Hyatt Hotels Corp

Good day and thank you for standing by and welcome to the Hyatt first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Noah Hoppe. Please go ahead, sir.

Thank you, Polly. Good morning, everyone, and thank you for joining us for Hyatt's first quarter 2021 earnings conference call. Joining me on today's call are Mark Hoplamazian, Hyatt's president and chief executive officer, and Joan Botterini, Hyatt's chief financial officer. Before we get started, I'd 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 our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday, along with 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.com, under the financial reporting section of our investor relations link, and in yesterday's earnings release. An archive of this call will be available on our website for 90 days. With that, I'll turn the call over to Mark.

Good morning, everyone, and thank you for joining us for our first quarter 2021 earnings call. And before I get started, I want to take a moment to congratulate Noah, who you just heard from, on his newly assumed extended position to include all investor relations in addition to financial planning and analysis. Noah has been an essential partner in our investor relation effort, and now he's formally at the head of that. So, Noah, congratulations. Thank you so much. And you'll all get to know him very well in the coming months. I want to begin today by acknowledging what a difficult period it's been since the onset of COVID-19. This global pandemic has impacted all of us in profound ways, both personally and professionally. We still see an elevated level of travel restrictions in various parts of the world as a result of new COVID-19 cases which remain uncomfortably high, especially in areas such as India and South America. Our heart goes out to those being impacted in these hard hit areas during this incredibly challenging period. Even in view of elevated cases, we are optimistic and believe that the road to recovery continues to become clearer and our role in that recovery is inspiring and energizing. The pent up demand for travel is immense and with the number of fully vaccinated potential travelers growing by the millions each day, we feel we're at the beginning of a growing level of demand for our hotels. Personally, I can't express how refreshing it is to see people who are now able to safely visit a loved one or travel to a location they've been putting off for far too long, or to see business travelers who can once again connect in person with colleagues and customers, or to hear from a growing chorus of larger groups who are ready to convene again in our hotels. The environment remains dynamic, But the desire to travel and connect has not abated. We remain focused on evolving with the changing needs and expectations of travelers today. We're listening to our guests and customers and learning how to support travel uniquely in individual markets in every geography around the globe. Our commitment is to make that first and long-awaited trip an experience that our guests can feel confident about. We spent considerable time since the onset of the pandemic planning and positioning Hyatt for this moment and the path ahead. I will give you an update on our business, and I plan to share updates on several key initiatives that are focused on the future for both our transient and group guests. I also plan to share details around our continued growth trajectory. I can confidently say that this is the most optimistic I've been since the onset of this pandemic. Let's first focus on the latest trends we're seeing. While COVID-19 continues to materially impact our business, and while results vary widely by country and by purpose of visit, I'm encouraged by the sequential uptick in demand that coincides with improved travel sentiment and widening vaccine availability. Our first quarter system-wide REVPAR declined 49% versus last year, but results varied significantly by month, with REVPAR in March finishing 54% higher than January, roughly double the rate of growth we typically experience over this timeframe in a stabilized environment. Occupancy during the first part of the quarter largely mirrored trends in the fourth quarter of last year, but we started to see elevated levels of leisure demand in February, followed by a pronounced improvement in March driven by spring break in the United States and the easing of travel restrictions in China. While several weeks do not make a trend, we feel the spring break period in the United States provides a preview of pent-up demand for travel, which we anticipate will drive performance through our traditionally heavier leisure period in late quarter two and into quarter three. During the latter half of March, leisure transient room nights for comparable hotels surpassed levels during the same period in 2019. This was primarily driven by our resort locations, but we also experienced improvement in urban and suburban locations as well. occupancy at our resorts in the continental United States approached 70% over a seven-day stretch in late March, with significant average rate growth of 15% over 2019 levels during the same timeframe. In fact, for the full month of March, our resorts in the United States experienced an increase in average rate of approximately 4% versus 2019 levels for comparable hotels. The acceleration of transient bookings for future dates also reinforces our optimism. We experienced the jump in transient