Q1 2024 Hyatt Hotels Corp Earnings Call
Good morning, and welcome to Hyatt Hyatt's first quarter 2024 earnings call.
All participants are in a listen only mode.
After the Speakers' remarks, there'll be a question and answer session.
Ask a question at that time, Please press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Adam Roman Senior Vice President of Investor Relations and S. P. N. A thank you. Please go ahead.
Adam Rohman: Thank you and welcome to Hyatt's first quarter 2024 earnings Conference call. Joining me today are <unk>.
Adam Rohman: Mark <unk>, Hyatt's, President and Chief Executive Officer, and John Barter, any hyatt's, Chief Financial Officer before we start I would like to remind everyone that our comments today will include forward looking statements under federal Securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on form.
John Barter: 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 forward looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold.
John Barter: In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks on our website at Hyatt Dot com under the financial reporting section of our Investor Relations link and in this morning's earnings release.
An archive of this call will be available on our website for 90 days. Please.
John Barter: Please note that unless otherwise stated references to our occupancy average daily rate and Revpar reflect comparable system wide hotels on a constant currency basis. Additionally percentage changes disclosed during the call are on a year over year basis, unless otherwise noted with that I will now turn the call over to Mark.
John Barter: <unk>.
Mark: Thank you Adam good morning, everyone and thank you for joining us today.
Mark: We are pleased to report that the year is off to a great start demonstrating high quality growth across multiple dimensions and expanding fees from all areas of our asset light business.
Mark: Let's start with the latest trends that we're seeing.
John Barter: System wide Revpar increased five 5% in the first quarter and travel across all customer segments remains very healthy.
John Barter: As anticipated the timing of Easter compared to 2023 positively impacted leisure travel in March and negatively impacted group and business travel.
John Barter: Leisure transient revenue increased 7% in the first quarter due to strong demand for spring break.
John Barter: And the week leading into Easter.
John Barter: As expected leisure transient revenue was negatively impacted in April due to the timing of Easter.
John Barter: While we expect year over year growth rates to moderate we are significantly above pre pandemic levels and are not seeing signs of consumers, reducing their leisure travel for.
John Barter: For example pace for our all inclusive resorts of the Americas is up approximately 4% for the second quarter led by Mccann crude market.
John Barter: Meanwhile, group room revenue increased approximately 6% in the quarter with strong performance in January and February.
John Barter: We anticipate solid contribution to Revpar from group in the second and third quarters of 2024 in the second quarter is off to a good start with April up 14% compared to last year.
John Barter: We expect another solid year of demand for group meetings and events with group pace for U S. Full service managed properties currently up 7% for May through December of 2024.
John Barter: Finally business transient revenue increased approximately 6% in the quarter with strength in both January and February.
John Barter: And we saw similar trends in the U S. A clear sign that business travel continues to recover.
John Barter: April was up 21% globally compared to 2023, and we remain optimistic about business transient is positive contribution to revpar growth.
John Barter: Over the last three quarters of 2024.
John Barter: Turning to our loyalty program World of Hyatt membership grew 22% over the past year, reaching a new high of approximately 46 million members at quarter end.
John Barter: Loyalty room night penetration increased in the quarter highlighting the strong engagement of our expanding membership base, which is highly valuable because our members stay longer and they spend more and they booked through hyatt channels.
John Barter: I'm also thrilled to share that more than 700, Mr and Mrs. Smith boutique and luxury hotels and villas around the world are now available through Hyatt channels, including World of Hyatt.
John Barter: We now have more than twice the number of properties previously available through our alliance with small luxury hotels.
John Barter: Offerings in 25 additional countries at hundreds of new markets.
John Barter: We expect to have approximately 1000, Mr and Mrs. Smith properties available through Hyatt channels and world of Hyatt by the end of this year.
John Barter: We are also establishing relationships with Mr and Mrs. Smith Hotel owners and we expect this will lead to potential opportunities to expand our direct engagement with those owners.
John Barter: Last week, we announced the collaboration with telecom to reward our members for prioritizing their wellbeing.
John Barter: This collaboration joins hi, its expansive roster of global wellbeing programming.
John Barter: Further differentiating world of Hyatt from other hospitality loyalty programs.
John Barter: Finally, <unk> received several accolades during the quarter, including being named the best loyalty program for hotels, and hospitality rewards by Newsweek and Best Hotel rewards program and best credit card benefits by Nerd wallet <unk>.
John Barter: Additionally, 55 properties were recognized by Forbes travel guide 2024.
John Barter: And 355 Hyatt properties were recognized by U S News and World reports Hotel rankings.
John Barter: These continued recognitions in addition to the loyalty programs growth.
John Barter: Is driving higher room night penetration and greater owner preference for our brands.
John Barter: Turning to development, we are realizing the benefit of greater owner preference through the continued expansion of our pipeline.
John Barter: Our pipeline reached a new record of approximately 129000 rooms, a 10% increase year over year and represents approximately 40% of our existing room base.
John Barter: We signed contracts across our brand portfolio, including luxury and lifestyle brands, such as park Hyatt <unk> and Thompson hotels and have further strengthened our upper mid scale pipeline, including our euro curve and Hyatt Studios brands.
John Barter: There are now 40 aircraft hotels opened in China with approximately 75 in the pipeline.
John Barter: And in the year since we announced hike studios.
John Barter: Around 250 hotels in various stages of negotiation.
Speaker Change: Today marks another milestone for <unk> studios as we celebrate the groundbreaking of a second property type Studios Huntsville, which is expected to open in late 2025.
John Barter: Our record pipeline is translating into an expanded global footprint and in the quarter net rooms growth increased five 5%.
John Barter: Notable openings include Thompson, Houston Secrets tides, Punta Cana Secrets, Playa Blanca Kosta <unk> head us.
John Barter: Multiple year co properties in China, and Hyatt Regency, Nairobi West ones, our first hotel in Kenya.
John Barter: We remain focused on enhancing our network effect by expanding our offerings in new markets and across more price points for our guests and customers.
John Barter: The first quarter demonstrates this with new lifestyle resort and upper mid scale hotels added to our portfolio.
