Q2 2024 Hyatt Hotels Corp Earnings Call

Speaker Change: Good morning and welcome to the Hyatt second quarter 2024 earnings call.

Operator: All lines are in a listen-only mode. After the speaker's remarks, we will have a question and answer session. To ask a question at that time, please press the star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and FP&A. Thank you. Please go ahead.

Adam Rohman: Thank you, and welcome to Hyatt's second quarter 2024 earnings conference. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer, and Joan Bottarini, Hyatt's Chief Financial Officer. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks on our website at hyatt.com under the financial reporting section of our investor relations link.

Speaker Change: Thank you and welcome to Hyatt's second quarter 2024 earnings Conference call. Joining me on today's call are Mark <unk>, Hyatt's, President and Chief Executive Officer, and Joe Battery Hyatt's, Chief Financial Officer.

Speaker Change: Before we start I would like to remind everyone that our comments today will include forward looking statements under federal Securities laws.

Speaker Change: 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 be materially different from those expressed in or implied by our comments.

Speaker Change: We're looking statements in the earnings release earnings release that we issued today along with the comments on this call are made only as of today and we will not be updated as actual events unfold.

Speaker Change: 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 and.

Speaker Change: An archive of this call will be available on our website for 90 days. Please note that unless otherwise stated references to our occupancy average daily rate and Revpar reflects 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.

Speaker Change: With that I'll now turn the call over to Mark.

Mark: Thank you Adam good morning, everyone and thank you for joining us today.

Mark Hoplamazian: I want to start by sharing my appreciation for our colleagues around the world who live our purpose every day to care for our guests, our colleagues, owners, and each other. I've been very fortunate to visit with many of you over the last quarter, and I'm continually inspired by the power of care and what differentiates Hyatt from others, our people. Leisure transient revenue decreased approximately 2% in the quarter, but it was up 2% when excluding the impact of EASTER. This is due to Rosh Hashanah and Yom Kippur falling in October this year compared to September of last year and the U.S. elections in November.

Mark: I want to start by sharing my appreciation for our colleagues around the world who live our purpose every day to care for our guests our colleagues owners and each other.

Mark: So I've been very fortunate to visit with many of you over the last quarter and I am continually inspired by the power of care and what differentiates it from others.

Mark: People.

Our purpose and execution of our strategy are evident in our operating results, which reflect record levels of fees would have higher numbers and things in our pipeline.

Mark: This morning, we reported system wide revpar growth of four 7% and as anticipated group and business transient were our strongest customer segments in the quarter.

Mark: So were taking place in the first quarter of 2024 with a tailwind for group and business travel in April.

Mark: The headwind for leisure travel.

Mark: Leisure transient revenue decreased approximately 2% in the quarter, but was up 2% when excluding the impact of Easter.

Mark: Significant renovations at several key U S resorts.

Mark: And our hotels in Maui, which were negatively impacted by the wildfires in Q3 of last year.

Mark: Through the first six months of 2020 for leisure transient revenue was up 2% compared to 2023. Despite these temporary headwinds.

Mark: And we remain significantly above pre pandemic levels.

Mark: Looking ahead transient pace for a resource in the Americas was flat in the third quarter, excluding resorts under significant renovation.

Mark: While pace for all inclusive resorts is down slightly as demand in Mexico, and the Caribbean reflects a return to pre pandemic seasonality.

Mark: Group room revenue increased approximately 8% in the quarter with strong results in most U S. Major urban markets during the months of May and June.

Mark: Group pace for U S. Full service managed properties is up 7% for the second half of 2024.

Mark: And we anticipate higher growth rates in the third quarter compared to the fourth quarter.

Mark: This is due to Russia, China, and Yom Kippur falling in October of this year compared to September of last year.

Mark: And the U S elections in November.

Mark Hoplamazian: Looking beyond 2024, PACE continues to be very strong across all group customer segments. Bookings for business travel over the next two months look very strong, led by corporate negotiated accounts. The solid quarter of group and business travel was reflected in our upper upscale brands, which produced REF hard growth of 4.2%. Our solid operating performance reflects the strength of our growing loyalty program. Our most active members are globalists who have been very engaged with Mr. and Mrs. Smedes, accounting for over 20% of the book.

Mark: Looking beyond 2024.

Mark: This continues to be very strong across all.

Mark: Customer segments.

Our business transient customer segment had the largest growth rate during the quarter with revenue up approximately 14%.

Mark: In the United States revenue increased 12% and New York, Seattle, San Diego, and Washington, D C with a top performing markets.

Mark: Bookings for business travel over the next two months look very strong led by corporate negotiated accounts.

Mark: While there are signs of slowing demand in lower chain scales, we saw strength among the high end consumer.

Mark: Luxury revpar increased six 9% driven by hotels in Europe, and Asia Pacific Excluding China.

Mark: The solid quarter of group and business travel is reflected in our upper upscale brands, which produced revpar growth of four 2% our solid operating performance reflects the strength of our growing loyalty program.

Mark: World of Hyatt membership reached a new record of approximately 48 million members at quarter end, the 21% increase over the past year.

Mark: Loyalty room night penetration also increased highlighting the strong engagement of our expanding membership base.

Mark: Our growth strategy and expansion into many new markets. In addition to delivering authentic and personalized experiences that lead the member growth and increased loyalty penetration.

Mark: Our expansion of course includes Mr and Mrs Smith, which realized significant engagement from our members. After we added over 700 properties to world of Hyatt in April.

Mark: 80% of these properties.

Mark: <unk> bookings from World of Hyatt members since going live with nearly two thirds of those bookings for paid reservations as opposed to the redemption of points.

Mark: Our most active members our global lists have been very engaged with Mr and Mrs. Smith accounting for over 20% of these bookings.

Mark: By the end of this year, we expect to have over 1000, Mr and Mrs. Smith properties available through world of Hyatt offering our members even more opportunities to earn and redeem points in these uniquely curated hotels.

Mark: We also recently announced an exclusive alliance with other Kansas.

Mark: And experiential outdoor hospitality with 13 patients in premier destinations such as the Grand Canyon.

Speaker Change: I'll add Yellowstone and Zion.

Speaker Change: Well the pipe members will be able to earn and redeem points at under canvas locations.

We're expanding our offerings and adding unique experiences for our members and guests.

Speaker Change: We have already seen great interest from world of Hyatt members with 60% of total bookings made it under Kansas locations being for paid reservations.

Speaker Change: The partnership with <unk> nearly two weeks ago.

Speaker Change: A few months ago I visited the under canvas Wyndham resort in Moab named the best Resort Hotel in Utah by travel and leisure.

Speaker Change: And I loved my overnight stay under canvas, North Yellowstone and Paradise Valley and Montana.

Speaker Change: Both destinations offer exceptional quality and immersive activities, which I'm really excited for world of Hyatt members to experience firsthand.

Speaker Change: We're also proud of the recognition that wildfire continues to receive.

Wallet hub recognized worldwide as the best Hotel rewards program and qualified credit card as the best overall hotel credit card the.

Speaker Change: The continued recognition of world of Hyatt is a testament to the value that our loyalty program provides members and hotel owners.

Speaker Change: Our focus on expanding our network effect as we grow allows us to offer more options to our members increasing their loyalty to Hyatt and making hyatt more attractive to prospective developers.

Speaker Change: Turning to development.

Speaker Change: We continue to see strong demand for our brands as our pipeline reached a record of approximately 130000 rooms. This.

Speaker Change: This represents a 9% increase year over year, and our pipeline accounts for 40% of our existing room base.

Speaker Change: Signings in the quarter were healthy across the world led by the United States and Greater China, and we continue to see increasing interest in Hyatt Studios with the first two properties under construction our growth pipeline continues to drive expansion of our portfolio worldwide.

Speaker Change: And in the quarter, we achieved net rooms growth of four 6%.

Speaker Change: Notable openings include the park Hyatt chunk shop.

Speaker Change: Park Hyatt in greater China.

Speaker Change: And the Hyatt, David Grand Island, and Ken <unk>, Our first I attended all inclusive property.

Speaker Change: Hi, Vivek brand introduces a younger generation to a vibrant adult only all inclusive experience with a focus on meaningful connections through experiential offerings.

Speaker Change: We opened our first caption by Hyatt properties outside of the U S in Shanghai in Osaka.

