Q4 2024 Hyatt Hotels Corp Earnings Call
Well listen only mode.
At this time, all participants are in a listen-only mode. After the speaker's remarks, we'll have a question-and-answer session. To ask a question, please press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.
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 Investor Relations website under the financial section and in the small.
<unk> earnings release and.
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.
Percentage changes disclosed during the call are on a year over year basis, unless otherwise noted.
Mark: With that I'll now turn the call over to Mark.
Speaker Change: Thank you Adam good morning, everyone and thank you for joining us today.
Mark: Recent tragic events around the world, including the wildfires in the Los Angeles area and the plane crash in Washington D C and the other in Philadelphia have affected many of our communities.
Mark: Our hearts go out to those affected and I want to thank the high colleagues, who have cared for those in need during these difficult times.
Mark: I'd like to start today's call by touching on recent transaction activity.
Mark: On Monday of this week, we announced that we entered into an agreement to acquire all outstanding shares of Playa hotels <unk> resorts for.
Mark: For $13 50 per share or.
Mark: We're approximately $2 6 billion, including approximately $900 million of debt net of cash.
Mark: Hyatt is currently the beneficial owner of approximately nine 4%.
Mark: <unk> outstanding shares.
Mark: The pending acquisition provides an opportunity for higher to enter into long term management agreements for our luxury all inclusive Hyatt zebra and hides the Lora branded properties currently owned by Playa.
Mark: And to expand our distribution channels, including ALG vacations and unlimited vacation club.
Mark: We are well poised to drive value creation through complementary business segments and strengthen our existing all inclusive infrastructure in Mexico and the Caribbean.
Mark: We remain committed to our asset light business model and intend to identify third party buyers for players owned properties.
Mark: At closing, we expect to announce a new commitment to realize at least $2 billion of proceeds by the end of 2027.
Mark: This includes existing Hyatt assets.
Mark: And property is currently owned by Playa.
Mark: We expect our asset light earnings mix to exceed 90% on a pro forma basis in 2027.
Mark: At closing, we expect to fund, 100% of the acquisition with new debt financing.
Mark: And consistent with maintaining our investment grade profile, we expect to pay down over 80% of the new debt financing.
Mark: With anticipated proceeds from the asset sales I just mentioned.
Mark: We're very excited about the opportunity ahead of us and look forward to sharing more details once the transaction closes.
Mark: We also closed on the acquisition of standard international during the fourth quarter and finalized the 50% long term strategic joint venture with Grupo <unk> narrow to manage the Bahia principate hotels and resorts.
Mark: Additionally, we were active on the real estate front, selling Hyatt Regency O'hare in Chicago, along with our share in two joint ventures, The Park Hyatt, Los Cabos hotel and residences and the Hyatt centric downtown Nashville.
Mark: We retained long term management or franchise agreements for each property.
Mark: We're also actively engaged in other discussions and expect to sell additional owned properties in 2025.
Mark: Turning to growth our pipeline expanded to approximately 138000 rooms in the quarter, a new record for Hyatt and represents 9% growth when compared to the fourth quarter of 2023.
Mark: Our pipeline does not include the 7100 rooms for the Venetian resort Las Vegas, which joined the Hyatt system in early January of 2025.
Mark: We now have nearly 10000 rooms in Las Vegas that are part of world of Hyatt, including over 2500 rooms at the Rio Hotel and casino.
Mark: We achieved net rooms growth of seven 8% in 2020 for delivering industry, leading growth for the eighth consecutive year.
Mark: There were several notable openings in the fourth quarter, enhancing our luxury resort and lifestyle offerings. These.
Mark: These included Park Hyatt London River Thames.
Mark: Grand Hyatt Deer Valley.
Mark: Thompson pump Springs, and the addition of the standard and <unk> hotels.
We expect organic net rooms growth to meaningfully accelerate in 2025.
Mark: Reflected in the outlook that we provided this morning.
Mark: We kicked off the year in a big way with the addition of the Venetian resort in January and through the first 45 days of the year, we have already opened 9000 new rooms.
Mark: Now turning to operating results, our fourth quarter results reflect the strength of our brands as we achieved several records during the quarter.
Mark: This morning, we reported system wide revpar growth of 5% for the quarter and four 6% for the full year.
Mark: We continue to see high end consumers prioritizing travel as Revpar growth was strongest among our luxury brands in both the quarter and for the full year.
Mark: Leisure transient rooms revenue increased approximately 4% in the quarter and for the full year revenue increased approximately 1%.
Mark: Results were strong for resorts in the Americas over the festive period and.
Mark: And transient pace for the first quarter of 2025 is up in the high single digits compared to the first quarter of 2024.
Mark: Group rooms revenue was flat in the quarter and was up 5% when adjusting for the timing of the Jewish holidays in October in the U S elections in November.
Mark: Looking ahead 2025 group pace for the U S full service managed properties.
Mark: Is up 7% compared to 2024 with average rate accounting for over half of the increase.
Mark: We expect group contribution to be strong in the first quarter driven by the timing of Easter falling in April 2025, compared to March of 2024, and the presidential inauguration in D. C. In January.
Mark: Business transient customers remained our strongest growth segment delivering revenue growth of 10% in the quarter.
Mark: We continue to see our large corporate customers back on the road and we experienced an increase in both demand and average rate in the quarter.
Mark: Overall business transient revenue was up 12% for the year.
Mark: And this benefited major urban markets in the United States, including New York, Washington, D C and Seattle.
Mark: World of Hyatt continues to deliver remarkable results and has fueled our commercial success.
Mark: World of Hyatt membership reached a new record of approximately 54 million members at year end at 22% increase over last year.
Mark: Loyalty room night penetration during the quarter set a record high highlighting the engagement from our world of Hyatt members.
Mark: Spend on our co branded credit cards increased 18% in 2024 compared to 2023.
Mark: And our consumer card was the winner of the Kiplinger's Readers' Choice Award for the Best Hotel credit card.
Mark: Our focused effort to deliver more unique experiences for our guests more frequently and in more locations helps to position Hyatt as the brand of choice.
Speaker Change: Before I turn it over to Jim I'd like to spend a few minutes, reflecting on heights evolution to a brand led organization.
