — | (946 | ) | ||||||||||||||||||
| Directors compensation | — | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||
| Employee stock plan issuance | 61,900 | — | — | — | 5 | — | — | — | 5 | ||||||||||||||||||||||
| Share-based payment activity | 300,654 | — | — | — | 22 | — | — | — | 22 | ||||||||||||||||||||||
| Class share conversions | 1,207,355 | (1,207,355 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||
| Cash dividends of $0.15 per share (see Note 16) | — | — | — | — | — | (68 | ) | — | — | (68 | ) | ||||||||||||||||||||
| BALANCE—December 31, 2018 | 39,507,817 | 67,115,828 | $ | 1 | $ | — | $ | 50 | $ | 3,819 | $ | (200 | ) | $ | 7 | $ | 3,677 | ||||||||||||||
| Total comprehensive income | — | — | — | — | — | 766 | (9 | ) | — | 757 | |||||||||||||||||||||
| Noncontrolling interests | — | — | — | — | — | — | — | (2 | ) | (2 | ) | ||||||||||||||||||||
| Repurchase of common stock | (4,943,897 | ) | (677,384 | ) | — | — | (86 | ) | (335 | ) | — | — | (421 | ) | |||||||||||||||||
| Directors compensation | — | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||
| Employee stock plan issuance | 79,700 | — | — | — | 5 | — | — | — | 5 | ||||||||||||||||||||||
| Share-based payment activity | 490,389 | — | — | — | 29 | — | — | — | 29 | ||||||||||||||||||||||
| Class share conversions | 975,170 | (975,170 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||
| Cash dividends of $0.19 per share (see Note 16) | — | — | — | — | — | (80 | ) | — | — | (80 | ) | ||||||||||||||||||||
| BALANCE—December 31, 2019 | 36,109,179 | 65,463,274 | $ | 1 | $ | — | $ | — | $ | 4,170 | $ | (209 | ) | $ | 5 | $ | 3,967 | ||||||||||||||
(1) Cumulative adjustment due to adoption of ASU 2016-01 and ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Upon the adoption of ASU 2016-01, the unrealized gains and losses on our equity securities, previously classified as available-for-sale, are recognized in other income (loss), net. | |||||||||||||||||||||||||||||||
See accompanying Notes to consolidated financial statements.
F- 1211
HYATT HOTELS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in millions, unless otherwise indicated)
1. ORGANIZATION
Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries (collectively "Hyatt Hotels Corporation") provide hospitality and other services on a worldwide basis through the development, ownership, operation, management, franchising, and licensing of hospitality and wellness-related businesses. We develop, own, operate, manage, franchise, license, or provide services to a portfolio of properties, consistinghas offerings that consist of full serviceservices hotels, select service hotels, all-inclusive resorts, and other properties, including branded spas and fitness studios, timeshare, fractional, and other forms of residential, vacation ownership, and condominium ownership units. We also offer travel distribution and destination management services through ALG Vacations and the Unlimited Vacation Club paid membership program offering member benefits exclusively at AMR Collection resorts within Latin America and the Caribbean. At December 31, 2019,2021, (i) we operated or franchised 446515 full service hotels, comprising 156,133171,399 rooms throughout the world, (ii) we operated or franchised 467539 select service hotels, comprising 66,97878,067 rooms, of which 399444 hotels are located in the United States, and (iii) our portfolio included 8we operated, franchised, or marketed 108 all-inclusive Hyatt-branded resorts, comprising 3,153 rooms, and 3 wellness resorts, comprising 41035,478 rooms. At December 31, 2019,2021, our portfolio of properties operated in 6570 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 which operate under other tradenames or marks owned by such hotelhotels or licensed by third parties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—Our consolidated financial statements present the results of operations, financial position, and cash flows of Hyatt Hotels Corporation and its majority owned and controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Impact of the COVID-19 Pandemic—The COVID-19 pandemic and related travel restrictions and containment efforts have had a significant impact on the travel industry and as a result, on our business. The impact began in the first quarter of 2020 and has continued throughout the year ended December 31, 2021. As a result, our financial results for 2021, and for the foreseeable future, are not comparable to past performance or indicative of long-term future performance.
Use of Estimates—We are required to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying Notes. ActualOur estimates and assumptions are subject to inherent risk and uncertainty due to the ongoing impact of the COVID-19 pandemic, and actual results could differ materially from suchour estimated amounts.
Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.
Revenue Recognition—Our revenues are primarily derived from the products and services provided to our customers and are generally recognized when control of the product or service has transferred to the customer. Our customers include third-party hotel owners and franchisees, guests at owned and leased hotels, and spa and fitness centers,Unlimited Vacation Club members, ALG Vacations customers, a third-party partner through our co-branded credit card program, and owners and guests of the residential, vacation, and condominium ownership units. A summary of our revenue streams is as follows:
•Owned and leased hotels revenues—Owned and leased hotels revenues are derived from room rentals and services provided at our owned and leased hotels. We present revenues net of sales, occupancy, and other taxes. Taxes collected on behalf of and remitted to governmental taxing authorities are excluded from the transaction price of the underlying products and services. •Management, franchise, and other fees—Management fees primarily consist of a base fee, which is generally calculated as a percentage of gross revenues, and an incentive fee, which is generally computed based on a hotel profitability measure. Included within the management fees are fees that we earn in exchange for providing the hotel access to Hyatt's intellectual property ("IP"). Franchise fees consist of an initial fee and ongoing royalty fees computed as a percentage of gross room revenues and as applicable, food and beverage revenues. Other fees include license fee revenues associated with the licensing of the Hyatt brand names through our co-branded credit card program, license fees associated with sales of our branded residential units, termination fees, and revenues from marketing services provided to certain AMR Collection resorts. •Net management, franchise, and other fees—Management, franchise, and other fees are reduced by the amortization of management and franchise agreement assets and performance cure payments, which constitute payments to customers. Consideration provided to customers related to management and franchise agreement assets is recorded in other assets and amortized to Contra revenue over the expected customer life, which is typically the initial term of the management or franchise agreement. |
F- 1312
•Other revenues—Other revenues include revenues from our residential management operations for condominium units, our Unlimited Vacation Club paid membership club offering member benefits exclusively at AMR Collection resorts in Latin America and the Caribbean, the sale of promotional awards through our co-branded credit card program, and spa and fitness revenues from Exhale, which was sold during the year ended December 31, 2020 (see Note 7).
•Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties—Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties represent the reimbursement of costs incurred on behalf of the owners of properties. These reimbursed costs relate primarily to payroll at managed properties where the Company is the employer, as well as system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties.
