Hyatt Hotels Corporation Class A Aktie

Thanks. Good morning, everyone. We're going to get started. I'm Mike Bellisario, senior research analyst at Baird. Today, we have a Hyatt with us not just Joan Bottarini, Chief Financial Officer, but also Adam Rohman, Senior Vice President, Investor Relations, FP&A.

Treasurer.

Treasurer. And soon to be Head of Americas for Hyatt July 1. So this is your farewell tour Adios. Thanks for joining us. We'll jump into a bunch of the Investor Day topics from last week, but first, maybe set the stage, 1Q RevPAR outperformance.

Maybe walk us through some of the drivers of that? And then what are you seeing so far in the second quarter?

Yes. So first quarter -- well, first, Mike, it's great to be here. We really enjoy this conference a lot, and it's been a great morning so far. So thanks for having us. As far as first quarter performance went, yes, better than expected. United States was very strong. International markets were all very strong as well, notwithstanding the tail end of the quarter when there was disruption in the Middle East with the conflict that's taking place. In terms of second quarter, we continue to see positive momentum. We had mentioned on our last earnings call that April was a little bit better than expectations.

I think May, we still have preliminary results right now, but certainly shaping up better than we were expecting, primarily driven by strength in the United States, strength in Asia. Middle East looks like it's going to be less worse than April, but obviously, still a lot of variability going on in that part of the world. But overall, I think we're really pleased to see how the quarter is shaping up and feel good about the sort of the second quarter estimates that we provided a couple of weeks ago on our earnings call.

And then just sort of along the same lines, the high-end, low-end debate that everyone is focusing on. What are you seeing within your select service portfolio in terms of the inflection that's occurred? And how sustainable do you think that is?

Yes. Select service looks a little bit better year-over-year, which isn't a surprise given that we're now starting to get into some easier comps after lapping Liberation Day last year. So there's certainly still a bifurcation between higher end and lower end. We're still seeing our luxury hotels performing better than select service, especially in the United States, but select service is starting to look a little bit better.

And in terms of the demand strength, are you seeing a lengthening in the booking window at all? And then on the group side, any changes in sort of group meeting planner sentiment?

No much on the -- I don't think the booking window has changed that much. I mean it's always shorter term for business travel, leisure travel, except for sort of fly to destinations. But it's probably more stable certainly than it was when we were sitting here with you a year ago. And group continues to look really solid. I think we said on the last earnings call, balance year was up kind of mid-single digits. So corporate customer, especially our top 100 accounts, continue to prioritize travel, both for group and business travel.

You mentioned the Middle East, but more specifically, what's the exposure for you directly? Any impacts on the development pipeline? And then how do you think about the indirect travel impacts to and through the Middle East?

Middle East has, obviously, since February when the war first started has had impacts across the region. For us, it's 3% of revenue, so not a fee revenue, so not a significant portion of our fees. All of our colleagues are safe, and that was always our first priority. And we had many guests coming through the region who were actually -- we had a boost in occupancy as soon as it happened and then occupancy levels have fallen down to pretty significant levels that we saw in April, and it's recovered in May to still negative levels, but better. So we expect that through the course of the year, that will improve over the course of the year. On our development pipeline, we're actually opening some hotels this year, a couple of hotels in Saudi Arabia. So the pipeline is not significant in the region, but we are seeing progress on those hotels that are under development right now.

And then any indirect impacts in terms of maybe Asia Pacific?

We haven't seen any notable direct impacts. Obviously, intercontinental travel coming through the Middle East between Europe and Southeast Asia is a very prominent route, but we've seen different routes being taken place clearly because the demand in Europe and what we've seen in Southeast Asia has been very stable. notable there.

We can spend a lot of time here on the Investor Day. And I should mention, if anyone in the audience does have questions, you can send the [email protected]. Just in terms of the financial targets, sort of the drivers, I think 2% to 4% RevPAR growth, probably no surprise, but 6% to 8% net unit growth. I guess what happens -- what needs to happen to get to 6%? What needs to happen on the good side to get up to 8% over the next 3 years?

