Hyatt Hotels Corp

session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Roman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you and welcome to Hyatt's third quarter 2024 earnings conference call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer and Joan Botorini, Hyatt's Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, quarterly reports on Form 10-Q, and other SEC filings. These risks could cause our actual results to be materially different from those expressed in or implied by our comments. 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.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. Percentage changes disclosed during the call are on a -over-year basis unless otherwise noted. Additionally, we have updated our inventory schedule on page A4 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, Hyatt 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. I recently spent time in Europe and Asia where I met with many of our teams and owners, including a visit to the newly opened and stunning Park Hyatt London. The hotel is a flagship representation of the Park Hyatt brand in one of the most vibrant cities in the world. I also had the opportunity to visit with our new Standard International colleagues in Bangkok who are preparing for several exciting openings of standard branded hotels across Asia over the coming months. The trip left me filled with excitement for Hyatt's future as we continue to grow across many markets globally while delivering differentiated guest experiences for the high-end travelers in each segment that we serve. Now turning to the quarter, our third quarter results reflect the strength of our asset-like business model, including double-digit growth and gross fees, record number of rooms in our pipeline, and a record number of World of Hyatt members. This morning we reported system-wide RevPAR growth of 3% and we continue to see high-end consumers prioritizing travel as RevPAR growth the strongest amongst our luxury brands. Leisure transient revenue decreased approximately 4% the quarter driven by the United States and Greater China. Through the first nine months of 2024, revenue is flat compared to 2023 despite headwinds from renovations at certain resort properties and weaker demand in Maui. Transient pace for resorts in the Americas is up over 9% over the FESTA period and up slightly in the first quarter of 2025. America's all-inclusive resorts pace is up 10% over the FESTA period and up over 20% in the first quarter of 2025. Group rooms revenue increased approximately 6% in the quarter with strong results in both the U.S. and Europe. Group pace for U.S. full-service managed properties is up over 5% in the fourth quarter, excluding the timing shift of the Jewish holidays in October and the U.S. election next week and is otherwise flat when accounting for the holidays and election week. As we look to 2025, group pace is up approximately 6% compared to 2024 with average rate accounting for over half of that increase. Business transient customers continue to deliver the largest -over-year growth with revenue up approximately 16%. In the United States, revenue increased at a similar growth rate and major urban markets continue to benefit from the recovery of business travel. We continue to see exceptional engagement from our World of Hyatt members, which is reflected in our third quarter results. World of Hyatt membership passed the 50 million milestone and reached a new record of approximately 51 million members at quarter end, a 22% increase over the prior year. Loyalty room night penetration also increased as we realized 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 a 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 135,000 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, Hyde Studios and Yurkove 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 Zillara and Hyatt Ziva Phang Na 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 JDB by Hyatt collection brands. Additionally, and separate from the JD, Hyatt and CRLand have signed agreements for two new projects, including Park Hyatt Xi'an and Andaz Dongwon, which deepens our relationship with CRLand, who own seven existing luxury Hyatt branded properties in China. During the third quarter, we achieved net rooms growth of 4.3%. There were several notable luxury openings in the quarter, including the Park Hyatt Marrakesh, our first Park Hyatt in Northern Africa, and the Alila Shanghai, a flagship for future development of this luxury brand in 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 $1.07 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 13.3 times. While we've successfully completed our third disposition commitment, we expect to continue to reduce our hotel ownership. Hyatt Grand Central New York and Andaz 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 2,000 rooms join Hyatt, and the acquisition will 10 executed agreements to the pipeline in the fourth quarter, totaling approximately 1,300 rooms. 