Q3 2024 Hyatt Hotels Corp Earnings Call
Good morning and welcome to the High-Eat Third Quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise.
24 earnings Conference call joining me on today's call are Mark <unk>, Hyatt's, President and Chief Executive Officer, and John Barter any title 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 10-K quarterly reports on Form 10-Q, and other SEC filings these risks could cause.
Cause our actual results to be materially different 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.
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 note that unless otherwise stated references to occupancy average daily rate and revpar reflect comparable system wide hotels on a constant currency basis.
The Senate changes disclosed during the call are on a year over year basis, unless otherwise noted. Additionally.
Additionally, we have updated our inventory schedule on page 84 of the earnings release to now include hotels and rooms associated with Mr and Mrs. Smith, and other strategic alliances and with that I'll now turn the call over to Mark.
Thanks, Adam Good morning, everyone and thank you for joining us today.
Before I turn to the quarter I would like to acknowledge the damage caused by recent hurricanes in the southeast United States.
In response <unk> colleagues have come together through our Hyatt care fund to provide financial support to those in need.
Our purpose to care for people. So they can be their best resonates in times like these and we are thankful that our colleagues are safe.
22% increase over the prior year.
Loyalty room night penetration also increased as we realize the direct benefit of our growing membership base.
And spending on our co branded credit cards has increased 16% through the first nine months of 2024 compared to the same period in 2023.
Finally world of Hyatt was recognized as one of the top hotel loyalty programs by U S News and World report.
Our members continue to benefit from our greater system size and expanding collection of World class brands, while our membership growth and increased room night penetration reduces customer acquisition costs, which we believe makes us even more attractive to owners and developers.
We see evidence of owner and developer preference reflected in our pipeline.
Which expanded to 135000 rooms, a new record.
This represents an increase of approximately 10% compared to the third quarter 2023, and our pipeline represents 41% of our existing room base.
The United States, and greater China continue to account for significant signing activity, especially among our upper mid scale brands Hyatt Studios and <unk> by Hyatt.
We also saw healthy signings among our all inclusive brands in the Americas and I'm thrilled that we signed our first all inclusive resorts in Asia Pacific The Hyatt <unk> and Hyatt Viva partner in Thailand.
We also recently announced the formation of a joint venture and strategic collaboration agreement with China resources land to expand Hyatt's brand presence across China.
This includes six existing hotels that have joined the unbound collection by Hyatt and GDP by Hyatt collection brands.
Additionally, and separate from the JV Hyatt and CR land have signed agreements for two new projects, including Park, Hyatt Xi'an, and Andaz Dong hwan, which deepens our relationship with CR land, who own seven existing luxury Hyatt branded properties in China.
During the third quarter, we achieved net rooms growth of four 3%. There were several notable luxury openings in the quarter, including the park Hyatt <unk>, Our first park Hyatt in Northern Africa.
And the <unk> Shanghai, a flagship for future development of this luxury branded urban markets.
We also opened the Grand Hyatt Kunming, the 18th Grand Hyatt in Greater China.
Our openings provide more opportunities for our guests and members to engage with us while our growing pipeline allows us to expand into new markets into the future.
Turning to transactions on August 16th we hit a significant milestone with the sale of Hyatt Regency Orlando.
And the adjacent land for gross proceeds of $1 <unk> $7 billion.
This marked the completion of our third asset disposition commitment, which we announced in 2021.
Over the three year period, we realized gross proceeds of $2 6 billion.
Net of acquisitions at a multiple of 13 three times.
While we successfully completed our third disposition commitment we expect to continue to reduce our hotel ownership.
Hyatt Grand Central New York, and under as Liverpool Street.
Both remain under contract for redevelopment.
Upon closing we will receive significant proceeds from these sales and upon the completion of the Redevelopments, we will have magnificent new hotels in each highly desirable location.
Additionally, we are actively engaged in other discussions and expect to sell more hotels in 2025 and beyond.
First we completed the acquisition of standard International which includes the standard standard X and bunkhouse brands further enhancing our position in the lifestyle segment.
At closing 22 hotels with approximately 2000 rooms joined Hyatt and the acquisition will add 10 executed agreements to the pipeline in the fourth quarter totaling approximately <unk> hundred groups.
In addition, there are more than 20 additional projects, including branded residences with a signed agreement or letter of intent I'm also pleased to share that we've already engaged in conversations resulting from inbound calls for new projects since we announced the acquisition.
On October 28, we announced the signing of an agreement to enter into a long term strategic joint venture with Grupo Pea Nieto to managed by <unk> hotels and resorts.
23 open and operating resorts totaling over 12000 rooms will be added to highest inclusive collection upon closing expanding highest all inclusive room portfolio by approximately 30%.
This is a unique opportunity to expand our all inclusive offerings in the four five star category, which fills white space in our brand portfolio.
Currently over 85% of Heights, all inclusive resorts in the Americas, Our five star properties in this transaction enhances our network effect by expanding our own inclusive offerings to members and guests at multiple price points.
The transaction is anticipated to close in the coming months and we will provide more details once the transaction closes.
Seven years ago, we committed to permanently reducing our earnings from owned hotels, while investing in asset light growth.
The results of our transformation into an asset light business has been highly accretive to shareholder value.
We've realized $5 $6 billion of gross proceeds net of acquisitions from asset sales at a multiple of 15 times, which exceeds the overall multiple at which Hyatt has historically traded.