Well, those targets that we laid out last week, and for those of you who haven't listened to our Investor Day presentation, very, very, I think, compelling messages that we delivered around highest differentiation at scale, our competitive advantages and our strategy to continue to deliver industry-leading growth in net rooms growth, in our fee growth, -- our organic fee growth exceeds the industry over the last 3 years and our fees that we generate for every room that we have in our system also on a per room basis, exceeds any other of our larger peers in the industry.

So when we look at all of what our competitive advantages are delivering, our messages there were that clearly, we're very well positioned to continue to deliver these industry-leading growth rates. And that is -- that leads to what you just asked, Michael, around net rooms growth. We have and had outlined in our session last week, a very compelling multidimensional reasons behind our net rooms growth, one of which is the scalable brands that we launched in the last couple of years in the upper mid-scale space. We have -- and we've got a great slide that's posted that shows how we have -- we've been operating for 70 years.

And across that time period, we have representation in the top 50 hotel demand markets in the world. So we have great representation across all of the major markets around the world. But as you go deeper, we didn't have into submarkets, and we show the top 650 on that slide and where we are relative to our larger peers, and there's a huge gap. So the white space that exists for our brands to continue to grow, that's primarily in the U.S. We noted 300 markets in the U.S. where we are not present. We now have the brands to be able to grow in those markets and be the first Hyatt in those markets, some of them which are highly saturated by other brands -- so great opportunity for us. And those -- that 6% to 8% is organic growth.

And everything I'm talking about with this opportunity for the white space is right exactly in that brand category and will help us as we look forward into the future. Our pipeline is over 150,000 rooms on the existing base of over 350,000 rooms. That's 40% of our existing rooms is in our pipeline. That embedded growth into the future also is what gives us confidence in the 6% to 8% number. And growth in markets outside the U.S. was also prominently featured last week. We have had very strong growth in China. Our pipeline as a percentage of the existing base in China is over 100% -- so we've got a lot of rooms opening in China, a lot of continued opportunity given our reputation there.

And then in India, we see that the investment being made into the country, the increase in domestic travel, increase in inbound travel and the growing middle class there is only creating more opportunity for travel in the country. So we've seen great signings just starting off this year actually. And so multiple dimensions that I just covered. Anything I missed?

Yes. I mean the other thing I'd probably just highlight, and Javier talked a little bit about this when he was discussing all-inclusive is that while we are the leader of all-inclusive 5-star luxury hotels, the opportunity to grow is still very significant for us. We've got strong market share in a traditional market like Mexico and the Caribbean. But when you get into Europe, it's a very fragmented space for all-inclusive opportunities really as you sort of think about North Africa as well as the -- really the whole entire Mediterranean basin as well as opportunities in the Middle East and Asia, where we've got 2 Hyatt Ziva and Hyatt Zilara opening in a couple of years.

So even in a brand category where we are the leader like all-inclusive, we still see significant opportunity to grow those brands over time. So I think we're very excited about the growth opportunity for us because in addition to what Joan said, there's just very few markets that we look at and go, we're good. We don't need any more hotels. We can continue to serve our members and our customers in a way that will benefit them for a very long time.

On Hyatt Studios, in particular, in the U.S., what's the developer feedback been? And how do developers today think about economics given higher interest rates, inflation pressures, higher construction costs today versus 7 years ago?

Well, one of the unique attributes of the brand that we launched in 2023, Hyatt Studios is we did it actually with developers right alongside of us. And we recognized and heard from them that you need product in this space, in the upper mid-scale space. And so we worked on it with them and made sure that it met return profiles, met the market profile. So the return on assets, so the cost to construct the product and the market rates that would yield the returns that investors were expecting, developers were expecting. And so that's where it all began. And we launched it with great momentum. It's been 3 years. We have 5 hotels now open and operating and several more in the pipeline and many more under discussion.

So it's just a unique commentary that I would make about doing that alongside of developers because we were actually building exactly what they were looking for, but very much designed with our customer base in mind, which obviously was attractive to the developer base because they are a higher-end customer base embedded within our World of Hyatt platform. And so going into a new category was going to be important that we had the quality to be able to deliver the top line and cash flow for owners. Right now, there has been some incremental costs that surrounding interest rates.