Speaker Change: When we launched world of Hyatt in 2017, we aspired to create a loyalty program that will build community and engage with high end travelers.
Jim: Hi, It was and is the foundation of our brand portfolio and we've deliberately expanded that portfolio to meet the needs of our existing customers and to attract new members.
Jim: While growing an award winning loyalty platform. We also took intentional steps to add brands that would complement our existing portfolio, while accelerating the growth of our existing brands.
Jim: We used customer insights to identify where and why our members wanted to travel and deliberately grew our portfolio of luxury resort and lifestyle hotels, while at the same time expanding into the upper Midscale segment.
Jim: Since 2017, we've doubled luxury rooms.
Jim: Triple resort rooms, and quintupled lifestyle rooms.
Jim: We also launched yaacov and height studios or upper mid scale brands.
Jim: At the same time, we embrace the power of a differentiated loyalty program.
Jim: By providing more benefits for our members when many loyalty programs, we're taking benefits away.
Jim: The relationship with our members as more than a transaction because when they say the hyatt they welcome us into their lives.
Jim: And we have always committed to carrying for them. So that they can be their best.
Jim: We also extended care by providing our members with more ways to experience Hyatt whether on property or through collaborations that extended the value of their membership.
Jim: While care is hard to measure.
Jim: We would know we were succeeding if our membership base and engagement at our hotels increased.
Jim: And.
Jim: On those measures we have been extremely successful.
Jim: Since 2017, we have grown our loyalty membership base on average by 27% per year.
Jim: And today, our members per hotel is significantly higher than our larger competitors.
Jim: And the next step of our journey begins with our new brand groupings.
Jim: Luxury lifestyle inclusive classics and essentials.
Jim: Our brand led organization allows us to further elevate the focus on our guests and customers that we serve in these brand groups.
Jim: We're using new tools that deliver bespoke insights that will drive greater customer preference for each brand group and more loyalty to Hyatt.
Jim: Even as we improve these abilities, we have the most white space and opportunities to grow compared to our major competitors.
Jim: We expect to continue to grow at a healthy pace with well defined brands and organic growth from our record pipeline to serve many more stay occasions for our guests.
Jim: Our growth in luxury and lifestyle.
Jim: Continued to be very intentional ensuring we protect ethos of each brand and to not just grow for the sake of growth.
Jim: We will continue to be a leader in the all inclusive space with an increasing level of powerful resources driving performance.
Jim: For <unk>. This means much more than just depending quote all inclusive unquote to the end of an existing brand.
Jim: It means providing a differentiated frictionless travel experience to vertically integrated channels like ALG vacations, and UBC, while delivering the best food and beverage and entertainment offerings in the category.
Jim: Our classics, which includes storied brands like.
Jim: Grand Hyatt and Hyatt Regency.
Jim: And our Essentials brand group, which includes our select service brands will drive scale for Hyatt.
Jim: We will focus on expanding our brand footprint.
Jim: We still have many more markets to serve especially among our essentials brands.
Jim: This includes our upper Midscale brands, which have great momentum with over 55 opened year Cove hotels, and our first Hyatt Studios hotel opening in the first quarter of this year.
Jim: We have over 120 upper mid scale hotels in the pipeline will fuel future growth.
Jim: This is a view to our future differentiated.
Jim: Differentiated offerings across distinctive brands.
Jim: A highly focused approach to leveraging our loyalty program and the insights that matter. The most as we serve high end travelers across more and more of their stay occasions.
Jim: We are committed to seeing our guests and customers as individuals and extending our purpose of care.
Jim: We will not use a lowest common denominator approach in any aspect of our business.
Jim: This leads to greater loyalty and share of wallet, among our members and customers at a higher average rate and at a lower cost of acquisition driving better returns for our owners.
Jim: Our owners realize the benefit of the Hyatt network and want to build more properties with us.
Jim: And that increases our brand footprint.
Jim: This provides more opportunities and more places for our members and guests driving further loyalty to Hyatt and better performance for our owners.
Jim: When you put this together.
Jim: We have the ability to generate significant fees per room, which increases our earnings margins and cash flow over time and serves as a powerful growth engine into the future.
Speaker Change: I'd like to close by expressing my gratitude to all Hyde colleagues, including the 15000, new colleagues from standard in Bahia P&C paying.
Speaker Change: Who live our purpose every day by carrying for each of our stakeholders.
Speaker Change: John will now provide more details on our operating results Joe over to you.
John: Thanks, Mark and good morning, everyone. During the fourth quarter system wide Revpar increased 5% led by increased business and leisure transient travel.
Joe: In the United States Revpar increased over 3%, our strongest quarter of growth in 2024, driven by business and leisure transient travel.
Joe: At par in the Americas, excluding the United States increased approximately 9% with business travel up over 15% in the quarter.
Joe: Our all inclusive properties in the Americas reported net package Revpar up 2% to last year and had a strong festive season.
Joe: In greater China, Revpar was flat to last year, a significant improvement from our third quarter results.
Joe: Domestic business transient travel benefited hotels in mainland China during the fourth quarter and we experienced similar trends in January of 2025.
Joe: Asia Pacific, Excluding greater China had another quarter of strong results with Revpar up approximately 12%.
Joe: Revpar in South Korea, Japan, and India increased by double digits compared to last year, driven by increased international inbound travel into these markets.
Joe: Europe finished an exceptionally strong year with revpar up 7% in the quarter leisure and business transient were the primary drivers as international inbound continues to positively impact operating results in Europe.
Joe: We reported gross fees in the quarter at $294 million up 17%, we set a record for the highest gross fees in the quarter driven by franchise and other fees, which increased 27% due to the contribution from UTC and revpar growth in the United States.
Joe: Base fees grew by 11%.
Joe: We'll buy managed revpar growth and fees from newly opened managed hotels.
Joe: Incentive fees were up 11% from strong contribution from all inclusive properties in the Americas and hotels and other international markets.
Joe: Owned and leased segment adjusted EBITDA increased by 5% when adjusted for the net impact of transactions.
Joe: <unk> for comparable hotels increased 70 basis points in the quarter and on a full year basis improved by 20 basis points compared to 2023.