We've reduced our owned and leased adjusted EBITDA by approximately $390 million in annual capital expenditures by over $100 million.
While adding approximately $50 million of durable management and franchise fees from the sold hotels.
At the same time, we've acquired asset light platforms, including two roads hospitality Apple Leisure Group Dream hotels group and standard International for a total of $3 6 billion.
At a blended multiple of approximately nine five times.
Yeah.
We have exceeded our underwriting expectations for both two roads and ALG.
We expect to do the same for dream and standard when those acquisitions mature.
Not only have we replaced the EBITDA from asset sales, but we have and will continue to do so in a much more capital efficient manner that drives greater free cash flow.
Additionally, during this time, we have returned $4 4 billion to shareholders, including $4 $2 billion of share buybacks at a weighted price of $87 74 per share.
Our capital allocation strategy has fueled our growth, while creating significant value for shareholders.
While we celebrate the successful execution of our earnings transformation, we recognize continued evolution and innovation is essential to benefit all our stakeholders into the future.
In the coming months, we will debut a new lifestyle group led by <unk> <unk>.
<unk> executive Chairman of standard International on <unk>.
<unk> brings his expertise designing world class lifestyle brands and delivering exceptional experiences and I'm excited to welcome him and all the standard international colleagues to Hyatt.
We will also be forming a dedicated luxury group with distinct leadership across key functions and services focused on carrying for guests and customers at the pinnacle of luxury.
We will continue to leverage the significant capabilities that we have been building, while welcoming new colleagues with unique talents.
We believe this alignment will allow us to care more deeply for guests customers and especially hotel owners across each of our brands.
Further deepening preference for Hyatt, while creating even more value for shareholders.
I would like to close by expressing my gratitude for all high colleagues, who live our purpose every day by carrying for each other and for all of our stakeholders.
Joan will now provide more details on our operating results John over to you.
Thanks, Mark and good morning, everyone. During the third quarter system wide Revpar increased 3% led by increased business and group travel in the United State Revpar increased over 1% group was strong in the quarter, reflecting continued momentum for corporate meetings and social events.
Association drove the growth in group rooms revenue and business transient was led by large corporate account benefitting hotels in major urban markets.
On the leisure front, we continue to lap challenging comparisons in Maui due to the wildfires last year. The quarter was also negatively impacted by hurricane activity and an increase in international outbound travel revpar in the Americas, excluding the United States increased approximately 4% and I'll include.
<unk> properties in the Americas reported net package revpar, 5% below last year, driven by the impact of Hurricane.
Despite some of the headwinds and challenging comparisons for leisure travel the forward booking activity that Mark mentioned earlier supports our continued confidence that the strong demand levels. We have experienced are sustainable.
In greater China, Revpar decreased approximately 7% as we lap unusually high levels of domestic travel last year, especially from higher income travelers, while domestic travel was down 9%. We did experience a moderate increase among international inbound travelers stimulus measures enacted.
The government in late September our targeted at boosting domestic spending and while still early we're seeing improved Revpar result from our hotels in the month of October compared with the third quarter.
Asia Pacific, Excluding greater China. Once again produced great results with Revpar up approximately 10% due to strong inbound travel with notable demand coming from greater China, and the United States Revpar increased by double digits compared to last year in South Korea, Japan and India.
In Europe, Revpar increased 15% driven by the Summer Olympics in Paris, and Euro 2024 in Germany. These.
These events were large drivers of international inbound travel and we saw significant growth of international travel throughout the rest of the quarter as well.
Our European all inclusive properties produced impressive net package revpar growth of approximately 13% driven by high demand for our resorts in the valley, Eric in Canary Islands.
We reported gross fees in the quarter of $268 million up 11% due to a combination of our greater system size revpar growth and an increase in our non revpar fees free.
Franchise and other fees increased 23% due to the growth in our co branded credit card the contribution from EDC and fees from newly opened franchise properties.
Growth in base fees reflect increased managed revpar, most notably in Europe and fees from newly opened managed hotels.
Incentive fees were flat with impacts from weather events renovations and results from hotels in greater China offset by strong contribution from hotels in Europe, and Asia Pacific Excluding greater China.
Turning to our segment results management and franchising segment adjusted EBITDA increased approximately 9% driven by the increase in our gross fees.
Owned and leased segment adjusted EBITDA increased by 13% when adjusted for the net impact of transactions.
Group rooms revenue for the portfolio increased 30%.
Strong demand in the United States in the Olympics in Paris.
Margins for comparable hotels increased 210 basis points and we continue to expect to achieve flat to moderate expansion of owned and leased margins for the full year compared to 2023.
Finally, our distribution segment's adjusted EBITDA declined by approximately $5 million when excluding the EDC transaction.
Consistent with the expectations, we communicated during our second quarter earnings call.
<unk> ahead, we anticipate fourth quarter adjusted EBITDA, excluding UEC to grow by approximately $5 million compared to last year.
In total adjusted EBITDA was $275 million in the third quarter, an increase of 9% compared to last year.
In the third quarter, we repurchased $407 million of class, a common stock and $250 million of class B common stock returning excess proceeds from asset sales to shareholders. We have approximately $1 billion remaining under our share repurchase authorization.
