HYATT REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS
Record Total Fee Revenue Led to the Highest Cash Flow from Operations in Company History, Full Year System-Wide RevPAR Increased 17%. |
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HYATT REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS
Record Total Fee Revenue Led to the Highest Cash Flow from Operations in Company History, Full Year System-Wide RevPAR Increased 17%. |
Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2024-02-26
Hyatt Hotels Corporation ("Hyatt" or the "Company") (NYSE: H) today reported fourth quarter and full year 2023 financial results.
Highlights include:
- Net income was $26 million in the fourth quarter and $220 million for the full year of 2023, and exceeded the full year outlook for 2023. Adjusted net income was $68 million in the fourth quarter and $276 million for the full year of 2023.
- Diluted EPS was $0.25 in the fourth quarter and $2.05 for the full year of 2023. Adjusted Diluted EPS was $0.64 in the fourth quarter and $2.56 for the full year of 2023.
- Adjusted EBITDA was $241 million in the fourth quarter and $1,029 million for the full year of 2023, and exceeded the full year outlook range for 2023.
- Adjusted EBITDA does not include Net Deferrals and Net Financed Contracts of $33 million1 in the fourth quarter or Net Deferrals and Net Financed Contracts of $158 million1 for the full year of 2023.
- Comparable system-wide RevPAR increased 9.1% in the fourth quarter and 17.0% for the full year of 2023, compared to the same periods in 2022, and exceeded the full year outlook for 2023.
- Comparable owned and leased hotels RevPAR increased 5.9% in the fourth quarter and 15.5% for the full year of 2023, compared to the same periods in 2022. Comparable owned and leased hotels operating margin was 26.2% in the fourth quarter and 25.4% for the full year of 2023.
- Comparable Net Package RevPAR increased 11.3% in the fourth quarter and 15.3% for the full year of 2023 compared to the same periods in 2022.
- Net Rooms Growth was 5.9% for the full year of 2023, in line with the full year outlook for 2023.
- Pipeline of executed management or franchise contracts was approximately 127,000 rooms.
- Share Repurchases were approximately 890 thousand Class A shares for $95 million in the fourth quarter and approximately 4.1 million Class A shares for $453 million for the full year of 2023.
- Capital Returns to Shareholders were $500 million for the full year of 2023, inclusive of dividends and share repurchases, in line with the full year outlook for 2023.
1 Represents the sum of Net Deferrals and Net Financed Contracts. Refer to Apple Leisure Group Segment Statistics on schedule A-18 for additional details.
Mark S. Hoplamazian, President and Chief Executive Officer of Hyatt, said, "The fourth quarter marks the completion of a transformative year and demonstrates the progress towards our strategic vision and earnings evolution. RevPAR growth exceeded the high end of our guidance range and we had industry leading net rooms growth for the seventh consecutive year. This led to a record level of fees and the highest free cash flow in Hyatt's history. We returned $500 million to our shareholders and achieved an asset-light earnings mix of approximately 76% for the full year, a testament to the successful execution of our strategy."
Operational Update
A record level of management, franchise, license, and other fees of $256 million were generated in the fourth quarter of 2023 driven by continued strong global demand for travel and net rooms growth.
Comparable system-wide RevPAR increased 9.1% in the fourth quarter and increased 17.0% for the full year of 2023, compared to the same periods in 2022, driven by the rapid recovery in Greater China and strengthening group demand in the United States.
Group booking pace for Americas full service managed properties is currently up 8% for full year 2024 compared to 2023.
Comparable Net Package RevPAR for ALG properties increased 9.2% in the fourth quarter and 13.6% for the full year of 2023, compared to the same periods in 2022.
The fourth quarter benefited from improved results in Cancun, with Comparable Net Package RevPAR up approximately 10% compared to the same period in 2022. In the first quarter of 2024, booking pace for ALG all-inclusive properties in the Americas is up 11% for the first quarter of 2024.