John Barter: Turning to transactions, we have several updates to share on asset sales, but first I want to cover an important transaction that was completed in the quarter with an existing joint venture partner in India.
John Barter: The relationship with our partner dates back 40 years when they developed the first Hyatt hotel in India.
John Barter: And 20 years ago, we formed a 50 50 joint venture Juniper hotels with this partner to develop hotels in India.
John Barter: Today, the Juniper portfolio is made up of six Hyatt hotels, including the iconic Grand Hyatt, Mumbai and Delhi.
John Barter: Each of which also has branded residences.
John Barter: February Juniper hotels completed an initial public offering on the BSC limited and National stock exchange of India successfully raising capital representing approximately 23% of the company.
John Barter: The current equity value of our stake in Juniper hotels is close to $475 million and we are confident the current value of our joint venture exceeds any some of the parts analysis or historical assessments of value of our joint venture interests.
John Barter: One other benefit of the IPO is that Juniper hotels paid down third party that we're leaving Hyatt of a substantial debt repayment guarantee.
John Barter: In addition to creating significant shareholder value. This joint venture relationship has allowed us to enhance our strong brand reputation in India, leading to over 100 open and pipeline hotels in the country.
John Barter: Turning to asset sales. In addition to closing the sale of Hyatt Regency Aruba on February 9th, which we announced during our fourth quarter 2023 call. We have several updates to share.
John Barter: We completed three separate transactions selling park Hyatt Zurich on April 4th High Regency, San Antonio on April 23rd and Hyatt Regency Green Bay on May one for combined proceeds of $535 million at a $14 seven times multiple.
John Barter: We retained long term management agreements at both park, Hyatt Zurich, and Hyatt Regency San Antonio.
John Barter: And our long term franchise agreement at Hyatt Regency Green day.
John Barter: In connection with the sale of Park Hyatt Zurich, we provided $45 million in seller financing.
John Barter: In addition to realizing great value for these assets, we will avoid approximately $40 million of capital expenditures over the next few years.
John Barter: Although the transaction environment has been uneven.
John Barter: We have once again proven our ability to transact with a variety of different buyers and in the case of Hyatt Regency, San Antonio complete an all cash transaction.
John Barter: We also signed a purchase and sale agreement for an asset that upon closing would yield cumulative gross proceeds that exceed the $2 billion asset sell down commitment.
John Barter: Finally, we remain in the marketing process for another asset we previously mentioned.
John Barter: We have realized $1 $5 billion of gross proceeds from the net disposition of real estate since our $2 billion commitment announced in August of 2021, including the three asset sales completed during the second quarter at a total multiple of 13 three times.
John Barter: We remain confident that we will complete the remaining portion of our disposition commitment before the end of this year.
John Barter: In closing we are pleased with our operational execution in the quarter.
John Barter: And forward looking indicators are positive across all customer segments.
John Barter: The significant progress that we have made selling owned assets increases our asset light earnings mix.
John Barter: Which we expect will exceed 80% on a run rate basis. Once we complete our $2 billion disposition commitment.
John Barter: We remain focused on expanding our network effects and our growth across multiple dimensions, including roos fees pipeline and loyalty membership.
John Barter: This is leading to strong free cash flow and increase shareholder value.
John Barter: Before I conclude my remarks, I want to say, how proud I am that high it was named one of the 100 best companies to work for by Fortune and Great places to work.
John Barter: This marks the 11th year in a row that Hyatt has received this recognition and we are honored to be one of the longest ranked hospitality companies on the list.
John Barter: Our purpose to care for people so they can be their best Guy.
John Barter: Guides Us every day and gives me confidence in our ability to deliver great results into the future and to continue to create value for our shareholders.
John Barter: Joanne will now provide more details on our operating results Joe over to you.
Joanne: Thanks, Mark and good morning, everyone before I begin I'd like to remind everyone that our first quarter results reflect our three new reportable segments management, and franchising owned and leased and distribution.
Joanne: First quarter 2023 results that we published in our earnings release. This morning have been recast to reflect our new reportable segments.
Joanne: <unk> recast historical financial information is available on our Investor Relations website.
Joanne: As Mark mentioned first quarter system wide Revpar increased five 5% led by growth across multiple international markets. This growth was fueled by 21% Revpar growth in Asia Pacific, Excluding greater China, which benefited from strong outbound travel from greater China to Mark.
Joanne: That's including Japan, Thailand, and South Korea.
Joanne: Greater China, Revpar increased approximately 12% aided by easier comparisons to the first quarter of 2023 during which COVID-19 restrictions were lifted.
Joanne: Revpar growth in the Americas, excluding the United States increased approximately 12% a result of strong leisure demand in Mexico and the Caribbean.
Joanne: We also saw similar results at our all inclusive properties in the Americas with net package revpar growth of 10% for the quarter.
Joanne: Moving to Europe, Revpar increased 10% due to exceptional performance in southern and Eastern Europe, Our European all inclusive properties produced impressive net package revpar growth of approximately 25% driven by high demand for our resorts in the Canary Islands.
Joanne: And finally in the United States Revpar was up approximately 2%, excluding the impact of Easter reflecting normalized growth.
Joanne: We reported record gross fees of $262 million up 13% due to a combination of our revpar growth greater system size and an increase in our non revpar fees for.
Joanne: Franchise and other fees increased 21% driven by the expansion of our franchise footprint and increases in co brand credit card fees and <unk> fees.
Joanne: Incentive fees increased 16%, excluding foreign exchange headwinds in Mexico due to greater contributions from international hotels.
Joanne: Base fees increased 8%, reflecting a combination of increased managed revpar and fees from newly opened managed hotels in total management and franchising segment adjusted EBITDA increased approximately 10%.
Joanne: Moving to our owned and leased segment adjusted EBITDA for the quarter decreased by 9% when adjusted for asset dispositions we.
Joanne: We faced difficult comparisons versus 2023, including lapping the Super Bowl, which benefited Hyatt regency Phoenix as well as the timing of Easter, which negatively impacted group revenues across our U S owned portfolio in March 2024.