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 28th, we announced the signing of an agreement to enter into a long-term strategic joint venture with Grupo Pinero to manage Bahia, Principe Hotels, and Resorts. Twenty-three open and operating resorts totaling over 12,000 rooms will be added to Hyatt's Inclusive collection upon closing, expanding Hyatt's all-inclusive room portfolio by approximately 30%. This is a unique opportunity to expand our all-inclusive offerings in the -a-half percent of Hyatt's all-inclusive resorts in the Americas are five-star properties, and this transaction enhances our network effect by expanding our all-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-like growth. The results of our transformation into an asset-like business have 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 and annual capital expenditures by over $100 million, while adding approximately $50 million of durable management franchise fees from the sold hotels. At the same time, we've acquired asset-like 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 9.5 times. We have exceeded our underwriting expectations for both Two Roads and ALG, and we expect to do the same for Dream and Standard when those acquisitions mature. Not only have we replaced 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 Amar Lalbani, former executive chairman of Standard International. Amar 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 caring for guests and customers at the pinnacle of luxury. We will continue to leverage the significant capabilities that we've 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 Hyatt colleagues who live our purpose every day by caring for each other and for all of our stakeholders. Joan will now provide more details on our operating results. Joan, 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 States, RevPAR increased over 1%. Group was strong in the quarter, reflecting continued momentum for corporate meetings and social events. Associations drove the growth in group rooms revenue, and business transient was led by large corporate accounts, benefiting hotels and major... On the leisure front, we continue to lack 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 all-inclusive properties in the Americas reported net package RevPAR 5% below last year, driven by the impact of hurricanes. 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 lapped 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. The stimulus measures enacted by the government in late September are targeted at boosting domestic spending, and while still early, we're seeing improved RevPAR results 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 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 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 Balearic and Canary Islands. We reported growth 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. Franchise and other fees increased 23% due to the growth in our co-branded credit card, the contribution from UVC, and fees from newly opened franchise properties. Growth and 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 growth fees. Owned and leased segment adjusted EBITDA increased by 13% when adjusted for the strong demand in the United States and the Olympics in Paris. Margin 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 adjusted EBITDA declined by approximately $5 million when excluding the UVC transaction, consistent with the expectations we communicated during our second quarter earnings call. Looking ahead, we anticipate fourth quarter adjusted EBITDA excluding UVC 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 30th, 2024, our total liquidity of approximately $2.6 billion included $1.1 billion of cash, cash equivalents, and short-term investments, and approximately $1.5 billion in borrowing capacity on our revolving credit facility. We remain committed to our $2.4 billion in debt. 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 rev part 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 business transient activity, and improved leisure pace over the festive period. In greater China, preliminary rev part 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 systemwide rev part growth is expected to be in the range of 3 to 4 percent compared to 2023. We anticipate United States rev part growth for the full year of approximately 1 to 1.5 percent, and we anticipate fourth quarter rev part growth will be similar to the third quarter, even with the timing of the Jewish holidays and U.S. elections. Rev part growth 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 rev part growth that is flat to 2023. And finally, we expect rev part growth in other international markets to exceed the high end of our range, led by Europe and Asia Pacific, excluding greater China. We expect net rooms growth in the joint venture with Grupo Pinero closes in early 2025. We would expect to be in the range of 4 to 4.5 percent. Gross fees are expected to be in the range of 1.085 to 1.11 billion dollars, a 13 percent 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 to 435 million dollars, consistent with our prior outlook. Adjusted EBITDA is expected to be in the range of 1.1 to 1.12 billion dollars, a 5 percent increase at the midpoint of our range compared to last year. Free cash flow is expected to range from 380 to 410 million dollars, which includes the payment of approximately 150 million dollars cash taxes related to asset sales. Finally, we expect capital returns to shareholders of approximately 1.25 billion dollars, including share repurchases and dividends. In closing, our third quarter results highlight the strength of our asset-like 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 as time permits and would ask that you limit yourself to one question.