Joe: Our hotel teams have demonstrated strong cost discipline and a focus on productivity improvements, which has led to expanded margins despite increases in non controllable costs.
Joe: And finally, our distribution segment adjusted EBITDA declined by approximately $4 million when excluding the EDC transaction lower than anticipated booking volumes and hurricane Milton contributed to the decline.
Joe: In total adjusted EBITDA was $255 million in the fourth quarter, an increase of approximately 20%, excluding the net impact of asset sales compared to last year.
Joe: For the full year 2024, we repurchased approximately $1 2 billion in shares and we've returned excess proceeds from asset sales to shareholders. We have approximately $1 billion remaining under our share repurchase authorization.
Joe: As of December 31, 2024, our balance sheet remains strong with total liquidity of approximately $2 9 billion.
Joe: Including approximately $1 $5 billion and capacity on our revolving credit facility and approximately $1 4 billion of.
Joe: Cash cash equivalents and short term investments.
Joe: During the quarter, we issued $600 million of senior notes and we intend to use a portion of those proceeds to repay our notes due in April 2025 on or before their maturity.
Joe: Now I'd like to cover our outlook for 2025, the full details can be found on page three of our earnings release.
Joe: As a reminder, our outlook does not include projections for acquisition or disposition activity beyond what has been completed as of today.
Joe: For the full year 2025, we expect full year system wide revpar growth to be in the range of 2% to 4% compared to 2024.
Joe: We expect Revpar in the United States to grow near the midpoint of our system wide outlook range, driven by strong group and business transient demand.
Joe: I'd expect to see a continuation of elevated levels of outbound international travel.
Joe: Our greater China visibility remained very short term, but as we have previously noted trends have begun to improve at this point, we expect to see international outbound travel trends in 2025 that looked like 2024. However, we expect domestic travel to improve throughout the year driven by business transient.
Joe: We anticipate our properties in Asia Pacific, Excluding greater China will have the strongest growth in revpar any of our geographic regions as they benefit from significant international inbound travel and favorable foreign exchange rates, especially compared with the U S. Dollar.
Joe: Well Europe is lapping very strong results in 2024, particularly in the second and third quarters from several large events, including the Olympics in Paris, we expect to see year over year Revpar growth at the lower end of our range.
We expect net rooms growth in the range of 6% to 7%.
Joe: Driven by an acceleration in our organic growth.
Joe: Our outlook does not incorporate small portfolio deals, which would be accretive to our current outlook.
Joe: Gross fees are expected to be in the range of one two to $1 billion to $3 billion, an 11% increase at the midpoint of our range compared to last year.
Joe: Outlook includes the addition of the standard international and via Principate transactions for the full year accounting for approximately one third of our fee growth.
Joe: Our outlook also incorporates fees from the Venetian resort Las Vegas, which joined the Hyatt system in January.
Joe: We earn fees based on the business that we deliver through our channels and expect fees to steadily increase over the coming years.
Adjusted G&A is expected to be in the range of $450 million to $460 million inclusive of G&A from the standard international and by our principal transactions.
Joe: Adjusted EBITDA is expected to be in the range of one one to one <unk>, one 5 billion, an 11% increase at the midpoint of our range compared to last year when adjusting for the impact of asset sales.
Joe: Our outlook incorporates the reduction of $80 million of owned and leased segment adjusted EBITDA from real estate that we sold in 2024. Please.
Joe: Please refer to slide 14 of the Investor presentation posted on our Investor Relations website. This morning for the quarterly impact of real estate dispositions in 2024 results.
Joe: For the distribution segment, we expect growth of approximately $5 million to $10 million compared to 2024 with most of the growth expected in the fourth quarter.
Joe: Adjusted free cash flow is expected to range from $450 million to $500 million.
Joe: Which excludes $150 million of deferred cash taxes expected to be paid in 2025 related to asset sales that took place in 2024.
Our capital allocation strategy remains consistent we are committed to our investment grade rating identifying opportunities to invest in growth that create value for our shareholders.
Joe: Paying a quarterly dividend and returning excess cash in the form of share repurchases.
Joe: We're not providing an outlook for capital returns to shareholders. At this time due to the pending transaction with Playa. However, we do expect to return capital to shareholders in 2025 beyond quarterly dividends, we will provide an update over the coming months as the transaction with Playa progresses.
Joe: Before closing I'd.
Joe: I'd like to highlight recent Revpar trends January started the year off strong driven by growth in leisure transient we see these trends continuing so far into February and with the shift of the timing of the holidays that Mark mentioned earlier, we expect for the first quarter to be at or above the high end of our full year guidance range as a reminder.
Joe: Our first quarter adjusted EBITDA results are expected to be negatively impacted by approximately $40 million due to the real estate dispositions completed in 2024.
Joe: In closing, our fourth quarter and full year results highlight the strength of our asset light business model over the past year, we have successfully executed our operational commercial and growth strategies, while simplifying and streamlining our business model and as we look ahead, we remain focused on operational X.
Joe: <unk> to continue to grow our core business, while our network is expected to be enhanced by strong organic growth in 2025, benefiting all stakeholders well into the future.
Joe: And this concludes our prepared remarks, and we're now happy to turn it over to the operator for Q&A.
Joe: As a reminder to ask a question. Please press star followed by one on your telephone keypad in the interest of time, we ask that you. Please limit yourself to one question and rejoin the queue for any additional questions. Thank you.
Speaker Change: Our first question comes from Ben Chaiken from Mizuho. Please go ahead. Your line is open.
Ben Chaiken: Hey, good morning, Thanks for taking my question.
Speaker Change: For my one question I would love the puts and takes on the.
Speaker Change: Doug I believe you mentioned mark in the prepared remarks that you expect to meaningfully accelerate in 2025 on an organic basis I guess any way, we can kind of unpack that.
Speaker Change: That comment and then I think last quarter. There was a conversation about elevated attrition is this largely behind us or is it still a variable that we're navigating thanks.
Speaker Change: Thanks Ben.
Speaker Change: Net rooms growth, we don't refer to it as nothing but net rooms growth outlook for this year is is materially better in the composition of it.
Speaker Change: As I've mentioned in my prepared remarks.