And during the quarter, we repaid the 2024 notes for approximately $750 million inclusive of accrued interest, reducing our total debt outstanding to approximately $3 1 billion.
As of September 32024, our total liquidity of approximately $2 $6 billion included $1 $1 billion of cash cash equivalents and short term investments and approximately one $5 billion.
And borrowing capacity on our revolving credit facility.
We remain committed to our investment grade profile and our balance sheet is strong.
Now I'll cover our outlook for 2024.
The full details can be found on page three of our earnings release.
We have tightened our ranges as a result of lower than expected results in the third quarter.
October to date results and pace data for November and December reflects encouraging revpar trends in the United States and greater China for the fourth quarter.
This is due to solid group pace, excluding the timing of the Jewish holidays and U S election sustained.
Sustained business transient activity and improved leisure pace over the festive period.
In greater China preliminary Revpar for the month of October is flat to last year, a meaningful improvement to the third quarter.
And I want to be clear that a continuation of these trends is assumed in our current outlook ranges for fees and adjusted EBITDA.
Global full year system wide revpar growth is expected to be in the range of 3% to 4% compared to 2023.
We anticipate the United States Revpar growth for the full year of approximately 1% to one 5% and we anticipate fourth quarter Revpar growth will be similar to the third quarter.
Even with the timing of the Jewish holidays and U S election.
Revpar growth in greater China is expected to improve in the fourth quarter relative to the third quarter as the stimulus measures take effect, leading to full year revpar growth that is flat to 2023.
And finally, we expect Revpar growth in other international market to exceed the high end of our range led by Europe, and Asia Pacific, Excluding greater China, We expect net rooms growth in the range of 775 to $8 two 5%.
The joint venture with Grupo upon Euro closes in early 2025, we would expect to be in the range of four to four 5% gross fees are expected to be in the range of $1.0852111 billion, a 13% increase at the midpoint of our range.
Compared to last year.
As I just mentioned our updated outlook accounts for lower than expected incentive fee contribution in the third quarter and also accounts for standard International closing later than our prior expectations.
Adjusted G&A is expected to be in the range of $425 million to $435 million consistent with our prior outlook.
Adjusted EBITDA is expected to be in the range of one $1 billion to $112 billion.
5% increase at the midpoint of our range compared to last year.
Free cash flow is expected to range from $380 million to $410 million, which includes the payment of approximately $150 million cash taxes related to asset sales.
Finally, we expect capital return to shareholders of approximately $125 billion, including share repurchases and dividends.
In closing our third quarter results highlight the strength of our asset light business model and the successful completion of our asset disposition program as Mark mentioned, we will continue to strategically sell owned assets next year and beyond and importantly, we are focused on operational excellence to continue to grow.
Our core business and enhance our network effect through strategic net rooms growth to benefit all stakeholders well into the future.
This concludes our prepared remarks, now we would like to turn to Q&A and we would like to speak with as many of you at time permits and would ask that you limit yourself to one question.
Yeah.
Thank you the floor is now open for questions again in order to maximize the number of questions. We can take we ask that you limit yourself to one question.
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The first question comes from the line of Joe Greff with JP Morgan. Please go ahead.
[laughter].
Joe Greff: Hey, good morning, everybody.
Thanks for taking my questions.
Kind of a two parter on the updated guidance.
Net rooms growth organically it looks like it's down relative to a quarter ago can you help us reconcile the drivers of that.
That shift and then.
With respect to this most recent pending acquisition the joint venture.
Can you talk about sort of I don't know maybe you can frame it on a trailing 12 month EBITDA basis. I know you gave out your fee contribution, but if you can maybe talk about what the run rate might be presently and then maybe how you're thinking about it for next year as we kind of think about incorporating not just the rooms, but also sort of years one through.
Three contribution thank you.
Great. Thank you very much Joe.
On the outlook for net rooms growth.
A few a few things that I wanted to note. The first is our gross openings. This year are expected to be over 6%.
Lower than our expectations because of slippage of over 2000 rooms into 2025.
Joe Greff: Part of that is as hotels that are under construction.
Lipped for openings or that we expect to slip I should say, we're not at the end of the year, yet so who knows they may be pulled forward and some conversion deals that we've been working on.
Joe Greff: Aggregate up to Cigna.
A significant number of rooms, so thats the first.
First development I would say from our last update the second is that attrition of rooms came in higher than we expected it's approaching something like one 5% this year, which is significantly higher than our typical run rate, which has been between 0.5 and 1%.
And some of that difference about 40% of that difference has to do with.
Joe Greff: Brand standard and market specific issues that affected our renewal or agreement to move forward with certain hotels in our portfolio. Some of it is the markets that have become I would say more challenging or.
Where the central business District has moved.
Joe Greff: And we are looking for new representation.
In a couple of cases owners that.
Joe Greff: We didn't come to agreement with on bringing hotels to brand standards. So part of that has to do with just disciplined in maintaining standards and elevating the quality of our portfolio.
Joe Greff: A few hotels with larger room counts that were conversion hotels expected to open this year that came out.
Overall momentum, though remains intact and we're.
We're looking into first quarter of 2005.
Our gross openings are tracking to our year over year over year net rooms growth was over 6%.
And while of course, we might experience slippage out of the first quarter Theres, no systemic or structural gap to our outlook for organic growth in the range of 6% going forward. There are three other things I thought I. Just mentioned quickly first this is supported by significant ongoing growth of our pipeline.