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. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the Q&A. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. The first question comes from the line of Joe Gref with JP Morgan. Please go ahead.

Good morning everybody. Thanks for taking my questions. Kind of a two-parter on the updated guidance. Net rooms growth organically looks like it's down relative to a quarter ago. Can you help us reconcile the drivers of 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 are you 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 contributions. Thank you.

Great. Thank you very much, Joe. On the outlook for net rooms growth, a few things that I want 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 2,000 rooms into 2025. Part of that is hotels that are under construction that slipped 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 that aggregate up to a significant number of rooms. So that's the 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 .5% this year, which is significantly higher than our typical run rate, which has been between .5% and 1%. And some of that difference, about 40% of that difference, has to do with 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 markets that have become, I would say, more challenging or where the central business district has moved, and we are looking for new representation. In a couple of cases, owners that we didn't come to agreement with on bringing hotels to brand standards. So part of that has to do with just discipline in maintaining standards and elevating the quality of our portfolio. And a few hotels with larger room accounts that were conversion hotels expected to open this year that came out. The overall momentum, though, remains intact, and we're looking into a first quarter of 25 where gross openings are tracking to a year over year net room's growth of over 6%. And while, of course, we might experience slippage out of the first quarter, there's no systemic or structural gap to our outlook for organic growth in the range of 6% going forward. There are three other things that I thought I'd just mention quickly. First, this is supported by significant ongoing growth of our pipeline and increasing construction starts and improving conditions for hotel development generally. Second, 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 the 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 may be. Our net room's growth is purely managed or franchised rooms and in rare cases, those homes or town homes that are also covered under either a management or a franchise agreement, period. As Adam already mentioned, we have included additional information on the hotels and rooms that are part of arrangements 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 room's growth calculation. That's on A4, is that correct? Schedule A4, we just included those for your reference if you could see that. So that's the story on the update. Basically, my confidence and 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, December 31 of any given year, happens to fall, openings happen to fall on one side or the other, is not what I focus on. I focus on ongoing momentum, which I think is very good. On the by-e principle deal, we have provided the information that I think we're going to provide until we close. 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 a platform and in this case, it's ownership of a platform, in 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 close the transaction. Yeah,

I would just add that we did disclose our expectations for gross management fees from the joint venture and then incremental to that is the Hyatt platforms that Mark just described.

Oh yeah, so separate and apart from those fees, those are strictly fees that we're counting from management. These are all managed hotels. There's no franchises in the 12,000 rooms that we're bringing on. In addition to those management fees, there are other fees and revenues that Hyatt will realize through Hyatt-owned platforms in the distribution space that will be incremental to that number. So we'll provide you more details when we get to closing.

Thank you. Your next question comes from the line of Daniel Pulitzer with Wells Fargo. Please go ahead.

Hey, good morning everyone and thanks for taking my question. You guys mentioned a couple times the credit card fees being additive in the quarter and 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 the non-REVPAR fee component of your growth going forward?

Well, I think we haven't gone into breaking out the details of what's in 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, the spend per card holder is higher than many, many other. I wouldn't say all because I can't say that conclusively, but 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 and also they are, they kind of fit a profile where their spending is not directly linked to a specific state of the economy because they have relatively higher net worth and household income. So we think that will come to grow. For those of you who are tracking multi-year, 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 at 20% forever. That would be fantastic, but very high. But it is in excess 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 an arrangement that had a life through 25 or towards the end of 25. And so we are actively engaged in looking at how our next phase of our credit card will be structured. And of course, no one waits until the deadline to get these deals done. So we're working on it now.

Got it. Thanks so much.

Thank you.

Our next question comes from the line of Ben Chaykin with Mizuho. Please go ahead.

Hey, thanks for taking the questions. Within distribution and destination, I think you said in 4Q up five, has the trajectory in this business changed at all? Was hurricane an impact? Just put all of any color on what you're seeing from a demand perspective and then one follow up.

Thanks. Yeah, sure. In the third quarter, we definitely had some impacts from the hurricanes, definitely in the Caribbean and southeastern United States. So bookings were a bit slower and frankly, a little bit less than what we had noted on our second quarter earnings call. 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 we look at the segments and the markets that our distribution business is 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 into the first quarter, we have a very strong booking pace there for our resorts and the distribution business actually also serves 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 .5% attrition was very helpful. Would you expect that attrition to leak into 25 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.

Thank you. Yeah, I think there was a relatively higher number of hotels that were coming to end life and PIP requirements that were not met. So maybe we had a bit of a blip here heading into the fourth quarter. I will say that if you look at the structure of our brand portfolio, we do not at this point have a 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.

Thanks. Our next question comes from the line of Sean Kelly 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 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 normalized a little bit, still a little bit below, I think your kind of longer term algo you laid out last year at the Investor Day. So maybe if you could 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 I think you're absolutely right. That is activity that we see, but other brand families have opportunities there. Is that something that Hyatt could explore? Thanks.