The products and services we offer to our customers are comprised of the following performance obligations:
Management and franchise agreements
•Access to Hyatt's IP, including the Hyatt brand names—We receive sales-based fees from •System-wide services—We provide system-wide services on behalf of owners of managed and franchised properties. The promise to provide system-wide services is not a distinct performance obligation because it is attendant to the access to our IP. Therefore, this promise is combined with the access to our IP to form a single performance obligation. In 2021, Hyatt's system-wide services are accounted for under a fund model whereby hotel owners and franchisees are invoiced a system-wide assessment fee on a monthly basis. We recognize the revenues over time as services are provided in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. We have discretion over how we spend program revenues, and therefore, we are the principal. Expenses related to the system-wide programs are recognized as incurred in costs incurred on behalf of managed and franchised properties. Over time, we intend to manage the system-wide programs to break-even and not earn a profit on these services, but the timing of revenues received from the owners may not align with the timing of the expenses incurred to operate the programs. Therefore, any difference between the revenues and expenses will impact our net income (loss). In prior years, certain system-wide services were provided and accounted for under a cost reimbursement model. Under the cost reimbursement model, hotel owners and franchisees were required to reimburse us for all costs incurred to operate the system-wide programs with no added margin. We had discretion over how we spent program revenues, and therefore, we were the principal. Expenses incurred related to the system-wide programs were recognized in costs incurred on behalf of managed and franchised properties. The reimbursement of system-wide services was billed monthly based on an annual estimate of costs to be incurred and recognized in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties commensurate with incurring the cost. Any amounts collected and not yet recognized as revenues were deferred and classified as contract liabilities. Any costs incurred in excess of revenues collected were classified as receivables to the extent we expected to recover the costs over the long term. As a result of the changes in the manner in which system-wide services are charged and provided, we no longer have any properties on a cost reimbursement model. •Hotel management agreement services—Under the terms of our management agreements, we provide hotel management services, which form a single performance obligation that qualifies as a series. In exchange, we receive variable consideration in the form of management fees which are comprised of base and/or incentive fees. Incentive fees are typically subject to the achievement of certain profitability targets, and therefore, we apply judgment in determining the amount of incentive fees recognized each period. Incentive fee revenues are recognized to the extent it is probable that we will not reverse a significant portion of the fees in a subsequent F- 13 period. We rely on internal financial forecasts and historical trends to estimate the amount of incentive fee revenues recognized and the probability that incentive fees will reverse in the future. Generally, base management fees are due and payable on a monthly basis as services are provided, and incentive fees are due and payable based on the terms of the agreement, but at a minimum, incentive fees are billed and collected annually. Revenues are recognized over time as services are rendered. |
Under the terms of certain management agreements, primarily within the United States,U.S., we are the employer of hotel employees. When we are the employer, we are reimbursed for costs incurred related to the employee management services with no added margin, and the reimbursements are recognized over time as services are rendered withinin revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. In jurisdictions in which we are the employer, we have discretion over how employee management services are provided, and therefore, we are the principal.
•Loyalty program administration—We administer the loyalty program for the benefit |
Hyatt's portfolio of properties during the period of their participation in the loyalty program. Under the program, members earn points based on their spend at our properties, by transacting with our strategic loyalty alliances, or in connection with spend on a Hyatt co-branded credit card, which may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties. Points earned by loyalty program members represent a material right to free or discounted goods or services in the future.
The loyalty program has one performance obligation that consists of marketing and managing the program and arranging for award redemptions by members. These two promises are not distinct because the promise to market and manage the program does not benefit the customer without the related arrangement for award redemptions. The costs of administering the loyalty program are charged to the properties through an assessment fee based on members' qualified expenditures. The assessment fee is billed and collected monthly, and the revenuerevenues received by the program isare deferred until a member redeems points. Upon redemption of points at managed and franchised properties, we recognize the previously deferred revenue throughin revenues for the reimbursement of costs incurred on behalf of managed and franchised properties, net of redemption expense paid to managed and franchised hotels. We are responsible for arranging for the redemption of promotional awards, but we do not directly fulfill the award night obligation except at owned and leased hotels. Therefore, we are the agent with respect to this performance obligation for managed and franchised hotels, and we are the principal with respect to owned and leased hotels. A portion of our owned and leased hotels revenues is deferred upon initial stay as points are earned by program members at owned or leased hotels, and revenues are recognized upon redemption at owned or leased hotels.
Room rentals and other services provided at owned and leased hotels
We provide room rentals and other services to our guests, including but not limited to food and beverage, spa, laundry, and parking. These products and services each represent individual performance obligations, and in exchange for these services, we receive fixed amounts based on published rates or negotiated contracts. Payment is due in full at the time the services are rendered or the goods are provided. If a guest enters into a package including multiple goods or services, the fixed price is allocated to each distinct good or service based on the stand-alonestandalone selling price for each item. Revenue isRevenues are recognized over time when we transfer control of the good or service to the customer. Room rental revenue isrevenues are recognized on a daily basis as the guest occupies the room, and revenuerevenues related to other products and services isare recognized when the product or service is provided to the guest.
Hotels commonly enter into arrangements with online travel agencies, trade associations, and other entities. As part of these arrangements, Hyatt may pay the other party a commission or rebate based on the revenuerevenues generated through that channel. The determination of whether toWe recognize revenues gross or net of rebates and commissions is made baseddepending on the terms of each contract.
F- 14
Distribution and destination management
ALG Vacations offers traditional leisure travel products and services on an individual and package basis to destinations primarily within Latin America and the Caribbean. Travel products and services include some or all of the following performance obligations:
•Performance obligations in which ALG Vacations is the agent as third-party suppliers are primarily responsible for providing the services:
•Commercial air transportation provided by third-party air carriers—revenues are recognized at the time of booking, net of related payments to suppliers
•Hotel accommodations provided by AMR Collection and third-party hotels and resorts—revenues are recognized on a net basis as the guest occupies the room
•Travel insurance provided by third-party insurance companies—revenues are recognized at the time of booking, net of related payments to suppliers
•Car rental reservations provided by third-party companies—revenues are recognized on a daily basis as the guest utilizes the rental car, net of related costs
•Excursions provided by third-party companies—revenues are recognized on the day of the excursion, net of related costs.
•Performance obligations in which ALG Vacations is primarily responsible for providing the services, and therefore, is the principal in the transaction and the revenue is recognized gross:
•Chartered air transportation provided by ALG Vacations—revenues are recognized at the time of departure and return
•Ground transportation and excursions provided by Amstar—revenues are recognized at the time of departure and return.
In exchange for the products and services provided, we receive fixed and variable consideration that is allocated between the performance obligations based on relative standalone selling prices. For all performance obligations, we utilize a cost plus margin approach to determine the standalone selling price. For car rental reservations and excursions provided by third-parties companies, we allocate the standalone selling price using observable transaction prices. ALG Vacation's customers pay for travel prior to trip departure and these deposits are recorded as contract liabilities until the transfer of control of the related performance obligation occurs, at which point the related revenues are recognized in distribution and destination management revenues. For certain airline, hotel, and car rental transactions, we also receive fees through global distribution systems ("GDS") that provide the computer systems through which travel supplier inventory is made available and reservations are booked. Payments received through GDS are considered commissions from suppliers and are recognized as revenues at the time of booking in distribution and destination management revenues.
We provide advertising services to travel suppliers on our consumer websites and travel agent websites, in travel brochures, and via other media. Revenues from advertising are recognized when the service is provided and recorded in distribution and destination management revenues.
Residential management operations
We provide services related to the residential management businessservices pursuant to rental management agreements with individual property owners and/or homeowners'homeowner associations whereby the property owners and/or homeowners' associationhomeowner associations participate in our rental program. The services provided include reservations, housekeeping, security, and concierge assistance to guests in exchange for a variable fee based on a revenue sharing agreement with the owner of the condominium ownership unit. The services represent an individual performance obligation. Revenue isRevenues are recognized over time as services are rendered or upon completion of the guest's stay at the condominium ownership unit. We are responsible for establishing pricing as well as fulfilling the services during the guest's stay, and as a result, we are deemedthe principal.