Segment Results and Highlights
| (in millions) |
Three Months Ended December 31, |
|
|
|
Year Ended
December 31, |
|
|
|
2023 |
|
2022 |
|
Change (%) |
|
2023 |
|
2022 |
|
Change (%) |
| Owned and leased hotels |
$ 90 |
|
$ 88 |
|
3.0 % |
|
$ 312 |
|
$ 307 |
|
1.7 % |
| Americas management and franchising |
114 |
|
106 |
|
7.6 % |
|
469 |
|
422 |
|
11.2 % |
| ASPAC management and franchising (a) |
36 |
|
20 |
|
76.9 % |
|
126 |
|
54 |
|
131.9 % |
| EAME management and franchising (a) |
17 |
|
15 |
|
19.7 % |
|
61 |
|
47 |
|
30.4 % |
| Apple Leisure Group |
21 |
|
43 |
|
(52.8) % |
|
199 |
|
231 |
|
(14.0) % |
| Corporate and other |
(37) |
|
(40) |
|
6.6 % |
|
(139) |
|
(154) |
|
9.9 % |
| Eliminations |
— |
|
— |
|
772.6 % |
|
1 |
|
1 |
|
33.1 % |
| Adjusted EBITDA |
$ 241 |
|
$ 232 |
|
4.0 % |
|
$ 1,029 |
|
$ 908 |
|
13.4 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
Year Ended December 31, |
|
|
|
2023 |
|
2022 |
|
Change (%) |
|
2023 |
|
2022 |
|
Change (%) |
| Net Deferrals |
$ 18 |
|
$ 28 |
|
(37.2) % |
|
$ 91 |
|
$ 94 |
|
(3.4) % |
| Net Financed Contracts |
$ 15 |
|
$ 15 |
|
1.7 % |
|
$ 67 |
|
$ 63 |
|
6.9 % |
(a) Effective January 1, 2023, the Company has changed the strategic and operational oversight for our properties located in the Indian subcontinent. Revenues associated with these properties are now reported in the ASPAC management and franchising segment. The segment changes have been reflected retrospectively for the three months and year ended December 31, 2022.
- Owned and leased hotels segment: Results in the fourth quarter were driven by the recovery of group demand and increased rate growth across group and transient customers which contributed to strong RevPAR growth over the fourth quarter of 2022. Comparable owned and leased hotels operating margin expanded 240 basis points compared to the fourth quarter of 2019 and 310 basis points compared to the full year of 2019.
- Americas management and franchising segment: Results in the fourth quarter were driven by improved group and business transient results along with resilient leisure demand. Total fees in the quarter increased 6% compared to the fourth quarter of 2022, with RevPAR in the United States up 3% in the fourth quarter compared to the same period in 2022, driven by strong group rate.
- ASPAC management and franchising segment: Results in the fourth quarter were driven by strength in all customer segments which contributed to RevPAR growth across the sub regions, with Greater China improving 84% compared to the fourth quarter of 2022.
- EAME management and franchising segment: Results in the fourth quarter were driven by resilient leisure demand and strong business transient and group performance, despite the impact of the 2022 World Cup in Qatar. The region benefited from increased airlift from the United States, Middle East, and China.
- Apple Leisure Group segment: Results in the fourth quarter benefited from improved results in Cancun. ALG segment Adjusted EBITDA for the quarter increased 33% when adjusted for the $23 million non-cash benefit in the fourth quarter of 2022, that did not repeat in 2023, and the unfavorable impact of foreign currency exchange rates from the strengthening Mexican Peso.
Openings and Development
In the fourth quarter, 29 new hotels (or 9,648 rooms) joined Hyatt's portfolio, inclusive of six hotels in Greater China that converted to a Hyatt brand through a strategic relationship with an affiliate of Mumian Hotels.
Notable openings included the 2,500 room Rio Hotel & Casino in Las Vegas, Nevada, and the 1,100 room Sunscape Coco Punta Cana and 900 room Sunscape Dominicus La Romana in the Dominican Republic.
Hotel Toranomon Hills, part of The Unbound Collection by Hyatt, in Japan, and Ronil Goa, a JdV by Hyatt hotel, in India, also opened during the quarter.
For the full year of 2023, 101 new hotels (or 23,965 rooms) joined Hyatt's portfolio, inclusive of 43 hotels (or 13,223 rooms) which converted to a Hyatt brand.
As of December 31, 2023, the Company had a pipeline of executed management or franchise contracts for approximately 650 hotels (approximately 127,000 rooms), inclusive of 17 Hyatt Studios hotels (approximately 2,000 rooms). During the fourth quarter, the first Hyatt Studios hotel broke ground in Mobile, Alabama.
Transactions and Capital Strategy
On February 14, 2024, the Company completed a transaction that resulted in the restructuring of the entity that owns our Unlimited Vacation Club (“UVC”) business by selling 80% of the entity to an investor unaffiliated with Hyatt for $80 million.
Hyatt will continue to manage the Unlimited Vacation Club business under a long-term management agreement and license and royalty agreement, ensuring a seamless transition for colleagues, UVC members and hotel owners.