Yeah. Thank you, Sean. First of all, that's correct. That's how you read my commentary correctly about 6% gross. I think that excludes any conversion activity. So I'm talking about pure organic in that number. And the fact is that 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. I think those numbers, if you put six at the midpoint of that, net of attrition still remains our outlook. So I think the level of conversions have continued represent a pretty significant proportion of our total during this lull in new construction starts, especially in the US, and a rebound, which we have seen in construction starts and construction activity in China. So we have seen increases in construction starts in China in the last two quarters. Rooms in China represent 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're seeing positive signs there that undergird organic. I think the number of portfolio deals and conversions, pure conversions, not acquisitions of platforms, remains high. And we are continuously pursuing those, especially in markets in which we have particularly low relative penetration. Was there a second part of your question?

Yeah, with respect to the brand standards, you know, we have, there's

potential opportunity for that. There is

opportunity. It's something we've been looking at ever since the beginning of time, actually. And we constantly listen to our owners and take their feedback and consider that into how 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 why our attrition has historically been so low is because owners have invested in the properties and they've been performing. So, you know, I think this is a bit of an anomaly that Mark described this year. And we don't expect those levels 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 where these other brands have been launched with respect to capturing those that are coming out of those other brands in the mid-scale or upper mid-scale or upscale categories. Those brands are maturely older than Hyde Place and Hyde House. When we launched Hyde Place, it was on the back of over 100 Amerisweets hotels. If you just look at total life post-opening of our portfolio, we're only now getting to the very beginning of seeing hotels that are, you know, past the 20-year mark of being open. It sounds crazy to say that, given how much growth we've had in Hyde Place and we launched Hyde Place, for example, 17 years ago. But Amerisweets were built prior to that time. So, yeah, we're now starting to see that. Our competitors are in version something high, I don't know, four, five, six of the prototype that they're using for their current brands and so forth. So, you've got many, many generations that stretch back into the 1980s. And I think that the incidence of those hotels reaching obsolescence or maybe they are an anachronism in their current marketplace is higher. We just have this level of product aging. By the way, I'm not criticizing those brands. It's just the nature of the business and also the evolution and the movement of CBDs, Central Business Districts, across many cities and towns in the United States. So, we've got our eyes wide open. We're very committed to brand quality and consistency. Our owners, especially in the Hyde Place and the Hyde 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, you know, we're experiencing something new that we really haven't had an issue with or had to consider as much as we do today prior to this time. I hope that's helpful.

Yeah, thank you very much.

Our next question comes from the line of Connor Cunningham with Milius Research. Please go ahead.

Everyone, thank you. Maybe on the inorganic side, you've obviously been very active from an M&A standpoint post your transformation. Can you just talk about the opportunity that you see there now and maybe what the multiples that you're kind of seeing in the market? Are they still relatively depressed? Do you see deals, all that stuff? Thank you.

Sure. 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 Turoz or at ALG, well, ALG was also we bought in the middle of COVID. So, the trailing multiple was stratospheric. So, you don't, we don't underwrite on the basis of trailing as much as understanding what's ahead for each portfolio. Every portfolio has got its own dimensions and different tenor and quality of the contracts that underlie the management agreements and the franchise agreements. 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 that's 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 to complete, to the extent that it's relevant, renovation programs. So, I would say, you know, 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 that's 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 a asset-like platform, that is value-accretive every day. And that is, we currently are in, you know, if you look at the last four acquisitions that we made, we're tracking below 10. So, we're in high single digits. So, that's particularly good. And 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 in. So, a lot of this that we see are places where we are way under-penetrated relative to our larger competitors. Therefore, the idea of adding new existing properties, this is not adding necessarily new capacity in different markets, or adding new capacity markets where we have very little representation is easily absorbed and also very welcomed by our by our loyalty members.

Thank you.

Sure.

Our next question comes from the line of Smith is Rose, the city. Please go ahead.

Hi, thank you. I just I wanted to ask you, performer for your JV with Grupo-Pamero, where do you see the leisure to present of overall demand now in the Hyatt in the Hyatt system?

