Hyatt Hotels CorpH
Hyatt Hotels Corp Commitments Disclosure
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, we enter into various commitments, guarantees, surety and other bonds, and letter of credit agreements.
Commitments—At December 31, 2023, we are committed, under certain conditions, to lend, provide certain consideration to, or invest in various business ventures up to $477 million, net of any related letters of credit.
Performance Guarantees—Certain of our contractual agreements with third-party owners require us to guarantee payments to the owners if specified levels of operating profit are not achieved by their hotels. Except as described below, at December 31, 2023, our performance guarantees had $104 million of remaining maximum exposure and expire between 2024 and 2042.
Through acquisitions, we acquired certain management and hotel services agreements with performance guarantees based on annual performance levels and with expiration dates between 2027 and 2045. Contract terms within certain management and hotel services agreements limit our exposure, and therefore, we are unable to reasonably estimate our maximum potential future payments.
At December 31, 2023 and December 31, 2022, we had $99 million and $108 million, respectively, of total performance guarantee liabilities, which included $91 million and $96 million, respectively, recorded in other long-term liabilities and $8 million and $12 million, respectively, recorded in accrued expenses and other current liabilities on our consolidated balance sheets.
Additionally, we enter into certain management contracts where we have the right, but not an obligation, to make payments to certain hotel owners if their hotels do not achieve specified levels of operating profit. If we choose not to fund the shortfall, the hotel owner has the option to terminate the management contract. At both December 31, 2023 and December 31, 2022, we had an insignificant amount recorded in accrued expenses and other current liabilities on our consolidated balance sheets related to these performance cure payments.
Debt Repayment Guarantees—We enter into various debt repayment guarantees in order to assist third-party owners, franchisees, and unconsolidated hospitality ventures in obtaining third-party financing or to obtain more favorable borrowing terms.
| Geographical region | Maximum potential future payments (1) | Maximum exposure net of recoverability from third parties (1) | Other long-term liabilities recorded at December 31, 2023 | Other long-term liabilities recorded at December 31, 2022 | Year of guarantee expiration (2) | |||||||||||||||||||||||||||
| United States (3), (4) | $ | 140 | $ | 41 | $ | 30 | $ | 3 | various, through 2027 | |||||||||||||||||||||||
| All foreign (3), (5) | 200 | 178 | 21 | 25 | various, through 2031 | |||||||||||||||||||||||||||
| Total | $ | 340 | $ | 219 | $ | 51 | $ | 28 | ||||||||||||||||||||||||
(1) Our maximum exposure is generally based on a specified percentage of the total principal due upon borrower default.
(2) Certain underlying debt agreements have extension periods which are not reflected in the year of guarantee expiration.
(3) We have agreements with our unconsolidated hospitality venture partners or the respective third-party owners or franchisees to recover certain amounts funded under the debt repayment guarantee; the recoverability mechanism may be in the form of cash or HTM debt security.
(4) Certain agreements give us the ability to assume control of the property if defined funding thresholds are met or if certain events occur.
(5) Under certain debt repayment guarantees associated with hotel properties in India, we have the contractual right to recover amounts funded from an unconsolidated hospitality venture, which is a related party, and therefore, we expect our maximum exposure for these guarantees to be approximately $83 million, taking into account our partner's 50% ownership interest in the unconsolidated hospitality venture. Under certain events or conditions, we have the right to force the sale of the properties in order to recover amounts funded.
At December 31, 2023, we are not aware, nor have we received any notification, that our third-party owners, franchisees, or unconsolidated hospitality ventures are not current on their debt service obligations where we have provided a debt repayment guarantee.
Guarantee Liabilities Fair Value—We estimated the fair value of our guarantees to be $148 million and $124 million at December 31, 2023 and December 31, 2022, respectively. Based on the lack of available market data, we have classified our guarantees as Level Three in the fair value hierarchy.