An increase in construction starts and improving conditions for hotel development generally second.
Joe Greff: We've had a significant level of conversions that have benefited us over time, especially in the last several years and we expect to engage in conversions portfolio deals and like in the future that activity is not included in this organic growth outlook I just gave you.
And third we are not including affiliation arrangements or rooms that are associated with affiliations or other so called quote unquote units.
Whether they be residential affiliations or loyalty partnerships or whatever the form maybe our net rooms growth is purely managed or franchised rooms and in rare cases. Those homes are townhomes that are also covered under either a management or franchise agreement period.
As Adam already mentioned we have.
Joe Greff: Yeah.
Speaker Change: Included additional information on the hotels and rooms that are part of the arrangements that we have with that we have through Mr and Mrs. Smith on which we earn booking fees by the way and under canvas. These have been hugely successful partnerships, but do not count as rooms for purposes of our net rooms growth calculation thats on a four is that correct.
Schedule eight four we just included those for your reference so you could see that.
So that's the story on the update basically.
Joe Greff: My confidence in outlook is quite positive I feel really good about the momentum that we've got and as I've said in the past whether at a specific measurement date call. It December 31.
Joe Greff: At any given year.
Joe Greff: <unk> to fall openings happen to fall on one side or the other of that is not what I focus on our focus on ongoing momentum, which I think is very good.
Joe Greff: On the.
Joe Greff: <unk> deal.
We have provided the information that I think we're going to provide until we close.
Joe Greff: We.
Joe Greff: Have.
We do have an outlook for what the next three years will look like.
And I would just say that in a number of cases in which we have gone into.
Platform and in this case.
Its ownership.
Of our platform.
And many of those cases, we had things that we had built into our underwriting and also into the plans with respect to either renovations or plugging into Hyatt systems that will apply in this case as well. So we will provide you more information when we closed the transaction yet.
I'd just add that we did disclose our expectation for gross management fees from the joint venture and then incremental to that is the Hyatt platforms that Mark just described Oh, yes, so separate and apart from those fees. Those are strictly fees that were counting from management. These are all managed hotels Theres no franchise.
And these in the 12000 rooms that were bringing on.
In addition to those management fees there are other fees and revenues that we that Hyatt will realize through Hyatt owned platforms in the distribution space that will be.
Joe Greff: Incremental.
To that number so we'll provide you more details when we when we get to closing.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Daniel <unk> with Wells Fargo. Please go ahead.
Hey, good morning, everyone and thanks for taking my question.
You guys mentioned a couple of times.
Speaker Change: Card fees, adding b being additive in the quarter.
Speaker Change: Certainly that's been a trend among your peers can you maybe talk about the order of magnitude or upcoming timing of the renewal and maybe how we should think about that non revpar fee component of your growth going forward.
Speaker Change: Well I think.
We haven't gone into breaking out the details of Watson and non revpar fees.
What I would say is the average spend per card. The data that we have that I think will be reflective of the strength of our customer bases, but not the spend per card holder is higher then.
Speaker Change: Many many other.
I wouldn't say, all because I can't see that conclusively, but it's.
It's at the very high end of affiliated or co branded credit cards second the volumes have been growing partly because we continue to expand our world of Hyatt membership base that have the card.
Speaker Change: And also they are.
Speaker Change: They tend to fit a profile where their spending is not directly linked to.
Speaker Change: A specific state of the economy, because they have relatively higher net worth and household income.
Speaker Change: So we think that will continue to grow.
Speaker Change: For those of you who are tracking multiyear we've been compounding growth of world of Hyatt membership by over 20% for the last couple of years in a row.
We don't see that actually we see we're confident that it's going to continue to grow I can't say that it's going to continue to compound a 20% forever that's that would be.
Speaker Change: Fantastic.
Very high.
But it is an access of actually the total rooms that we're adding and I think part of that is that we are gaining some traction with respect to other experiences that we're offering.
And different price points that we're offering so we're excited about all of that.
In terms of the contract itself I think we've made this comment before but this is this is an arrangement that.
Had a life through.
Speaker Change: 25 or towards the end of 'twenty five and so we are actively engaged in looking at how our next phase of our.
Of our credit card will be structured and of course no.
No one waits until the deadline to get these deals done so we're working on it now.
Speaker Change: Got it thanks, so much.
Speaker Change: Thank you.
Our next question comes from the line of Ben Chaiken with Mizuho. Please go ahead.
Ben Chaiken: Hey, Thanks for taking my questions within distribution and destination I think you said EBITDA.
<unk> five <unk>.
Ben Chaiken: Trajectory in this business changed at all was hurricane impact just would love any color on what Youre seeing from a demand perspective, and then one quick follow up thanks.
Yes sure in the third quarter, we definitely had some impacts from the hurricanes definitely in the in the Caribbean and South Eastern United States bookings were a bit slower and <unk>.
Frankly, a little bit less than what we had.
We noted on our second quarter earnings call.
Ben Chaiken: And in the fourth quarter.
As we noted in our prepared remarks, there is a lot of reason to be encouraged by our leisure booking trends. So.
Through the end of coming out of September and into October our leisure booking pace.
Has really accelerated so as as.
As we look at the at the segments in the market that our distribution business is.