bookings of over 50% for our system-wide hotels in March, as compared to February, driven by significant demand for our leisure-oriented properties. Globally, transient revenue at our resorts is now pacing 20% ahead of 2019 levels over the back half of the year. Leisure transient rooms revenue accounted for approximately 45% of our total revenue base for the full year of 2019, and more recently at 67% in Q1 of 2021. And we're confident that our brands are well-positioned to outperform in this segment as the recovery unfolds. While leisure transient trends are encouraging, we are fully aware that group and business transient demand needs to improve meaningfully to reach a full REVPAR recovery. Despite rooms revenue from these segments being just over 20% of 2019 levels in March, we remain optimistic. Business transient has shown steady week-over-week improvement since January and continues to grow through April. While visibility remains low, we're encouraged to see future bookings for business transient guests improve to approximately 35% of 2019 levels in recent weeks. Conversations with several of our top corporate clients suggest that we will continue to see moderate progress in the near term with a more pronounced uptick expected in the fall. On the group side, bookings are also headed in the right direction. New group business booked in Q1 for all future periods finished up 55% as compared to Q4 of 2020. Further, we crossed a notable inflection point in April when net group production in the month for the year was approximately $8 million, meaning gross group revenue booked was in excess of all cancellations and reduced projections for attendees over the remainder of the year. We're also encouraged by the number of group leads we're receiving, which are up maturely since January and gaining momentum. We're seeing increased interest from the pharma, information technology, and banking and finance segments. It's also notable that larger in-person corporate and association events are occurring as early as June, and we're seeing a growing number of citywide events confirming for the fall. All of this positive activity provides optimism that these segments will continue to strengthen as more of the population is fully vaccinated and travel restrictions are lifted. As we think about the pace of recovery, China continues to serve as an interesting case study for what may occur in other areas as COVID-19 disruption subsides. We noted in our last earnings call that we anticipated the recovery in China to be swift Once travel restrictions were eased, this is precisely what we experienced, with occupancy in mainland China falling to the mid-30% range during the middle of February, followed by a sharp rebound throughout March, and reaching a fully recovered level of over 70% in April. Importantly, RevCar has more than 90% recovered, as rates are within 10% of 2019 levels, despite virtually no higher-rated international inbound travel into China. In summary, all these data points fuel our optimism. And it is also true that this recovery will not be linear or evenly distributed. Case counts remain high in certain parts of the world, and the pace of vaccine distribution is uneven. What we do know is the desire to travel and connect is fundamental, and there is clear positive change in the mindset of travelers after vaccination. And we remain agile and ready to adapt as our guests return to our hotels. Speaking of agility, I'd like to provide a brief update on three key initiatives that are responsive to shifting needs for our transient and group customers, putting us in a position to meet the needs of travelers returning to our hotels. First, with heightened guest awareness around cleanliness and survey data that shows strong cleaning and sanitization practices improve a guest's likelihood to travel, I'm pleased with all we've accomplished through our global care and cleanliness commitment. As part of this commitment, nearly all of our operating hotels globally have received an independent accreditation through the Global BioRisk Advisory Council. focused on comprehensive processes for cleaning disinfection and infectious disease prevention additionally each hotel has a trained hygiene and well-being leader responsible for the team's adherence to protocols and training all of this provides assurance and inspires confidence in hyatt's unwavering commitment to providing a clean and safe environment for our colleagues and our guests second On our fourth quarter conference call, I mentioned our work on a hybrid meetings solution. I'm excited to update you on our new meetings and advanced platform called Together by Hyatt. This is not just a hybrid solution, but a holistic approach to delivering on the essential benefits of an in-person meeting while allowing meetings to be more inclusive than ever before by expanding participation to those who can only attend remotely. We know our customers are at different points on their journey to return to events, and Together by Hyatt is designed to provide support at every step of the way. After extensive research, we're proud to announce we're teaming up with Swapcard to develop a robust and innovative integration of their platform with our proprietary meeting tools, one that will simplify event planning and execution and unify in-person and virtual attendee experiences. To further support hybrid formats, we've introduced a dedicated team of hybrid event experts who bring deep-rooted experience