I think right now we're tracking between 50 and 55 percent leisure. This will take it up a little bit. It's a 30 percent increase in rooms and all-inclusive, but relative to the totality, it's, let's see, about a four percent increase in our leisure rooms overall. These are hotels that trade at a lower net package revenue rate because they're four and a half star hotels in the main, and therefore it won't have as much as a four percent impact on our mix.

Thanks. And can I ask you one more quick one? You mentioned markets in tracks where you don't have a lot of representation. Do you feel like you could potentially be an acquirer of real estate in some of those markets to get sort of jump-started, if you will? Or is the system sort of big enough now that you feel like it can kind of, you know, just sort of organically grow through convergence and people coming to you and developers coming to you, etc.?

Yeah, I mean, if I look back on 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 I can think of right away are the High-Raisie Orlando, which we purchased for over $700 million. 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, it was a Peabody before we bought it, of a quality and a team ethos and culture that was amazing. It is a family-owned and run business, and the culture of the team just matched 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 diligence in a very short period of time because we knew the hotel and 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 a billion. So that's one example. The second example is the High-Raisie Mexico City. We've been absent, completely absent in that market. It's a top five MSMA around the globe, and we've not been present there for over 25 years. This is a hotel that's right on the Chapultepec Park in the middle of Palo Alto. It's like main and main. And it was a NICO hotel. They wanted to deal with someone 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, I guess, a year and a half ago, two years ago, three years ago, pre-COVID, for like $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 those are two examples. So the answer is, yeah, if it's a unique opportunity that gets us an amazing location in a market in which we are under-penetrated all day, we will do that as long as we have a clear path to sell. And 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're not running into ourselves in any market in the world. So we have a lot of space to roll.

Great. Thank you very much.

Sure. Our next question comes from the line of David Katz with Jefferies. Please go ahead.

Hi. Good morning, everyone. Congrats on your quarter. I wanted to, you know, I'm looking at the page in your deck where, you know, you've added quite a few, you know, brands and channels, et cetera, over the past couple of years. And I wanted to just get a sense from you, you know, are these entirely kind of asset-free? Or when we say asset-light, you know, that can be, mean a range of different things, meaning, you know, are these entirely incremental to revenues and profits? You know, 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, you know, earnings business as it grows going forward.

Yeah. So, yes, there's key money that we deploy that is covered in the CapEx figures that you see in our, in our reported figures. And 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. We're sort of allergic to leases, actually. And we don't have, well, that's leases are actual real estate exposure. We don't have synthetic real estate exposure through guarantees. It's not, I'm not saying we have zero guarantees. I'm saying that they are small and they are infrequent because we have, we have a version to operating guarantees as well.

So

we don't, we don't pretend that we are now asset light while we are running around signing operating guarantees or synthetic leases to hide real estate exposure. And with respect to the investments that we have made, whether it's key money or actually helping to fund a given hotel through a preferred interest or sometimes an equity interest, although that's very rare, or occasionally some guarantees on debt repayment, they're all disclosed. So they're already in our numbers.

Got it. Okay. Thank you very much.

Sure. Our next question comes from the line of Patrick Schultz with Truest Securities. Please go ahead.

Patrick, if you're speaking, you must be on mute because we can't hear you.

All right. There we go. Thank you. Good morning, everyone. Going back a few questions, concerning some older hotels aging out of the system. What I heard from that is that you folks could really use a sort of an upscale conversion brand, perhaps equivalent to something like Hilton's Doubletree. Is that completely out of the question or might it be something that you would be contemplating introducing? Thank you.