Membership club
Through the Unlimited Vacation Club, we enter into membership contracts with guests that provide various benefits, which each represent a performance obligation: access to preferred rates and benefits at participating properties, free room
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stays, up-front incentives, including gifts and upgrades, the right to renew after the initial contract term, and initial memberships to third-party vacation exchange services.
Membership contracts may be paid in full at commencement or by making a deposit and paying the remaining balance in monthly installments over an average term of less than 4 years. Members are required to pay an annual renewal fee to have continuous access to the benefits outlined in the contract. The unpaid portion of the membership contract does not meet the definition of an asset or a financing receivable as the unpaid balance relates to future services to be provided by us, and our right to collect future cash flows is conditional on our ability to provide continuous access to the principal inmember over the transaction.contract term.
•Preferred rates and benefits at participating properties—revenues are recognized over the pointestimated customer life, which ranges from 3 to 25 years, using the straight-line method
•Free night stays and up-front incentives—revenues are recognized upon redemption, net of redemption expenses as we are the agent
•Right to renew after the initial contract term—this performance obligation represents a material right and revenues are recognized annually as earned
•Initial memberships to third-party vacation exchange services—revenues are recognized over the exchange membership term, net of expenses as we are the agent
Members can upgrade their membership to a higher tier for an additional fee, which results in timeadditional products and services that are separable from the initial contract, and therefore, upgrades are considered a cancellation of the old contract and the creation of a new contract. Members can also downgrade their membership by opting out of paying the unpaid portion of the membership contract. Downgrades do not result in additional distinct goods or services, are rendered orand therefore, the products are provided to the customer. If a guest purchases a spa or fitness package, the fixed pricerevised consideration is allocated to each distinct product or service basedthe remaining performance obligations, with an adjustment to revenues recognized on the stand-alone selling pricedate of downgrade for each item.
Co-branded credit cardscard program
We have a co-branded credit card agreementagreements with a third party and under the terms of the agreement, we have various performance obligations: granting a license to the Hyatt name, arranging for the fulfillment of points issued to cardholders through the loyalty program, and awarding cardholders with free room nights upon achievement of certain program milestones. The loyalty points and free room nights represent material rights that can be redeemed for free or discounted services in the future.
In exchange for the products and services provided, we receive fixed and variable consideration which is allocated between the performance obligations based uponon the relative stand-alonestandalone selling prices. Significant judgment is involved in determining the relative stand-alonestandalone selling prices, and therefore, we engagedengage a third-party valuation specialist to assist us.for assistance. We utilize a relief from royalty method to determine the revenuerevenues allocated to the license which isare recognized over time as the licensee derives value from access to Hyatt's brand name. We utilize observable transaction prices and adjusted market assumptions to determine the stand-alonestandalone selling price of a loyalty point, and we utilize a cost plus margin approach to determine the stand-alonestandalone selling price of the free room nights. The revenues allocated to loyalty program points and free night awards are deferred and recognized upon redemption or expiration of a card member's promotional awards which is recognized net of redemption expense when we are the agent. We are responsible for arranging for the redemption of promotional awards, but we do not directly fulfill the award night obligation except at owned and leased hotels. Therefore, we are the agent for managed and franchised hotels, and we are the principal with respect to owned and leased hotels.
We satisfy the following performance obligations over time: the license ofaccess to Hyatt's symbolic IP, hotel management agreement services, administration of the loyalty program, and the license to our brand name through our co-branded credit card agreement.agreements, and access to preferred pricing for Unlimited Vacation Club members. Each of these performance obligations is
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considered a sales-based royalty or a series of distinct services, and although the activities to fulfill each of these promises may vary from day to day, the nature of each promise is the same and the customer benefits from the services every day.
For each performance obligation satisfied over time, we recognize revenuerevenues using an output method based on the value transferred to the customer. Revenue isRevenues are recognized based on the transaction price and the observable outputs related to each performance obligation. We deem the following to represent our progress in satisfying these performance obligations:
•revenues and operating profits earned by the hotels during the reporting period for access to Hyatt's IP, as it is indicative of the value third-party hotel owners and franchisees derive;
•revenues and operating profits of the hotels for the promise to provide management agreement services to the hotels;
•award night redemptions or point redemptions with third-party partners for the administration of the loyalty program performance obligation; and
•cardholder spend for the license to the Hyatt name through our co-branded credit cards,card program, as it is indicative of the value our partner derives from the use of our name.name; and
•time elapsed as we provide access to AMR Collection resorts under the Unlimited Vacation Club paid membership program.
Within our management agreements, we have two2 performance obligations: providing a licenseaccess to Hyatt's IP and providing management agreement services. Although these constitute two2 separate performance obligations, both obligations represent services that are satisfied over time, and Hyatt recognizes revenuerevenues using an output method based on the performance of the hotel. Therefore, we have not allocated the transaction price between these two2 performance obligations as the allocation would result in the same pattern of revenue recognition.
We have applied the practical expedient that permits the omission of prior-period information about revenuerevenues allocated to future performance obligations.
We do not estimate revenues allocated to remaining performance obligations for the following:
•Deferred revenue related to the loyalty program and base and incentive management fee revenues as the revenues are allocated to a wholly unperformed performance obligation in a series;
•Revenues related to royalty fees as they are considered sales-based royalty fees;
•Revenues received for free nights granted through our co-branded credit card program as the awards have an original duration of 12 months;
•Revenues related to advanced bookings at owned and leased hotels as each stay has a duration of 12 months or less; and
•Revenues related to ALG Vacations as bookings are generally for travel within 12 months or less.
Contract Balances—Our payments from customers are based on the billing terms established in our contracts. Customer billings are classifiedrecorded as accounts receivable when our right to consideration is unconditional. If our right to consideration is conditional on future performance under the contract, the balance is classifiedrecorded as a contract asset. Due to certain profitability hurdles in our management agreements, incentive fees are considered contract assets until the risk related to the achievement of the profitability metric no longer exists. Once the profitability hurdle has been met, the incentive fee receivable balance will be recorded in accounts receivable. Contract assets are includedrecorded in receivables, net on our consolidated balance sheets. Payments received in advance of performance under the contract are classifiedrecorded as current or long-term contract liabilities on our consolidated balance sheets and recognized as revenuerevenues as we perform under the contract.
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Foreign Currency—The functional currency of our consolidated entities located outside the U.S. isgenerally the local currency. The assets and liabilities of these entities are translated into U.S. dollars at period-end exchange rates, and the related gains and losses, net of applicable deferred income taxes, are recorded in accumulated other comprehensive loss on our consolidated balance sheets. Gains and losses from foreign currency transactions are recognized in net income (loss) on our consolidated statements of income (loss). Gains and losses from foreign exchange rate changes related to intercompany receivables and payables of a long-term nature are generally recorded in accumulated other comprehensive loss. Gains and losses from foreign exchange rate movement related to intercompany receivables and payables that are not long-term are recognized in net income (loss) on our consolidated statements of income (loss).