Speaker Change: We've opened 9000 rooms in the first six weeks of the not quite six weeks yet.
Speaker Change: The year.
Speaker Change: And that represents about 40% of our net rooms growth for the year.
Speaker Change: The pipeline openings are expected to be significantly higher than last year because a.
Speaker Change: A number of projects got pushed from last year into this year and a number of those are relatively larger hotels.
Speaker Change: And we're seeing a an outlook there'll be published that doesn't include portfolio transactions.
Speaker Change: We have.
Speaker Change: <unk> been very successful in conversions.
Speaker Change: In 2023, it was around 50% of our total net rooms growth last year about 30. This year are probably 40% to 50%.
Speaker Change: And I think I think the upside there is further upside for first of all we've got 40% already spoken for.
Speaker Change: And the further upside from potential portfolio deals are significant.
Speaker Change: The last thing I'll say is over 60% of all of our openings that we see coming out of the pipeline. This year are frontloaded in the first half of the year, that's very different than the profile. We had last year, which is why we had slippage.
Speaker Change: So I feel really good about where we stand and the conservatism of our outlook.
Speaker Change: Thank you I appreciate it it also I would only also just add one other thing and that is we have taken a very.
Speaker Change: I would say conservative and cautious approach.
Speaker Change: You may have seen a number of a number of people on the phone I'm sure it read that.
Speaker Change: An entity of the lender group in Germany, which is under a franchise.
Speaker Change: A number of their properties are under a franchise agreement with us.
Speaker Change: Under the Lindner brand not under the <unk> brand.
Speaker Change: File for insolvency.
Speaker Change: <unk> like a.
Speaker Change: More akin to chapter 11.
Speaker Change: Uh huh.
Speaker Change: Proceeding, but the the family and some third party.
Speaker Change: Appointees are working through that right now but.
Speaker Change: To be cautious and to be conservative, we've actually assumed within our net rooms growth outlook attrition associated with that.
Speaker Change: I think that's.
Speaker Change: A very conservative approach because the nature of these processes is to work out a.
Speaker Change: Go forward.
Speaker Change: The basis on which you can continue to operate and none of our none of the hotels are stopped operating at this point.
Speaker Change: I'm sorry, what's the size of that.
Speaker Change: It's pointed out somewhere else and tracking down.
Speaker Change: Yes, I think it's in excess of 2000 rooms.
Speaker Change: Thanks.
Speaker Change: Our next question comes from David Katz from Jefferies. Please go ahead. Your line is open.
David Katz: Thanks for all the detail on the follow up with respect to the guidance I wanted to ask about your Playa deal.
I don't know the degree to which you can shed some light, but it's come up in a number of conversations about it.
David Katz: With respect to the portfolio of brands like the strategy of buying it in the real estate and recycling I get it all.
David Katz: But there is a number of other brands within that portfolio, assuming there is some strategy for dealing with those other brands right. It's a bit unusual for what we see in that context.
David Katz: So we're really not going to be commenting on the planned transaction or the details of it beyond what's already been released and the 8-K filing issued earlier this week or in the earnings release, the focus of our attention is really.
David Katz: The expanded management platform the expansion of our distribution channels, namely ALG V ALG vacations and UBC.
David Katz: That will offer guests more seamless booking options and also more value.
David Katz: And were I think very well positioned to be able to.
David Katz: Drive more value creation to the properties and to the owners of the properties.
David Katz: And to.
David Katz: Hyatt.
David Katz: And to our guests through the complementary business segments and further optimizing our existing all inclusive infrastructure in Mexico and the Caribbean. So that's really the gist of what we're focused on.
David Katz: And beyond that we're not going to really go into any further details until <unk>.
David Katz: More things.
David Katz: Reveal themselves as we go through the process, which will take some months.
David Katz: Okay. Thank you.
Speaker Change: Our next question comes from Conor Cunningham from Melius Research. Please go ahead. Your line is open.
Conor Cunningham: Hi, everyone. Thank you I was curious just if you could talk a little bit about the appetite for further M&A, you've obviously been super active with your portfolio.
Conor Cunningham: Are things going to calm down this year and you, let things digest, a little bit and then in the past you've talked a lot about about about irreplaceable hotels like when you go through this next this next stop.
Conor Cunningham: Dispositions are are you do you still view those are irreplaceable going forward just trying to understand the changes in the portfolio.
Conor Cunningham: From here. Thank you.
Conor Cunningham: Sure.
Conor Cunningham: The short answer to your first question is yes things will definitely combat calmed down as you said.
Conor Cunningham: This was a somewhat unique opportunity with respect to Playa and.
Conor Cunningham: Otherwise, we feel really good about the brand portfolio that we currently have and we are focusing our attention on the optimization.
Conor Cunningham: It's part of the rationale behind the brand organization that I mentioned in my prepared remarks as to the portfolio.
Conor Cunningham: We do have a.
Conor Cunningham: <unk>.
Conor Cunningham: We do have a.
Conor Cunningham:
Conor Cunningham: A number really extremely high value assets in our portfolio.
Conor Cunningham: They they are basically irreplaceable it doesn't mean that they're not for sale.
Conor Cunningham: We don't have any hotels that I would consider to be off limits.
Conor Cunningham: We've got a number of hotels.
Conor Cunningham: That we are in discussions with we've got to.
Conor Cunningham: With respect to which we have <unk> at the moment.
Conor Cunningham: We've already talked about the the Hyatt at the grant at Grand Central Station in New York and also the Andaz in Liverpool Street.
Conor Cunningham: And we're working through those those two processes and yes, it's been a couple of years since we've been discussing it and it will take longer because there's they're very complicated, but they are very attractive.
Conor Cunningham: From a value perspective, and from a freeing up of capital and Capex.
Conor Cunningham: Obligations into the future.
Conor Cunningham: So we will continue to pursue those and in addition to those two we are also working on others at the moment. So we will continue to.
Conor Cunningham: To look towards further sales of existing assets in our portfolio.
Conor Cunningham: As we said very clearly by 2027.
Conor Cunningham: We vary it is an absolute.
Conor Cunningham: Sort of a plan.
Conor Cunningham: Our plan at this point, our expectation that we're going to get to 90% fee based earnings on a run rate basis.