As a result of the transaction, the Company will receive management fees and royalty fees in relation to the exclusive arrangement between the Hyatt Inclusive Collection brands and UVC, and the Company will no longer report Net Deferrals and Net Financed Contracts.
On February 9, 2024, the Company sold Hyatt Regency Aruba Resort Spa and Casino for approximately $240 million to an unrelated third party and entered into a long-term management agreement. As part of the transaction, the Company provided approximately $41 million of seller financing.
The Company is providing updates on the progress for five asset sales. The Company has signed definitive purchase and sale agreements for two assets that aggregate to approximately $310 million of expected gross proceeds. Further, the Company is marketing one additional asset for sale and is engaged in off-market discussions for two other assets.
The Company remains committed to successfully executing plans to realize $2.0 billion of gross proceeds from the sale of real estate, net of acquisitions, by the end of 2024 as part of its expanded asset-disposition commitment announced in August 2021.
As of February 23, 2024, the Company has realized $961 million of gross proceeds from the net disposition of real estate, inclusive of Hyatt Regency Aruba Resort Spa and Casino.
Balance Sheet and Liquidity
As of December 31, 2023, the Company reported the following:
- Total debt of $3,056 million.
- Pro rata share of unconsolidated hospitality venture debt of $548 million, substantially all of which is non-recourse to Hyatt and a portion of which Hyatt guarantees pursuant to separate agreements.
- Total liquidity of approximately $2.4 billion with $896 million of cash and cash equivalents and short-term investments, and borrowing availability of $1,496 million under Hyatt's revolving credit facility, net of letters of credit outstanding.
The Company repurchased a total of 889,902 Class A common shares for approximately $95 million in the fourth quarter and repurchased a total of 4,123,828 Class A common shares for approximately $453 million during the full year of 2023.
The Company ended the fourth quarter with 44,275,818 Class A and 58,757,123 Class B shares issued and outstanding. During the full year of 2023, the Company returned $500 million to shareholders, inclusive of dividends and share repurchases.
From January 1 through February 15, 2024, the Company repurchased 227,958 Class A common shares for approximately $30 million. As of February 15, 2024, the Company has approximately $1.1 billion remaining under its share repurchase authorization.
Segment Realignment
During the quarter ending March 31, 2024, the Company has realigned its financial reporting segments to align with Hyatt's business strategy, the organizational changes for certain members of Hyatt's leadership team, and the manner in which the Company's President and Chief Executive Officer, who is also its chief operating decision maker, assesses performance of the business and makes decisions regarding allocation of resources.
As a result of the realignment, a summary of Hyatt's reportable segments is as follows:
- Management and franchising, which consists of the provision of management, franchising, and hotel services, or the licensing of our intellectual property to, (i) our property portfolio, (ii) our co-branded credit card programs, and (iii) other hospitality-related businesses, including the Unlimited Vacation Club;
- Owned and leased, which consists of our owned and leased hotel portfolio and, for purposes of owned and leased segment Adjusted EBITDA, our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA based on our ownership percentage of each venture; and
- Distribution, which consists of distribution and destination management services offered through ALG Vacations and the boutique and luxury global travel platform offered through Mr & Mrs Smith.
2024 Outlook
The Company is providing the following outlook for the 2024 fiscal year.
Please refer to the table on schedule A-22 which bridges 2023 full year reported actual results to illustrative 2023 results that adjust for the sale of Hyatt Regency Aruba Resort Spa and Casino, the Unlimited Vacation Club transaction, and the reporting of Mr & Mrs Smith commissions and SG&A in the Distribution segment within distribution revenues and distribution expenses, in connection with the segment realignment.
|
|
Full Year 2024 vs. 2023 |
| System-Wide RevPAR1 |
|
3% to 5% |
| Net Rooms Growth |
|
5.5% to 6% |
| (in millions) |
|
Full Year 2024 |
| Net Income |
|
Approx. $560 |
| Management, Franchise, License, and Other Fees |
|
$1,100 - $1,130 |
| Adjusted SG&A2, 3 |
|
$425 - $435 |
| Adjusted EBITDA2 |
|
$1,175 - $1,225 |
| Net Deferrals + Net Financed Contracts |
|
N/A - Refer to Transactions and Capital Strategy section of the Earnings Release |
| Capital Expenditures |
|
Approx. $170 |
| Free Cash Flow2 |
|
$625 - $675 |
| Capital Returns to Shareholders4 |
|
$550 - $600 |
1 RevPAR is based on constant currency whereby previous periods are translated based on the current period exchange rate. RevPAR percentage for 2024 vs. 2023 is based on comparable hotels.