Fair Value—We apply the provisions of fair value measurement to various financial instruments, which we measure at fair value on a recurring basis, and to various financial and nonfinancial assets and liabilities, which we measure at fair value on a nonrecurring basis. We disclose the fair value of our financial assets and liabilities based on observable market information where available or market participant assumptions. These assumptions are subjective in nature and involve matters of judgment, and therefore, fair values cannot always be determined with precision. When determining fair value, we maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are as follows:
•Level One—Fair values based on unadjusted quoted prices in active markets for identical assets and liabilities;
•Level Two—Fair values based on quoted market prices for similar assets and liabilities in active markets, quoted prices in inactive markets for identical assets and liabilities, and inputs other than quoted market prices that are observable for the asset or liability; and
•Level Three—Fair values based on inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. Valuation techniques may include the use of discounted cash flow models and similar techniques and may be internally developed.
We recognize transfers in and transfers out of the levels of the fair value hierarchy as of the end of each quarterly reporting period.
We typically utilize the market approach and income approach for valuing our financial instruments. The market approach utilizes prices and information generated by market transactions involving identical or similar assets and liabilities, and the income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single, discounted present value. For instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the classification within the fair value hierarchy has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy.
The carrying values of our current financial assets and current financial liabilities approximate fair values with the exception of debt and equity securities (see below and Note 4) and financing receivables (see Note 6). The fair value of long-term debt is discussed in Note 11, and the fair value of our guarantee liabilities is discussed below and in Note 15. We do not have nonfinancial assets or nonfinancial liabilities required to be measured at fair value on a recurring basis.
Cash Equivalents—We consider all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Our cash equivalents are classified as Level One in the fair value hierarchy as we are able to obtain market available pricing information on an ongoing basis, see Note 4.
Restricted Cash—We hadCash deposited or held in escrow under contractual or regulatory requirements is classified as restricted cash. Our restricted cash of $170 million and $52 million at December 31, 2019 and December 31, 2018, of which $20 million and $19 million, respectively, are recorded in other assets on our consolidated balance sheets, which includes:
Equity Method Investments—We have investments in unconsolidated hospitality ventures accounted for under the equity method. These investments are an integral part of our business and strategically and operationally important to our overall results. When we receive a distribution from an investment, we determine whether it is a return on our investment or a return of our investment based on the underlying nature of the distribution. Certain of our equity method investments are reported on a lag of up to three months. When intervening events occur during the time lag, we recognize the impact in our consolidated financial statements.
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We assess investments in unconsolidated hospitality ventures for impairment quarterly. Whenquarterly, and when there is an indication that a loss in value has occurred, we evaluate the carrying value in comparison to the estimated fair value of the investment. Fair value is based uponon internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers. The principal inputs used inUnder the discounted cash flow analysisapproach, we utilize various assumptions requiring judgment, are theincluding projected future cash flows, the discount rate,rates, and the capitalization raterates, which are primarily Level Three assumptions. Our estimates of projected future cash flows are based on historical data, various internal estimates, and a variety of external sources, and are developed as part of our routine, long-term planning process.
If the estimated fair value is less than the carrying value, we use ourapply judgment to determine ifwhether the decline in value is other than temporary. In determining this, we consider factors including, but not limited to, the length of time and extent of the decline, loss of value as a percentage of the cost, financial condition and near-term financial projections, our intent and ability to recover the lost value, and current economic conditions. Impairments deemed other than temporary are charged torecognized in equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income. income (loss).
For additional information about equity method investments, see Note 4.
Debt and Equity Securities—Excluding the aforementioned equity method investments, debt and equity securities consist of various investments:
•Equity securities consist of interest-bearing money market funds, mutual funds, common shares, and preferred shares. Equity securities with a readily determinable fair value are recorded at fair value on our consolidated balance sheets based on listed market prices or dealer quotations where available.available and are classified as Level One in the fair value hierarchy as we are able to obtain pricing information on an ongoing basis. Equity securities without a readily determinable fair value are recognizedrecorded at cost less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Net gains and losses, both realized and unrealized, and impairment charges on equity securities are recognized in other income (loss), net on our consolidated statements of income.income (loss).
•Debt securities include preferred shares, time deposits, and fixed income securities, including U.S. government obligations, obligations of other government agencies, corporate debt, mortgage-backed and asset-backed securities, and municipal and provincial notes and bonds. Debt securities are classified as either trading, available-for-sale ("AFS"), or held-to-maturity ("HTM").HTM.
•Trading securities—recognizedrecorded at fair value based on listed market prices or dealer price quotations, where available. Net gains and losses, both realized and unrealized, on trading securities are recognized in net gains (losses) and interest income from marketable securities held to fund rabbi trusts or other income (loss), net, depending on the nature of the investment, on our consolidated statements of income.income (loss).
•AFS securities—recognizedrecorded at fair value based on listed market prices or dealer price quotations, where available. Unrealized gains and losses on AFS debt securities are recognized in accumulated other comprehensive loss on our consolidated balance sheets. Realized gains and losses on AFS debt securities are recognized in other income (loss), net on our consolidated statements of income.income (loss). AFS securities are assessed quarterly for expected credit losses which are recognized in other income (loss), net on our consolidated statements of income (loss). In determining the reserve for credit losses, we evaluate AFS securities at the individual security level and consider our investment strategy, current market conditions, financial strength of the underlying investments, term to maturity, credit rating, and our intent and ability to sell the securities.
HTM securities—investments whichthat we have the intent and ability to hold until maturity and are recorded at amortized cost.
We classify debt securities as current or long-term based on their contractual maturity dates and our intent and ability to hold the investment. Our debt securities are primarily classified as Level Two in fair value hierarchy. Time deposits are recorded at par value, which approximates fair value, and are therefore, classified as Level Two. The remaining securities, other than our investment in preferred shares, are classified as Level Two due to the use and weighting of multiple market inputs being considered in the final price of the security. Our investments in preferred shares are classified as Level Three as discussed in Note 4.
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Interest income on preferred shares that earn a return is recognized in other income (loss), net.
For additional information about debt and equity securities, see Note 4.
Financing Receivables—Financing receivables represent contractual rights to receive money either on demand or on fixed or determinable dates and are recognizedrecorded on our consolidated balance sheets at amortized cost.cost, net of expected credit losses. We recognize interest income as earned and provide an allowance for cancellations and defaults. include accrued interest in the amortized cost basis of the asset.
Our financing receivables are composed of individual, unsecured loans and other types of unsecured financing arrangements provided to hotel owners. These financing receivables generally have stated maturities and interest rates, however,but the repayment terms vary and may be dependent uponon future cash flows of the hotel. We individually assess all financing receivables for credit losses quarterly and establish a reserve to reflect the net amount expected to be collected. We estimate credit losses based on an analysis of several factors, including current economic conditions, industry trends, and specific risk characteristics of the financing receivable, including capital structure, loan performance, market factors, and the underlying hotel performance. Adjustments to credit losses are recognized in other income (loss), net on our consolidated statements of income (loss).
We evaluate accrued interest allowances separately from the financing receivable assets. On an ongoing basis, we monitor the credit quality of our financing receivables based on historical and expected future payment activity. We determine our financing to hotel owners to be non-performingnonperforming if interest or principal is greater than 90 days past due based on the contractual terms of the individual financing receivables or if an impairment charge is recognized for a loan, or if a provision isallowance has been established for our other financing arrangements.arrangements with that borrower. If we consider a financing receivable to be non-performing,nonperforming, we place the financing receivable on non-accrualnonaccrual status.
After an allowance for credit losses has been established, we may determine the receivable balance is based onuncollectible when all commercially reasonable means of recovering the receivable balance have been exhausted. We write off uncollectible balances by reversing the financing receivable and the related allowance for credit losses.