Joanne: Compared to the first quarter of 2023 adjusted EBITDA was also negatively impacted by higher real estate taxes increased wages in certain markets and transaction costs associated with asset sales that closed after the first quarter.
Joanne: Our expectations continue to be that we will achieve flat to moderate expansion of owned and leased margins for the full year, maintaining ongoing margin expansion relative to 2019.
Joanne: Finally, our distribution segments adjusted EBITDA reflects highest ownership of UEC through the sale of our majority interest in February 14th of 2024 as well as full year ownership in 2023.
Joanne: First quarter 2024 results includes $6 million of adjusted EBITDA losses for a period of full ownership of EDC before the transaction closed.
Joanne: The distribution segment's adjusted EBITDA declined $19 million compared to the first quarter of 2023 as ALG vacations lapped a very strong first quarter last year.
Joanne: These results are consistent with our prior public statements as our expectations relating to year over year headwinds for ALG vacations.
Joanne: Overall total company adjusted EBITDA for the quarter with $252 million.
Joanne: Third to last year, adjusted EBITDA increased approximately 3% when excluding transactions the impact of foreign exchange and the headwind from ALG vacations.
Joanne: Our core management and franchising business delivered outstanding results led by Revpar and net rooms growth the owned and leased portfolio lap challenging comparisons in the first quarter, which we do not expect will continue through the remainder of the year.
Joanne: Now moving to liquidity as of March 31, 2024, our total liquidity remains strong at $2 3 billion, including approximately $1 $5 billion in borrowing capacity on our revolving credit facility at.
Joanne: At the end of the quarter, we reported approximately $3 billion of debt outstanding we remain committed to our investment grade profile and our balance sheet is strong.
Joanne: During the first quarter, we returned over $400 million to shareholders inclusive of dividends and share repurchases, we repurchased approximately two 5 million shares of class, a and class b common stock for an aggregate purchase price of $388 million.
Joanne: The company's board of directors has authorized a $1 billion increase to our share repurchase authorization and we now have approximately one 8 billion available.
Joanne: Now I'd like to review, our 2024 outlook after adjusting for the impact of transactions, we are reaffirming our outlook for the full year that we provided during our fourth quarter earnings call.
Joanne: We expect full year system wide revpar growth between 3% and 5% compared to 2023, we expect group and business transient customer segments to contribute meaningfully to overall revpar growth and leisure transient to grow compared to 2023 at a moderate growth rate.
Joanne: We anticipate U S revpar growth around the lower end of our global outlook, while revpar growth in our key international markets exceeds the high end of our range.
Joanne: We expect net rooms growth between five 5% and 6% driven by both organic growth and conversions.
Joanne: Those fees are expected to be in the range of one one to 113 billion.
Joanne: And adjusted G&A is expected to be in the range of $425 million to $435 million.
Joanne: For adjusted EBITDA, our updated outlook of 115 to $1 109 billion reflects a $30 million reduction at the midpoint due to transactions, including the three asset sales in the second quarter that Mark mentioned as well as the adjusted EBITDA losses from UEC prior to <unk>.
Joanne: <unk> the transaction.
Joanne: Free cash flow is expected to be in the range from 575 million to $625 million <unk>.
Joanne: Including the $30 million reduction to adjusted EBITDA and $25 million of cash tax payments relating to the three asset sales.
Joanne: Finally, we are raising our outlook for capital returns to shareholders to a range of $800 million to $850 million, including share repurchases and dividends.
Joanne: We will update our outlook as additional asset sale transactions close.
Joanne: Full details of our outlook can be found on page three of our earnings release.
Joanne: Additionally, we published a revised earnings growth model. This morning, which can be found on our Investor Relations website on slide 11 of the Investor presentation.
Speaker Change: I'll conclude my prepared remarks by saying we are very pleased with our first quarter results. Our teams have delivered outstanding results, which we believe demonstrates our unique positioning and differentiated model.
Speaker Change: We're excited about the remainder of this year and continuing to execute our strategic vision.
Speaker Change: Thank you and with that I'll turn it back to our operator for Q&A.
Speaker Change: Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Speaker Change: Our first question comes from Danielle Pulitzer from Wells Fargo. Please go ahead. Your line is open.
Danielle Pulitzer: Hey, good morning, everyone and thanks for taking my question.
Danielle Pulitzer: First I just wanted to touch high level, how you think about asset sales from here. It seems like you guys are pacing towards that $2 billion target.
Danielle Pulitzer: As you kind of maybe get there or even exceed it how do you think about going forward, what's your appetite for incremental asset sales should we expect another target or do you feel like you are.
Speaker Change: B kind of AD hoc from here. Thanks.
Speaker Change: Thanks, Danielle and good morning.
Speaker Change: Yes.
Speaker Change: We will be.
Speaker Change: At a run rate of in excess of 80% fee based earnings and assuming that we close everything that we've got remaining.
Speaker Change: And.
Speaker Change: But from from our.
Speaker Change: From our perspective, we are fully asset light we were 76%.
Speaker Change: Last year for the full year.
Speaker Change: And we do not intend to publish another targeted.
Speaker Change: Sell down program. It is true that we have a number of really.
Speaker Change: Phenomenal assets left in the portfolio and we will continue to look at opportunities to sell those.
Speaker Change: And the opportunities will likely come in conjunction with other growth opportunities that we have we have some irreplaceable assets in the form of three park hyatt's.
Speaker Change: Excluding JV, we have a JV in a park Hyatt in Europe, we owned the Park Hyatt, Paris, New York, and Chicago, and the mirror ball portfolio all of which represent.
Speaker Change: What I would consider to be.
Speaker Change: Highly durable from a valuation perspective assets in extremely high barrier markets.
Speaker Change: So we were very optimistic about what we're going to be able to do going forward. So I think you can expect to see us continue to sell down.
Speaker Change: We like every other company in our industry, we will not get to zero. There is nobody in the opening of our industry that has zero and we don't that's not a target for us.