2 Refer to the tables beginning with schedule A-15 for a reconciliation of estimated net income attributable to Hyatt Hotels Corporation to EBITDA and EBITDA to Adjusted EBITDA, selling, general, and administrative expenses to Adjusted selling, general, and administrative expenses, and net cash provided by operating activities to Free Cash Flow.
3 Adjusted SG&A outlook excludes integration related expenses.
4 The Company expects to return capital to shareholders through a combination of cash dividends on its common stock and share repurchases.
No disposition or acquisition activity beyond what has been completed as of the date of this release has been included in the 2024 Outlook.
The Company's 2024 Outlook is based on a number of assumptions that are subject to change and many of which are outside the control of the Company.
If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that Hyatt will achieve these results.
Refer to the tables beginning with schedule A-11 for a summary of special items impacting Adjusted net income and Adjusted diluted earnings per share in the three months and year ended December 31, 2023 and December 31, 2022.
Note: All RevPAR and ADR percentage changes are in constant dollars. This release includes references to non-GAAP financial measures. Refer to the non-GAAP reconciliations included in the schedules and the definitions of the non-GAAP measures presented beginning with schedule A-9.
Conference Call Information
The Company will hold an investor conference call this morning, February 23, 2024, at 9:00 a.m. CT.
Participants may listen to a simultaneous webcast of the conference call, which may be accessed through the Company's website at investors.hyatt.com. Alternatively, participants may access the live call by dialing: 800-715-9871 (U.S. Toll-Free) or 646-307-1963 (International Toll Number) using conference ID# 2303828 approximately 15 minutes prior to the scheduled start time.
A replay of the call will be available Friday, February 23, 2024 at 12:00 p.m. CT until Thursday, February 29, 2024 at 10:59 p.m. CT by dialing: 800-770-2030 (U.S. Toll-Free) or 647-362-9199 (International Toll Number) using conference ID# 2303828. An archive of the webcast will be available on the Company's website for 90 days.
Non-GAAP Financial Measures
The Company refers to certain financial measures that are not recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP") in this press release, including: Adjusted Net Income; Adjusted Diluted EPS; Adjusted EBITDA; Adjusted EBITDA Margin; Adjusted SG&A Expenses; and Free Cash Flow. See the schedules to this press release, including the "Definitions" section, for additional information and reconciliations of such non-GAAP financial measures.
Availability of Information on Hyatt's Website and Social Media Channels
Investors and others should note that Hyatt routinely announces material information to investors and the marketplace using U.S. Securities and Exchange Commission (SEC) filings, press releases, public conference calls, webcasts and the Hyatt Investor Relations website.
The Company uses 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 X 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 the Company's business to our guests, customers, colleagues, investors, and the public.
While not all of the information that the Company posts to the Hyatt Investor Relations website or on the Company's social media channels is of a material nature, some information could be deemed to be material.
Accordingly, the Company encourages investors, the media, and others interested in Hyatt to review the information that it shares at the Investor Relations link located at the bottom of the page on hyatt.com and on the Company's social media channels. Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting "Email Alerts" in the "Investor Resources" section of Hyatt's website at investors.hyatt.com.
The contents of these websites are not incorporated by reference into this press release or any report or document Hyatt files with the SEC, and any references to the websites are intended to be inactive textual references only.
About Hyatt Hotels Corporation
Hyatt Hotels Corporation, headquartered in Chicago, is a leading global hospitality company guided by its purpose – to care for people so they can be their best. As of December 31, 2023, the Company's portfolio included more than 1,300 hotels and all-inclusive properties in 77 countries across six continents. The Company's offering includes brands in the Timeless Collection, including Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt, Hyatt Vacation Club, Hyatt Place, Hyatt House, Hyatt Studios, and UrCove; the Boundless Collection, including Miraval, Alila, Andaz, Thompson Hotels, Dream Hotels, Hyatt Centric, and Caption by Hyatt; the Independent Collection, including The Unbound Collection by Hyatt, Destination by Hyatt, and JdV by Hyatt; and the Inclusive Collection, including Impression by Secrets, Hyatt Ziva, Hyatt Zilara, Zoëtry Wellness & Spa Resorts, Secrets Resorts & Spas, Breathless Resorts & Spas, Dreams Resorts & Spas, Hyatt Vivid Hotels & Resorts, Alua Hotels & Resorts, and Sunscape Resorts & Spas. Subsidiaries of the Company operate the World of Hyatt loyalty program, ALG Vacations, Mr & Mrs Smith, Unlimited Vacation Club, Amstar DMC destination management services, and Trisept Solutions technology services.