Conor Cunningham: So that's the direction of travel and that.
Conor Cunningham: We said last year that you can expect to see US continue to look at further dispositions and that Hasnt changed.
Speaker Change: I appreciate it thank you.
Speaker Change: Our next question comes from Smedes Rose from Citi. Please go ahead. Your line is open.
Smedes Rose: Hi, Thank you.
Speaker Change: I wanted to ask just a little bit more I guess as you are.
Speaker Change: Enter a period now of expected another kind of round it real estate sales.
Speaker Change: I was hoping you could just kind of comment on the environment that you're seeing and maybe specifically and just kind of a way of supply, but just maybe speak to just the all inclusive market.
Speaker Change: Sales in general it's not an area that we've got a lot of information on but we do see some transactions and they seem like the buyer pool there its quite different from maybe a more traditional kind of legacy hotels that just kind of hoping you could just provide a little more color around how that could proceed and what's your willingness to provide seller.
Speaker Change: Financing as you look to sell down assets going forward. Thank you.
Speaker Change: Thanks for the question.
Speaker Change: <unk>.
Speaker Change: Does have our position through the <unk> acquisition.
Speaker Change: And our presence in the marketplace, we are doing business with the principal large investors in very high end all inclusive resorts. So we know the market.
Speaker Change: Very well, it's dominated by families both Spanish families in Mexican families and Dominican family, So not both all of.
Speaker Change: All of Mexico, Dominican and and Spanish so the so they are well known to us personal relationships with many of the family principles.
Speaker Change: And also those banks and other financial institutions, both in well in all three of those locales Spain.
Speaker Change: Mexico and Caribbean are also well known to us So we're in the market we understand.
Speaker Change: Who's doing what to whom what their strategies are and how they think about it. It is a market that's not yet institutionalized.
Speaker Change: In the same volume as you see in Europe in Europe, all inclusive resorts are largely owned by institutions.
Speaker Change: And we are at an inflection point.
Speaker Change: In the Americas.
Speaker Change: <unk> institutional capital, yes, including PEO capital R.
Speaker Change: Are now entering the market and there is a pretty simple reason.
Speaker Change: The model is very very attractive its more predictable higher margins higher free cash flow.
Speaker Change: And.
Speaker Change: The.
Speaker Change: The durability of the model has been proven and the yields are higher so for investors. So.
Speaker Change: There has been and there continues to be an increasing elevated level of inbound interest from institutional capital into the market. So we feel like we are at that inflection point, we've already had.
Speaker Change: A few transactions that aggregates are probably maybe just under $1 billion worth of assets that have been that have traded hands. It involved institutional capital from the United States and so we feel like the the ice has been.
Speaker Change: Broken so to speak and and we're optimistic.
Speaker Change: Domestic that we will see more and more investment.
Speaker Change: Investment in these kinds of assets going forward because they are so attractive.
Speaker Change: Alright, and then they sell the financing piece.
Speaker Change: I think you could put them in the fourth.
Speaker Change: Quarter, I think it's really premature for us to comment on anything related to potential asset sales at this point.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Stephen Grambling from Morgan Stanley. Please go ahead. Your line is open.
Stephen Grambling: Hi, Thank you I think you referenced an 18% increase in spend on the co brand credit card.
Stephen Grambling: I'm curious when was that contract last signed in.
Stephen Grambling: Do we think about an opportunity to drive incremental fees from this.
Stephen Grambling: Going forward.
Stephen Grambling: So we renewed that contract in 'twenty, one and it's a five year contract or a five year arrangement.
Stephen Grambling: So we are actively engaged in.
Stephen Grambling: And looking at alternatives as we look forward.
Stephen Grambling: And is there any kind of rhyme or reason in terms of how those typically get set up for how you would think about characterizing the business now versus 2021 in terms of what is beneficial towards a co brand partner.
Stephen Grambling: Yeah, a couple of things one we've doubled the number of members over the last four years second.
Stephen Grambling: We are told we don't have data to prove this ourselves that we have the highest spend per card holder of any hotel co branded credit card.
Stephen Grambling: Third.
Stephen Grambling: Our customer base is a customer base that is at a higher level of household income and household net worth.
Stephen Grambling: So it stands to reason that they are more durable.
Stephen Grambling: Spenders.
Stephen Grambling: So I think we have a very attractive.
Stephen Grambling: Member base that is now twice as large as.
It was when we did our deal that's underway right now and we've continued to add.
Stephen Grambling: Significantly to our luxury and our lifestyle and our resort portfolio, meaning we have many more aspirational hotels in great.
Stephen Grambling: Vince that clientele would like to travel to and I mentioned in my prepared remarks that our luxury brands had the highest revpar growth in the quarter and for the year and that should not be lost on anyone in terms of the differentiation of our customer base. So I think all of that is the network effect, that's part of the network effect of.
Stephen Grambling: Why.
Stephen Grambling: Card membership and and <unk> activity.
Stephen Grambling: Is higher and should be reflected in any future arrangement that we make.
Stephen Grambling: Helpful. Thank you.
Speaker Change: Our next question comes from Chad Beynon from Macquarie Group. Please go ahead. Your line is open.
Chad Beynon: Hi, good morning, Thanks for taking my question.
Speaker Change: Mark you noted some of the stats in terms of the.
Chad Beynon: Net unit growth.
Chad Beynon: <unk>, particularly in the first half of the year, but I wanted to dive into that a little bit deeper mainly related to the 50% of your pipeline, which is in the Asia Pac region, which has had some more delays than other part of parts of the developed markets. So.
Chad Beynon: Is it fair to say that the growth that youre seeing or the confidence that you have in the net unit growth kind.
Kind of highlights.
Chad Beynon: Construction starts and just openings in that part of the World and then more importantly, as we look forward to have those construction starts picked up and that gives you more confidence as we look out beyond 25 with net unit growth. Thanks.
Chad Beynon: Yeah, So I think.
Chad Beynon: Construction.
Chad Beynon: A portion of the portfolio that's under construction pipeline that's under construction is about.
Chad Beynon: About flat quarter over quarter.
Chad Beynon: And so we see a steady.