Speaker Change: Finally, the legend resort product has opened in the quarter, a stunning resort on Peru Southern coast in our first destination by high property in Peru.

Mark Hoplamazian: Our openings this quarter strengthen the equity of our brands and open new markets for our guests and members. The pipeline will continue to expand as we strategically enhance our brand portfolio. On June 28th, we announced the acquisition of the Mean All Hotels brand from Lindner Hotels Group. We're really excited about the growth trajectory and great potential for me and all hotels over the decades to come for three key reasons. The brand is well suited for adaptive reuse and conversions, facilitating growth in great locations to fill the significant white space that Hyatt has across Europe.

Speaker Change: Our openings this quarter strengthened the equity of our brands and opening new markets for our guests and members.

Speaker Change: And we are confident that our pipeline will continue to fuel growth well into the future.

Speaker Change: The pipeline will continue to expand as we strategically enhance our brand portfolio on June 28, we announced the acquisition of the mean, all hotels brand from Lindner hotels group.

Speaker Change: Allowing us to accelerate growth of the brand.

Speaker Change: We're really excited about the growth trajectory and great potential for me and all hotels over the decades to come for three key reasons first <unk> hotels is a highly attractive lifestyle brand in the fast growing upscale segment in Europe.

Speaker Change: The brand is well suited for adaptive reuse and conversions to <unk>.

Speaker Change: <unk> growth in great locations to fill significant white space at Hyatt has across Europe.

Speaker Change: Second mean, all hotels deliver high margins, allowing developers to realize attractive returns that are required for lease structures, which are common in Europe. This lead friendly brand enhances operational flexibility and greatly expands our access to capital sources across Europe and.

Speaker Change: And third it is important to note that our strategic positioning and brand mapping our design to aggressively expand and capture market share across Europe.

Speaker Change: While we expect the brand to gain scale in Europe. Initially we believe there are opportunities to grow the brand globally, providing more destinations for our members and guests to enjoy a curated lifestyle experience.

Mark Hoplamazian: We have been and will continue to be very intentional with our organic and inorganic growth, ensuring that our brand and property portfolio expansion creates opportunities for new guests to find us and join World of Hyatt, maximizing our core business, integrating new growth platforms, and optimizing capital and resources, which extends to each of our states.

Speaker Change: We have been and will continue to be very intentional with our organic and inorganic growth ensuring that our brand and property portfolio expansion and creates opportunities for new guests to find us and joined world of Hyatt.

Speaker Change: While providing existing members and guests new and exciting places to enjoy great experiences.

Speaker Change: Turning to asset sales, we completed the sales of park Hyatt Zurich, Hyatt Regency, San Antonio and Hyatt Regency Green Bay during the second quarter as previously announced with these sales we have realized $1 $5 billion in gross proceeds from asset sales towards our $2 billion commitment.

Speaker Change: We expect to close the sale of the property that is currently under purchase and sale agreement by the end of August, which will put us above our 2 billion disposition commitment.

Speaker Change: We'll provide more details on that transaction when the deal closes.

Speaker Change: Before I conclude my remarks, I am pleased to report that we recently published our annual world of care highlights demonstrating progress towards our change starts here roles and environmental sustainability goals, including our science based targets.

Speaker Change: While we have more work ahead of us I am exceptionally proud of the progress that we've made led by our Hyatt colleagues worldwide.

Speaker Change: Closing, we are pleased with the execution of our long term strategy, which we highlighted at our Investor day last year, maximizing our core business integrating new growth platforms, and optimizing capital and resource deployment.

Speaker Change: Our growth across multiple dimensions, including rooms.

Speaker Change: These pipeline and loyalty membership fuels, our asset light business model, leading to strong free cash flow and greater value for our shareholders.

Speaker Change: I want to thank hi colleagues around the world.

Speaker Change: Live our purpose every day to care for people. So they can be their best which extends to each of our stakeholders.

Speaker Change: John will now provide more details on our operating results Joe over to you.

Joe: Thanks, Mark and good morning, everyone Systemwide Revpar increased four 7% led by increased business in grid travel.

Joe: United States Revpar increased over 2%, reflecting the timing of Easter and strong results in group and business transient travel.

Large corporate accounts contributed to both group and business transient travel benefitting hotels in major urban markets.

Speaker Change: As Mark noted, we are lapping challenging comparisons in Bali due to the wildfires in the third quarter last year, and we have several resort undergoing exciting transformational renovations.

Speaker Change: The confidante is being rebranded at Andaz, Miami Beach, Hyatt Regency, Scottsdale, and Hyatt Regency Indian Wells.

Speaker Change: Both the rebranded under the Grand Hyatt brand later this year after extensive renovations.

Speaker Change: Both in the Americas, excluding the United States.

Speaker Change: Approximately 9% with notable strength in Canada, and South America.

Speaker Change: Our all inclusive properties in the Americas had net package revpar growth of 2% for the quarter.

Speaker Change: In greater China, Revpar decreased by approximately 3%.

Speaker Change: As a reminder, the second quarter of last year saw a dramatic recovery for domestic travel and revpar surpassed pre pandemic levels for the first time.

Speaker Change: We expected growth rates to normalize starting in the second quarter. This year, however, unfavorable macro conditions and greater outbound Chinese travel negatively impacted results in the quarter.

Joan Bottarini: Domestic travel was down 9% in the quarter compared to last year, with a notable impact on hotels with secondary and tertiary markets. We expect that we'll achieve flat to moderate expansion of owned and leased margins for the full year compared to 2023. And finally, for distribution segments, Justity Bida increased $9 million compared to the second quarter of 2023. We now exclude transactions and integration costs from adjusted EBITDA, as we believe this better represents our core operations and provides information consistent with how our management evaluates operating performance. We expect net room growth between 5.5 and 6% driven by organic growth. Free cash flow is expected to range from $560 to $610 million.

Speaker Change: Domestic travel was down 9% in the quarter compared to last year with a notable impact on hotels in secondary and tertiary markets while.

While we saw positive revpar growth in most major markets. This could not offset weaker demand in secondary and tertiary markets.

Speaker Change: Despite these pressures we increased our Revpar index by approximately 3% during the quarter, which is a testament to our strong brand recognition in China.

Speaker Change: Although domestic travel declined we're seeing demand for travel and affluent customers increase however, they are prioritizing international travel and we expect outbound travel from China to remain at elevated levels in the near term.

Speaker Change: Asia Pacific, Excluding greater China. Once again produced remarkable results with Revpar up approximately 18% due to strong international inbound travel with notable demand coming from greater China, and the United States Revpar in Japan increased 35%.

Speaker Change: Revpar in South Korea increased 20%.

Speaker Change: In Europe, Revpar increased approximately 11% driven by outbound travel from the United States with notable strength in Germany, and Spain are European all inclusive properties produced impressive net package revpar growth of approximately 12% driven by high demand for our reserve.

Speaker Change: And the Balearic and Canary Islands.

Speaker Change: We reported record gross fees in the quarter at $275 million up 12% due to a combination of our revpar growth greater system size and an increase in our non revpar fees.

Speaker Change: Franchise and other fees increased 32% due to the growth of our franchise footprint the growth in our co branded credit card fees and the contribution from <unk>.

Speaker Change: Base fees increased 4%, reflecting the combination of increased managed revpar and fees from newly opened managed hotels.

Speaker Change: Offset by hotels in greater China.

Speaker Change: Incentive fees decreased approximately 7% due to lower contribution from hotels in greater China hotels under renovation and hotels in Maui.

Speaker Change: Turning to our segment results management and franchising segment adjusted EBITDA increased approximately 11% driven by the increase in our gross fees.

Speaker Change: Owned and leased segment adjusted EBITDA increased by 9% when adjusted for the net impact of transactions.

Speaker Change: Business transient revenue for the portfolio increased by double digits during the quarter and the contribution from group and related food and beverage revenue was strong.

Speaker Change: In the quarter margins for comparable hotels increased 110 basis points we.

Speaker Change: We expect that we'll achieve flat to moderate expansion of owned and leased margins for the full year compared to 2023.

Speaker Change: And finally, our distribution segment, adjusted EBITDA increased $9 million compared to the second quarter of 2023.

Speaker Change: Excluding UBC adjusted EBITDA declined by approximately $5 million consistent with the expectations, we communicated during our first quarter earnings call.