Financing receivables acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased with credit deterioration ("PCD") assets. PCD assets are accounted for at the purchase price or acquisition date fair value with an analysisestimate of several factors including current economic conditionsexpected credit losses to arrive at an initial amortized cost basis. We use certain indicators, such as past due status and industry trends, as well as the specific risk characteristics of these loansthe financing receivable, including capital structure, loan performance, market factors, and the underlying hotel performance. When it is probable that we will be unable to collect all amounts dueperformance, in accordance withidentifying and assessing whether the contractual terms of the individual loan agreement or if projected future cash flows available for repayment of unsecured receivables indicate there is a collection risk, we measure the impairment based on the present value of projected future cash flows discounted at the loan's effective interest rate. For impaired loans, we establish a specific loan loss reserve for the difference between the recorded investment in the loan and the estimated fair value.
Inventories—Inventories are comprised of operating supplies and equipment that have a period of consumption of two years or less and food and beverage items at our owned and leased hotels, which are generally valued at the lower of cost (first-in, first-out) or net realizable value.
Property and Equipment and Definite-Lived Intangible Assets—Property and equipment is stated at cost, including interest incurred during development and construction periods, less accumulated depreciation. Definite-lived intangible assets are recorded at the acquisition-date fair value, less accumulated amortization. Depreciation and amortization are recognized over the estimated useful lives of the assets, primarily on the straight-line method.
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Property and equipment are depreciated over the following:following useful lives:
| Buildings and improvements | |||||
| Leasehold improvements | The shorter of the lease term or useful life of asset | ||||
| Furniture and equipment | |||||
| Computers | |||||
Definite-lived intangible assets are amortized over the following:following useful lives:
| Management and franchise agreement intangibles | 1–30 years | ||||
| Customer relationships intangibles | 5–11 years | ||||
| Other intangibles | Varies based on the nature of the asset | ||||
We assess property and equipment and definite-lived intangible assets for impairment quarterly. Whenquarterly, and when events or circumstances indicate the carrying amountvalue may not be recoverable, we evaluate the net book value of the assets for impairment by comparisoncomparing it to the projected undiscounted future cash flows of the assets. The principal factor used inUnder the undiscounted cash flow analysisapproach, the primary assumption requiring judgment is theour estimate of projected future operating cash flows, which are based on historical data, various internal estimates, and a variety of external resources, which are primarily Level Three assumptions, and are developed as part of our routine, long-term planning process.
If the projected undiscounted future cash flows are less than the net book value of the assets, the fair value is determined based uponon internally developed discounted cash flows of the assets, third-party appraisals or broker valuations, and if appropriate, current estimated net sales proceeds from pending offers. The principal inputs used inUnder the discounted cash flow analysisapproach, we utilize various assumptions requiring judgment, are theincluding projected future operating cash flows, the discount rates, and the capitalization rate assumptions.rates. The excess of the net book value over the estimated fair value is recognized in asset impairments on our consolidated statements of income.income (loss).
We evaluate the carrying value of our property and equipment and definite-lived intangible assets based on our plans, at the time, for such assets and consider qualitative factors such as future development in the surrounding area, status of local competition, and any significant adverse changes in the business climate. Changes to our plans, including a decision to dispose of or change the intended use of an asset, may have a material impact on the carrying value of the asset.
For additional information about property and equipment and definite-lived intangible assets, see NotesNote 5 and Note 9, respectively.
Leases—We primarily lease land, buildings, office space, spas and fitness centers, and equipment. We determine if an arrangement is an operating or finance lease at inception. For our hotel management agreements, we apply judgment in order to determine whether the contract is accounted for as a lease or management agreement based on the specific facts and circumstances of each agreement. In evaluating whether an agreement constitutes a lease, we review the contractual terms to determine which party obtains both the economic benefits and control of the assets. In arrangements where we control the assets and obtain substantially all of the economic benefits, we account for the contract as a lease.
Certain of our leases include options to extend the lease term by 1 to 99 years. We include lease extension options in our operating lease ROU assets and lease liabilities when it is reasonably certain that we will exercise the options. The range of extension options included in our operating lease ROU assets and lease liabilities is approximately 1 to 20 years. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.
We assess operating lease ROU assets for impairment quarterly. Whenquarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the asset for impairmentassets by comparisoncomparing it to the projected undiscounted future cash flows.flows of the assets. If the carrying value of the assetassets is determined to not be recoverable and is in excess of the estimated fair value, we recognize an impairment charge in asset impairments on our consolidated statements of income.
As our leases do not provide an implicit borrowing rate, we use our estimated IBR to determine the present value of our lease payments and apply a portfolio approach. We apply judgment in estimating our IBR, including factorsassumptions related to currency risk and our credit risk. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when determining our IBR.
Our operating leases may include the following terms: (i) fixed minimum lease payments, (ii) variable lease payments based on a percentage of the hotel's profitability measure, as defined in the lease, (iii) lease payments equal to the greater of a minimum or variable lease payments based on a percentage of the hotel's profitability measure, as defined in the lease, (iv) lease payments adjusted for changes in an index or market value, or (v) variable lease payments based on a percentage split of the
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total gross revenue, as defined in the leases, related to our residential management operations. Future lease payments that are contingent are not included in the measurement of the operating lease liability or in the future maturities table, see Note 8.
For office space, land, and hotel leases, we do not separate the lease and nonlease components, which primarily relate to common area maintenance and utilities. We combine lease and nonlease components for those leases where we are the lessor, and we exclude all leases that are twelve months or less from the operating lease ROU assets and lease liabilities.
For additional information about leases, see Note 8.
Acquisitions—We evaluate the facts and circumstances of each acquisition to determine whether the transaction should be accounted for as an asset acquisition or a business combination.
Under the supervision of management, independent third-party valuation specialists estimate the fair value of the assets or businesses acquired using various recognized valuation methods, including the income approach, cost approach, relief from royalty approach, and sales comparison approach, which are primarily based on Level Three assumptions. Assumptions utilized in determining the fair value under these approaches include, but are not limited to, historical financial results when applicable, projected cash flows, discount rates, capitalization rates, royalty rates, current market conditions, likelihood of contract renewals, and comparable transactions. In a business combination, the fair value is allocated to tangible assets and liabilities and identifiable intangible assets, with any remaining value assigned to goodwill, if applicable. In an asset acquisition, any difference between the consideration paid and the fair value of the assets acquired is allocated across the identified assets based on the relative fair value. When we acquire the remaining ownership interest in or the property from an unconsolidated hospitality venture in a step acquisition, we estimate the fair value of our equity interest using the assumed cash proceeds we would receive from sale to a third party at a market sales price, which is determined using the aforementionedour fair value methodologies and assumptions.
The results of operations of properties or businesses have been included inon our consolidated statements of income (loss) since their respective dates of acquisition. Assets acquired and liabilities assumed in acquisitions are recorded on our consolidated balance sheets at the respective acquisition dates based uponon their estimated fair values (see Note 7).values. In business combinations, the purchase price allocations may be based uponon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when we receive final information, including appraisals and other analyses.
Acquisition-related costs incurred in conjunction with a business combination are recognized in other income (loss), net on our consolidated statements of income.income (loss). In an asset acquisition, these costs are included in the total consideration paid and allocated to the acquired assets.