Speaker Change: And so you have the other fact is that we will find other I think very value accretive opportunities to buy hotels from time to time Irvine as an example, Indian wells, we prove that out.
Speaker Change: And so not to mention if you go back in history, the Hyatt Regency, Mexico City.
Speaker Change: And others. So I think we've proven that we can buy add value to and then sell at a profit plus retaining long term management agreements and if the market is important enough to us and the opportunity is good enough, we will do that but that will be opportunistic and not programmatic and modest.
Speaker Change: Thanks, that's really helpful and just for my follow up.
Speaker Change: You reiterated your three 3% to 5% Revpar guidance.
Speaker Change: I guess as we think about now versus a few months ago. When you. Initially introduced it what are some of the puts and takes and if you could maybe opine a bit on what you're seeing in China, and if that's changed a little bit versus a few months ago.
Danielle Pulitzer: Sure Danielle.
Danielle Pulitzer: I'll take that question on a 3% to 5% we're seeing very strong as we ended we reported in the first quarter International results and that is as we look at pacing into the second quarter.
Danielle Pulitzer: And what our operators are telling us around the world as that continues to be strong. So we feel good about international results and those what I would say on the high end or exceeding the high end of our guidance as we think about the full year. The U S has been.
Speaker Change: In the low single digits, we reported that we saw in the U S 2% growth to outside of Easter There was a headwind in the first quarter for <unk> for the U S.
Speaker Change: The Easter holiday, but as we noted in our prepared remarks, our group business is very strong with pacing into the last three quarters of the year up 7% and business transient is also very strong with some very important markets for us like New York up significantly and.
Speaker Change: Seeing good short term transient pacing on the business side, So I would say all in all the.
Speaker Change: The composition of the Revpar range is U S and then on the.
Speaker Change: Lower and international markets and the higher to maybe exceeding the higher end and then with respect to China, China has been as I mentioned international markets very strong, China, and Asia Pacific, Excluding China, No exception really really good results coming out in the quarter.
Speaker Change: And specifically what we're seeing is actually good news on the international inbound into China. So the mix of that business into China from International has increased.
Speaker Change: I think our numbers are about <unk>.
Speaker Change: Seven to eight percentage points on the mix so a material increase in international inbound.
Speaker Change: It's still below pre COVID-19 levels, but but we're seeing that business pick up and then outbound is a phenomenal story into markets like Japan, South Korea, Thailand that we noted in the prepared remarks, we're seeing significant outbound travel from China into those markets and frankly, all around the world.
Speaker Change: So a really good results coming out of coming out of that region.
Speaker Change: Thanks, so much.
Speaker Change: Welcome.
Speaker Change: Our next question comes from Shaun Kelley from Bank of America. Please go ahead. Your line is open.
Shaun Clisby Kelley: Hi, good morning, everyone.
Shaun Clisby Kelley: And Margo Joe I, just wanted to dig in on ALG, a little bit so the first part.
Shaun Clisby Kelley: Was just kind of exactly helping us understand kind of what is occurring here. So big picture you had great. It sounds like you had very strong demand on the packaged tour side, both in Europe and in the Caribbean and Latin America, and I'm trying to kind of square that with the distribution headwinds called out in the release and mentioned about sort of a difficult.
Shaun Clisby Kelley: Comps is there is there just a timing gap on the way the distribution piece.
Shaun Clisby Kelley: <unk> revenue is there something different in that that we're seeing so just help us kind of balance the two those two comments or those two areas both want to strengthen one of weakness.
Shaun Clisby Kelley: Yeah.
Speaker Change: We had.
Speaker Change: We had.
Speaker Change: Already indicated previously that there was going to be.
Speaker Change: I think we said in approximately $20 million headwind with respect to the ALG vacations business and that that would be that would really show up in the first quarter and that's that's true that's what happened so.
Speaker Change: None of that had to do with the comparison to last year, which was extraordinary.
Speaker Change: Just by way of reminder, there were.
Speaker Change: There were there was an unusual level of.
Speaker Change: Air demand, which was not being fully satisfied by scheduled carriers.
Speaker Change: We were able to backfill that in relation to our efforts.
Speaker Change: We also drove tremendous traffic.
Speaker Change: Two are owned.
Speaker Change: All inclusive resorts both in the Americas.
Speaker Change: Throughout the Americas.
Speaker Change: Throughout the Caribbean and the West coast of Mexico, and can make and so forth.
Speaker Change: So and this year.
Speaker Change: The World has changed with respect to the.
Speaker Change: <unk> side, so packaged levels have come down a bit.
Speaker Change: And which we understood and knew that we were facing different dynamics. There. It is still true that.
Speaker Change: The demand for our resorts remains extremely strong so our pace of plus 11% for the first quarter with very strong pace if.
Speaker Change: If you look at <unk> for example, in the second quarter patient Decant Kunis plus six.
Speaker Change: So the.
Speaker Change: Was it referred to as the Kan Coon.
Speaker Change: Fatigue last year as we predicted it was temporary and sure enough. It is.
Speaker Change: So demand for hotels remains very very strong and I would just point out that there can be a difference between ALG vs.
Speaker Change: Business results and our own <unk>.
Speaker Change: <unk> by virtue of the fact that.
Speaker Change: Our resorts represent maybe 25%.
Speaker Change: LG vacations total total volume.
Speaker Change: And ALG vacations represents about 20% of the.
Speaker Change: The total revenue that we book into our resorts. So theres a lot of other hotels and a lot of other markets that are being served by ALG vacations.
Speaker Change: One thing I would just add to that is recognizing what mark just said is that there is a mix of packages and mix of business as far as what markets ALG vacations is serving and what we plan to do is to provide additional color going forward just like we did for the first quarter the heads.
Speaker Change: Wind that we anticipated and going forward, we will continue to provide color on that just because of that.
Speaker Change: That correlation that isn't entirely Ah.
Speaker Change: Connected with our net package Revpar results, yes, and so.
Speaker Change: One such.
Speaker Change: Difference in the first quarter and most likely will show up again in the second quarter in the third quarter, given our pace outlook as Jamaica, Jamaica will be lower.