Hyatt Hotels Corporation
Definitions
Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization (Adjusted EBITDA) and EBITDA
We use the terms Adjusted EBITDA and EBITDA throughout this earnings release. 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:
- benefit (provision) for income taxes;
- depreciation and amortization;
- amortization of management and hotel services agreement and franchise agreement assets and performance cure payments, which constitute payments to customers (Contra revenue);
- revenues for the reimbursement of costs incurred on behalf of managed and franchised properties;
- costs incurred on behalf of managed and franchised properties that we intend to recover over the long term;
- equity earnings (losses) from unconsolidated hospitality ventures;
- stock-based compensation expense;
- gains (losses) on sales of real estate and other;
- other income (loss), net.
We calculate consolidated Adjusted EBITDA by adding the Adjusted EBITDA of each of our reportable segments and eliminations to corporate and other Adjusted EBITDA.
Our board of directors and executive management team focus on Adjusted EBITDA as one of the key performance and compensation measures both on a segment and on a consolidated basis. Adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operations both on a segment and on a consolidated basis. Our President and Chief Executive Officer, who is our 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 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 with results from other companies within our industry.
Adjusted EBITDA excludes certain items that can vary widely across different industries and among companies within the same industry including interest expense and benefit (provision) for income taxes, which are dependent on company specifics, including capital structure, credit ratings, tax policies, and jurisdictions in which they operate; depreciation and amortization which are dependent on company policies including how the assets are utilized as well as the lives assigned to the assets; Contra revenue which is dependent on company policies and strategic decisions regarding payments to hotel owners; and stock-based compensation expense which varies among companies as a result of different compensation plans companies have adopted. We exclude revenues for the reimbursement of costs and costs incurred on behalf of managed and franchised properties which relate to the reimbursement of payroll costs and for system-wide services and programs that we operate for the benefit of our hotel owners as contractually we do not provide services or operate the related programs to generate a profit over the terms of the respective contracts. Over the long term, these programs and services are not designed to impact our economics, either positively or negatively. Therefore, we exclude the net impact when evaluating period-over-period changes in our operating results. Adjusted EBITDA includes costs incurred on behalf of our managed and franchised properties related to system-wide services and programs that we do not intend to recover from hotel owners. Finally, we exclude other items that are not core to our operations, such as asset impairments and unrealized and realized gains and losses on marketable securities.
Adjusted EBITDA and EBITDA are not substitutes for net income (loss) attributable to Hyatt Hotels Corporation, net income (loss), or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA and EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income (loss) generated by our business. Our management compensates for these limitations by referencing our GAAP results and using Adjusted EBITDA supplementally.
Adjusted EBITDA Margin
We define Adjusted EBITDA margin as Adjusted EBITDA divided by total revenues excluding Contra revenue and revenues for the reimbursement of costs incurred on behalf of managed and franchised properties (Adjusted revenues). We believe Adjusted EBITDA margin is useful to investors because it provides investors the same information that the Company uses internally for purposes of assessing operating performance.
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Losses) per Share (EPS)
Adjusted net income (loss) and Adjusted Diluted EPS, as we define them, are non-GAAP measures. We define Adjusted net income (loss) as net income (loss) attributable to Hyatt Hotels Corporation excluding special items, which are those items deemed not to be reflective of ongoing operations. We define Adjusted Diluted EPS as Adjusted net income (loss) per diluted share. We consider Adjusted net income (loss) and Adjusted Diluted EPS to be an indicator of operating performance because excluding special items allows for period-over-period comparisons of our ongoing operations.
Adjusted net income (loss) and Adjusted Diluted EPS are not a substitute for net income (loss) attributable to Hyatt Hotels Corporation, net income (loss), diluted earnings (losses) per share, or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted net income (loss) and Adjusted Diluted EPS. Although we believe that Adjusted net income (loss) and Adjusted Diluted EPS can make an evaluation of our operating performance more consistent because they remove special items that are deemed not to be reflective of ongoing operations, other companies in our industry may define Adjusted net income (loss) and Adjusted Diluted EPS differently than we do. As a result, it may be difficult to use Adjusted net income (loss) or Adjusted Diluted EPS 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 net income (loss) and Adjusted Diluted EPS should not be considered as measures of the income (loss) and earnings (losses) per share generated by our business. Our management compensates for these limitations by reference to its GAAP results and using Adjusted net income (loss) and Adjusted Diluted EPS supplementally.