Speaker Change: We expect third quarter adjusted EBITDA for ALG vacations to decline approximately $5 million to last year due to a combination of two.

Speaker Change: Cancellations related to hurricane barrel and weaker bookings over the last few weeks due to the temporary system disruptions impact on airline bookings.

Speaker Change: However, we anticipate fourth quarter adjusted EBITDA for ALG vacations to grow by approximately $10 million compared to last year because of improved airlift.

Speaker Change: I'd like to now provide an update on our strong cash and liquidity position.

Speaker Change: As of June 32024, our total liquidity of approximately $3 $5 billion included $2 billion of cash cash equivalents and short term investments and approximately $1 $5 billion in borrowing capacity on our revolving credit facility.

Speaker Change: At the end of the quarter, our total debt outstanding was approximately $3 9 billion.

Speaker Change: Increased levels of debt and short term investments this quarter results from the notes we issued in June.

Speaker Change: The proceeds from these notes in marketable securities and are planning to fully repay our notes maturing on October one 2024 at or prior to maturity.

Speaker Change: In the second quarter, we repurchased $134 million of class a common shares and we have approximately $1 $6 billion remaining under our share repurchase authorization.

Speaker Change: We remain committed to our investment grade profile and our balance sheet is strong.

Speaker Change: Before I turn to our 2024 outlook I'd like to note a change that we made to our financial reporting.

Speaker Change: <unk> added a new financial line item to the income statement called transaction and integration costs, which includes integration costs for our recently acquired businesses and transaction costs.

Speaker Change: Pending and completed transactions.

Speaker Change: We now exclude transaction and integration costs from adjusted EBITDA as we believe this better represents our core operations and provides information consistent with how our management evaluates operating performance now.

Speaker Change: Now I will cover our outlook for 2020 for the full details can be found on page three of our earnings release.

Speaker Change: We expect full year system wide revpar growth between three and 4% compared to 2023.

Speaker Change: And we expect group and business transient revenue growth to outpace leisure transient for the second half of the year.

Speaker Change: We anticipate United States Revpar growth for the full year of approximately 2% compared to 2023 led by group and business travel in the third quarter.

Speaker Change: Our outlook assumes revpar growth in greater China is negative for the last two quarters of this year compared to last year as domestic travel lapsed tougher comparisons to 2023.

Speaker Change: And outbound international travel increases.

Speaker Change: Finally, we expect Revpar growth in other international markets to exceed the high end of our range led by Europe, and Asia Pacific, Excluding greater China, We expect net rooms growth between five five and 6% driven by organic growth.

Speaker Change: Conversions and potential portfolio transactions that may close by year end.

Speaker Change: Gross fees are expected to be in the range at $1.08521115 billion.

Speaker Change: 13% increase at the midpoint of our range compared to last year.

Speaker Change: Our revised outlook accounts for lower incentive fee contribution in the second quarter from hotels in greater China weaker than expected demand in Maui and hotels under renovation.

Speaker Change: Our outlook also assumes lower fee contribution from hotels in greater China. During the second half of 2024, and a lower fee contribution from hotels in the United States during the fourth quarter.

Speaker Change: Adjusted G&A is expected to be in the range of $425 million to $435 million adjust.

Speaker Change: Adjusted EBITDA is expected to be in the range of $1 13521, $175 billion, a 10% increase at the midpoint of our range compared to last year.

Speaker Change: Our outlook accounts for the removal of about $10 million of integration costs related to the change to adjusted EBITDA I just mentioned and reflects the reduction that we have made to our revpar range and gross fees.

Speaker Change: Free cash flow is expected to range from $560 million to $610 million.

Speaker Change: And finally, we expect capital returns to shareholders in the range of $800 million to $850 million, including share repurchases and dividends.

Speaker Change: In closing our second quarter results highlight the strength of our asset light business model and our mix of asset light earnings will increase further as we complete our asset disposition program and realize our net rooms growth expectations, we remain committed to our capital allocation strategy, which has delivered.

Speaker Change: <unk> and will continue to deliver exceptional shareholder value by investing in growth, maintaining an investment grade profile and returning capital to shareholders.

Speaker Change: This concludes our prepared remarks, and we're now happy to answer your questions.

Yeah.

Speaker Change: As a reminder to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again.

Unknown Executive: In the interest of time, we ask that you please limit yourselves to one question and one follow-up question. Thank you.

Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up question. Thank you.

Speaker Change: Our first question will come from Shaun Kelley from Bank of America. Please go ahead. Your line is open.

Shaun Kelley: Hi, Good morning, everyone. Thanks for taking my question.

Shaun Kelley: Had sort of a two parter on just what's going on in the leisure transient area too.

Shaun Kelley: Mark and John both I think you mentioned this kind of throughout the script around kind of what youre seeing there, but could you can you just elaborate a little bit across the U S. Specifically in terms of patterns and how let's call. It de risked you think your outlook is from here specifically on the leisure side and then secondarily on that could you comment specifically on I think some comment.

Speaker Change: The Caribbean and Mexico in the prepared remarks, Mark I think you said something about returned to pre pandemic seasonality and if we take barrel out of it just what are we seeing kind of on the ground in the across ALG in the Caribbean and Mexico.

Mark: Great. Thanks, Sean I'll start and I think Jon will.

Jon: We will add some additional color.

Jon: I would say that we are.

Speaker Change: We're lapping some unusual periods last year and so the results that we're reporting are.

Speaker Change: When I say.

Jon: The unusual results last year.

Jon: I mean, both calendar changes and also significant demand in certain parts of the year.

Jon: So what we're seeing is sort of a.

Jon: Evening out.

Jon: <unk>.

Jon: Demand over time, the disruption in airline traffic due to the system's averages was a.

Jon: Unfortunate.

Jon: Shocks to the system.

Jon: And.

Jon: But that was relatively short lived.

Jon: Nonetheless, it did cause a lot of disruption in terms of bookings.

Jon: And secondly.

Jon: We have.

Jon: A few issues with respect to not issues, but just headwinds with respect to.

Jon: Two major resorts under complete renovation at this point plus.

Jon: The Maui issues that everyone knows about.

Jon: Overall, I would say that the.

Jon: The general level of demand has been maintained.

Jon: At a very high level.

Jon: Significantly above sort of levels that we experienced pre pandemic times and rate continues to be.

Holding up continues to hold up.

Jon: And expand slightly.

Speaker Change: So I feel like.

Jon: We are maintaining.

Jon: At a high level of demand at this point and I think our outlook is informed by.

Jon: What we think is going to be.

Jon: Somewhat tougher third quarter.

Jon: But the more robust fourth quarter and Thats based on the visibility that we have two schedules airline schedules heading into the fourth quarter.

Jon: And.

Jon: And also overall demand that we're seeing in terms of bookings.

Mark Hoplamazian: The booking curve, though, really, it's like the wave curve for cruises. We really see a significant increase in October and November in terms of bookings into the festive season and the following year. So I think that we'll have a lot more information on the next quarterly conference call as to what those bookings are starting to look like and shape up to be.

The booking curve, though really it's like the wave curve for for cruises, we really see.

Jon: A significant increase in October and November in terms of bookings into festive and the following year.

Jon: So I think that will have a lot more information on the next quarterly conference call as to what those bookings are starting to look like in shape up to be.

Speaker Change: Yeah, and what I would add to that with respect to your question Sean on what's happening in all inclusive in the Caribbean, We had a really strong first quarter double digit growth in net package revpar at.

Speaker Change: And in the second quarter, we had about a 2% increase and if you look at over the first half of year that averages to about 7%. So really strong and the first quarter second quarter dynamic was impacted by the Easter holiday as we look forward Mark mentioned that in the third quarter.

Mark: We certainly had theirs.

Mark: Temporary disruptions in with.

Mark: With the early hurricane and assistant disruptions, but as we look forward into the fourth quarter, we're seeing pacing up into the festive season in the mid single digits. So when you put that all together.

Mark: Got sustaining momentum on the leisure trends in the Caribbean and our net package Revpar and we think the full year will be about in that mid single digit.

Mark: Mid single digit range, just a quick add.

Mark Hoplamazian: Just a quick add. It's 2% growth in the second quarter in the Americas. But if you look at the HIC portfolio, our all-inclusive portfolio globally is up three, because Europe continues to lapping strong results last year, but it has strengthened from there. So we're really encouraged to see that as well.