Speaker Change: Even though we have packaged packages that we saw in the Jamaica and Ken Kun as I mentioned is going strong. So those differences also also affect ALG vacations total volumes.
Speaker Change: Very helpful. And then maybe just to kind of stick with the theme can you just give us an update on sort of for the year. Your general expectations for this distribution segment or what's embedded in your broader outlook for it and then general talks about I think mid teens are up mid to high teens margins as being I think normalized in that.
Speaker Change: Business, if we look back to pre Covid times, and I know there was a lot of noise and changes during COVID-19, but it will go back to that as a baseline I think you were a little bit beneath that so in this quarter should we expect that to mean revert or is in Q1, a little bit like the best quarter of the year, just given seasonality just help us understand how to think about yet margins.
Speaker Change: And sort of the underlying topline assumption from here.
Speaker Change: Sure So Sean and the earnings growth model that Youll see on our Investor Relations website, we do have some indicators here for the distribution margins between 16% to 19% all of those.
Speaker Change: It does.
Speaker Change: That data that we're sharing is on a full year basis. So you can you can.
Speaker Change: I expect us to be within that range for the distribution margin and I mentioned, we'll give some color on what we expect for the full year for the last three quarters of the year, we anticipate.
Speaker Change: That to last year.
Speaker Change: For the ALG vacations business.
Speaker Change: And about about $5 million or so down in the second quarter and about $5 million or so down or excuse me $5 million up in the fourth quarter. So flattish for the for the last three quarters of the year and Thats all excluding the $20 million that we reported for the first quarter now what you'll have to do it.
Speaker Change: As we have UEC reported in the distribution segment in 2023. So we've given you all of that information to strip out ALG vacations.
Speaker Change: For that segment.
Speaker Change: Thank you so much.
Speaker Change: Youre welcome.
Speaker Change: Our next question comes from Stephen Grambling from Morgan Stanley. Please go ahead. Your line is open.
Stephen White Grambling: Hey, Thank you.
Stephen White Grambling: So you flagged the lower operating leverage in I think it was on slide 11 of the deck and also on slide 14, you noted that even before considering the free cash flow generation I think youll be at sub two turns of.
Stephen White Grambling: Net leverage versus all of the asset light appears closer to three and maybe targeting higher. So how are you thinking about the right capital structure as our model shifts and then what are the factors that you're watching to potentially take advantage of either greater debt capacity.
Stephen White Grambling: Something like that or if thats something thats on the path.
Speaker Change: Yeah, we are.
Stephen White Grambling: Our capital allocation strategy Hasnt changed as we look at generating free cash flow and asset.
Stephen White Grambling: Asset sale proceeds one of our priorities is reinvesting back in the business, maintaining our investment grade profile and returning excess cash to shareholders. So that's how we've looked at it and balancing it.
Stephen White Grambling: Are we are squarely in investment grade profile.
Stephen White Grambling: Now and our ratios look good so as we think about opportunities for us to grow well.
Stephen White Grambling: We will be balancing how we manage those ratios into the future.
Stephen White Grambling: We've been talking ahead, I guess correct three times on a gross debt basis, and we're definitely trending below that at the moment.
Speaker Change: Right and I guess, maybe a follow up would just be are there generally more or less opportunities that you see out there to reinvest in growth in the business.
Speaker Change: Here today.
Speaker Change: Then maybe last quarter or even last year.
Speaker Change: Yes.
Speaker Change: The short answer is more.
Speaker Change: We are more actively engaged in more transactions now than we were over the course of last year.
Speaker Change: These kinds of transactions.
Speaker Change: <unk> take different forms and shapes some of them are portfolio deals. Some of them are brand acquisitions. Some of them are management company.
Speaker Change: With brand management.
Speaker Change: So they take different forms.
Speaker Change: Again, just to reiterate how we think about it it's primarily.
Speaker Change: Customer basis, the first screen second is geography and third is.
Speaker Change: Is the.
Speaker Change: Which any potential acquisition fits to expand network effect for world of Hyatt and also for destinations served so we are we are seeing more activity.
Speaker Change: Much of it is.
Speaker Change: I would say.
Speaker Change: Off market in fact pretty much everything that we're looking at and engaged in right now is not part of an auction process.
Speaker Change: One quick clarification there.
Speaker Change: Second follow up but on the customer base being the first thing that you that you think through is that just suggesting that you'll you'll stick with servicing our higher end customer or are you talking about maybe broadening out the customers that youre looking for yes, I think the core of our business, obviously is serving high end customers.
Speaker Change: But what I would say is.
Speaker Change: Just to double click on the customer what I mean by customer base, it's either growing and existing customer base that we already know and serve so we have really good predictive value in terms of what their travel patterns might look like in their spending patterns.
Speaker Change: Or it's looking at a demographic profile, that's similar but expands our existing customer base either by each cohort or by geography. So in the case of Dream hotels. For example, the age demographic profile is actually quite similar to our core but the average age of their guest base was 20 <unk>.
Speaker Change: There is younger than the average age of Rguest space. So we feel that Thats, a great extension and expansion of our customer base still financially capable.
Speaker Change: But similar to our core customers, but at younger and younger age. If you look at lender hotels, Linda is very similar in terms of.
Speaker Change: The demographic profile Budd.
Speaker Change: A significant proportion of their total business or Germans traveling within Germany. So those are two different deals done for different really strategic reasons, but it's all designed to build network effect and grow our customer base and grow.
Speaker Change: World of Hyatt, which as I mentioned in my prepared remarks is on a very significant growth rate up 22% over the last year.
Speaker Change: That's that's a key benefit of doing this in a very deliberate way.
Speaker Change: Helpful color, a lot more to dig into there, but I'll jump back in the queue. Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Joe Greff from JP Morgan. Please go ahead. Your line is open.
Joseph Richard Greff: Good morning, everybody.
Joseph Richard Greff: John I think you touched on this a little bit and maybe I'll ask it differently in terms of maybe how your capital allocation evolve post the additional asset sales from here.
Joseph Richard Greff: And then is there much in the way of M&A in terms of brands.