I think that has actually stabilized a bit. We're looking at ways that we can help our developers and make relationships where they're trying to pull their equity stack together and secure financing. And again, back to the relationship approach, getting those hotels built in the coming years. So we're very excited about it and see a great opportunity.

And with Hyatt Select on the conversion front, what's the franchisee or potential franchisee's decision to say, "Hey, I have an XYZ competitor hotel. Why am I going to partner with Hyatt now? And what are those conversations like?

It's exactly the reason that I was just describing around us not being present in 300 markets clearly that we've identified as top markets. So if you are a developer owner of a particular brand and you're looking at an opportunity to enter the Hyatt system, we now have a brand for you and you can convert your asset to Hyatt brand and enter into a system, be the first Hyatt hotel in that market and tap into the world of Hyatt high-end customer base and have a premium RevPAR in the market. And so that is what we're seeing. And it's coming from multiple categories surrounding the Hyatt Select, which is well positioned in the upper mid-scale space. So some that are converting from another upper mid-scale product, some from a step below, making incremental investments.

And some coming from an upscale space that want to make a lesser investment to enter into the upper mid-scale category. So it's -- there's multiple dimensions of how that brand is going to grow. Again, very exciting for us. We're seeing a lot of momentum in the pipeline and under discussion, and these will open up quickly. They'll take 3 to 6 months to get signed and open.

Yes. The other thing that -- and this applies to Hyatt Studios, too, is as we're getting more hotels open, we're learning more and then we're using feedback that we're getting from our owners, our operators so that we can adjust as we need to, to ensure that the continual growth of the brand successful. So I think our openings and conversions teams, our developers, our operators are all learning together and collaborating in a way that really allows us to continue to evolve and make sure that the ability to grow these brands is as successful as we believe it can be.

And Studios and Select, for the most part, at least the open properties are in the U.S. What are the international growth plans for those brands?

There are -- we've already put in a licensing agreement in China for both of the brands with an existing developer that we've worked with, who is an existing owner. So we've already got underway agreements, multiunit agreements with 2 different developers in [ China ], which both of which we have announced.

We have announced both of those.

So -- and then there's opportunities outside of China as well, but we're really getting the momentum here in the U.S. and then we'll expand.

Yes. I think these brands will work really well in a lot of different markets, including a country like India, even something like the Unscripted by Hyatt brand, our select service soft brand that's primarily a conversion brand. The first hotels or several of the first hotels that came into the system were actually through a portfolio in Vietnam. So we believe that's a brand that will scale across the world as well. .

You and others don't talk about it too much, but branded residential is, I think, still sort of nascent for you. I guess what's the opportunity set there for you? And then how do you think about sort of the brand halo around residential for the broader World of Hyatt platform?

It's a great opportunity for us actually and something that we haven't taken advantage of as much as we are now. So it was an opportunity we identified. We actually hired a leader in this space that has done an incredible job actually bringing together these opportunities for developers, mostly in luxury and lifestyle brand categories. And so we'll see that actually grow as we -- over the next couple of years as a part of our fee base. So lots of opportunities that are coming to fruition over the coming years.

At your Investor Day, you outlined 3 years, $2.2 billion to $2.7 billion of cash. What are the investment priorities for you in thinking about sources and uses of capital over the next 2.5 years?

We consistently over the last 9 years, 8 years, we have -- as we've undertaken a transformation of unlocking value on our balance sheet by selling down real estate, reinvesting proceeds in growth, asset-light growth opportunities and returning cash to shareholders. Very successful in the shareholder value we've created in both the sales of those assets at 15x, the acquisition of asset-light opportunities less than 10x, we have created an incredible amount of shareholder value and along the way, returned significant amount of capital back through share repurchases. That is our strategy. We will continue to balance investing in the company in growth and returning cash back.

Yes. And maybe one thing to add, too, is we also announced that our Board of Directors authorized a $1 billion increase to our share repurchase authorization. So you can take that as a sign that we're going to continue to be active on that front as well. And ultimately, the capital allocation decisions that we make will be consistent with what we've done in the past, which is to ultimately drive the highest free cash flow per share. So if there's an opportunity to invest in growth that we believe will deliver a better return that way, then we'll do that. Otherwise, we'll return excess cash to shareholders. And would expect we'll likely, as Joan said, find a balanced way to do all of the above.