in technology and events to Hyatt and will assist meeting planners with exploring hybrid options and execution. Alongside these experts, planners will also have a dedicated support squad during the event to assist virtual speakers and attendees. Further, we know well-being is top of mind for many right now, and we've incorporated the expertise of our wellness brand, Miraval, as well as Headspace, into Together by Hyatt offerings, providing planners with a unique opportunity to care for attendees' well-being during events. Long term, we believe hybrid formats provide an opportunity for events to be more inclusive than ever before, and we look forward to collaborating with our customers on the path forward to create the most meaningful experiences possible. And third, we've accelerated our development of and rapidly deployed a set of digital capabilities that provide guests the ability to manage contact to a customizable level of comfort. For example, our digital check-in experience is unique in our space as it not only supports guests of ours who are not members of World of Hyatt, but among the members we serve, it recognizes their tier status and notifies elite members when they've been upgraded. Digital check-in also gives these members options for other room types that are available if immediate check-in is important to them. Additionally, we're providing flexibility around guest and member housekeeping preferences. If guests prefer not to have housekeeping in their room, our digital platform makes this a simple request by way of our app. And for elite tier members, there's additional flexibility to choose between morning and afternoon housekeeping to fit their schedule and preference. It's an example of leaning into our digital platforms to personalize the guest experience and we will continue to build on it in the coming months to offer more purpose-suited solutions. These are just a few of the many initiatives that we have underway that respond to how the world is changing. We will remain agile and continue to put health, safety, and care at the heart of our hospitality as we welcome more and more guests back to our hotel. Turning to growth, We achieved a noteworthy milestone in Q1. We opened our 1,000th hotel, the magnificent Alila Napa Valley in St. Helena, California. This is an impressive milestone in our growth, as we've more than doubled the number of hotels and brands in a span of about eight years. We continue to grow at an industry-leading rate, with net rooms growth of 6.5% in Q1. Conversions continue to serve as a meaningful catalyst, with three properties converted from other brands in Q1. Two of these conversions were into brands that more recently joined our portfolio from our TruWords acquisition, namely JDV by Hyatt and Alila. The pace of openings has been especially swift over the past three quarters, with just over 15,000 rooms entering our system during that time and consequently leaving our pipeline. We're pleased to have kept our pipeline relatively flat at around 100,000 rooms during this period, despite the pressure of significant openings coupled with a difficult financing environment. we remain encouraged by the volume of leads and feel confident in our ability to keep our pipeline strong well into the future. One particular area that has propelled Hyatt's industry-leading growth is the expansion of our franchise distribution. Over the past decade, our mix of franchise rooms has grown from 16% of our total rooms to over 36% today, reflecting a compound annual growth rate of 15%. As part of our long-term strategy to further maximize our growth potential, we recently launched a new global franchise and owner relations organization dedicated to accelerated growth moving forward. This cross-functional team is focused on operating with excellence and revenue maximization for our franchise partners. While growth in our franchise business has been strong, we see an opportunity to accelerate this further And as we think about resource allocation, we're investing in our franchise business while staying highly disciplined in our overall cost profile. Finally, I want to provide a brief update on transactions before I turn it over to Joan. We are advancing negotiations for the sale of one owned hotel and actively evaluating offers for a second owned hotel. We look forward to providing details on these two transactions in the future. We're actively evaluating potential asset acquisitions for strategic purposes. It's important to reiterate, however, that even with potential acquisition activity we remain steadfast and absolute in reaching our sell-down commitment of 1.5 billion dollars by march of 2022 and for clarity this commitment is based on net proceeds meaning that any capital spent on acquisitions will be counted against our commitment I'll conclude my prepared remarks this morning by saying that we are optimistic and encouraged by strong leisure transient demand and improving sentiment around group and business travel. We continue to stay agile to be able to quickly adapt to the changing needs of our guests by staying deeply focused on cleanliness, enhancing our digital capabilities, and expanding how we support our groups coming together to meet. We are optimistic about the future and are ready to welcome all the travelers who are eager to get back to experiencing and connecting with others. I'll now turn it over to Joan to provide additional detail on our operating results. Joan, over to you.