Periodically, we enter into like-kind exchange agreements upon the disposition or acquisition of certain properties. Pursuant to the terms of these agreements, the proceeds from the sales are placed into an escrow account administered by a qualified intermediary and are unavailable for our use until released. The proceeds are recorded as restricted cash on our consolidated balance sheets and released (i) if they are utilized as part of a like-kind exchange agreement, (ii) if we do not identify a suitable replacement property within 45 days after the agreement date, or (iii) when a like-kind exchange agreement is not completed within the remaining allowable time period.
For additional information about acquisitions, see Note 7.
Goodwill—Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified andor separately recognized. As required, weWe evaluate goodwill for impairment annually during the fourth quarter of each year using balances at October 1 and at an interim datedates if indicationsindicators of impairment exist. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount.
We evaluate the fair value of the reporting unit either by performing a qualitative or quantitative assessment. In any given year, we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we proceed to the quantitative assessment.
When determining fair value, we utilize internally developed discounted future cash flow models, third-party valuation specialist models, third-party appraisals or broker valuations, and if appropriate, current estimated net sales proceeds from pending offers. Under the discounted cash flow approach, we utilize various assumptions requiring judgment, including projected future cash flows, discount rates, and capitalization rates. Our estimates of projected future cash flows are based on historical data, various internal estimates, and a variety of external sources, which are primarily Level Three assumptions, and are developed as part of our routine, long-term planning process. We then compare the estimated fair value to our carrying value. If the carrying value is in excess of the fair value, we recognize an impairment charge in asset impairments on our
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consolidated statements of income (loss) based on the amount by which the reporting unit's carrying value of the reporting unit exceeded itsthe fair value, limited to the carrying amount of goodwill. For additional information about goodwill, see Note 9.
Indefinite-Lived Intangible Assets—We have certain brand and other indefinite-lived intangiblesintangible assets that were acquired through various business combinations. At the time of each respective acquisition, fair value was estimated using a relief from royalty methodology.method.
Guarantees—We enter into performance guarantees related to certain hotels we manage. We also enter into debt repayment and other guarantees with respect to unconsolidated hospitality ventures and certain managed or franchised hotels, and other properties.hotels. We record a liability for the fair value of these guarantees at their inception date. In order to estimate the fair value, we use a Monte Carlo simulation to model the probability of possible outcomes. The valuation methodology requires that we make certain assumptions and judgments regarding discount rates, volatility, hotel operating results, and hotel property sales prices.prices, which are primarily Level Three assumptions. The fair value is not re-valuedrevalued due to future changes in assumptions. The corresponding offset depends on the circumstances in which the guarantee was issued and is recorded to equity method investments, other assets, or expense.expenses. We amortize the liability for the fair value of a guarantee into income over the term of the guarantee using a systematic and rational, risk-based approach. Guarantees related to our managed or franchised hotels and other propertiesour unconsolidated hospitality ventures are amortized into income in other income (loss), net and in our consolidated statements of income. Guarantees related to our unconsolidated hospitality ventures are amortized into equity earnings (losses) from unconsolidated hospitality ventures, inrespectively, on our consolidated statements of income. income (loss).
•Performance and other guarantees—On a quarterly basis, we evaluate the likelihood of funding under a guarantee. To the extent we determine an obligation to fund is both probable and estimable based uponon performance during the period, we record a separate contingent liability and recognize expense in other income (loss), net.
•Debt repayment guarantees—At guarantee inception and on a quarterly basis, we evaluate the risk of funding under a guarantee. We assess credit risk based on the current and forecasted performance of the underlying property, whether the property owner is current on debt service, the historical performance of the underlying property, and the current market, and we record a separate liability and recognize expense in other income (loss), net or equity earnings (losses) from unconsolidated hospitality ventures. ventures based on the nature of the guarantee.
For additional information about guarantees, see Note 15.
Income Taxes—We account for income taxes to recognize the amount of taxes payable or refundable for the current year and the amount of deferred tax assets and liabilities resulting from the future tax consequences of differences between the financial statements and tax basis of the respective assets and liabilities. We assess the realizability of our deferred tax assets and record a valuation allowance when it is more likely than not that some or all of our deferred tax assets are not realizable. This assessment is completed by tax jurisdiction and relies on the weight of both positive and negative evidence available with significant weight placed on recent financial results. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions.
We recognize the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. We review these estimates and make changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. For additional information about income taxes, see Note 14.
Stock-Based Compensation—As part of our LTIP, we award SARs, RSUs, and PSUs to certain employees and non-employee directors:
•SARs—Each vested SAR gives the holder the right to the difference between the value of one share of our Class A common stock at the exercise date and the value of one share of our Class A common stock at the grant date. The value of the SARs is determined using the fair value of our common stock at the grant date based on the closing stock F- 23 price of our Class A common stock. SARs generally vest 25% annually over four years, beginning on the first anniversary after the grant date. Vested SARs can be exercised over their life as determined in accordance with the LTIP. All SARs have a 10-year contractual term, are settled in shares of our Class A common stock, and are accounted for as equity instruments. |
We recognize the compensation expense for SARs on a straight-line basis from the date of grant through the requisite service period.period, which is generally the vesting period, unless the employee meets retirement eligibility criteria resulting in immediate recognition. We recognize the effect of forfeitures as they occur.
•RSUs—Each vested RSU will generally be settled by delivery of a single share of our Class A common stock and therefore is accounted for as an equity instrument. In certain situations, we grant a limited number of cash-settled RSUs, which are recorded as liability instruments. The exercise pricecash-settled RSUs represent an insignificant portion of these SARsprevious grants.
The value of the RSUs is determined using the fair value of our common stock at the grant date based on a valuation of the Company prior to the IPO or the closing share price on the date of grant (as applicable). We recognize the effect of forfeitures for SARs as they occur.
Under certain circumstances, we may issue performance-basedtime-vested RSUs with performance requirements, which vest in tranches according to performance targetsbased on the satisfaction of a continued employment requirement and the attainment of specified performance-vesting conditions that are established annually.annually and eligible to be earned in tranches. Generally, these RSUs fully vest and settle in Class A common stock to the extent performance requirements for each tranche are achieved and if the requisite service period, which is generally three to five years, is satisfied. The value of the RSUs is determined using the fair value of our common stock at the grant date based uponon the closing stock price of our Class A common stock. Due to the fact that the performance tests, and therefore the vesting criteria,conditions are established annually, each award tranche may have its own grant date. We issued 140,0000 and 51,400 of such RSUs during the yearyears ended December 31, 2019,2021 and December 31, 2020, respectively, for which, 126,000119,980 RSUs have not met the grant date criteria and are therefore not deemed granted as ofat December 31, 2019.2021.
•PSUs—PSUs vest and are settled in Class A common stock based on the performance of the Company through the end of the applicable performance period relative to the applicable performance target and are generally subject to continued employment through the applicable performance period. The PSUs will vest at the end of the performance period only to the extent the performance threshold is met and continued service requirements are satisfied; there is no interim performance metric, except in the case of certain change in control transactions. The value of the PSUs is determined using the fair value of our common stock at the grant date based on the closing stock price of our Class A common stock. We recognize compensation expense over the requisite performance period, which is generally a vesting period of approximately three to six years. Compensation expense recognized is dependent on management's quarterly assessment of the expected achievement relative to the applicable performance targets. We recognize the effect of forfeitures as they occur. |
For additional information about stock-based compensation, see Note 17.