Joseph Richard Greff: Tuck in acquisitions, and then the juniper hotels stake, which I think $5 per share for Hyatt not insignificant.
Joseph Richard Greff: Are your plans to hold Ed or plans to monetize that over time, and then I have a follow up.
Speaker Change: Maybe I'll just start and John.
Speaker Change: Joe already stated.
Joseph Richard Greff: Stated that our capital allocation strategy has not changed we're still prioritizing investing in the business.
Joseph Richard Greff: Being very disciplined about is I think our track record speaks for itself without trying to sound arrogant about it sorry about that but I think we've done a good job of the deals that we have executed against and we've we've executed well post acquisition.
Joseph Richard Greff: So I think we.
Joseph Richard Greff: We've done well there thats why we think it's reasonable for us to allocate capital where it makes sense, we're not we're not.
Joseph Richard Greff: Biased I would say, we're very disciplined we wont do deals that are too thin or negative just for the sake of.
Joseph Richard Greff: I don't know posting higher net rooms growth or something like that that's not that's not what we're doing we're trying to create more much more shareholder value.
Joseph Richard Greff: And and we have a significant pipeline.
Joseph Richard Greff: Pipeline growth continues to grow and our first quarter net rooms growth for the quarter was that almost everything was pipeline was openings out of our pipeline. We had a tiny conversion percentage in the first quarter. So the pipeline is is not to be forgotten.
Joseph Richard Greff: With respect to <unk>.
Joseph Richard Greff: What's out there yes. There are there are some branded opportunities there they tend to be more narrow.
Joseph Richard Greff: And.
Joseph Richard Greff: So we are we are we are seeing some activity in that in that regard.
Joseph Richard Greff: But.
Joseph Richard Greff: They are not they are going to be fewer and fewer and further between.
Joseph Richard Greff: It's just not.
Joseph Richard Greff: A very large universe of things that would make sense for us.
Joseph Richard Greff: Having said that.
Joseph Richard Greff: We're not we're aware of everything that's going on around the world because we make it our business to know it.
Joseph Richard Greff: And we continue to pursue things that do include Brenda brand brand platform and management opportunities.
Joseph Richard Greff: I can tell you that 100%.
Joseph Richard Greff: The things that we're looking at right now are either fully asset light. The vast majority. If you look at proportionately is 100% asset light or in one or two cases, where there may be assets involved.
Joseph Richard Greff: We have very good line of sight for what we would do with the assets. So we do not plan to end up.
Joseph Richard Greff: Being going going backwards in terms of our asset intensity for any extended period of time whatsoever.
Speaker Change: Okay and then.
Joseph Richard Greff: With respect to your outlook for this year I guess, maybe from a EBITDA perspective.
Joseph Richard Greff: How do you see it by quarter, just so that estimate through sort of in a in a position where spot that's consistent with how youre viewing.
Joseph Richard Greff: Quarterly results.
Joseph Richard Greff: Note that the full year has been maintained which is great but that would probably be helpful for everybody on this call.
Joseph Richard Greff: So by the way Joe I forgot to answer your comment on your question about Juniper. So let me just quickly cover that.
Joseph Richard Greff: We're obviously thrilled with the with the IPO. The company itself has done a remarkable does.
Joseph Richard Greff: <unk> has done some remarkable service and over the years by helping us grow in India, and a very good way with high quality assets and by the way that business.
Joseph Richard Greff: And the management team there see more opportunities to grow so it's sort of an opportunity to have a stake in a company that is going to continue to look for opportunities to help us continue to grow in India and that's our expectation.
Joseph Richard Greff: Maybe is it a very interesting time.
Joseph Richard Greff: First quarter results across the country were staggering over 20% Revpar growth.
Joseph Richard Greff: It is on fire and the supply growth has been muted.
Joseph Richard Greff: So the outlook is really strong and the <unk>.
Joseph Richard Greff: I would say our management team and the leadership of our partners organization. They are extremely well placed in terms of identifying and getting a breadth of opportunities in the marketplace for potential acquisitions of other hotels now as to our intentions with respect to our stake 75% of our <unk>.
Joseph Richard Greff: Stake is locked up for one year and the remaining 25% is locked up for three.
Joseph Richard Greff: So what I will tell you is that over time.
Joseph Richard Greff: We do expect that we will lighten up our and sell down our stake but.
Joseph Richard Greff: I can't comment on exactly what the timing of that would be I think we're going to keep track of and look into.
Joseph Richard Greff: Look into this and state say closer to it as we get past. These these lockup dates.
Joseph Richard Greff: But it is a very strong business. It's now de Levered and has lots of acquisition capacity and a superb management team. So we're really happy with where we stand at the moment with respect to the outlook for the remainder of the year. There are some incredible things that I think are just continuing to fire on all cylinders business transient Fran.
Joseph Richard Greff: In the first quarter into the second quarter is extraordinarily encouraging.
Joseph Richard Greff: Our business transient hotels were up 15% 15, almost 16% in the first quarter.
Joseph Richard Greff: Convention hotels were up about 11, just as a hotel type.
Joseph Richard Greff: New York City was up 19%, San Jose and Seattle.
Joseph Richard Greff: Really going strong why because technology transient business transient was up 30% in the first quarter.
Joseph Richard Greff: These numbers are staggering and we just see continued strength.
Joseph Richard Greff: In business transient.
Joseph Richard Greff: And I would make special note of the fact that 100% of those reference points. I. Just gave you was in the U S. We're in the U S on the group side.
Joseph Richard Greff: This is a multiyear the gift that will keep on giving.
Joseph Richard Greff: We are paces up 7% for the remainder of this year, but.
Joseph Richard Greff: We're up.
Joseph Richard Greff: Double digits.
Joseph Richard Greff: For each of 25 and 26.
Joseph Richard Greff: Something in the 11% to 12% range for each of those two years with 50% of our business and 25 on the books already and 30% of our business with expected business on the books.
Joseph Richard Greff: In 2006 already both numbers are higher.
Joseph Richard Greff: Then where we would expect it to be on a normalized basis. So the demand is very strong and into 2007, even were up in the mid singles.
