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Text: These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, quarterly reports on Form 10-Q and other SEC filings.
These risks could cause our actual results to differ materially from those expressed in or implied by our comments.
We closed on the acquisition of Apple Leisure Group on November 1, and we are collectively even more thrilled about the prospects for the combined company today than we were when we first announced our plans back in August.
As I reflect over the past several months during which I've gotten to know the ALG team much better, met with hotel owners and toured a number of stunning AMR collection resorts.
I'm energized and really excited about the bright future for ALG as a part of Hyatt.
The cultural fit between our two companies with a joint focus of care could not be better.
And the timing is proving to be very auspicious as leisure demand continues to be durable and a growing proportion of our segment mix.
We look forward to keeping you well informed on the progress of our integration efforts and performance of the ALG platform moving forward.
Turning to our results.
We are another quarter into the recovery and have again produced results that demonstrate the strength of our business and reinforce that we are emerging from this challenging period as a more agile and stronger company.
In the span of just two quarters, our quarterly adjusted EBITDA has improved $130 million, recovering to nearly 70% of 2019 levels in the third quarter.
We've worked tirelessly to evolve and reimagine aspects of our operating model and the financial results and our momentum demonstrate our progress.
Importantly, while we have been focused on preserving cash and managing expenses tightly, we've invested in areas that are driving growth, and we have not wavered from our long-term strategy.
With vaccination rates continuing to rise, travel restrictions around the world easing and borders reopening, I am as confident as I've ever been that we are on a path to full recovery.
I'm optimistic that the most recent trends in our business and also the important developments over the past quarter, including, of course, the acquisition of ALG demonstrates significant progress toward realizing the benefits of our long-term strategy.
Before diving deeper into the progress on our strategy, let's take a look at the latest business trends.
RevPAR in the third quarter continued to recover at a robust pace, accelerating nearly 30% compared to the second quarter and doubling RevPAR levels in the first quarter.
As discussed on our last earnings call, we experienced a wave of leisure demand during the summer with systemwide RevPAR eclipsing $100 in July, which was approximately 75% recovered as compared to 2019.
As we moved into August, RevPAR decelerated by approximately 10% as compared to July driven by seasonality, coupled with reimposed travel restrictions in certain markets related to the Delta variant.
However, this deceleration was short-lived.
Demand rebounded throughout September and has strengthened further as we move into the fourth quarter.
Absolute RevPAR in October is nearly as strong as July at $98.
What is encouraging is that the recovery has broadened, whereas our strength in July was primarily driven by resort locations, the improvement more recently has been from urban locations, which experienced RevPAR growth of 10% in October as compared to July.
From a segmentation perspective, Leisure Transient remains the top-performing segment.
Systemwide Leisure Transient revenue was at 96% of fully recovered levels in the third quarter, an incredible performance when considering the significant restrictions that were still prevalent in many parts of the world.
Strong leisure transient demand is proving to be far more than the summer surge as Leisure Transient revenue booked in October for all periods was over 20% ahead of 2019 levels.
Further, total transient revenue at our Americas resorts is pacing 25% ahead of 2019 levels for the last weeks of December.
At this pace, we anticipate the festive season could be one of the strongest we've ever experienced.
We've also been pleased with the progression of group and business transient demand.
While demand did not accelerate immediately following Labor Day due to the Delta variant, the upward momentum has been steady throughout September and October.
The rate of improvement in group during October has been particularly meaningful after seeing elevated levels of cancellations in August and early September due to the Delta variant.
Since that time, cancellations have receded while short-term group demand has strengthened.
Overall, systemwide group revenue jumped 16% in October as compared to September and is trending at 50% of fully recovered levels.
Group bookings for 2022 are also showing significant improvement.
In October, our leads for 2022 grew by 38% as compared to September, and we're now 10% ahead of 2019 levels for group business that is likely to book.
While group pace for 2022 is approximately 80% recovered, a bit weaker than what we reported last quarter.
The strong current level of group bookings, coupled with growing lead volume provides confidence that momentum will build as we head into 2022.
As for business transient, the recovery has been softer than group, but is still showing steady momentum with demand recovering to 46% of 2019 levels in October.
We continue to see stronger growth in our regional accounts as compared to our larger national accounts.
However, that gap is narrowing.
Our largest corporate accounts have grown by 50% since June and we continue to be encouraged by dialogue with our corporate customers who are returning to offices in bigger numbers with many planning on a more robust return to travel in 2022.
The recovery momentum has also expanded geographically.
One of the areas with the most pronounced improvements is Europe, which is now trending at roughly the same level as the United States after seeing RevPAR quadruple over the past five months.