It's managing those markets in particular are really accelerating so into the fourth quarter. We expect an increase as I said about $5 million in excess of last year and and into the first quarter, we have done.
A very strong booking pace there for our resorts.
Speaker Change: The distribution business actually.
Speaker Change: Officer, those resorts and other markets. There. So we believe that booking pace will continue into the future into the near future.
Got it and then that's very helpful. I appreciate it and then on room growth.
The color on the one 5% attrition was very helpful. But would you expect that attrition to leak into 'twenty five as well or is this more so concentrated to a few examples in this more of a 2024 dynamic just how are you thinking about it as we stand today. Thanks.
Speaker Change: Thank you, yes, I think there was a relatively higher number of hotels that were coming to end of life and Pip requirements that were not.
Speaker Change: Matt.
So maybe we had a bit of a blip here heading into the fourth quarter.
I will say that if you look at the.
Speaker Change: The structure of our brand portfolio.
We do not at this point have.
Our brand into which we would encourage.
Owners, who want to downgrade their hotels to something that's at a lower level.
Just to maintain those rooms in our portfolio that's different than our competitors and so some of this is just maintaining brand integrity across our brands as they stand today.
Speaker Change: Thanks.
Speaker Change: Our next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.
Hi, Good morning, everyone and thanks for taking my question Mark maybe just to fill in from that last question about a couple of points. So first of all for next year. If I. If I caught you correctly I think you said you feel comfortable at six but that would be kind of closer to a gross basis. So even if attrition normalize a little bit still a little bit below I think.
Speaker Change: Your kind of longer term algo you laid out last year at the Investor day. So maybe if you could just walk us through.
Pros cons on that piece and then specifically on that last thing you said about the ability to kind of trade down on sort of the brand standard side is that an opportunity for Hyatt maybe you could just talk about that as you think about that and conversions because thank you are absolutely right that is activity that we see but other brand families have opportunities there as that.
Speaker Change: Hi, it could explore.
Speaker Change: Yeah. Thank you Sean.
First of all Thats correct.
You read my commentary correctly about 6% growth I think that excludes any conversion activity.
So I'm talking about pure organic in that number and.
Speaker Change: The fact is that.
Speaker Change: We do have conversions that we continue to work on they've been a material part of our total so I think we've talked about.
A longer term outlook of five to six or six plus or minus maybe six to seven and I think those those numbers. If you put six at the midpoint of that.
Net of attrition still remains our outlook.
Speaker Change: So.
Speaker Change: <unk>.
The level of conversions have continued to represent a pretty significant proportion of our total during this lull in new construction starts, especially in the U S.
And a rebound, which we have seen in construction starts and construction activity in China.
Speaker Change: So we have seen.
Increases in construction starts in China in the last two quarters.
That represents so China, China rooms in China represented about 37, 38% of our total pipeline and in terms of rooms under construction they represent 31.
Which is up from last quarter percent of rooms under construction. So we are seeing.
Speaker Change: Positive signs there.
<unk> organic.
Speaker Change: I think the number of portfolio deals and conversions pure conversions not acquisitions of platforms remains high.
Speaker Change: And we are continuously pursuing those.
Speaker Change: Especially in markets in which we have.
Particularly low relative penetration.
Was there a second part of your question yes.
With respect to the brand standards. We have there is there is a potential opportunity for that there is opportunity it's something we've been looking at Emerson.
Speaker Change: You can have time actually and we constantly.
Speaker Change: Listen to our owners and take their feedback and consider that enter into that.
How do we think about brand standards. It's also true that serving the high end of each segment that we serve requires investment into the properties that we have so our owners recognize that they are well capitalized and that's why our attrition has historically been so low.
<unk> owners have invested in the properties and they've been performing so I think this is this is a bit of a nominally anomaly that that mark described this year.
And we don't expect this level to continue going forward I would say, Sean just to paint a broader picture of this if you think about where that kind of attrition has come from and where these.
Speaker Change: Other brands have been launched with respect to capturing those that are coming out of.
Those other brands in the midscale or upper midscale or upscale categories.
Those brands are materially older.
Hyatt place and Hyatt House, when we launched Hyatt place. It was on the back of over 100, <unk> suites hotels.
Speaker Change: If you just look at total life.
Speaker Change: Post opening.
Of our portfolio, we are only now getting to the very beginning of seeing hotels that are.
Past, the 20 year market being open.
It sounds crazy to say that given how much growth we've had in Hyatt place and Hyatt House.
You might forget but that really we launched Hyatt Hyatt place for example, 17 years ago.
Speaker Change: So, but <unk> were built prior to that time. So yeah. We're now starting to see that our competitors are version something high I don't know 456 of the of the prototype that they're using for their current brands and so forth. So you've got many many generations that strip church back into the 19 eighties.
And I think that the incidence of those hotels, reaching obsolescence or maybe.
They are an anachronism in their current marketplace is much much much higher we just don't have the same level.
Of a product aging by the way I'm not criticizing those brands. That's just the nature of the business and also the evolution and the movement of CBD East Central business districts across many cities and towns in the United States. So we got our eyes wide open we're very committed to brand quality and <unk>.
<unk>, our owners, especially in the Hyatt place and Hyatt House category are coming to us and saying, Hey, you need to hold everyone's feet to the fire because we're investing we want everyone to invest because it's our brand equity and so we're very aligned with our owner Advisory group on this topic.