In terms of M&A opportunities, are you seeing -- hearing more pressures or desires from potential sellers to transact? And also sort of where is the global white space that you're thinking about for M&A?

We have -- in all of these opportunities that we've executed on in the last 7 years, they've all been off market. So unique opportunities, all in luxury lifestyle, resort opportunities. And this is, I think, an endorsement of both the attractiveness of our World of Hyatt membership base and these developers, owners who have come to us and said, we really want to tap in. We want our assets to be part of the Hyatt system. So as we think about opportunities into the future, it's a very similar filter that we put through, if you will, a complementary customer base, something that will amplify and increase the network between our existing members and what these new opportunity might contribute.

And now that we have a lot of soft brands, there's probably opportunities for some of other brands to join our soft brands in a portfolio way or if it's a brand that we would acquire, it would have to have the opportunity to grow and join our pipeline and be something that we could continue to grow. So we have certain attributes that we've been successful with bringing together and amplifying our network. And that's how we would continue to look at. And of course, it would be asset-light or a path to asset-light quickly. So that's sort of the way we think about it. I'll just comment that there's -- we're underpenetrated in markets around the world. Europe tends to be for us, a particular opportunity underpenetration-wise. And so I would say that's an area, and it's very fragmented.

There's a lot of portfolios that are non-branded, so potential opportunity for us. So we -- but we're open. And like I said, a lot of these have come off market. Urgency-wise, it's just -- I think it's a very unique opportunity when unbranded portfolios or owner operators come to a brand operator and say, I want to join your system -- sometimes this comes with estate planning or multigenerational type progression with families who own and operate these portfolios. So we'll see how it evolves over time. But I think there's lots of opportunities just finding the right one.

And then funding some of these potential acquisitions would obviously free cash flow, but potential asset sales. What's the state of the transaction market today? And then how do you and how should we think about sort of timing of continuing to sell down the real estate portfolio?

Well, it's not wise to say the transaction market overall is one way or the other because it really depends on the market and it depends on the asset. So we've been successful in all of the sales that I was describing earlier, selling into strength, whether that's what's coming into a particular market by way of incremental demand. and/or what's -- that particular category is strong. So this is what we will continue to do. We're actually in discussions right now on a few potential sale opportunities. And that's why during the Investor Day with the outlook part of the presentation, we indicated that we expect to be 95% asset-light by the end of 2028 because of these opportunities that we are looking at. And the proceeds from those would be considered excess cash, which would then be available to -- for growth opportunity or returning to shareholders.

Topic du jour is, obviously, artificial intelligence, maybe level set. What have you been spending money on? What are owners asking you to spend money on? And then sort of where do you think booking channel changes sort of evolve over the coming years?

We have been long time committed and invested in our data and in the way that we use data to deliver insights to help decision support throughout the company, whether that's acquiring something or helping operations perform better on property. So it's been -- we've long been very, very focused in this way. That -- what that does is that enables a company like us to take advantage of these capabilities in a differentiated way. We had launched intent-based search about 18 months ago within hyatt.com. And what we found is we learned a lot. We experimented, we piloted, we learned a lot. We actually improved conversion on our site by 25% before and after. So that's just a proof point of how we've gone about it, how we've built sort of the infrastructure to help us position ourselves to take advantage.

And this is coming all the way from our CEO. He is consistently demonstrating in every internal and external forum, his commitment to and our investment in improving these capabilities, both for our guests as they engage with us and book online. You mentioned the distribution channels and the intent-based search as part of that, but also operationally, and we focus on revenue-generating opportunities. We believe those are the most important for us to focus on, and we'll continue to drive revenue for our owners, driving, obviously, cash flow and coming back around to the flywheel of growing the company. So investments of those -- of that nature actually helps our teams to focus on the things that matter. And it's not all about efficiency for efficiency's sake. It's about better revenue opportunities so that our teams can actually spend the time to help us grow and do things to improve our owners' bottom line.

And your direct channel mix is what today? And then how do you think some of these LLM partnerships sort of drive that higher over time?