Chad Beynon: Maintenance of that.
Chad Beynon: Level.
Chad Beynon: And we expect to see that at least maintained itself is not if not improve over the course of this year.
Chad Beynon: I think the two things are happening one is we will have our first Hyatt studios opened in the first quarter.
Chad Beynon: Yeah.
In that particular market seeing is believing and so there's some element of of momentum that we believe will come out of being the first one out of the ground the year Cove.
Chad Beynon: Activity has been extremely high and that's that's our Chinese upper mid scale brand.
Chad Beynon: And those are conversions.
Chad Beynon: Adaptive reuse basically and those happen in very short periods of time.
Chad Beynon: From the time that.
Chad Beynon: Our leases signed where we're not the lessee, but.
Chad Beynon: From the time that the leases signed in our management agreement is signed it takes roughly nine or 10 months to open the hotel from.
Chad Beynon: From scratch.
Chad Beynon: So that tends to be.
Chad Beynon: Our high throughput and.
Chad Beynon: And short term.
Chad Beynon: Cycle time.
Chad Beynon: And we are.
Chad Beynon: We are optimistic actually with respect to what we're seeing in Asia at this point for openings.
Chad Beynon: <unk> I think.
Chad Beynon: Across the board, we feel more and more constructive about openings over the course of this year and I think that.
Chad Beynon: We're headed towards the <unk>.
Chad Beynon: Better than maybe more balanced approach to.
Chad Beynon: Promoting organic growth and realizing it.
Speaker Change: Okay. Thank you and then secondly, just on the owned portfolio I can see in the <unk>.
Speaker Change: Release, the impact John you mentioned $80 million from an EBITDA standpoint, and the revenues are in here as well, but as we think about the margins for or change in the outlook of margins for the owned portfolio 25 versus 24 should we expect anything to be outside of the range that you've previously.
Speaker Change: Provided for us thank you.
Speaker Change: We've been consistently guiding to the fact that the.
Speaker Change: The efforts that we've undertaken to look where we can with respect to productivity improvements and managing controllable costs has yielded.
Speaker Change: Great returns and with an eye towards making sure that we're preserving customer service.
Speaker Change: Our expectations from our guests so.
Speaker Change: We are we are managing margins to be incrementally positive year over year and what you see is the portfolio structurally has changed with the asset sales. So our expectation is that we continue to deliver at.
Speaker Change: At least flat to incremental margins going forward. Despite the fact that we've got some.
Speaker Change: The uncontrollable expenses that we're facing with respect to insurance costs and some wage inflation in some markets. So we're managing that well and and continue to expect that our margins will expand.
Speaker Change: And if I could just add quickly.
Speaker Change: I think for clarity.
Speaker Change: We did make a note below the table at the top of page two of our earnings release about the adjusted EBITDA increase in the fourth quarter of 2024, excluding asset sales. We then put two pages in the investor deck.
Which are pages 13 and 14.
Speaker Change: Age 13.
Speaker Change: Demonstrates.
Speaker Change: The adjusted EBITDA growth without that.
Speaker Change: Sorry, taking into account asset sales and page 14 to provide all the information that should be needed.
Speaker Change: To really understand this it's broken down by quarter.
Speaker Change: So I know that there may have been some.
Speaker Change: Mrs in terms of picking up the information.
Speaker Change: So I just wanted to clarify that yeah. Those are those extra slides were prevented.
Speaker Change: Presented for your benefit because we've observed that some models are not picking up the distribution or the dispositions of assets and the resulting EBITDA.
Speaker Change: That is.
Speaker Change: Boston associated with those disposition exactly.
Speaker Change: That's helpful. Thanks for the additional disclosure I appreciate it.
Speaker Change: Sure.
Speaker Change: Our next question comes from Brad <unk> from Barclays. Please go ahead. Your line is open.
Speaker Change: Good morning, everybody. Thanks for taking my question. So one of your peers.
Speaker Change: Kind of gave a.
Speaker Change: And outlook on IMF that was a little more a little downbeat, just given China uncertainty, but they had they had also had some other things going on in everyone's obviously your portfolio is different when it comes out and I was wondering if John if you could give us.
Speaker Change: Some of your sense on how IMF.
Speaker Change: So to come in this year or how you are feeling about it at least given the sort of China uncertainty and especially the <unk> tough comps you Havent China.
Speaker Change: Sure.
Speaker Change: The revpar growth.
Speaker Change: That.
Speaker Change: We're providing the outlook for 2025 is healthy across all.
Speaker Change: All markets and it's it's it's strong considering that we've had.
Speaker Change: Some a little bit tougher comps in 2024, but as we look to international markets still healthy growth, we're expecting and I pointed out what we expect in Asia Pacific, Excluding greater China. So those markets deliver a strong incentive fee growth and we expect a strong.
Speaker Change: Contribution from those markets. This year when you maybe just taking a step back on your question too when you look at our fee growth outlook.
Speaker Change: And you consider the midpoint of that range, it's a healthy range and a little less than a third of it is related to the acquisitions that we made in the fourth quarter.
Speaker Change: So.
Speaker Change: It's still a healthy growth rate in the high single digits at the core.
Speaker Change: Our fees related to Revpar and net rooms growth so.
Speaker Change: Across all of our line items base incentive and franchise and other fees, we're seeing healthy growth across the board in 2025 that we expect and just one last thing I'd point out is part of our net.
Speaker Change: Net rooms growth is the.
Speaker Change: The Venetian and the Venetian is a couple of hundred basis points of that net rooms growth and that property in particular, we're earning fees on the business that we deliver and it's it's a little dilutive to our to our algo to our to our fee algo, but we're seeing really great.
Speaker Change: Early results coming out of the business that we're delivering and just 45 days. So we expect that those fees will be contributing in 2025, and we will continue to grow into the future. So overall, we feel really good about the fee growth into 2025.
Speaker Change: Helpful. Thank you for that just to make sure I understand those are in Asia fees will flow through the franchise and other bucket correct.
Speaker Change: That is correct okay.
Speaker Change: Okay. Thanks, everybody.
Speaker Change: Our next question comes from Alex <unk> from Redburn Atlantic. Please go ahead. Your line is open.
Speaker Change: Okay.