Contingent Consideration Fair Value—We may pay up to an additional $175 million of contingent consideration through 2028 as a result of our acquisition of Dream Hotel Group (see Note 7). At December 31, 2023, we had $174 million of potential future consideration remaining. The contingent consideration liability, which is remeasured at fair value on a recurring
basis and is classified as Level Three in the fair value hierarchy, is recorded in other-long term liabilities on our consolidated balance sheets. The following table summarizes the change in fair value recognized in other income (loss), net on our consolidated statements of income (loss):
| 2023 | |||||
| Fair value as of acquisition date | $ | 107 | |||
Change in fair value (Note 21) | 9 | ||||
| Payments | (1) | ||||
Fair value at December 31 (Note 13) | $ | 115 | |||
Insurance—We obtain insurance for potential losses from general liability, property, automobile, aviation, environmental, workers' compensation, employment practices, crime, cyber, and other miscellaneous risks. A portion of these risks is retained through a U.S.-based and licensed captive insurance company that is a wholly owned subsidiary of Hyatt and generally insures our deductibles and retentions. Reserve requirements are established based on actuarial projections of ultimate losses. Reserves for losses in our captive insurance company to be paid within 12 months are $41 million and $39 million at December 31, 2023 and December 31, 2022, respectively, and are recorded in accrued expenses and other current liabilities on our consolidated balance sheets. Reserves for losses in our captive insurance company to be paid in future periods are $73 million and $68 million at December 31, 2023 and December 31, 2022, respectively, and are recorded in other long-term liabilities on our consolidated balance sheets (see Note 13).
Collective Bargaining Agreements—At December 31, 2023, approximately 21% of our U.S.-based employees were covered by various collective bargaining agreements, generally providing for basic pay rates, working hours, other conditions of employment, and orderly settlement of labor disputes. Certain employees are covered by union-sponsored, multi-employer pension and health plans pursuant to agreements between various unions and us. Generally, labor relations have been maintained in a normal and satisfactory manner, and we believe our employee relations are good.
Surety and Other Bonds—Surety and other bonds issued on our behalf were $253 million at December 31, 2023 and primarily relate to our insurance programs, litigation, taxes, licenses, liens, and utilities for our lodging operations.
Letters of Credit—Letters of credit outstanding on our behalf at December 31, 2023 were $260 million, which primarily relate to our ongoing operations, collateral for customer deposits associated with ALG Vacations, collateral for estimated insurance claims, and securitization of our performance under certain debt repayment guarantees, which are only called on if the borrower defaults on its obligations or we default on our guarantees. Of the letters of credit outstanding, $4 million reduces the available capacity under our revolving credit facility (see Note 11).
Capital Expenditures—As part of our ongoing business operations, expenditures are required to complete renovation projects that have been approved.
Other—We act as general partner of various partnerships owning hotel properties that are subject to mortgage indebtedness. These mortgage agreements generally limit the lender's recourse to security interests in assets financed and/or other assets of the partnership(s) and/or the general partner(s) thereof.
In conjunction with financing obtained for our unconsolidated hospitality ventures and certain managed or franchised hotels, we may provide standard indemnifications to the lender for loss, liability, or damage occurring as a result of our actions or actions of the other unconsolidated hospitality venture partners or the respective third-party owners or franchisees.
As a result of certain dispositions, we have agreed to provide customary indemnifications to third-party purchasers for certain liabilities incurred prior to sale and for breach of certain representations and warranties made during the sales process, such as representations of valid title, authority, and environmental issues that may not be limited by a contractual monetary amount. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed-upon contract terms expire.
We are subject, from time to time, to various claims and contingencies related to lawsuits, taxes, and environmental matters, as well as commitments under contractual obligations. Many of these claims are covered under our current insurance programs, subject to deductibles. Although the ultimate liability for these matters cannot be determined at this point, based on information currently available, we do not expect the ultimate resolution of such claims and litigation to have a material effect on our consolidated financial statements.
During the year ended December 31, 2018, we received a notice from the Indian tax authorities assessing additional service tax on our operations in India. We appealed this decision and do not believe a loss is probable, and therefore, we have
not recorded a liability in connection with this matter. At December 31, 2023, our maximum exposure is not expected to exceed $18 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 23, 2024 | Showing above |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 18, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.