We're also seeing occupancy of 70% in the Middle East, which is similar to 2019 levels, driven by very strong demand from the Dubai Expo, which kicked off in October and runs through March of 2022.
Lastly, occupancy in India, which was below 20% just a few months ago due to the Delta variant, is now trending at almost 60% as we exit October.
When you add up the trends, both from a geographic and purpose of visit perspective, coupled with the most recent data on forward bookings, the underlying momentum in the business is clear, and it's consistent with our conviction that we are on a path to full recovery.
Turning to our long-term strategy.
As I mentioned earlier, we've been actively positioning Hyatt for the future with intense focus on advancing three pillars of our long-term strategy, namely: first, to maximize our core business; second, to integrate new growth platforms; and third, to optimize our capital deployment.
I cannot recall a quarter where we advanced our long-term strategy as much as we did in the third quarter of this year.
Let me start with the first pillar of our strategy, maximizing our core business as it underpins everything that we do.
We've been particularly focused on three key areas within this pillar to drive performance.
First, focusing on the high-end traveler going deeper into the segment, not extending outside the segment.
Second, driving more business to our direct channels through engagement supported by data and analytics.
And third, operating with excellence through agility and responsiveness to market dynamics.
Our progress in these areas is not only reflected in the third quarter financial results I commented on earlier, but is also demonstrated in the results of our core metrics as compared to the third quarter of 2019.
Several highlights include market share growth, stronger direct channel mix, a higher percentage of arrivals to our hotels from existing loyalty members and better comparable O&L margins as compared to the same period in 2019.
The ultimate test is investment by owners and our brands, which is best demonstrated through our net rooms growth and pipeline.
Our net rooms growth was 6.9% in the third quarter, again, leading the industry with notable openings, including the Thompson Hollywood, the Park Hyatt Toronto and the Hyatt Ziva Riviera Cancun.
And our pipeline at 103,000 rooms again expanded from the prior quarter, represents an industry-leading 41% of our existing property portfolio.
We were also able to achieve significant progress; with the second pillar of our long-term strategy, integrating new growth platforms through our acquisition of Apple Leisure Group, an exciting new asset-light growth platform for Hyatt.
ALG now as part of Hyatt, immediately doubles the number of resorts in our portfolio, increases our European footprint by more than 60% and positions us as the world's largest operator of hotels in the fast-growing luxury all-inclusive resort segment.
Further, we expect it to increase our systemwide stabilized leisure transient revenue mix to over [50%].
We also expect the ALG brands to drive accretive rooms well into the future similar to what we've achieved with our Two Roads Hospitality acquisition in 2018, which has been a significant driver of growth for Hyatt this year, including conversions and expansion of our pipeline.
In 2021, ALG through the AMR collection is expected to finish the year with net rooms growth of 35% with the addition of 31 hotels and approximately 8,500 rooms and taking the AMR collection to 101 hotels in total with 33,000 rooms by the end of 2021.
The ALG acquisition represents a brand-defining moment in Hyatt's more than 60-year history, much like the company's international expansion into Hong Kong or the launch of the Park Hyde brand.
We are now marking the beginning of a new chapter for Hyatt.
In addition to the exciting growth the acquisition represents for Hyatt, and the new experiences the ALG platform provides our guests.
The earnings base from ALG also allows us to make significant progress on the third pillar of our long-term strategy, which is to optimize our capital deployment.
We are very encouraged that ALG is on track to outperform its 2019 results in 2021, exceeding the expectations of our underwriting.
This earnings base allows us to execute an essential part of our capital strategy to unlock the value of our real estate assets by selling assets over time and prioritizing the reinvestment of proceeds into growth opportunities for Hyatt.
In August, at the same time, as the acquisition announcement, we committed to a $2 billion expansion of our asset disposition commitment.
The proceeds from these future asset sales will allow us to deleverage our balance sheet on an accelerated basis as we reduce the debt incurred to fund the ALG acquisition.
We've initiated this effort with two properties currently in the market and other active discussions underway.
We feel very confident in our ability to execute on this expanded asset disposition commitment.
We've realized over $3 billion in proceeds since our original announcement in 2017 at a very attractive multiple, and we have a high quality and a highly desirable asset base that remains on our balance sheet today.
As a reminder, the $3 billion commitment was in two parts, $1.5 billion in 2017 and an additional $1.5 billion in 2019.
During September, we completed the sale of two assets, the Hyatt Regency Lake Tahoe and Alila Ventana Big Sur, for approximately $500 million in gross proceeds and reached cumulatively over $3 billion in total gross proceeds from asset sales since 2017 at an average aggregate multiple of 17.4 times.