Loyalty Program—The loyalty program is funded through contributions from participating properties and third-party loyalty alliances based on eligible revenues from loyalty program members and returns on marketable securities. The funds are used for the redemption of member awards and payment of operating expenses. Operating costs are expensed as incurred throughand recognized in costs incurred on behalf of managed and franchised properties.
The program invests amounts received from the participating properties and third-party loyalty alliances in marketable securities which are included in other current and noncurrentlong-term assets on our consolidated balance sheets (see Note 4). Deferred revenues related to the loyalty program are classified as current and long-term contract liabilities on our consolidated balance sheets (see Note 3). The costs of administering the loyalty program, including
the estimated cost of award redemption, are charged to the participating properties and third-party loyalty alliances based on members' qualified expenditures.
Adopted Accounting Standards
F- 24
Contracts with Customers (Topic 606), providing entities with an additional optional transition method. as if the acquirer had originated the contracts at the date of the business combination. The provisions of ASU 2016-02, and all related ASUs, were effective for interim periods and fiscal years beginning after December 15, 2018, with early adoption permitted.
| December 31, 2018 | January 1, 2019 | ||||||||||
As reported | Effect of the adoption of ASU 2016-02 | As adjusted | |||||||||
| ASSETS | |||||||||||
| Prepaids and other assets | $ | 149 | $ | (2 | ) | $ | 147 | ||||
| Intangibles, net | 628 | (103 | ) | 525 | |||||||
| Other assets | 1,353 | (7 | ) | 1,346 | |||||||
| Operating lease right-of-use assets | — | 512 | 512 | ||||||||
| TOTAL ASSETS | $ | 7,643 | $ | 400 | $ | 8,043 | |||||
| LIABILITIES AND EQUITY | |||||||||||
| Accounts payable | $ | 151 | $ | (1 | ) | $ | 150 | ||||
| Accrued expenses and other current liabilities | 361 | (2 | ) | 359 | |||||||
| Current operating lease liabilities | — | 34 | 34 | ||||||||
| Long-term operating lease liabilities | — | 418 | 418 | ||||||||
| Other long-term liabilities | 840 | (49 | ) | 791 | |||||||
| Total liabilities | 3,966 | 400 | 4,366 | ||||||||
| Total equity | 3,677 | — | 3,677 | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 7,643 | $ | 400 | $ | 8,043 | |||||
Future Adoption of Accounting Standards
Government Assistance—In November 2021, the FASB issued Accounting Standards Update No. 2021-10 ("ASU 2021-10"), Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires annual disclosures that are expected to be applied using a modified retrospective approachincrease the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements. The provisions of ASU 2021-10 are effective for interim periods and fiscal years beginning after December 15, 2019,31, 2021, with early adoption permitted. While we continue to evaluateWe are currently evaluating the impact of adopting ASU 2016-13 and its disclosure requirements, we do not expect a material impact upon adoption.2021-10.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenues
The following tables present our revenues disaggregated by the nature of the product or service:
| Year Ended December 31, 2021 | ||||||||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Apple Leisure Group | Corporate and other | Eliminations | Total | |||||||||||||||||||
| Rooms revenues | $ | 519 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (17) | $ | 502 | ||||||||||
| Food and beverage | 196 | — | — | — | — | — | — | 196 | ||||||||||||||||||
| Other | 140 | — | — | — | — | — | — | 140 | ||||||||||||||||||
| Owned and leased hotels | 855 | — | — | — | — | — | (17) | 838 | ||||||||||||||||||
| Base management fees | — | 130 | 37 | 22 | 5 | — | (25) | 169 | ||||||||||||||||||
| Incentive management fees | — | 19 | 21 | 15 | 10 | — | (7) | 58 | ||||||||||||||||||
| Franchise fees | — | 115 | 2 | 2 | — | — | — | 119 | ||||||||||||||||||
| Other fees | — | 13 | 12 | 4 | 6 | 37 | — | 72 | ||||||||||||||||||
| Management, franchise, and other fees | — | 277 | 72 | 43 | 21 | 37 | (32) | 418 | ||||||||||||||||||
| Contra revenue | — | (19) | (4) | (12) | — | — | — | (35) | ||||||||||||||||||
| Net management, franchise, and other fees | — | 258 | 68 | 31 | 21 | 37 | (32) | 383 | ||||||||||||||||||
| Distribution and destination management | — | — | — | — | 115 | — | — | 115 | ||||||||||||||||||
| Other revenues | — | 84 | — | — | 19 | 4 | 2 | 109 | ||||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 1,410 | 96 | 66 | 11 | — | — | 1,583 | ||||||||||||||||||
| Total | $ | 855 | $ | 1,752 | $ | 164 | $ | 97 | $ | 166 | $ | 41 | $ | (47) | $ | 3,028 | ||||||||||
| Year Ended December 31, 2019 | |||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Corporate and other | Eliminations | Total | |||||||||||||||
| Rooms revenues | $ | 1,058 | $ | — | $ | — | $ | — | $ | 25 | $ | (35 | ) | $ | 1,048 | ||||||
| Food and beverage | 607 | — | — | — | 12 | — | 619 | ||||||||||||||
| Other | 143 | — | — | — | 38 | — | 181 | ||||||||||||||
| Owned and leased hotels | 1,808 | — | — | — | 75 | (35 | ) | 1,848 | |||||||||||||
| Base management fees | — | 227 | 46 | 37 | — | (50 | ) | 260 | |||||||||||||
| Incentive management fees | — | 65 | 72 | 38 | — | (24 | ) | 151 | |||||||||||||
| Franchise fees | — | 136 | 4 | 1 | — | — | 141 | ||||||||||||||
| Other fees | — | 5 | 14 | 7 | 6 | — | 32 | ||||||||||||||
| License fees | — | — | — | — | 24 | — | 24 | ||||||||||||||
| Management, franchise, and other fees | — | 433 | 136 | 83 | 30 | (74 | ) | 608 | |||||||||||||
| Amortization of management and franchise agreement assets constituting payments to customers | — | (15 | ) | (2 | ) | (5 | ) | — | — | (22 | ) | ||||||||||
| Net management, franchise, and other fees | — | 418 | 134 | 78 | 30 | (74 | ) | 586 | |||||||||||||
| Other revenues | — | 89 | — | — | 35 | 1 | 125 | ||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 2,268 | 113 | 74 | 6 | — | 2,461 | ||||||||||||||
| Total | $ | 1,808 | $ | 2,775 | $ | 247 | $ | 152 | $ | 146 | $ | (108 | ) | $ | 5,020 | ||||||
| Year Ended December 31, 2018 | |||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Corporate and other | Eliminations | Total | |||||||||||||||