Yes. We talked about it last week, we're about 70% direct channel, so pretty similar to our larger peers. As far as the second piece of that question goes, I think it's too early to tell. I think what we're really focused on is making sure that the brand, whether it's Hyatt or the brands within our brand groups and obviously, the loyalty program are top of mind for consumers so that how -- whatever tool you're using to plan travel, you're thinking about Hyatt first. So if you use ChatGPT to plan a trip through Europe, you're saying, I want to go to these countries and I want to stay at Hyatt. That's where the power of our brand and ultimately, the increased distribution that we have will come from and then making sure that you're able to interact with the various tools that are out there now.

We talked about or we have talked about being one of the first to have a Hyatt app within the ChatGPT domain. It's very early days. I think there's a lot written about the direction that travel is going with LLMs. And the reality is it's still -- there's not a lot of activity that we're seeing relative to other booking channels. But ultimately, we believe it will be very helpful for us from a direct channel standpoint, having a relationship with our members, having a relationship with our customers so that we're able to serve them when they're on property and then when they want to come back and stay with us. So something we're very focused on and continuing to learn and make sure that we're present wherever our customers are going.

And in terms of World of Hyatt, how do you think about sort of next steps of sort of further improving and maybe even monetizing the program even more than you already do?

Well, we don't use that term, [indiscernible].

We do on our side.

We look at World of Hyatt as an experiential platform. This is a loyalty platform. It is not a transaction between us and our members. It's an experience that we're providing and benefits that we are providing for all of our members. We invest in our program. We have the best benefits of any loyalty program in the industry. And we have a transparent award chart. We have the ability to gift your points to your loved ones, all very unique attributes for our program. And what that does is it creates an incredibly loyal and engaged membership that is spending more at our properties.

They are 90% of the time when they make a reservation, they're paying for that reservation as opposed to redeeming it. So they are wanting to do more and more with us. And what we give back is those benefits and the experiences that are delivered by our operating teams in the field to actually deliver the experience that they expect. And from an overall perspective, we are very committed to building the network and growing in the areas where we're underrepresented so that we can be in the places to meet our members more and more of their purpose of visit and their share of travel experiences. So opportunities is to continue to invest in that because it has created the highest growing loyalty platform in the industry, and it's delivering value for owners, and that is the flywheel that we're focused on.

That's a good point to end, and we're out of time. Next in this room, we have [ Corpay ]. Session 1 is a market discussion with [ Strategas ]. Bentley Systems is Session 3. Session 4 is [ Knowles Corporation ]. [ Weight Watchers ] is Session 5 and [indiscernible] is Session 6. Thank you.

This is great. We're joined by Hyatt Hotels, Mark Hoplamazian, President and CEO; Joan Bottarini, CFO. You're both just off of an Analyst Day event last week in Chicago. For those who couldn't listen in, maybe just give us the key message and what you were hoping to accomplish from hosting that event.

Okay. We'll tag team this. I think the #1 point that we were trying to make is our strategy is really centered around differentiation at scale. And what we mean by that is being in a premium positioning in the industry from a rate perspective, a household income perspective, a brand portfolio perspective, has led us to be more deliberate and very focused on serving that higher-end guest. So differentiating the experiences for those individuals is really, really important to us and very critical for us. And it's part of what's allowed us to grow World of Hyatt at the highest rate. We've been compounding at 18% to 20% growth per year.

So that flywheel of activity that is really focused on making it special at scale for our core customer base, elevating the membership of World of Hyatt and elevating penetration leads to a separate flywheel that relates to performance of our hotels and therefore, developer interest. that's translated into the highest RevPAR growth in the last 5 years in the industry, highest net rooms growth over the last 9 years in the industry. And so that's really the core of what the strategy piece of the discussion was about. But that's not all because we had a bunch of financial -- really compelling financial results of that, that Joan will talk about later on.

Sure. So one of the major highlights as part of my presentation last week was to really illustrate these metrics around performance because what tends to get lost, we think, in some of the coverage is the fact that our organic growth rates have been exceptionally strong and industry-leading. So Mark mentioned our net rooms growth for the past 9 years. Since 2017, we've grown on a compounded basis by 9%. Organic has been 7% that has led the industry. That is the number, the organic growth rate that's -- and then fee growth has grown since 2022 at 14% on a [ reported basis ] organic is 10%. That leads the industry.