But it is the we're experiencing something new.
That we really haven't had an issue with or had to had to consider as as much as we do today.
Speaker Change: At this time.
Hope that's helpful. Yes, Thank you very much.
Our next question comes from the line of Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Everyone. Thank you.
Conor Cunningham: Maybe on the on the inorganic side, you've obviously been very active from an M&A standpoint cluster transformation can you just talk about.
The opportunity that you see there now and maybe what the multiples that youre kind of seeing in the market. How are they still relatively depressed you see deals all of that stuff. Thank you.
Speaker Change: Sure.
Speaker Change: I think.
The way that.
Platform acquisitions tend to be valued.
They look like a very high multiple at the inception.
I think if you looked at two roads or ALG. While ALG was also we bought it in the middle of Covid. So.
The trailing multiple was stratospheric.
So you don't.
Speaker Change: We don't underwrite on the basis of traveling as much as understanding.
What's ahead for each portfolio and every portfolio has got its own dimensions and different.
Speaker Change: The tenor and quality of the contracts that underlie the management agreements and their franchise agreements all of them excuse me all of that is taken into account for deals that we do and deals that we don't do.
And so I would say that typically you would see it going in multiple.
Significantly higher probably double.
Or more what you would expect to see on a run rate basis, why because it takes some time to plug into loyalty programs into other distribution channels and also.
Two are complete.
To the extent that it's relevant renovation programs.
So I would say going in multiples will look high.
You really have to be careful and underwrite correctly for the.
Growth in fee revenue and therefore, EBITDA associated with these platforms to buy them down to something thats in the low double digits. Our general belief is that if we can have confidence that we end up on a glide path to a low double digit multiple of earnings on.
<unk> asset light platform that is value accretive everyday.
And that and we currently are in.
If you look at the last four acquisitions that we made were tracking below 10.
Speaker Change: So we're in high single digits, so that's particularly good.
That's our that's our design that's what we're going to continue to focus on we have so much white space.
That the other dimension that we have that others might not have as in as much capacity is to fill in a number of market tracks that we just don't have any representation.
Speaker Change: So a lot of this that we see are.
Places, where we are way underpenetrated relative to our larger competitors there.
Speaker Change: Therefore, the idea of adding new existing properties. This is not adding necessarily new capacity in different markets or adding new capacity in markets, where we have very little representation is easily absorbed and also.
Very welcomed by our by our loyalty members.
Speaker Change: Okay.
Speaker Change: Helpful. Thank you.
Speaker Change: Sure.
Speaker Change: Okay.
Our next question comes from the line of Smedes Rose with Citi. Please go ahead.
Speaker Change: Alright, thank you.
I just I wanted to ask you pro forma from your.
JV with Grupo Tomorrow, where do you see.
Speaker Change: Sure.
Speaker Change: Overall demand now and the Hyatt and Hyatt system.
I think right now we're tracking between 50 and 55% leisure and this will take it up a little bit.
It's a 30% increase in rooms, and all inclusive.
But relative to the totality, it's let's see about a 4% increase in our leisure rooms overall.
Speaker Change: These are.
Hotels that trade at a lower.
Net package revenue rate.
Speaker Change: Because they're four five star hotels and the main.
Speaker Change: And therefore.
Speaker Change: Won't have as much as a.
A 4% impact on our total mix.
Speaker Change: Thanks.
One more quick one you mentioned.
Markets in tracks, where you don't have a lot of Brexit inflation.
Do you feel like you could potentially be an acquirer of real estate in some of those markets to get.
Speaker Change: Jim started if you will the system sort of big enough now that you feel like it can kind of just sort of organically grow through conversion from people coming to you and developers coming to you et cetera.
Yeah, I mean, if I look back at our history, we've executed a few different.
Acquisitions of specific hotels or groups of hotels, where we felt that we had a clear pathway to reselling those hotels, but they were specifically because they were exemplary in their location. The two biggest examples I can give you that off top of my head that I can think of right away.
Speaker Change: The hirings, you Orlando, which we purchased for over $700 million.
Speaker Change: The only convention hotel in Orlando connected to both sides of the Orange County Convention Center right in the middle of that complex and of a quality was the Peabody before we bought it of our quality and the team at <unk>.
Bose and culture that was.
Speaker Change: This is a family owned and run business and the culture of the team just match beautifully with ours and the quality of the asset was really high. So we ended up having a unique opportunity we wanted to control it.
We negotiated a deal and it was all cash we completed due diligence in very short period of time, because we knew the hotel in the market very well.
And as you know we owned it for a number of years and earned a very good return on it while we owned it and then just sold it for over $1 billion. So that's one example, the second example is the hydrogen see Mexico city, we've been absent completely absent in that market. It's a top five MSA in the globe around the globe.
And we've not been present there for over 25 years. This is a hotel that's right on the chip will go back park in the middle of <unk>, It's like Maine and Maine.
Speaker Change: And it was a Nico hotel they wanted to deal with someone that they that didn't need a financing contingency or anything else. We came in completed diligence and all cash bought the hotel.
For about $190 million and we recently sold it a couple of I guess, a year and a half ago two years ago three years ago.
Speaker Change: Pre COVID-19.
For like.
Speaker Change: 400, something like that but that's because we were able to first unlock some additional value on vacant lots that were a part of that.