Adjusted Selling, General, and Administrative (SG&A) Expenses
Adjusted SG&A expenses, as we define it, is a non-GAAP measure. Adjusted SG&A expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. Adjusted SG&A 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.
Asset-Light Earnings Mix
Asset-Light Earnings Mix is calculated as Adjusted EBITDA from the Americas Management and Franchising Segment, ASPAC Management and Franchising Segment, EAME Management and Franchising Segment, and Apple Leisure Group Segment plus Net Deferrals and Net Financed Contracts divided by Adjusted EBITDA, excluding Corporate & Other and Eliminations, plus Net Deferrals and Net Financed Contracts. Our management uses this calculation to assess the composition of the Company's earnings.
Average Daily Rate (ADR)
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 below.
Comparable Hotels
"Comparable system-wide hotels" represents all properties we manage, franchise, or provide services to, including owned and leased properties, that are operated for the entirety of the periods being compared and that have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared. Comparable system-wide hotels also excludes properties for which comparable results are not available. We may use variations of comparable system-wide hotels to specifically refer to comparable system-wide Americas hotels, including our wellness resorts, or our all-inclusive resorts, for those properties that we manage, franchise, or provide services to within the Americas management and franchising segment, comparable system-wide ASPAC hotels for those properties we manage, franchise, or provide services to within the ASPAC management and franchising segment, or comparable system-wide EAME hotels for those properties that we manage, franchise, or provide services to within the EAME management and franchising segment, or comparable system-wide ALG all-inclusive resorts for those properties that we manage or provide services to within the Apple Leisure Group 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.
Comparable Owned and Leased Hotels Operating Margin
We define comparable owned and leased hotels operating margin as the difference between comparable owned and leased hotels revenues and comparable owned and leased hotels expenses. Comparable owned and leased hotels revenues is calculated by removing non-comparable hotels revenues from owned and leased hotels revenues as reported in our consolidated statements of income (loss). Comparable owned and leased hotels expenses is calculated by removing both non-comparable owned and leased hotels expenses and the impact of expenses funded through rabbi trusts from owned and leased hotels expenses as reported in our consolidated statements of income (loss). We believe comparable owned and leased hotels operating margin is useful to investors because it provides investors the same information that the Company uses internally for purposes of assessing operating performance.
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.
Free Cash Flow
Free cash flow represents net cash provided by operating activities less capital expenditures. We believe free cash flow to be a useful liquidity measure to us and investors to evaluate the ability of our operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, our ability to grow our business through acquisitions and investments, as well as our ability to return cash to shareholders through dividends and share repurchases. Free cash flow is not necessarily a representation of how we will use excess cash. Free cash flow is not a substitute for net cash provided by operating activities or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as free cash flow and management compensates for these limitations by referencing our GAAP results and using free cash flow supplementally. See our consolidated statements of cash flows in our consolidated financial statements included in our Annual Report on Form 10-K.
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. We believe Net Deferrals is useful to investors as it represents cash received that will be recognized as revenue in future periods.
Net Financed Contracts
Net Financed Contracts represent Unlimited Vacation Club contracts signed during the period for which an initial cash down payment has been received and the remaining balance is contractually due in monthly installments over an average term of less than 4 years. The Net Financed Contract balance is calculated as the unpaid portion of membership contracts reduced by expenses related to fulfilling the membership program contracts and further reduced by an allowance for future estimated uncollectible installments. Net Financed Contract balances are not reported on our consolidated balance sheets as our right to collect future installments is conditional on our ability to provide continuous access to member benefits at ALG resorts over the contract term, and the associated expenses to fulfill the membership contracts become liabilities of the Company only after the installments are collected. We believe Net Financed Contracts is useful to investors as it represents an estimate of future cash flows due in accordance with contracts signed in the current period. At December 31, 2023, the Net Financed Contract balance not recorded on our consolidated balance sheet was $253 million.
Net Package ADR
Net Package ADR represents net package revenues divided by the total number of rooms sold in a given period. Net package revenues generally include revenue derived from the sale of package revenue at all-inclusive resorts comprised of rooms revenue, food and beverage, and entertainment, net of compulsory tips paid to employees. 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.
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.
Revenue per Available Room (RevPAR)
RevPAR is the product of the average daily rate 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.
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