So I think there's some debate around what is actually behind those numbers and how do we break it out. We did the math, and it's really, really compelling because everything Mark is talking about with respect to differentiation, our competitive advantages has translated into results. And when we are pressing all of the elements of our strategy to maintain those competitive advantages, it's going to be durable growth well into the...

I was just going to say one other thing I think that's changed a lot is conversion of earnings to cash flow. So maybe.

Past 3 years, we've been at -- we've been averaging 55% free cash flow to adjusted EBITDA. And it's very much our expectation over the next 3 years, which is the outlook that we provided at Investor Day that we will have that same and even growing because we just see great opportunity. So what we said is that mid-50s number, which is very compelling, especially when you look at the industry and our asset-light mix is here.

So I think that 2022, going back a little bit, the investor actually pointed this out to me at your Analyst Day, they said that we had talked about how you had the ability between asset sales and free cash flow to give back effectively 50% of your market cap. Now when we look at the numbers you've laid out, it's still over 30%. So you had a little bit of a multiple change, but still over 30% of your market cap is available in terms of the free cash flow and some of the asset monetization.

Is some of the change in messaging -- or I shouldn't say change in messaging, some of the messaging meant to be we're now at a point where it's going to be more focused on organic. More of that cash is going to go back to shareholders and the capital allocation priorities are shifting a little bit? Or is it kind of same trajectory or same prioritization from a capital allocation standpoint that we had in the past?

Well, I'll let Mark comment on opportunities potentially that we see relative to inorganic growth. But we've been very successful in investing in asset-light businesses. Our track record here has been investments that are on a stabilized basis, realizing below a 10x multiple, about a 9x multiple. And a lot of that has come from the realization of proceeds from asset sales that we've reinvested, and we've also returned a significant amount to shareholders along the way.

So when you look at the balance of what we've accomplished and the shareholder value that we've delivered by making those investments and also returning, that balance is what we anticipate into the future. We haven't given specific guidelines beyond that, but we definitely know that we'll be able to balance them given the opportunity.

And we will continue to look at inorganic opportunities. I don't know that any of them will be massive in size. I think the really compelling dimensions of target -- potential targets would be a coincident or adjacent customer base to our own. And secondly, a geography or a subsegment that we think is particularly attractive that we think we can actually address faster and better by buying something than building it. We've launched new brands in the upper mid-scale, Hyatt Select, Hyatt Studios and also Unscripted by Hyatt. And we think that, that's the best way for us to grow in that segment as opposed to through acquisition.

But there are probably other pockets. And that's the way I think about this. There are probably other niches and pockets in different places where we might find opportunities. But we would still run the playbook that we have in the past, which is really look to deliver double-digit multiple -- effective multiple acquisitions.

On the -- Joan, you made the comment that sometimes recycle the capital that you sell. Do you view the asset monetization proceeds in a different lens than free cash flow generated from the core business? Or is it all together?

It's really all together. I did also state last week, going back to the Investor Day messages that we expect to be about 95% asset-light earnings because of the opportunities we see on selling some of the real estate in our portfolio today. And so that -- it all depends on timing, timing of the opportunities that Mark is describing, we'll have greater opportunities from a leverage ratio perspective to take on some debt to -- or opportunities or for return to shareholders.

So as you think about balancing all of that together, we've got a lot of options going forward. And we look at excess cash where there isn't an opportunity that's going to create great shareholder value and be accretive, turn that.

So one of the other, I think, messages that surprised -- I shouldn't say surprised, but it was definitely above where consensus expectations was, was on the room growth side, so 6% to 8%, effectively best-in-class, highest of the peer group. Maybe talk to us about what gives you the confidence in sustaining those? Where is that growth coming from across different categories? And I think we often look at the pipeline, but I know the pipeline is not the only thing that ends up leading to room growth. So maybe you can tie in conversion activity within that.

Sure. I mean I think the pipeline -- you got to start there because it's -- we have the highest pipeline ever. And the pipeline activity in the new dialogue that we're in on a bunch of hotel development opportunities and including this week, like I've been taking pulse indicators from our developers that are here for the NYU conference and the activity level has been super high. So a lot of interest in the brands, especially the newest brands.