So that's really those are two examples so the answer is yes, if it's if it's a unique opportunity that gets us an amazing.
Location and a market in which we are underpenetrated.
<unk>, we will do that as long as we have a clear path to sell.
Speaker Change: So.
We will remain open to those ideas, it's not exactly what we're rushing around looking for frankly, but they do arise from time to time and we just have.
We're not running into ourselves in any market in the world. So we have a lot of space to to Rome.
Great. Thank you so much.
Speaker Change: Sure.
Our next question comes from the line of David Katz with Jefferies. Please go ahead.
Hi, good morning, everyone.
Speaker Change: <unk> on your quarter.
Speaker Change: I wanted to.
Looking at the page in your deck.
<unk> added quite a few.
Brands and channels et cetera over the past couple of years.
I wanted to just get a sense from you.
Are these entirely kind of acid free or when we say asset light that can be <unk>.
Speaker Change: Range of different things.
Speaker Change: <unk>.
Are these entirely incremental to revenues and profits is there some sort of key money or other kinds of investment expectation that comes along with them I'm just trying to sort of calibrate your earnings business as it grows going forward.
Yeah, so yes.
Speaker Change: Yes, there is key money that we deploy that is covered in the capex figures that you see in our in our reported figures.
Speaker Change: And.
Speaker Change: So we do make investments from time to time, and we also invest sometimes in the capital stack of hotels.
What you will not see or experience is guarantees we do have some but they are quite small.
So we don't have synthetic real estate exposure through leases.
Speaker Change: We're sort of allergic leases actually.
Speaker Change: And we don't have.
Well, that's leases or actual real estate exposure, we don't have instead of.
Speaker Change: Real estate exposure through guarantees.
It's not I'm, not saying, we have zero guarantees I am saying that theyre small.
Speaker Change: They are infrequent.
Speaker Change: As we have.
The aversion to operating guarantees as well so.
We don't.
We don't pretend that we are now asset light, while we were running around signing operating guarantees or synthetic leases to hide real estate exposure.
And with respect to the investments we have made whether it's key money or actually helping to fund a given hotel through a preferred interest or sometimes in equity interest, although thats very rare.
Speaker Change: Or occasionally.
Speaker Change: <unk> on debt repayment.
Speaker Change: They are all disclosed so they're already in our numbers.
Got it okay. Thank you very much.
Speaker Change: Sure.
Speaker Change: Our next question comes from the line of Patrick Scholes with <unk> Securities. Please go ahead.
Speaker Change: Yeah.
Mr. Patrick if Youre speaking you must be on mute because we can't hear you all right. There we go.
Patrick Scholes: Thank you good morning, everyone.
Going back a few questions.
Speaker Change: Concerning.
Speaker Change: Some older hotels.
Speaker Change: Out of the system.
Speaker Change: What I heard from that is that you folks could really use.
Upscale conversion brand.
Perhaps equivalent do something Mike Hilton Doubletree.
Speaker Change: Is that completely out of the question or might it be something that you would be contemplating introducing thank you.
Speaker Change: Look I learned a long time ago that you never say never it's not something that we have chosen to pursue to date.
As we look forward of course, we're looking at the total state of our of our.
Of our real estate, the real estate that underlies our portfolio.
So it is something that I think because of our relative.
Speaker Change: Uh huh.
Penetration of our distribution and because of the growth and the strength of our channels and direct channel.
Speaker Change: It's possible that we could craft something that would work for existing owners.
We don't want to do is do something that is going to be.
Speaker Change: A.
A detriment to either our brand reputation and serving the higher end guests in each segment.
And we also don't want to end up in a situation in which.
<unk> got something that is so.
That has a scrambled egg kind of.
Portfolio that you can't tell what youre going to get.
Speaker Change: No.
I think those are the sort of guardrails.
So I would say stay tuned.
We will continue to continue to monitor and discuss this but.
Speaker Change: Theres nothing that we.
We have done to date at least that would be in that category.
Speaker Change: And I would say converting.
Speaker Change: Hyatt regency's into.
Speaker Change: Hi places is not trivial in terms of capital to actually conformance to the brand standards or a hyatt.
Speaker Change: So it's not that we haven't done any of those but it's more typical for us to convert.
Eight hotels from other brands that are closer in carrier programming and size and shape of rooms into Hyatt places, which we have done.
Again, not trivial, but definitely possible so so.
Speaker Change: So yes, we were.
Our eyes are wide open.
Those other brands or other brand competitors have very large collections in those in those other brands that they convert into.
Including some in the upscale or lower upscale.
Speaker Change: Sorry.
Speaker Change: The mid scale or lower mid scale.
I don't see us going there.
It's not a market that we currently plan.
Speaker Change: Okay. Thank you and then follow up question.
Speaker Change: For you Joan.
And I apologize if you did.
Speaker Change: Quantify this earlier, but it sounded like there was some earnings impact from.
In the Caribbean for you folks from Hurricanes can you.
Can you give us what the EBITDA hit was then that'll be something too.
Help us going forward for for 2025, and we're thinking about modeling.
Up against or what that tailwind might be thank you.
Speaker Change: Sure in the third quarter, what I had mentioned is that we were down in the Americas for net package Revpar about.
Speaker Change: 4% and that was primarily related to the hurricane activity and that equates to for the quarter about $46 million of EBITDA.
Speaker Change: Okay.