Joseph Richard Greff: Mid single digits with something like 17% of our business on the books. This is these are numbers that.
Joseph Richard Greff: Are quite remarkable and I think we are extremely well positioned to continue to benefit from very strong group and then finally leisure.
Joseph Richard Greff: Leisure has been consistently strong yes, there are certain markets like Maui.
Joseph Richard Greff: Which is still effective.
Joseph Richard Greff: Given the storm and behind Us.
Joseph Richard Greff: And we have two major hotels, two large hotels, rather that are under extensive renovation, both actually being rebranded to grant hyatt's at this time, so big investments being made by our partners are owners.
Joseph Richard Greff: In those hotels. So if you have to adjust out those properties to really get a sense for what the market is and the U S resort base in the first quarter was up 6%.
Joseph Richard Greff: And we already mentioned that our all inclusive we were up 11%.
Joseph Richard Greff: With good pace into the second quarter, So I look across the board.
Joseph Richard Greff: Look at across the geographies.
Joseph Richard Greff: I see many many collect points of of proof.
Joseph Richard Greff: This is going to be a solid year.
Joseph Richard Greff: Yes, the elections will negatively impact the D C area and travel in November in the fourth quarter.
Joseph Richard Greff: It is also true that the Olympics will positively affect.
Joseph Richard Greff: The second quarter.
Joseph Richard Greff: Third quarter, rather sorry.
Joseph Richard Greff: And.
Joseph Richard Greff: In Europe, so that leaves us we those outliers aside for a second.
Joseph Richard Greff: And of course, we have to we have to mentioned Taylor Swift, who continues to grow at GDP for the world now.
Joseph Richard Greff: So she is having an effect.
Joseph Richard Greff: On every market in which she shows up.
Joseph Richard Greff: So.
Joseph Richard Greff: I, just see I see a lot of data and a lot of data points.
Joseph Richard Greff: Can't remember when we've seen all three segments business segments going so well now <unk>.
Joseph Richard Greff: Inflation is higher yes, its going to negatively impact people's ability to spend we're very sensitive to that.
Joseph Richard Greff: Not particularly happy about that and.
Joseph Richard Greff: And it's good factors, but the reality is for US, we're serving a higher end customer and the impact of <unk>.
Joseph Richard Greff: Interest rates the team sticky.
Joseph Richard Greff: Down.
Joseph Richard Greff: And higher somewhat higher inflation or just not they're not having an impact on our customer base nothing that we can see at this point so that's a.
Joseph Richard Greff: Maybe.
Joseph Richard Greff: A tour around our customer base and a little bit around the world.
Joseph Richard Greff: Okay.
Joseph Richard Greff: Our next.
Joseph Richard Greff: Comes from Richard Clarke from Bernstein. Please go ahead your line is open.
Richard J. Clarke: Alright, Thanks for taking my questions, maybe just first on the Easter impact on Q1, you gave us the U S impact just wondering maybe you can comment on what you think the global impact would be and if you sort of unpack that into Q2, maybe all else being equal would you expect revpar to accelerate into Q2 from Q1 is Easter.
Joseph Richard Greff: It reverses.
Joseph Richard Greff: Richard.
Richard J. Clarke: The global impact it is not a material number.
Joseph Richard Greff: We don't we don't see a material impact from the holiday on a global basis certainly in the U S. There is because of different travel patterns that people take around spring break and the Easter holiday.
Joseph Richard Greff: April will benefit.
Joseph Richard Greff: On the reverse side on for group and business transient in the month of April which we've seen in quoted in our prepared remarks. So we certainly see the reverse particularly in the U S.
Speaker Change: Okay that makes that makes sense and I know you've taken a couple of questions on buybacks already but just wondering about this.
Speaker Change: Sizing of the increase that you have done up to the.
Speaker Change: 800 million.
Speaker Change: Q1.
Speaker Change: Is this the limit you got to that number is just is that just the disposals Tommy in Q1, and as you actually get the cash in Zurich et cetera, and we look forward to a bigger buyback increase later this year.
Speaker Change: Sure.
Speaker Change: We.
Speaker Change: Provide outlook each quarterly earnings call, we are doing that without without incorporating future transaction.
Speaker Change: As we looked at the increase that we would that we would undertake in our buyback outlook our share recall the return outlook. We saw the increased proceeds and evaluated about about 50% of those with the excess cash that we could.
Speaker Change: Clearly a return and increase our outlook.
Speaker Change: As we proceed throughout the year, we'll continue to update you we.
Speaker Change: Some transactions in process and as opportunities are evaluated and whether we execute on those if we generate additional excess cash flow. We will update you on any new shareholder return outlook that we have.
Speaker Change: Very clear thank you very much.
Speaker Change: Okay.
Speaker Change: Our next question comes from Meredith Jensen from HSBC. Please go ahead. Your line is open.
Meredith Jensen: Yes, Hi, I noticed fee or you had in your press release, 22% increase in the loyalty program, which is huge I was wondering if theres any particular sort of.
Meredith Jensen: The driver of that increase and would that be something that we should sort of expect as a trend increase and related to that.
Meredith Jensen: Why what may we see sort of that trend increase show in the financials I guess it would just be co brand or engagement.
Speaker Change: And secondly, just very quickly.
Speaker Change: Mr. Mr. Smith, you mentioned building the deeper relationship directly as time goes on.
Meredith Jensen: Was wondering.
Meredith Jensen: That evolved over time, how how we might track that sort of what kind of metrics can we use and how would those show up in the financials over time in terms of profitability.
Meredith Jensen: Profitability of that that relationship. Thank you.
Mr. Smith: Sure a couple a couple of comments on the world of Hyatt.
Meredith Jensen: Sure.
Meredith Jensen: Yes.
Speaker Change: Have continuously.
Meredith Jensen: <unk> and refine the program to be very attractive to the core customer base that we serve.
Meredith Jensen: And I think that.
Meredith Jensen: When you accumulate accumulate all of those moves that we've made over the over a number of years, including our portfolio shifts.
Meredith Jensen: We've doubled our luxury hotels over the last five years seven years now.