Alex: Alright. Thank you so much for taking the question.
Alex: It really relates to the last point that you made on on the nation, obviously point taken on the contribution that has to the wider brand value.
Alex: I guess my question is how that ties into.
Alex: Underlying.
Alex: Room growth, obviously, that's a relatively large component of the guidance that you've given.
Alex: Yes.
Alex: And I Wonder if we look into outer years, how we should think about the contribution of <unk>.
Alex: Incremental deals within your expectations for growth.
Alex: And whether they are likely to be.
Alex: <unk> kept to fees as the basin is.
Alex: Thank you.
Alex: Sure so deep.
Speaker Change: We look at every single portfolio deal or individual assets.
Speaker Change: There is we obviously underwrite new deals.
Speaker Change: Every single deal that that.
Speaker Change: Buyers.
Speaker Change: And on a portfolio basis, but we look across those individual deals and the fees per room that they contribute and so overall, we've got higher fees per room across the industry because of the quality of our contracts and the quality of our assets frankly in our performance.
Speaker Change: So it's important to point out yes, the Venetian has fees that per the contract are contributing based on the amount of business that we provide so it's a little bit lower than.
Speaker Change: Our overall fees per room, and then the I'd point out that another big transaction that we did the buyer principate deal has fees per room that are above on a stabilized basis.
Speaker Change: Our averages. So this all averages out and we are constantly looking at our fees per room to make sure we're still delivering that quality value overall for the portfolio as we look at different portfolio deals whether organic or inorganic growth.
Speaker Change: And.
Speaker Change: It is providing great great interests and is attractive to a world of Hyatt members and our corporate customers because our group sales system is engaging with them.
Speaker Change: Both of the Venetian and the Rio in Vegas, but it's a unique deal.
Speaker Change: And an exciting one that was fantastic.
Speaker Change: I guess as a quick follow up I might ask in terms of the comment you made on an acceleration in underlying unit growth. If I kind of just look at the signings trajectory. It looks relatively similar on an underlying basis ex some of these bolt ons, but 24 relative to 'twenty three I may have done just.
Speaker Change: Terrible maths on that said, David excuse me if I have so.
Speaker Change: So how would is in terms of the underlying net unit growth accelerating.
Speaker Change: What would be the fairway to think about it for outer years.
Speaker Change: After this I said it should it be kind of the underlying growth that you've done ex the bolt ons and then we think about more bolt ons or should that number grow exclusive of anything incremental that you would bolt on.
Speaker Change: The latter.
We are really what's happening.
Speaker Change: Happening is we're seeing signings maintain and have further momentum we've got a new new upper mid scale brand introductions that I think will drive a lot more signings in this year. So I think the signings basis is going to be continue to be strong, but also the openings out of our pipeline will continue.
Speaker Change: To expand last year was a was a unusual year for openings out of the pipeline unusually low.
Speaker Change: Part of that was hotels they got pushed.
Speaker Change: So I think we're at a point, where we have.
Speaker Change: I think more both more visibility in the near term and also more confidence that we're going to see the mix change it will be increasingly organic.
Speaker Change: And the top up as you described it or the or the AD the increment will come from portfolio transactions.
Speaker Change: That's hugely helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Michael Bellisario from Baird. Please go ahead. Your line is open.
Speaker Change: Thank you good morning, everyone.
Speaker Change: Just on this lindner uncertainty inherent opportunity for you to invest there maybe by the brand or the real estate just trying to think about alternative potential outcomes and also just a quick follow up on FX. What impact are you assuming in your EBITDA outlook for 'twenty five thank you.
Speaker Change: On the on the first one I think there are many options that will reveal themselves.
Speaker Change: Not in control of the situation, but we are very closely tied to.
Speaker Change: The family members and advisors that are working on it. So yes. What you described are in the realm of possibility.
Speaker Change: And you can imagine we are inventive and.
Speaker Change: I have a lot of history in.
Speaker Change: Identifying great.
Speaker Change: Real estate partners, but also.
Speaker Change:
Speaker Change: So.
Speaker Change: I would say the spoke structures that will allow us to.
Speaker Change: Play a part but that remains to be seen and with respect to the FX.
Speaker Change: And I'll leave it to John and.
Speaker Change: Michael the FX impacts for US are expected into 2025 is really incrementally positive as we look at them.
Speaker Change: Our results and the expectations or our outlook in Mexico and in other markets around and around the world. There is a little bit of an impact, but it is really not material to our overall outlook nothing to call out with respect to our fee expectations related to Opex at this point.
Speaker Change: Understood. Thank you.
Speaker Change: Sure.
Speaker Change: Our next question comes from Duane <unk> from Evercore ISI. Please go ahead. Your line is open.
Speaker Change: Yeah, Hi, this is Peter on for Duane.
Speaker Change: Thanks for taking the question. So you mentioned BT was up 10% in the fourth quarter leisure looks strong as well group is flat and I know there are some calendar shift noise in there, but could you just expand on your broad expectations for each of those demand segments and how they fit into the 2% to 4% Revpar guide for.
For 2025, thank you.
Speaker Change: Sure absolutely right you picked up all of those metrics from our prepared remarks and as we look ahead.
Speaker Change: Group is really been strong we ended the year with record production levels.
Speaker Change: <unk> into for all periods in the future. So we're looking at a 7% group pace in the U S. In 2025, which which is a really strong position to be in and that's coming from both rate and and demand occupancy. So we're that that growth is.
Speaker Change: <unk> continues to be healthy and the business transient side, we're seeing momentum as well going into the.
Speaker Change: The first quarter January was off to a good start and and leisure has been very strong as well.
Speaker Change: In the start of the year going into the quarter. So I would say overall, it's a continuation of trends with with grouping really helped healthy business being continuing the momentum and leisure sustaining.
Speaker Change: Yes, I would just point out two things that might be useful. Additionally.
Speaker Change: Corporate.
Speaker Change: Group has been growing at a much higher rate than association and part of that is rate driven which is why we're seeing rates continue to expand and that's true for what we realized in 2024, but also with our outlook and pace looks like into 2025, and secondly, I'm really encouraged to see.