Speaker Change: Alright this thing.
Speaker Change: Thanks.
Your next question comes from the line of Duane <unk> with Evercore ISI. Please go ahead.
Hey, good morning.
I wanted to ask you about your view of the optimal number of brands in your portfolio longer term.
Do you envision keeping everything that you currently have now or is there a streamlining opportunity within the existing portfolio and maybe the groups you referenced the new groups you referenced the lifestyle and the luxury groups.
Relate to those decisions and then I guess, just lastly, if you do see an opportunity to streamline.
What are the criteria, you think about to determine which of your brands wins. Thank you.
Sure first of all.
I hope [laughter].
Speaker Change: Our goal has been to add brands that have our brand equity and brand rationale unto themselves that are distinctly identifiable and can be can be described.
As offering a different type of experience than other brands that we already are so so far Lockwood I don't think we have overlapped in terms of buying a brand that is the substantive equivalent of an existing brand.
Having said that some are small and yet and still growing so we have a lot of.
Room to grow just within our current brand portfolio second we have collection brands JV by Hyatt as one example destination by Hyatt as another example, unbound collection is another example.
Where we have.
Brought some third party brands into those collections, there's a magnificent small boutique hotel brand in Scandinavia Coke story. The story hotels that are J D D by Hyatt's.
There is a magnificent small collection of very high end resorts in Europe called seven times that are part of the destination brand. So we have examples of other brands that we have brought into our collection brands and that is neither atypical nor something that we will stop doing.
Speaker Change: So there is.
Speaker Change: There are opportunities when we're working with mostly family or individual founders, who want to continue to grow their brand equity, but the affiliated.
So I think that's where the primary quote consolidation might look like.
Speaker Change: But right now.
In our business.
Because we have third party owners going to them and saying yeah.
Yes, you bought this brand from us and because you believed in it and now it's going to be converted into some other brand of ours doesn't typically work well.
So that's that in terms of our brand evolution of organizationally, Yes. Your point is well taken and the purpose of forming a lifestyle group and separately a luxury group is to hyperfocus on distinct customer groups that we're serving and two more.
With higher fidelity and more breadth and depth.
Personalize the experiences of those guests to our brands and to have much sharper definition of each brand one by each so that's the that's really the goal, but it's going to be broken down. So that you don't have.
When you when you approach Hyatt youre not going to have a cacophony of a laundry list of brands, you're kind of youre willing to see collections or groups that have logic four distinct customers and guests and thats really the purpose of doing the evolution that we're doing in our organization.
That's really interesting thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Our last question comes from the line of Brent <unk> with Barclays. Please go ahead.
Good morning, everybody. Thanks for squeezing me in here I, just mark just a clarification.
On the commentary on gross.
Speaker Change: Net unit growth.
You said, specifically that 6% growth excludes any conversion activity.
Speaker Change: But we know that.
Conversions are a big part of your growth. So I kind of took that at 6% growth ex sort of like big portfolio deal conversion deals.
I misspoke, if I've said that I misspoke I meant big portfolio deals not not conversions conversions like running the mill conversions one by each they are included in that number so I apologize if I said that.
No I'm really happy we've cleared it up and then because other people had a second question I'm going to throw an extra one here if you don't mind.
The first quarter pace that you gave for transient business looked really strong.
Just curious but that was a revenue number I was just curious if you could sort of suss out the pricing embedded in that and then tell us generally speaking how much alright.
Speaker Change: Alright.
Speaker Change: Occupancy at this point would even be booked for that period and the visibility implied in there.
Speaker Change: Okay.
I actually don't have a good handle on what the total occupancy that spoken for but.
It's not insignificant. This is not a this is not on the basis of 5% of the business booked for easier, especially in the all inclusive segment, which I'm more familiar with in terms of how about forward bookings work.
Speaker Change: And the ADR composition.
Speaker Change: I'm sorry.
Speaker Change: Okay.
Speaker Change: That meeting.
Speaker Change: Sure.
Adr's are flat. So it's mostly occupancy is what I'm getting from one of my team members here. So that's the answer on that one.
Speaker Change: Great. Thanks, everybody.
Speaker Change: Sure.
Speaker Change: I wanted to just close.
We didn't really talk about two things that I think are critically important the two businesses that we are now in one case have purchased and in another case, our 50% JV.
It'll be a 50% JV owner once we close our I will tell you that our partners and the and the colleagues that we are bringing into the Hyatt family.
<unk> aligned culturally at and values and I think this was the major wins that we had with ALG I think the culture work beautifully and my in my speech to all of those colleagues that became members of the Hyatt family was when culture works everything works it becomes easy because.
It's like fluid and when culture doesn't work as a zero sum game that sneaks in and it becomes a disaster I'm, telling you that I feel as strong if not stronger about the standard colleagues that are coming to join the Hyatt family as well as the Bayou principle.
Group, which is super professional they started this business 50 years ago Dawn Pablo Pineiro created an amazing business from scratch and his family is carried on that legacy beautifully and so I feel really strongly that this culture of care and the values that we share are going to position us.
For fantastic success going forward. So I. Thank you for your time of course, please come and experience that sense of care by visiting our properties. Please.
Speaker Change: And lastly, happy Halloween.
Speaker Change: This.
Today's conference call. Thank you for participating and have a wonderful day you may all disconnect.
Speaker Change: [music].