Mark: 2% growth in the second quarter in the Americas, but if you look at it.

Mark: The HFC portfolio are all inclusive portfolio globally. It was up three because Europe continues to we're lapping strong results last year, but.

Strengthened from there so.

Mark: We're really encouraged to see that as well.

Speaker Change: Thanks, so much.

Operator: Our next question comes from Joseph Greff from J.P. Morgan. Please go ahead; your line is open.

Speaker Change: Our next question comes from Joseph Greff from Jpmorgan. Please go ahead. Your line is open.

Joseph Greff: Good morning, everybody. Thanks for taking my questions I have a multipart question for you Mark.

Joseph Greff: Can you talk about what the recent trend lines are in China development and pipeline signing and construction starts how stark differences there between full service and select service hotel activity there.

Speaker Change: And maybe you could kind of put things in perspective, how much dependency on the five 5% net rooms growth is China related.

Sure So first of all.

Speaker Change: China has been.

Speaker Change: Greater China and Asia Pacific generally speaking have been.

Speaker Change: The highest.

Speaker Change: Producers of open rooms.

Speaker Change: And also growth in pipeline, so the Americas and China.

Speaker Change: Together represent the majority of the pipeline change that we've seen and also the openings. So we are we are continuing to grow faster than we're opening.

Speaker Change: <unk>.

Speaker Change: We are seeing is not just openings, we're seeing great openings, we're seeing openings of high quality. We mentioned the park Hyatt juncture. We also just opened Grand Hyatt Kunming, it's the 18th.

Speaker Change: Grand Hyatt hotel in greater China, I'm, sorry in mainland China.

And so we really got.

Speaker Change: We've got some remarkable.

Mark Hoplamazian: We've got some remarkable network effects going on amongst the highest end brands that we have in the country. So I've actually been super encouraged to see completions. Part of that is frankly not surprising to us because a majority of the owners that we're dealing with are state-owned enterprises. And I would also just quickly point out that the openings that we're talking about, you know, we always say a room is not a room is not a room.

Speaker Change: We've got some remarkable network effect going on amongst the highest in brands that we have in the country.

Speaker Change: So I've been actually Super encouraged to see completions part of that is frankly not surprising to us.

Speaker Change: Because.

Speaker Change: A majority of the.

Speaker Change: The owners of that but we're dealing with are state owned enterprises.

Speaker Change: And I'm also just quickly point out that the openings that we're talking about we always say room is not a rooms about a room. These are.

Mark Hoplamazian: These are very high-revenue hotels. It's not dominated by Eurocorp, even though Eurocorp is really healthy and continues to open at a good pace, Eurocorp being our upper mid-scale brand in the upper mid-scale segment in China. With respect to the impact of Chinese growth overall on the annual NRG, we'll have to get back to you on that. I don't have that off the top of my head. By the way, the signings also spell out, I would say, continued strength and a good platform heading into the future for Chinese growth.

Speaker Change: Very high revenue.

Speaker Change: Hotels, it's not dominated by your curve, even though your curve is really healthy and continues to open at a good pace yurko being our upper mid scale.

Speaker Change: On the.

Speaker Change: Upper mid scale segment in China.

Speaker Change: With respect to the impact of.

Speaker Change: China over trying to growth overall on the annual NRG will have to get back to you on that I don't have that off the top of my head.

Speaker Change: By the way the signings also spell for.

Speaker Change: I would say continued strength and a good platform heading into the future for Chinese growth.

Speaker Change: So overall.

Speaker Change: I'm pretty encouraged there are a lot of there's a lot of headlines to sort through and theres a lot of disruptions that you can you can see actually going on it is relatively more.

Speaker Change: Tactful at lower chain scales, that's what we're seeing in China, although some of our luxury hotels will also see in China have also seen some impact from the highest end Chinese consumers.

Speaker Change: Increasingly our outbound travel.

Speaker Change: Great. Thank you and then just a quick follow up.

Speaker Change: Joan.

How do you plan to use the 500 million plus of proceeds from this.

And to close later this month asset sale.

Speaker Change: Obviously you have enough.

Speaker Change: Liquidity and cash to take care of debt maturities.

Speaker Change: End of this year so at the end of 2006.

Joe: So Joe.

Joe: As Mark mentioned, we will announce.

Joe: Any transactions when we close and when we do that we will update.

Speaker Change: All components of our outlook that are impacted by the transaction, including shareholder returns so stay tuned for that announcement.

unknown: when we're ready to do so.

Speaker Change: When we're ready to do it.

Speaker Change: Thank you guys.

Thank you.

Speaker Change: Our next question comes from Dan <unk> from Wells Fargo. Please go ahead. Your line is open.

Dan: Hey, good morning, everyone. Mark I believe you mentioned that group was pacing I think up 7% in the second half. This year can you maybe talk about how it's pacing for 2025.

Speaker Change: Of this year and next year, how much is on the books at this point and maybe give some historical context with how thats compared in the past.

Speaker Change: Absolutely.

Speaker Change: Didn't really.

Speaker Change: Taken with how strong group has been overall, it's both short term and long term in the short term vicinity July was extraordinarily strong in terms of total bookings.

Speaker Change: Full scale.

Speaker Change: Sorry full.

Speaker Change: Oh.

unknown: The full cycle net production in the month was up 16%, and a third of that was in the month for the year. So we saw the third quarter actually impacted by a very strong July booking activity basically. August through December pace is up 6%, and ADR is up 5% in the year-for-year bookings. So the bookings that we're getting are not just filling rooms at compromised rates. We are realizing great ADRs.

Speaker Change: Full cycle net production in the month was up 16% a third of that was in the months of the year. So we saw third quarter actually impacted by a very strong July.

Speaker Change: Booking activity base.

Speaker Change: August through December pace is up 6%.

Speaker Change: <unk> is up 5% in the year for the year bookings.

Speaker Change: The bookings that we're getting are not just.

Speaker Change: Filling rooms.

Speaker Change: A compromise rates, we are realizing great adr's.

Speaker Change: 25 equally strong.

unknown: ADR represents the vast majority of the plus 7.5% pace increase. Tenants are running way ahead of anything we've ever seen at this time of the year ahead of 25. So we not only have great pace heading into next year, but we also have a swelling of tentative business that is really striking. The sales force is really taken with it.

Speaker Change: <unk> represents the vast majority of the plus seven 5% pacing.

Speaker Change: Pace increase.

Speaker Change: Candidates are running way ahead of anything we've ever seen at this time of the year ahead of 25.

So we not only have great pace heading into next year, but we also have the swelling of tentative business.

Speaker Change: That is really striking.

Speaker Change: Sales forces, it's really taken with it.

unknown: And right now, we have about 60% of our total business on the books for next year, so that sort of addresses your other question. By the way, just as a quick note on pharma and tech, which are leading the way with respect to the July swell was dominated by pharma and tech and all of our categories in terms of both association and corporate and across a number of different segments. I would add financial services to the pharma and tech comments are all pacing. Well, so we don't think this is not like. The Association has taken over and is pulling up an average. This is very, very well balanced and widespread.

Speaker Change: And right now we have about 60% of our total business on the books for next year.

Speaker Change: So that sort of.

Speaker Change: Addressing your other question by the way just as a quick note of pharma and tech.

Speaker Change: Our leading the way with respect to the July 12 was dominated by pharma and tech.

Speaker Change: And all of our categories.

In terms of both association and corporate and across a number of different segments I would add financial services to the pharma and tech comment.

Speaker Change: Are all pacing well so that we don't this is not like association has taken over and is pulling up in average this is very very well balanced and widespread.

Speaker Change: Got it thanks, Thanks for the detail and then in terms of the incentive management fees Joanne I think you called out China renovation Maui certainly headwinds.

Speaker Change: And in the back half of the year, but.

Speaker Change: As we think about third quarter versus fourth quarter should should we see it start to grow again in the fourth quarter, you kind of get through some of those or do we should we expect this to be down for the remainder of the year.

Speaker Change: Yes, so with respect to CS overall, the change in our outlook that we provided reflects a 13% growth year over year. So I just wanted to.

Speaker Change: Reinforce that point at at at the outset.

Speaker Change: And the <unk>.

Speaker Change: The change that we made to our outlook at the midpoint of $15 million. The breakdown between that is about 50% driven by our IMF and about 50% driven by base and incentive fees.