We retained long-term management agreements for both of the hotels that we recently disposed of and exceeded our disposition target well ahead of schedule.
In summary, we look forward to continuing our track record of realizing proceeds in excess of the valuation implied by the multiple for Hyatt and simultaneously transforming our earnings mix to an expected 80% fee-based proportion by the end of 2024.
Importantly, with the earnings from our ALG acquisition, coupled with fees driven by our industry-leading growth, we'll be able to achieve this progress while maintaining investment capacity for future opportunities.
Overall, I'm extremely pleased with the progress we are making toward our long-term strategy as we remain intently focused on executing the three key areas I've outlined as we position ourselves for the future.
Finally, I want to touch upon the owner's meeting we recently held a couple of weeks ago at the beautiful Hyatt Regency Huntington Beach Resort.
The attendance was as strong as it's ever been, and the energy from gathering in person was truly palpable.
I was struck by the collective optimism we share about the future and how our purpose of caring for people so they can be their best has resonated with and been felt by our owners during the most of year downturn this industry has ever experienced.
Their feedback centered on our attention to listening intently, focusing on the important issues and staying connected to their needs.
We have much to do to ensure we are attracting the best talent in a challenging labor environment, to ensure we're doing everything possible to drive market share and operating margins for our brands and owners, and to make sure our systems and services keep pace with quickly shifting trends in technology.
I left the meeting feeling energized at the progress we are making and the opportunities ahead to continue to deliver value to all of our constituents.
We made significant progress toward realizing the benefits of our long-term strategy.
And as the recovery continues to unfold, we have positioned Hyatt to emerge from this pandemic a stronger and more agile company.
Our view to sustainable demand in the future continues to sharpen and with each passing month, our conviction and our enthusiasm grows.
Joan, over to you.
Late yesterday, we reported a third quarter net income attributable to Hyatt of $120 million and a diluted earnings per share of $1.15 with our results favorably impacted by gains on the sale of real estate of $307 million.
Adjusted EBITDA was $110 million in the third quarter effectively doubling our adjusted EBITDA from the second quarter, again demonstrating our ability to translate improving demand into a strong increase in earnings.
In a RevPAR environment that is improving but still challenging, we were able to narrow our adjusted EBITDA decline to only 32% in the third quarter versus the same period in 2019, which is the same as our systemwide RevPAR decline of 32%.
Additionally, our adjusted EBITDA margin was 27.4% for the third quarter, an improvement of 50 basis points from the adjusted EBITDA margin of 26.9% we reported in the third quarter of 2019, serving as yet another marker of operating excellence in a lower demand environment.
Systemwide RevPAR was $94 in the third quarter, representing a 29% increase compared to second quarter.
Both occupancy and rate contributed to the sequential growth with occupancy improving by 700 basis points and rate growing by 12%.
The improvement in rate is especially notable as it reached 96% of 2019 levels on a systemwide basis.
Our base incentive and franchise fees totaled $96 million in third quarter reaching 71% of 2019 levels, with base and franchise fees more fully recovered than RevPAR as a result of our strong net rooms growth over the past two years.
Turning to our segment results.
Our management and franchising business delivered a combined adjusted EBITDA of $85 million, improving 33% from the second quarter.
The Americas segment accounted for the vast majority of the sequential growth and recovered to approximately 80% of 2019 segment adjusted EBITDA levels.
Hotels and resort locations were the primary driver of the recovery during the first two months of the quarter, with a more notable improvement from urban locations in September, driven by growing demand for business transient and group.
Our Europe, Africa, Middle East and Southwest Asia segment also experienced material improvement in the third quarter as it benefited from the easing of travel restrictions and reopening of borders across Europe.
Fees from our European hotels more than doubled from the prior quarter with France and Southern Europe leading the recovery.
The Asia Pacific segment did not see the same level of improvement as our other two segments and the recovery in this part of the world remains uneven.
Mainland China RevPAR had a strong start to the quarter trending 4% ahead of 2019 levels in July before dropping to less than 50% of 2019 levels in August due to reimposed travel restrictions.
Demand has improved since with RevPAR strengthening to 78% of 2019 levels in October.
Additionally, the recovery in Asia Pacific, excluding Mainland China, has progressed at a slower pace than other areas of the world as more stringent travel restrictions remain in place.
However, we remain optimistic that results will improve in the region as vaccination rates continue to rise allowing for restrictions to be eased.
Turning to our owned and leased hotels segment.