| Rooms revenues | $ | 1,110 | $ | — | $ | — | $ | — | $ | 23 | $ | (33 | ) | $ | 1,100 | ||||||
| Food and beverage | 636 | — | — | — | 10 | — | 646 | ||||||||||||||
| Other | 143 | — | — | — | 29 | — | 172 | ||||||||||||||
| Owned and leased hotels | 1,889 | — | — | — | 62 | (33 | ) | 1,918 | |||||||||||||
| Base management fees | — | 200 | 44 | 34 | — | (53 | ) | 225 | |||||||||||||
| Incentive management fees | — | 67 | 71 | 39 | — | (29 | ) | 148 | |||||||||||||
| Franchise fees | — | 123 | 3 | 1 | — | — | 127 | ||||||||||||||
| Other fees | — | 10 | 9 | 6 | 6 | — | 31 | ||||||||||||||
| License fees | — | — | — | — | 21 | — | 21 | ||||||||||||||
| Management, franchise, and other fees | — | 400 | 127 | 80 | 27 | (82 | ) | 552 | |||||||||||||
| Amortization of management and franchise agreement assets constituting payments to customers | — | (13 | ) | (2 | ) | (5 | ) | — | — | (20 | ) | ||||||||||
| Net management, franchise, and other fees | — | 387 | 125 | 75 | 27 | (82 | ) | 532 | |||||||||||||
| Other revenues | — | — | — | — | 43 | 5 | 48 | ||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 1,787 | 95 | 68 | 6 | — | 1,956 | ||||||||||||||
| Total | $ | 1,889 | $ | 2,174 | $ | 220 | $ | 143 | $ | 138 | $ | (110 | ) | $ | 4,454 | ||||||
F- 25
| Year Ended December 31, 2020 | |||||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Corporate and other | Eliminations | Total | |||||||||||||||||
| Rooms revenues | $ | 283 | $ | — | $ | — | $ | — | $ | — | $ | (12) | $ | 271 | |||||||||
| Food and beverage | 148 | — | — | — | — | — | 148 | ||||||||||||||||
| Other | 94 | — | — | — | — | — | 94 | ||||||||||||||||
| Owned and leased hotels | 525 | — | — | — | — | (12) | 513 | ||||||||||||||||
| Base management fees | — | 72 | 26 | 13 | — | (15) | 96 | ||||||||||||||||
| Incentive management fees | — | 4 | 14 | 5 | — | (1) | 22 | ||||||||||||||||
| Franchise fees | — | 61 | 1 | 1 | — | — | 63 | ||||||||||||||||
| Other fees | — | 15 | 20 | 4 | 19 | — | 58 | ||||||||||||||||
| Management, franchise, and other fees | — | 152 | 61 | 23 | 19 | (16) | 239 | ||||||||||||||||
| Contra revenue | — | (18) | (2) | (10) | — | — | (30) | ||||||||||||||||
| Net management, franchise, and other fees | — | 134 | 59 | 13 | 19 | (16) | 209 | ||||||||||||||||
| Other revenues | — | 42 | — | — | 15 | 1 | 58 | ||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 1,152 | 75 | 55 | 4 | — | 1,286 | ||||||||||||||||
| Total | $ | 525 | $ | 1,328 | $ | 134 | $ | 68 | $ | 38 | $ | (27) | $ | 2,066 | |||||||||
| Year Ended December 31, 2019 | |||||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Corporate and other | Eliminations | Total | |||||||||||||||||
| Rooms revenues | $ | 1,083 | $ | — | $ | — | $ | — | $ | — | $ | (35) | $ | 1,048 | |||||||||
| Food and beverage | 619 | — | — | — | — | — | 619 | ||||||||||||||||
| Other | 181 | — | — | — | — | — | 181 | ||||||||||||||||
| Owned and leased hotels | 1,883 | — | — | — | — | (35) | 1,848 | ||||||||||||||||
| Base management fees | — | 229 | 46 | 37 | — | (52) | 260 | ||||||||||||||||
| Incentive management fees | — | 65 | 72 | 38 | — | (24) | 151 | ||||||||||||||||
| Franchise fees | — | 136 | 4 | 1 | — | — | 141 | ||||||||||||||||
| Other fees | — | 9 | 14 | 7 | 26 | — | 56 | ||||||||||||||||
| Management, franchise, and other fees | — | 439 | 136 | 83 | 26 | (76) | 608 | ||||||||||||||||
| Contra revenue | — | (15) | (2) | (5) | — | — | (22) | ||||||||||||||||
| Net management, franchise, and other fees | — | 424 | 134 | 78 | 26 | (76) | 586 | ||||||||||||||||
| Other revenues | — | 89 | — | — | 35 | 1 | 125 | ||||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 2,268 | 113 | 74 | 6 | — | 2,461 | ||||||||||||||||
| Total | $ | 1,883 | $ | 2,781 | $ | 247 | $ | 152 | $ | 67 | $ | (110) | $ | 5,020 | |||||||||
| Year Ended December 31, 2017 | |||||||||||||||||||||
| Owned and leased hotels | Americas management and franchising | ASPAC management and franchising | EAME/SW Asia management and franchising | Corporate and other | Eliminations | Total | |||||||||||||||
| Rooms revenues | $ | 1,270 | $ | — | $ | — | $ | — | $ | 22 | $ | (38 | ) | $ | 1,254 | ||||||
| Food and beverage | 722 | — | — | — | 11 | — | 733 | ||||||||||||||
| Other | 167 | — | — | — | 30 | — | 197 | ||||||||||||||
| Owned and leased hotels | 2,159 | — | — | — | 63 | (38 | ) | 2,184 | |||||||||||||
| Base management fees | — | 193 | 39 | 29 | — | (59 | ) | 202 | |||||||||||||
| Incentive management fees | — | 62 | 65 | 35 | — | (27 | ) | 135 | |||||||||||||
| Franchise fees | — | 112 | 2 | — | — | — | 114 | ||||||||||||||
| Other fees | — | 13 | 6 | 5 | 4 | — | 28 | ||||||||||||||
| License fees | — | — | — | — | 19 | — | 19 | ||||||||||||||
| Management, franchise, and other fees | — | 380 | 112 | 69 | 23 | (86 | ) | 498 | |||||||||||||
| Amortization of management and franchise agreement assets constituting payments to customers | — | (12 | ) | (1 | ) | (5 | ) | — | — | (18 | ) | ||||||||||
| Net management, franchise, and other fees | — | 368 | 111 | 64 | 23 | (86 | ) | 480 | |||||||||||||
| Other revenues | 13 | — | — | — | 14 | 9 | 36 | ||||||||||||||
| Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties | — | 1,625 | 79 | 58 | — | — | 1,762 | ||||||||||||||
| Total | $ | 2,172 | $ | 1,993 | $ | 190 | $ | 122 | $ | 100 | $ | (115 | ) | $ | 4,462 | ||||||
F- 26
Contract Balances
Contract liabilities arewere comprised of the following:
| December 31, 2021 | December 31, 2020 | ||||||||||
| Deferred revenue related to the paid membership program | $ | 833 | $ | — | |||||||
| Deferred revenue related to the loyalty program | 814 | 733 | |||||||||
| Deferred revenue related to travel distribution and destination management services | 629 | — | |||||||||
| Advanced deposits | 61 | 44 | |||||||||
| Deferred revenue related to insurance programs | 52 | 47 | |||||||||
| Initial fees received from franchise owners | 42 | 41 | |||||||||
| Other deferred revenue | 96 | 76 | |||||||||
| Total contract liabilities | $ | 2,527 | $ | 941 | |||||||
| December 31, 2019 | December 31, 2018 | ||||||
| Deferred revenue related to the loyalty program | $ | 671 | $ | 596 | |||
| Advanced deposits | 77 | 81 | |||||
| Initial fees received from franchise owners | 41 | 35 | |||||
| Deferred revenue related to system-wide services | 5 | 7 | |||||
| Other deferred revenue | 126 | 111 | |||||
| Total contract liabilities | $ | 920 | $ | 830 | |||