Speaker Change: And then also about 50% China.

And what we're seeing there the dynamic there and demand and the remaining by the U S and a little bit of FX that we're seeing so.

Speaker Change: It's concentrated in those two areas and you saw the performance in the second quarter. So as you look at that and think about the rest of the year, we anticipate that will be.

unknown: Concentrated on those two areas, and you saw the performance in the second quarter. So as you look at that and think about the rest of the year, we anticipate that we'll be performing better relative to.

Speaker Change: Performing better relative to last year in the second half as it relates to incentive fees.

Joan Bottarini: And just to clarify, sorry, Joan, you said based on incentives, but you meant based on franchise, so 50%, yeah, sorry, yeah, so 50% incentives, and the other 50% is based on franchise.

Speaker Change: And just to clarify sorry, Joe.

Joe: You said based on incentive based and franchise so $50 alright.

Joe: The 50% incentive and the other 50% is the base and franchise fee base.

Joe: Understood. Thank you so much.

Speaker Change: Thank you. Thank you.

Speaker Change: Our next question comes from Michael Bellisario from Baird. Please go ahead. Your line is open.

unknown: Thanks. Good morning, everyone. Organic Strategic Deals, or if you're referring to potential brand M&A.

Michael Bellisario: Thanks, Good morning, everyone.

Michael Bellisario: Good morning, good morning.

Michael Bellisario: One two parter on net unit growth.

Michael Bellisario: You did about 1% net in the first half of the year.

Speaker Change: We're openings below your expectations or did you see any outsized deletions in the quarter and then <unk>.

Speaker Change: <unk> part on the back half.

Speaker Change: Just help us understand the puts and takes to get to the low end and high end and then could you also provide some more details on the I think you said potential portfolio transactions is that organic.

Speaker Change: Strategic deals that you're referring to potential brand M&A. Thanks.

Speaker Change: Great. Thanks.

Speaker Change: First of all there were some terminations.

Speaker Change: And.

Speaker Change: They were not particularly outsized, but they did affect the first half.

Speaker Change: And as we look forward.

Speaker Change: Got a pretty robust opening schedule for Q3, and Q4, but I would quickly add.

Speaker Change: In Q2 for example, our room openings.

Speaker Change: About a third conversions and we actually believe that we will end the year at closer to 50% of the total net rooms growth being conversions and those are conversions that are known to.

Speaker Change: US, but also some that are <unk>.

Speaker Change: Subject to.

Speaker Change: Completing some other transactions that we're working on right now since the first quarter of this year I have been talking about the fact that we see a robust opportunity and real opportunities not just theoretical.

Speaker Change: To do portfolio deals and sometimes that means.

Speaker Change: Doing a strategic.

Speaker Change: Ship like.

Speaker Change: Portfolio deal like the Lindner hotels deal, where we signed franchise agreements for all of their all of those hotels.

Speaker Change: Sometimes.

Speaker Change: They come in the form of an acquisition.

Speaker Change: A brand or a management.

Speaker Change: <unk> platform like we did with <unk>.

Speaker Change: Hotels, just as one example.

Speaker Change: We are in the in sort of the Hopper at this point and we've been working on several that.

Speaker Change: We feel really good about now it's now August six and.

Speaker Change: Whether we actually have everything closed and those hotels in the system to count as NRG at December 31st or sometime in January I can't tell you that but I don't either neither do I care because the point is not to make that particular date.

Speaker Change: That the overall rate of growth and our momentum is actually maintained.

Speaker Change: And so I've always I've always said.

Speaker Change: Whether we have slippage into January we're not as sort of a relevant to me you have to look at it on a smooth basis over time.

Speaker Change: And that's where we are.

Speaker Change: So we we do expect more conversion activity I would just add one thing.

Speaker Change: I don't want to imply that this is a open up here.

Speaker Change: We've actually applied a tremendous level of data and analytics to the markets.

Speaker Change: That we believe would provide the biggest network effect, we've done it by price point and by brand segment.

Speaker Change: And we have been cross match that with a huge number of portfolios that we've identified and qualified across the globe and we did all that work.

Speaker Change: In the fourth third and fourth quarter of last year.

That's actually.

Speaker Change: <unk> proven to be extraordinarily helpful and focusing our resources and our time and attention.

unknown: Thanks.

Speaker Change: And of course, we are also very focused on making sure that we understand the customer base like we always do and Thats, what we start with and that each of these acquisitions or partnerships that we do have embedded growth.

Speaker Change: Already identified embedded growth and that they are asset light. So those are the principles that we continue to follow.

Speaker Change: That's helpful that was going to be my follow ups. Thank you.

Speaker Change: Perfect.

unknown: that we believe would provide the biggest network effect. We've done it by price point and by brand segment. And we have then cross-matched that with a huge number of portfolios that we've identified and qualified across the globe. And we did all that work in the fourth, third, and fourth quarters of last year. That's actually proven to be extraordinarily helpful in focusing our resources and our time and attention. And, of course, we are also very focused on making sure that we understand the customer base, like we always do, that's what we start with, and that each of these acquisitions or partnerships that we do have embedded growth, already identified embedded growth, and that they are asset light. So those are the principles that we continue to follow.

Speaker Change: Our next question comes from Stephen Grambling from Morgan Stanley. Please go ahead. Your line is open.

unknown: That's helpful. That was going to be my follow-up question. Thank you.

Stephen Grambling: Hi, Thanks, you called out the lease structure in Europe is allowing for rapid expansion in the region. How should investors think about the cyclicality of the fees associated with that growth versus the U S and there is a structure ultra how he made.

Speaker Change: You need to think through how that market could scale or its sensitivity to things like interest rates.

Operator: Our next question comes from Stephen Grambling from Morgan Stanley. Please go ahead. Your line is open.

Speaker Change: So Steve I am sorry, I missed the.

Speaker Change: Just the question was.

Steve: The beginning just to repeat the beginning part of your question I apologize just just understanding the cyclicality of these lease oriented management rates in Europe.

Stephen Grambling: Hi, thanks. You called out the lease structure in Europe is allowing for rapid expansion in the region. How should investors think about the cyclicality of the fees associated with that growth versus the US? And does the structure alter how we may need to think through how that market could scale or its sensitivity to things like interest rates?

Steve: Think about the scaling in that region.

Okay I don't look at it is cyclical.

Speaker Change: Of course, it's dependent on then prevailing rates.

Speaker Change: But if you look at the form of ownership in the form of transactions that are done in Europe.

Speaker Change: Significant proportion of them are done through leases.

Speaker Change: We have.

Speaker Change: I think one or two leases in our portfolio in Europe, we have not we have.

Speaker Change: We have not stepped into being a lessee.

Speaker Change: Pretty much anywhere in the World I think we have a grand total certainly less than 10 or is it five now we have five leased hotels.

Speaker Change: And we just don't leave.

Speaker Change: The leases are not.

Speaker Change: Really are easily managed.

Speaker Change: Sort of class of ownership for us having said that.

Speaker Change: There are a large number of developers in Europe too and.

Speaker Change: And owners, who are both very experienced in leases, but also won't do a deal and any of the four and that's a capital base that we have historically not actually focused our time and attention on.

Speaker Change: And we are now enabled to do that through the mean, all hotels acquisition, but also now as we develop those relationships we can extend that to some of our other brands mostly in the select an upscale.

Speaker Change: Scale and upper mid scale.

Speaker Change: So for that purpose.

Speaker Change: Excited about it and I am excited that we that's a very very large capital base.

Speaker Change: Some of the institutions are huge and has even come to the United States.

Speaker Change: With deals to be the lessor.

Speaker Change: For hotels again, this is not a form and format that we prefer and therefore, we do we do.

Speaker Change: We're writing anything that I can think of across the globe right now in which we would be let's see so it's just not something we do.

Speaker Change: But working with the lessee to become the manager of the hotel or the franchise or that is something that has got a significant new chapter of growth.

Opportunity for us in Europe, especially.

Stephen Grambling: So, Stephen, I'm sorry; I missed the gist of the question at the beginning. Just repeat the beginning part of your question, I apologize.

Speaker Change: So that all makes sense I guess.

Speaker Change: Europe occasion, or these management fee structures or a franchise fee structures unique or different relative to the U S or other markets just given.

Speaker Change: The unique ownership structure being leased.