Speaker Change: <unk> that we've got relatively balanced I mean, the two sectors on the BT side, the business transient side, ITM banking and finance.
Speaker Change: Are up over 20% in 2024 versus 2023, but we also have consulting in pharma that are also in the double digits. So it's not like one sector is blowing the doors off and everything else is flat or down it's actually relatively well spread in these sectors are our top sectors and they are also.
The biggest travel centers, so the breadth of the market. So to speak if you want to put it in in stock market terms is really healthy and very exciting to see our large corporate clientele, which is really our core base of BT.
Speaker Change: Back on the road in significant measure.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Richard Clarke from Bernstein. Please go ahead. Your line is open.
Richard Clarke: Alright, Thanks, taking my question good morning, guys.
Richard Clarke: Capital markets day in 2023.
Richard Clarke: You said in 2025, you'd be doing $1 2 billion of EBITDA and that would translate into $750 million of free cash flow you, obviously lost a bit of EBITDA due to the disposals.
Richard Clarke: Nearly $300 million about free cash flow I'm, just trying to understand that bridge.
Richard Clarke: Is that 750 million number may be a number we can expect in 2026 is that coming back.
Richard Clarke: Thanks Richard.
Speaker Change: There's a couple of drivers.
Speaker Change: Between what we presented at Investor Day, and where we are now for 2025 and you pointed out a very important one which is we accelerated asset sales beyond what we anticipated back in 2023. So that's a that's a big driver of the change.
Speaker Change: Another driver is the Revpar ranges that we provided clearly we were emerging from.
Speaker Change: The pandemic and we provided a pretty wide range is 3% to 7% and so where we've come in in the last two years that compounded growth rate since 2023, while in 2023 with a little bit better than we had provided.
Speaker Change: Provided at Investor Day, 24, and what we're seeing for 2005 is towards the lower end of the range. So those two are on our.
Speaker Change: Our meaningful components of the difference.
Speaker Change: And then there is a couple that I would just point out with respect to our interest expense expectations.
Speaker Change: We've taken out a little bit more debt than we anticipated back at Investor day.
Speaker Change: Feel really good about our execution in the capital and the debt capital markets. So we're getting our new debt at.
Speaker Change: Very very good rates, and but a little bit higher than what we had anticipated and then finally.
Well, our Capex is coming down significantly it's not quite at the levels that we had anticipated at Investor day for two major regions regions, we're providing them.
Speaker Change: Some incremental investments towards some important strategic technology them.
Speaker Change: Both in our <unk> business.
Speaker Change: And in our in our management business, so that theres, a little bit of Capex related to those investments and then we're making a couple of strategic investments into our own portfolio really to position assets through.
Speaker Change: The building systems work and some ROI projects. So those are the four items that that bridge, you, which is the sole EBITDA.
Speaker Change: Lower revpar expectations, a little higher interest expense, a little higher Capex, we do anticipate that our free cash flow will be increasing our asset light mix in 'twenty five is over 80%. So it's going to continue to grow and we'll keep you posted with respect to the specific number as we proceed.
Speaker Change: Through this year and look at 2026.
Speaker Change: Yes, I would just add one quick thing on the point that John made about the investment incremental investment in some of our assets, it's really designed to optimize and maximize the potential on sale.
Speaker Change: And for some other investments in relation to existing third party owned assets.
Speaker Change: Four.
Speaker Change: Returned four.
Speaker Change: Enhanced.
Speaker Change: Management agreement.
Speaker Change: Terms.
Speaker Change: We've also provided some support that we previously reported on with some of our major retail owners. So those are the things that are I think having a.
Speaker Change: Short term, but not a continuous it's not a run rate issue.
Speaker Change: <unk> on our cash flow this year.
Speaker Change: Understood. Thank you guys.
Speaker Change: Our last question will come from Patrick Scholes from tourist Securities. Please go ahead. Your line is open.
Patrick Scholes: Hi, good morning.
Patrick Scholes: Most of my questions been asked but I wonder if we can just step back a little bit and talk about the fourth quarter.
Patrick Scholes: Quite a few of the high level kpis that far package revpar above expectations, yet EBITDA guide.
Patrick Scholes: Missed guidance only thing I heard in the prepared remarks might've been from Hurricanes made the timing of asset sales.
Patrick Scholes: It looks like at least versus my numbers and some others.
Patrick Scholes: Distribution.
Patrick Scholes: Which could have been from the hurricane.
Patrick Scholes: Other revenues and G&A expenses can you just talk about what's that.
Patrick Scholes: In your view drove the earnings Miss Thank you.
Patrick Scholes: Sure Patrick you hit on the points I would I would just highlight we had some onetime G&A costs bad debt reserves that we decided to take in the fourth quarter. When you consider our outlook for next year for 25 in relation to G&A got very modest growth rate when you.
Patrick Scholes: Sidor inflation and adding.
Patrick Scholes: Some standard G&A and by our principal G&A. So those amounts are one time in 2024 with a choice that we decided to make at the end of the fourth quarter and yes. The distribution business was it was a bit lower that was onetime events from the hurricane was partially contributing to that and then some lower bookings that we saw.
Patrick Scholes: Our business has been healthy in net package revpar, but some of the lower chain scales that the ALG vacations, a distribution business serves.
Patrick Scholes: We're a little bit lower than we had anticipated. So those are the main two drivers of the EBITDA Miss because we had really terrific fee growth in the quarter that was frankly ahead of our expectations and.
Patrick Scholes: As a result of really strong demand that we're seeing globally.
Speaker Change: Okay I'll just follow up on the LG vacation bookings is that going to flow through to this year at all in your numbers and what has been the.
Speaker Change: The trend so far this year with those Oh Gee this is Scott.
Speaker Change: Thank you.
Speaker Change: Yeah, it's it's it's a little bit better, but I would anticipate for modeling purposes.
Speaker Change: Flat to incrementally positive in 2025 as part of our EBITDA outlook for.
Speaker Change: For the distribution segment.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Speaker Change: So thank you all for your time. This morning, we appreciate your interest in Hyatt and look forward to welcome you to our hotels and resorts. So you can experience the power of our care firsthand.
Speaker Change: Wish you a great day ahead.
Speaker Change: This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: [music].