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 real estate, the real estate that underlies our portfolio. So it is something that I think because of our relative penetration or distribution and because of the growth and the strength of our channels and direct channel, it's possible that we could craft something that would work for existing owners. What we don't want to do is do something that is going to be 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 you've got something that is so that has a scripted bag kind of portfolio that you can't tell what you're going to get. So I think those are the sort of guardrails. So I would say stay tuned. We will continue to monitor and discuss this, but there's nothing that we have done to date at least that would be in that category. And I would say converting former high regencies into high places is not trivial in terms of capital to actually conform it to the brand standards of a high place. So it's not that we haven't done any of those, but it's more typical for us to convert hotels from other brands that are closer in area programming and size and shape of rooms into high places, which we have done. Again, not trivial, but definitely possible. So yeah, our eyes are wide open. Those other brands, our other brand competitors have very large collections in those other brands that they convert into, including some in the mid-scale or lower mid-scale arena. I don't see us going there. Because it's not a market that we currently plan.

Okay. Thank you. And then follow-up question, this is for you, Joan. And I apologize if you did quantify this earlier, but it sounds like there was some earnings impact from in the Caribbean for you folks from hurricanes. Can you give us what the EBITDA hit was? And that'll be something to help us going forward for 2025 when we're thinking about modeling what we're up against or what the tailwind might be. Thank you.

Sure. In the third quarter, what I had mentioned is that we were down in the Americas for net package ref par about 4%. And that was primarily related to hurricane activity. And that equates to for the quarter about $46 million of EBITDA.

Okay. Thank you. Sorry. I'm just not sure.

Your next question comes from the line of Duane Fenigworth 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 our goal has been to add brands that have brand equity and brand rationale unto themselves that are distinctly identifiable and can be described as offering a different type of experience than other brands that we already own. So far, knock wood, I don't think we've 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. JDV by Hyatt is one example. Destination by Hyatt is another example. Unbound Collection is another example where we have brought some third party brands into those collections. There's a magnificent boutique hotel brand in Scandinavia called Story, the Story Hotels that are JDV by Hyatt. There's a magnificent small collection of very high end resorts in Europe called Seven Pines 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. So there are opportunities when we're working with mostly family or individual founders who want to continue to grow their brand equity but be affiliated. So I think that's where the primary quote consolidation might look like. But right now in our business, because we have third party owners going to them and saying, yes, you bought this brand from us and because you believed in it 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 organizationally, yes, your point is well taken and the purpose of forming a lifestyle group and separately a luxury group is to hyper focus on distinct customer groups that we're serving and to more with higher fidelity and more breadth and depth personalize the experiences of those guests to our brands and have much sharper definition of each brand one by each. So that's really the goal but it's going to be broken down so that you don't have when you approach Hyatt, you're not going to have a cacophony of a laundry list of brands. You're going to see collections or groups that have logic for distinct customers and guests. And that's really of doing the evolution that we're doing in our organization.

That's really interesting. Thank you.

Yep. Our last question comes from the line of Prant Montour with Berkley's. Please go ahead.

Good morning everybody. Thanks for squeezing me in here. I just, Mark, just a clarification on the commentary on gross net unit growth. I think you said specifically that six percent gross excludes any conversion activity but we know that conversions are a big part of your growth. So I kind of took that as six percent gross acts sort of like big portfolio deal conversion deals. If I

said that I misspoke, I meant big portfolio deals, not conversions. Conversions like -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 in here if you don't mind. The first quarter pace that you gave for transient business looked really strong. I'm just curious, 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 occupancy at this point would even be booked for that period and the visibility implied in there?

I actually don't have a good handle on what the total occupancy that's spoken for but it's not insignificant. This is not on the basis of five percent of the business book for leisure, especially in the all-inclusive segment which I'm more familiar with in terms of how the Ford bookings work. And the ADR composition, I'm sorry, flat meeting, ADR. ADR is mostly occupancy is what I'm getting from one of my team members here. So that's the answer on that one.

Great, thanks everybody.

Sure. I want 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, in the case of 50% JV, will be a 50% JV owner once we close. I will tell you that our partners and the colleagues that we are bringing into the family are aligned culturally and in values and I think this was the major win that we had with ALG. I think the culture worked beautifully and my speech to all of those colleagues that became members of the Hyde family was when culture works, everything works. It becomes easy because it's like fluid and when culture doesn't work, there's 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 Hyde family as well as the Bai Principe group, which is super professional. They started this business 50 years ago. Don Pablo Pinero created an amazing business from scratch and his family has 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 care by visiting our properties, please. And lastly, happy Halloween.

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