Stephen Grambling: Just understanding the cyclicality of these, you know, lease-oriented management rates in Europe and how to think about the scaling in that region.

Speaker Change: No.

Mark Hoplamazian: Okay, I don't look at it as cyclical. Of course, it's dependent on the prevailing rates. But if you look at the form of ownership in the form of transactions that are done in Europe, a significant proportion of them are done through leases. We have, I think, one or two leases in our portfolio in Europe. We've not, we haven't stepped into being a lessee pretty much anywhere in the world. I think we have a grand total of, certainly less than ten, or is it five now?

Speaker Change: They are quite typical actually.

So I mean rates might vary.

Speaker Change: The royalty rates might vary or the ramp might look different or whatever.

Speaker Change: Disposal issues, but generally speaking and we have.

The vast majority of the lender portfolio actually is leased in by the lender group.

Speaker Change: So they are the lessee and we are the franchise or to the less they are the lessee and manager by the way and we.

Speaker Change: Our deal with them as this arrangement.

Speaker Change: So and those franchise deal terms are not different than what you would see in a normal.

Speaker Change: Franchise deal that you would do with an owner.

Speaker Change: As opposed to a lessee.

Speaker Change: Great. That's helpful. Thanks, so much I'll jump back in the queue.

Speaker Change: Yes.

Speaker Change: Our next question comes from Richard Clarke from Bernstein. Please go ahead. Your line is open.

Richard Clarke: Hi, good morning, Thanks for taking my questions I just wanted to know we revised full year guidance. So I just wanted to call back to the analyst day you did.

Richard Clarke: Last year, if I do that.

Speaker Change: <unk> correctly it looks like in 2025 to hit those targets, you'll have to grow EBITDAR of about 14% free cash flow about 28%.

Speaker Change: And we will taking capex down by about 41%. So just your confidence in hitting those days 'twenty 'twenty five target base.

Speaker Change: Based on where we are now in 2024.

Speaker Change: Thank you and good afternoon, Richard I would say the.

Speaker Change: Outlook really is dependent on a bit on what.

Speaker Change: The overall economy, and how macro factors impact having said that.

Mark Hoplamazian: We have five leased hotels, and we just don't, leases are not really easily managed, uh, sort of class of ownership for us. Having said that, there are a large number of developers in Europe and owners who are both very experienced in leases but also won't do a deal in any form. And that's a capital base that we have historically not actually focused our time and attention on. And we are now, you know, able to do that through the Me and All Hotels acquisition.

Mark Hoplamazian: But also now, as we develop those relationships, we can extend that to some of our other brands, mostly in the select and upscale, you know, upscale and upper mid-scale. So for that purpose, I am excited about it. And I am excited that we have that's a very, very large capital base. Some of the institutions are huge and have even come to the United States with deals to be the lessor for hotels.

Mark Hoplamazian: Again, this is not a form and format that we prefer. And therefore, we do we really aren't underwriting anything that I can think of across the globe right now in which we would be a lessee. So it's just not something we do. But working with a lessee to become the manager of the hotel or the franchisor, that is something that has got a significant new chapter of growth and opportunity for us in Europe, especially.

Stephen Grambling: So that all makes sense. I guess, as a clarification, are these management fee structures or franchise fee structures unique or different relative to the US or other markets, just given The Unique Ownership Structure being leased?

Speaker Change: There are certain dynamics and I don't want to I don't want to kill too far into <unk>.

Mark Hoplamazian: No, they're quite typical, actually. Rates might vary, royalty rates might vary, or the rent might look different or whatever, you know; there are certain bespoke issues. But generally speaking, and we have the vast majority of the lender portfolio actually leased in by the lender group. So they are the lessee, and we are the franchisor to the lessor. They are the lessee and manager, by the way. And we, our deal with them, is this arrangement. So, those franchise deal terms are not different from what you would see in a normal franchise deal that you would do with an owner, as opposed to us.

Stephen Grambling: Great, that's helpful. Thanks so much. I'll jump back in the queue.

Speaker Change: Interpreting and extrapolating macro indicators from a very short term to highly disrupted period, which is what we're living through right now into the future.

Operator: Our next question comes from Richard Clarke from Bernstein. Please go ahead. Your line is open.

Speaker Change: Underlying issue that we focus on is the general economic health and.

Speaker Change: And growth rate for the key markets that we participate again.

Speaker Change: And.

Speaker Change: Yes. It is true that the that the public markets have been extraordinarily disrupted it is not true that that is reflective of a massive disruption in the U S economy economic outlook or otherwise.

Speaker Change: Secondly.

Speaker Change: The rig rates have come down fixed rates have come down.

Speaker Change: Variously between <unk>.

Speaker Change: 40% and 50 basis points excuse me over the last five or six days.

Speaker Change: The floating rate market is actually quite stable at this point spreads.

Speaker Change: Have widened out a bit.

Speaker Change: But not materially on the fixed rate side.

Not so not so much on the floating rate side, so I'm looking at a situation in which.

Speaker Change: We do expect that the backdrop for openings and.

Speaker Change: Our.

Speaker Change: Net rooms growth.

Speaker Change: Is set up to be able to expand assuming.

Speaker Change: We see rate adjustments in the future and we see the overall economic sorry.

Speaker Change: Which market environment.

Speaker Change: Capital market environment, improving secondly, capex has been dropping.

Speaker Change: Thrilled to see.

Speaker Change: The outlook that we've got currently in it's going to be lower than that next year. So we are on path with respect to.

Speaker Change: The drop in in <unk>.

Speaker Change: And Capex.

Speaker Change: <unk>.

Speaker Change: The further expansion of conversion from EBITDA to free cash flow by.

By virtue of our asset light Trish.

Speaker Change: Trajectory. So if you put all that together.

Speaker Change: I feel pretty good about our outlook at this point.

Speaker Change: We are obviously tracking below the 6% to 7% NRG that we had put out at Investor day.

Speaker Change: I do think that that's temporal.

Speaker Change: And whether we get fully recovered to what we know we can sustain over the long term by next year or whether it takes a year and a half I can't really predict at this point, but I would say the general direction of travel is consistent with what we set out in the Investor day.

Speaker Change: Okay. It makes sense, maybe just as a.

Speaker Change: Follow up you've changed the definition of EBITDA, you've moved the transactional cost out of that I guess in my experience companies often do that when they know they've got a big cost coming up so maybe.

Speaker Change: The thesis behind making that definitional change to adjusted EBITDA.

Speaker Change: Sure Richard the rationale is pretty simple these are onetime costs.

Richard Clarke: That we experience in relation to our integration activity and also our transaction activity and so as we consider two core earnings and EBITDA.

Richard Clarke: We felt as though it was a better representation to remove these and also provide the visibility.

Richard Clarke: Ability to all of you with respect to what those costs are outside of adjusted EBITDA.

Richard Clarke: Integration costs, you will have seen that we've put on a separate line and youll see all of that through 2023.

Richard Clarke: We recast that we did in the first quarter and then transaction costs for last year, we assumed about $10 million within the 2023 annual year.

Richard Clarke: And what I would say is with transaction costs.

Richard Clarke: It can be.

Speaker Change: Uh huh.

Speaker Change: Variable very variable from quarter to quarter, and we have very few.

Speaker Change: All it did deal or abandoned costs. So when we closed on asset sales.

Speaker Change: They were as we are working on transactions and asset sale transactions that run through our G&A and then they get re reported into a gain and loss on sale of an asset.

Speaker Change: And when we acquire a company or undertake a transaction like we did with UBC. They get recorded into the asset base. So this is why made the change and the onetime nature and the variable nature.

Speaker Change: We are looking at our operating core performance without these two items. So now they are on a separate line item going forward.

Speaker Change: I'd also just point out Richard.

Speaker Change: Our culture.

Speaker Change: Implication.

Richard Clarke: This might have to do with it.

Richard Clarke: On an outlook that includes some disruption because of this line item because that's not the case, if we if we were able to predict with precision what the transactional activity and exactly how that fell over a given quarter.

We would probably be making.

Richard Clarke: A lot of others.

Prognostications and be magical in some fashion. So it's sufficiently uncertain that we could never plan around something like that just to be clear.

Speaker Change: Okay makes sense. Thank you.

Speaker Change: Our next question comes from Patrick Scholes from Suntrust. Please go ahead. Your line is open.