The business delivered $51 million of adjusted EBITDA for the third quarter representing an improvement of $39 million from the second quarter.
The performance was significantly ahead of expectation, driven by the ingenuity and responsiveness of our teams to market dynamics.
Owned and leased RevPAR was $117 for the third quarter, improving 39% from the second quarter with notable improvement from group revenue, which jumped 87% sequentially and accounted for over 28% of the room night mix.
We previously discussed how strong performance has been in our resorts during the quarter and it's important to highlight outperformance in some of our larger owned convention hotels as well.
In the third quarter, Hyatt Regency Orlando, Hyatt Regency Phoenix and Grand Hyatt San Antonio, collectively had a stronger EBITDA contribution in the third quarter of 2021 as compared to 2019.
This is quite notable considering group business accounted for approximately 70% of the rooms revenue mix for these hotels during the third quarter of 2019.
This year, these hotels were still able to generate a significant amount of group business, representing 57% of rooms revenue and we're also able to grow transient revenue nearly 30% above 2019 levels through creative tactics such as repositioning the hotels for families and other leisure business.
This is a great example of how we are evolving go-to-market sales strategies real time to meet the current demand profile and maximize performance of our owned and leased hotels.
Overall, excellent revenue management and strong operational execution have resulted in significant margin expansion for our owned and leased hotels.
Comparable operating margins were 20.3% in the third quarter, which is an improvement of 490 basis points relative to 2019 levels despite RevPAR that was only 75% recovered.
Open positions have also contributed to lower operating costs, and we continue to closely monitor the labor environment and are working hard to fill open positions.
The situation remains challenging, but we're making progress.
As we mentioned last quarter, we continue to see some pressure on wages, and our general managers have made significant adjustments based on competitive market factors and the challenge and our response varies by market.
I'd also like to provide an update on our liquidity and cash.
As of September 30, our total liquidity inclusive of cash, cash equivalents and short-term investments and combined with revolver borrowing capacity was approximately $4.3 billion compared with $3.2 billion as of June 30.
We received a USD254 million tax refund in July, $491 million of net proceeds from the sale of Hyatt Regency Lake Tahoe and Alila Ventana Big Sur, and raised $575 million in net proceeds from our equity offering in September.
We also repaid $250 million in senior notes that matured in August.
In October, we raised $1.75 billion of short-term 2- and 3-year fixed and floating rate notes at an approximate weighted average interest rate of 1.48%.
We used $750 million of those proceeds to refinance our 2022 short-term prepayable bonds and successfully reduced our interest costs by $12 million annually on the refinancing.
Our approximate total liquidity after the debt capital markets proceeds was $5.2 billion at the end of October.
On November 1, we closed on the acquisition of ALG and paid cash of $2.7 billion.
After the acquisition and as of today, our total liquidity position remains strong at approximately $2.6 billion, with $1.3 billion of cash, cash equivalents and short-term investments, and $1.3 billion available under the revolver.
Finally, I'd like to make a few additional comments regarding our 2021 outlook.
Consistent with our communication in the second quarter, we continue to expect adjusted SG&A to be in the approximate range of $240 million, excluding any bad debt expense or ALG integration costs.
We're still refining the ALG integration cost estimate but expected to be in the range of $5 million to $10 million for the full year of 2021 with $2 million of that amount already included in the third quarter adjusted SG&A.
It's important to note that these costs are nonrecurring and our plan does not include an extensive or costly integration of systems and processes.
We continue to expect capital expenditures for 2021 to be approximately $110 million exclusive of any impact from ALG.
We mentioned on our last call that we are pulling forward selected renovation projects to take advantage of the timing of lower displacement during the fourth quarter and therefore, our capital expenditures could actualize slightly higher if our materials and labor needs are secured before the end of the year.
Turning to net rooms growth.
We are reaffirming our expectation of rooms growth to be greater than 6% for the full year, exclusive of any impact from ALG.
There is some degree of uncertainty related to supply chain issues, which could push certain openings into the first quarter of 2022.
However, greater than 6% remains our best estimate at this time and we're pleased to be delivering another very strong year of net rooms growth.
As we turn to 2022, we look forward to sharing more on the progress of our ALG integration efforts, and we'll be providing more detailed disclosures on the ALG business on our next earnings call.
We're proud of the accomplishments we achieved to advance our long-term strategy and are excited about the value creation ALG brings to Hyatt and are even better positioned today to drive asset light growth than ever before.

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q3 earnings per share $1.15.
qtrly net rooms growth of 6.9% compared to q3 of 2020.2021 capital expenditures are expected to be approximately $110 million.

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