Meredith Jensen: Triple the number of resorts and quintupled the number of lifestyle resorts all at the high end.
Meredith Jensen: The choice that's available through Hyatt, even though.
Meredith Jensen: We are the smallest of the major players.
Meredith Jensen: When you talk about the relevant base of hotels that the members really want to be able to travel to.
Meredith Jensen: We've grown disproportionately in those which are in highest demand.
Meredith Jensen: And so when you look at it as a total corporate strategy. This was all very deliberate to continue to build what we call network effect. The result of network effect as higher direct bookings.
Meredith Jensen: From our members through higher channels, which are the cheapest channels available.
Meredith Jensen: And therefore, our relative performance in terms of delivering.
Meredith Jensen: Margins to our hotel owners will continue to improve with that as the tailwind.
Meredith Jensen: That in turn drives growth because the better that we can do at hotel level performance the more capital that we will attract.
Meredith Jensen: To our platform from diverse owners around the world.
Meredith Jensen: The fact is that if you look at our pipe.
Meredith Jensen: Pipeline expansion over the last couple of quarters.
Meredith Jensen: That's just proof that that.
Meredith Jensen: We've we've got.
Meredith Jensen: <unk> in that area.
Meredith Jensen: On the portfolio front, we also launched an upper mid scale hotel extended stay hotels.
Meredith Jensen: Brand last year called Hyatt Studios again, very deliberate move to increase the network effect for markets in which we saw our members traveling too, but not staying at a high property because theres no. There was no high property they're.
Meredith Jensen: Turning to Mr and Mrs. Smith.
Meredith Jensen: We are just <unk>.
Meredith Jensen: <unk>.
Meredith Jensen: I saw the statistics two days ago, thousands of room nights booked in.
Meredith Jensen: At the upon opening of the of the.
Speaker Change: Of the channels at very high rates and actually quite diverse yes. The vast majority are in Europe, because that's where the critical masses for Mr and Mr. Smith, but I was surprised to see a number of U S markets in which.
Meredith Jensen: There were very very unique hotels.
Meredith Jensen: In markets in which we are underrepresented or not represented.
Speaker Change: So I am I am.
Meredith Jensen: Surprised frankly to see that much traction this quickly.
Meredith Jensen: And I think it's very clear based on the owner feedback a hotel owner feedback in the Mr and Mrs. Smith network.
Meredith Jensen: They are likewise.
Meredith Jensen: Very happy.
Meredith Jensen: And maybe a bit surprised.
Meredith Jensen: Traction that we gained already I think overtime what.
Meredith Jensen: That will likely lead to is a subset of the height of the hotel owners recognizing that.
Meredith Jensen: A more fulsome.
Meredith Jensen: Connection with Hyatt the Hyatt network through a franchise arrangement will make sense for them and we have every expectation that we will.
Meredith Jensen: B segmenting that hotel portfolio to pursue just that.
Meredith Jensen: So we're really excited about that and our mesh our measure is driving performance for those hotel owners. That's that's that's our key measure.
Meredith Jensen: Of course that will help to build more direct connectivity.
Meredith Jensen: And.
Meredith Jensen: A more I guess.
Meredith Jensen: Loan.
Meredith Jensen: Durable network overtime.
Speaker Change: That's awesome. Thank you so much.
Speaker Change: Okay.
Speaker Change: Our next question comes from Patrick <unk> from <unk> Securities. Please go ahead. Your line is open.
Patrick: Hi, good morning, everyone.
Patrick: Could you talk a little bit about.
Patrick: Expectations for the other fees.
Patrick: Within the revenues.
Patrick: I believe.
Patrick: A significant portion of that is credit card fees what are your expectations.
Patrick: For the rest of the year and perhaps beyond that thank you.
Speaker Change: Sure Patrick.
Speaker Change: In the quarter, we had a a significant increase in franchise and other fees combined over over 20% in the quarter for the full year, we are giving guidance now on fees as a reminder, our total fees guidance for the full year is up 15.
Speaker Change: Sent at the mid point, so we're not going to give the specific components within other fees, but what I will tell you is that in the quarter all of the different categories grew significantly within our non revpar fees.
Patrick: Did get we did get an increase from the UPC transaction.
Patrick: Which listed the percentage point on overall fees by a couple of points.
Patrick: Very very strong.
Patrick: Results on our on our fee growth driven by strong revpar or five 5% Revpar growth, which is very strong mostly in international markets and net package revpar so across the board our fee growth is.
Patrick: Is really strong and the other fees. We expect we will continue to grow at a healthy pace as well.
Speaker Change: Okay. Thanks, and just a follow up on that is there when is your next major credit card.
Speaker Change: Contract renegotiation.
Speaker Change: Coming up.
Speaker Change: Sure, we're going to we're going to start having discussions later this year into early next year.
Speaker Change: On that.
Speaker Change: The renewal of that contract.
Speaker Change: Okay. Thank you.
Speaker Change: You're welcome.
Speaker Change: Our last question today will come from Michael Bellisario from Baird. Please go ahead. Your line is open.
Michael Joseph Bellisario: Thanks, Good morning, everyone.
Michael Joseph Bellisario: Hi.
Michael Joseph Bellisario: Just a quick follow up on the model just those three hotels that you sold can you quantify how much EBITDA that they contributed during your four month ownership period of trying to figure out the run rate earnings impact going forward.
Speaker Change: Yes, we have those Michael on schedule in the earnings release, we're going to continue.
Speaker Change: Any asset sale transactions to report those on schedule I think the number is 88, Michael it's on it's on AA and weakening we can chat about that separately.
Speaker Change: Additional questions.
Speaker Change: By quarter and the assets are listed there in the table. It actually includes the one post quarter, we actually put those into the table.
Speaker Change: To help with modeling.
Speaker Change: Okay. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you all for your time. This morning, we appreciate your interest in Hyatt and look forward to extending our purpose of care by welcome you welcoming you to our hotels and resorts. During your travels we wish you a great rest of your day. Thanks, so much for joining us.
Speaker Change: This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.