Richard Clarke: Hi, good morning. Thanks for taking my questions.

Patrick Scholes: Hi, Good morning, just a couple of questions on China.

Richard Clarke: Now we've got, you know, revised four-year guidance. I just want to call back to the analyst you did last year. If I do the math correctly, it looks like in 2025, to hit those targets, you'll have to grow EBITDA about 14%, free cash flow about 28%, and all while taking CapEx down by about 41%. So just your confidence in hitting those 2025 targets, you know, based on where we are now in 2024.

Mark Hoplamazian: Thank you and good afternoon, Richard. I would say the outlook really is dependent a bit on the overall economy and how macro factors affect it. Having said that, there are certain dynamics, and I don't want to tilt too far into interpreting and extrapolating macro indicators from a very short term to highly disrupted period, which is what we're living through right now into the future. The underlying issue that we focus on is the general economic health and growth rate for the key markets that we are participating in. And yes, it is true that the public markets have been extraordinarily disrupted. But it is not true that that is reflective of a massive disruption in the U.S. economic outlook or otherwise. Secondly...

Mark Hoplamazian: The rates have come down. Fixed rates have come down variously between 40 and 50 basis points, excuse me, over the last five or six days. The floating rate market is actually quite stable at this point. Spreads have widened out a bit, but not materially on the fixed rate side, not so much on the floating rate side.

Mark Hoplamazian: So I'm looking at a situation in which we do expect that the backdrop for openings and our net room growth is set up to be able to expand, assuming that we see rate adjustments in the future, and we see the overall economic, sorry, financial market environment, the capital market environment, improving. Secondly, CapEx has been dropping. I was thrilled to see the outlook that we've got currently, and it's going to be lower than that next year.

Patrick Scholes: And.

Mark Hoplamazian: So we're on track with respect to the drop in CapEx and the further expansion of conversion from EBITDA to free cash flow by virtue of our asset light trajectory. So if you put all that together, I feel pretty good about our outlook at this point. We are obviously tracking below the 6% to 7% NRG that we had put out yesterday. I do think that that's temporal. And whether we get fully recovered to what we know we can sustain over the long term by next year, or whether that takes a year and a half, I can't really predict at this point. But I would say the general direction of travel is consistent with what we set out in the investment.

Patrick Scholes: Incentive management fees currently right now what percentage of your incentive management fees.

Richard Clarke: Okay, makes sense. Maybe just as a follow-up, you've changed the definition of EBITDA; you've moved the transactional cost out of that. I guess, in my experience, companies often do that when they know they've got a big cost coming up. So maybe what was the thesis behind making that definitional change to adjust EBITDA?

Joan Bottarini: Sure, Richard. The rationale was pretty simple. These are one-time costs that we experience in relation to our integration activity and also our transaction activity. And so, as we consider true core earnings in EBITDA, we felt as though it was a better representation to remove these and also provide visibility to all of you with respect to what those costs are outside of adjusted EBITDA. Integration costs. You'll have seen that we've put on a separate line, and you'll see all of that through 2023.

Joan Bottarini: Transaction costs for last year, we assumed about $10 million within the 2023 annual year. And what I would say is, with transaction costs, they can be, you know, recorded in the asset base. So, you know, this is why we made the change. The one-time nature and the variable nature, we are looking at our operating core performance without these two items. So now they're on a separate line item going forward.

Patrick Scholes: Do come from China, and how does that historically compare and then my follow up question is what is your visibility.

Speaker Change: Into revpar.

Speaker Change: Or bookings in China, basically what is the booking window.

Speaker Change #100: For your Chinese business. Thank you.

Mark Hoplamazian: I would also just point out, Richard, I caught your implication that this might have to do with an Outlook that includes some disruption because of this line item. That's not the case. If we were able to predict with precision what the transactional activity was and exactly how that fell over a given quarter, we would probably be making a lot of other... prognostications and be magical in some fashion. So it's sufficiently uncertain that we could never plan around something like that just to be sure.

Speaker Change #101: Let me make sure I have all of the elements sure Patrick.

Richard Clarke: Okay, that makes sense. Thank you.

Speaker Change #102: As far as the competition.

Speaker Change #103: China, the China incentive fees as a percentage of total what I can what I have off the top of my head is at total fees for greater China relative to our overall base is about a high single digit composition.

Operator: Our next question comes from Patrick Scholes from Truist. Please go ahead; your line is open.

Speaker Change #103: So thats greater China as a percentage of our total.

Speaker Change #103: We are earning incentive fees and our greatest China hotels and over 90% of our hotels, earning incentive fees. Its the structure, there where were earning fees.

Speaker Change #103: On the.

Speaker Change #103: The first dollar of GOP that we earn and that has actually remained pretty consistent period over period.

Speaker Change #103: Because of the nature of the structure.

Speaker Change #103: Maybe a point or two lower than we were last year.

Patrick Scholes: Hi, good morning. Just a couple of questions on China and incentive management fees. You know, currently, right now, what percentage of your incentive management fees come from China, and how does that compare historically? And then my follow-up question is, what is your visibility into rev par or bookings in China? You know, basically, what is the booking window for your Chinese business?

Speaker Change #103: As we as we consider whats happening in the operating environment, Yes, Revpar was negative in the quarter.

Joan Bottarini: Let me make sure I have all of those elements, Patrick. As far as the composition of the China incentive fees as a percentage total, what I have off the top of my head is total fees for greater China relative to our overall base are about high single digits. So that's Greater China as a percentage of our total. We are earning incentive fees in our Greater China hotels; over 90% of our hotels are earning incentive fees. It's the structure there where we're earning fees on the first dollar of GOP that we earn.

Speaker Change #103: And the demand expectations that we have going forward given what we're seeing around travel outside the outbound China other regions in Asia Pacific.

Joan Bottarini: And that has actually remained pretty consistent period over period because of the nature of the structure, maybe a point or two lower than we were last year. As we consider what's happening in the operating environment, yes, res par was negative in the quarter, and the demand expectations that we have going forward, given what we're seeing around travel outside of outbound China and other regions in Asia-Pacific and the decline in domestic travel, we expect that that will continue in the second half of the year.

Speaker Change #103: And the decline in domestic travel and we expect that that will continue in the second half of the year.

Joan Bottarini: So that's impacting top line revenue. It's also impacting total revenue as you look at greater China total revenue. So that dynamic is certainly impacting a negative growth rate at rev par, and then an impact on total revenue is impacting GOP margins. So it's just lower fees that we're earning in greater China in the quarter. Certainly more than we had expected, and that's what's captured in our full year outlook. The impact of into the revised rev par outlook. Okay.

Speaker Change #103: And so thats impacting topline revenue. It's also impacting total revenue as you look at China, China total greater China total revenue. So that dynamic is certainly impacting a negative growth rate at Revpar and then an impact on total revenue is impacting GOP margins. So it's just a lesser.

Speaker Change #104: <unk> fees that we're earning.

Speaker Change #104: Greater China in the quarter, certainly more than we had expected and that's what's captured into our full year outlook the impact on Sun.

Speaker Change #104: Moving to the revised Revpar outlook.

Speaker Change #104: Okay.

unknown: The IMF is about 3%.

Speaker Change #104: Okay.

Speaker Change #104: This.

Speaker Change #105: It is about 3% and our gross fees on a global basis, you also asked about booking curve.

unknown: of our gross fees on a global basis. He also asked about BookmanKirk.

unknown: and The Booking Curve. Yeah, you know, or the window.

Speaker Change #105: Booking curves.

unknown: It's always been very short in greater China relative to other regions of the world. One of the primary drivers of that is the group business. So in the US, our group business is 30 plus percent. And so we obviously have more visibility to the group for longer periods into the future. In China, it's closer to 10%. So that's part of the problem. But you know, in China, it can be days in many markets where the booking windows sit, and right now, we're seeing very short windows consistent with what we typically experience.

Speaker Change #106: Yeah, you know are the window, it's always been very short in.

Speaker Change #106: Greater China realm.

Speaker Change #107: Relative to other regions of the world.

Speaker Change #107: One of the primary drivers of that is the group business. So in the U S. Our group business.

Speaker Change #107: The 30 plus percent and so we obviously have more visibility to group.

Speaker Change #107: Sure.

Speaker Change #107: Longer periods into the future in China, it's closer to 10%. So that's part of the visibility but.

Speaker Change #107: In China can be days in many markets, where the booking windows.

Speaker Change #107: Six and right now, we're seeing very short windows consistent with what we.

Speaker Change #107: What we typically experience I would also just add quickly that.

unknown: I would also just add quickly that the level of outbound travel is significant, probably higher than we would have otherwise thought. And we have said for a couple of quarters now that we have embedded in our outlook that we believe that inbound traffic, sorry, inbound lift, airline lift into China will improve in the fourth quarter and towards the end of the year. We have not had that offset in China to date.

Speaker Change #107: The level of outbound travel is significant.

Speaker Change #107: Probably higher than we would have otherwise thought and we have said for a couple of quarters now that we do we embedded in our outlook, we believe that inbound traffic sorry, inbound lift airline lift into China will improve in the fourth quarter or towards.

Speaker Change #107: The end of the year.

Patrick Scholes: So if you go to pre-pandemic levels, there was plenty of outbound travel. Everyone talked about outbound travel from China being a major driver of world global travel demand. And that was true then, and it's beginning to be true again. But what was balanced then was an equal measure of high-rated business coming into China. That's not the current situation. Okay, thank you for the color on all of that; I'm all set.

Speaker Change #107: We have not had that offset in China to date.

If you go to pre pandemic levels.

Speaker Change #107: Plenty of outbound travel everyone talked about the outbound travel from China being a major driver World Global travel.

Speaker Change #107: Demand and that was true then and it's beginning to be true again.

Speaker Change #107: But what was balanced then is an equal measure of high rated business coming into China, that's not present currently.

Speaker Change #108: Okay. Thank you for the color on all of that I'm all set.

Speaker Change #109: Sure our next.

Operator: Our next question comes from Chad Beynon from Macquarie. Please go ahead, your line is open.

Speaker Change #110: Our next question comes from Chad Beynon from Macquarie. Please go ahead. Your line is open.

Chad Beynon: Morning, thanks for taking my question. With respect to the REVPAR guidance, has anything changed, or could you just kind of talk about what changed regarding the two components, ADR or occupancy? And yeah, I guess just kind of broadly as you look out beyond 24, if you think the gains are going to be more from ADR if there's still occupancy opportunities.

Chad Beynon: Good morning, Thanks for taking my question with respect to the Revpar guidance is there anything or could you just kind of talk about what changed.

Chad Beynon: Regarding the two components ADR or occupancy and yeah, I guess, just kind of broadly as you look out beyond 'twenty four.

Speaker Change #112: You think the gains are going to be.

Speaker Change #113: More from ADR or if they're still occupancy opportunities. Thanks.

Joan Bottarini: Yes, the composition, Chad, is about split the way we're looking at our forecast for the remainder of the year. We do have a strong group in the second half on the books. You heard our pacing numbers at seven percent, and a healthy portion of that is rate growth. So maybe a little bit more skewed towards rate.

Speaker Change #114: Yes, so the composition Chad is about split the way, we're looking at our forecast for the remainder of the year we.

Speaker Change #115: We do have a strong group in the second half group on the books, you heard our pacing numbers at 7% and a.

Speaker Change #115: Healthy portion of that is rate growth, so maybe a little bit more skewed towards rate and we definitely still have opportunity on the occupancy front.

Joan Bottarini: And we definitely still have opportunity on the occupancy front. We've realized greater demand in the first half from business transients, which has been lagging for us. And those occupancy rates in our convention, convention, and business hotels are much closer to kind of pre-pandemic levels. So, there's still some room to grow in the occupancy side as we look forward. Our group bookings are nicely, nicely split between occupancy and rate. So we have an opportunity on both.

Speaker Change #115: We've.

Speaker Change #115: Realized greater demand in in the in the first half from business transient which has been.

Speaker Change #115: <unk> for us and those occupancy rates in our convention convention and business hotels are much closer to kind of pre pandemic levels, so, but theres still some there's still some room to grow in the occupancy side as we as we look forward our group bookings are nicely nicely split between.

Speaker Change #115: Occupancy and rate so we have opportunity on both fronts.

Chad Beynon: Thank you, Joan. And then, with regard to rooms under construction, how is that pacing against the pipeline? And what do you think the biggest catalyst would be to get more of these pipeline rooms kind of shovel ready?

Speaker Change #115: Thank you John and then with.

Speaker Change #116: Regard to rooms under construction, how is that pacing against the pipeline and what do you think the biggest catalyst would be to get more of these.

Speaker Change #116: Pipeline rooms.

Speaker Change #118: Kind of shovel ready.

unknown: Yeah, thank you. So, you know, over the course of the last several years, we've moved from a percentage of our pipeline under construction from the high 30s to the low 30s, which is where we are now. So we have roughly 40,000 rooms under construction at the moment. That's about a two to two and a half percent decline year over year in terms of the number of rooms under construction. Not surprising, given the environment that everyone's talking about. But that's, that's the, those are the facts that are associated with it.

unknown: Thanks. Yeah, thank you. So, you know, over the course

Speaker Change #119: Yeah. Thank you so.

Speaker Change #120: Over the course of the last several years, we've moved from.

Speaker Change #121: Percentage of our pipeline under construction from the high <unk> to the low thirties, which is where we are now.

Speaker Change #121: So we have a we have roughly 40000 rooms under construction at the moment.

Speaker Change #121: That's about a two to two 5% decline year over year in terms of rooms under construction.

Speaker Change #122: Surprising given the environment that everyone's talking about.

Speaker Change #122: That's the that's what those are.

Speaker Change #122: The facts that are associated with that China overall is a bit lower than that in terms of the proportion of the pipeline. That's under construction part of that has to do with the fact that we've actually executed quite a few.

unknown: China overall is a bit lower than that in terms of the proportion of the pipeline that's under construction. Part of that has to do with the fact that we've actually executed quite a few, or we've entered into agreements to execute some conversions in China. And that actually also inflates the pipeline that ends up in production earlier. But so it's not under construction; it may be under renovation or something else, but not technically under construction. The pipeline itself, I think the dynamics that would significantly change what we're seeing currently are the availability of capital for new starts in the United States. That's probably number one.

Speaker Change #122: Or we have entered into agreements to execute some conversions in China and that actually also inflates the pipeline that ends up in production earlier.

Speaker Change #122: So it's not under construction it may be under renovation or something else, but not technically under construction.

Speaker Change #122: The pipeline itself.

Speaker Change #123: The dynamics.

Speaker Change #124: That would significantly change the what we're seeing currently is availability of capital for new starts in the United States, That's probably number one and number two would be.

unknown: And number two would be a more favorable lending environment in China. We haven't been significantly hurt by that because most of our hotels are signed with state-owned enterprises, but it still has a marginal impact with respect to private developers who do depend on the debt markets in China to fund their projects. Great, thank you very much. We have no further questions.

Speaker Change #123: Yes.

Speaker Change #123: A.

Speaker Change #123: More favorable.

Speaker Change #125: Lending environment in China, we haven't been significantly hurt by that because most of our hotels are signed with the state owned enterprises.

Speaker Change #125: But it still has a.

Speaker Change #125: A marginal impact with respect to private developers, who do depend on the debt markets in China to fund their projects.

Great. Thank you very much.

We have no sir so.

Speaker Change #125: Sorry go ahead.

Mark Hoplamazian: We are just out of time for questions. I'll turn it back over to Mark Hoplamazian for closing remarks.

Speaker Change #126: We are just out of time for questions I'll turn it back over to Mark.

Mark: Mark <unk> for closing remarks.

Mark Hoplamazian: I just want to thank all of you for your time this morning, and we continue to appreciate your continued interest in Hyatt and look forward to welcoming you to our hotels so that you can help our Rev Par outlook and otherwise, but mostly to experience the power of care as delivered by the Hyatt family. So we wish you all a great day ahead. Thank you.

Mark: Thanks, I just wanted to thank all of you for your time. This morning, and we continue to appreciate your continued interest in Hyatt and look forward to welcome you to our hotels. So that you can help our revpar outlook.

Operator: This concludes today's conference call. Thank you for participating and have a wonderful day. You may all disconnect.

Speaker Change #127: And otherwise, but mostly to experience the power of care is delivered by the Hyatt family. So we wish you all a great day. Thank you.

Speaker Change #128: This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.

Speaker Change #127: Okay.

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