And so I think between the huge activity, the surge in activity for Hyatt Select and Unscripted and Hyatt Studios, which is really exponential in dimension, in addition to a strong pipeline and a lot of that pipeline is outside the U.S. and it's full-service or luxury hotels, we think we're going to end up both growing the premium segment and serving -- getting into -- getting representation into a lot of new markets through the upper mid-scale brands that we have and that we've launched. The one other thing that I would say is it's not just about -- I made a comment that caught some attention, I said, when you're eating celery, that's referred to as empty calories.

So NRG reported by itself is not that helpful. I don't think if you're an investor, you want to know how much money associated with your growth. And so what I said is we're not interested in empty calories. We want nutrition, which means money. And the money equation is that the stabilized fees per key in our pipeline is higher stabilized fee than the current fees per key that we have in our system. So -- and that goes to the mix. So we've got a significant number of full service and luxury hotels, resorts in the pipeline, and that's helping to sustain a very high fee per key for the new hotels that are coming. So I would just pay close attention. A lot of the conversion activity is going to be in the upper mid-scale. And I would just say, I think that's distinct and different to some other systems that are also seeing a surge in conversions in the lower mid-scale and economy segments because of their new brands.

So you could have high conversion rates. We do expect to have high conversion rates, 35%, 40%, which is really what we've been running at. I think we will still see that. But ours are at the upper mid-scale or above. And I would say a lot of conversion activity that we're seeing elsewhere in the industry is lower mid-scale and maybe even economy.

Would you ever want to go down into that category?

It will take a while. I mean we want to fill out the upper mid-scale because we have so much room so much empty space there, white space markets in which we don't have representation. So it will take a while for us to want to go down. We have -- we're strong believers in contiguity or adjacency with respect to how we grow the segments that we're in. We've looked at and rejected opportunities to buy brands that were mid-scale or below because there would have been a gap between upscale, Hyatt Place and those brands. So we looked at a bunch, but we kept on rejecting them because we don't believe that establishing essentially a bimodal distribution of members is helpful. It doesn't create a network effect. So people who -- and we used to own Microtel, we used to own [ Best Inn ], we used to own Hawthorn Suites, but there was a big gap between Hyatt Place and those brands never between did they meet. There's no crossover.

So we don't want to have a huge system down here and a system up here with any wall or gap, we believe that the continuity is really the best way to do it because 80% of the cross-brand stays that people have are one segment away. So that's really -- so we need to maintain -- we believe that we want to maintain continuity adjacency all the way through. So if we do grow, it will be to mid-scale, then to lower mid-scale to economy, but that's going to take more than a decade.

And so that -- just to be clear on that, so effectively, it's maximizing the value of your loyalty program because people are going to be earning and then redeeming and staying in the system within that short...

Exactly...

Narrow band, I should say.

That's right.

Great. You also renegotiated your co-brand credit card program late last year, you said you were expecting a doubling of the contribution to, let's say, roughly $100 million in 2027. Remind us how these programs work? What are some of the drivers as people start to see some of these creep up in terms of the contribution? And what's included in the multiyear outlook that you talked to?

What you were referring to is the doubling is from '25 to '27 put out there for 2027. And we expressed that we thought that, that was reasonable and estimate because what we see is very strong engagement and spend on our card. And what our bank partner is telling us is that it's even stronger relative to other cards in the industry. So it's a very good partnership that we have, Chase, and it also is an opportunity for us to expand that partnership into the future.

So when you think about the future of our card portfolio, we think there's opportunities. This is something that our Chief Commercial Officer talked about as well that we think expanding into areas outside of the U.S., maybe a premium card as well in the U.S. These are all things that we're exploring, and there's real opportunities for us in the [ future ] and that spend that we're seeing from cardholders is what we are collecting a license fee on. So Hyatt benefits, program benefits and our owners benefit because we increased the base, increase the network in actually the World of Hyatt membership base. And that increases the benefits that are delivered to owners because those are guest that are spending more, staying longer, going to hotels first when they open. So it's a win-win for -- across the stakeholder group.

I feel that I still have conversations with folks who confused by the programs a little bit and the drivers. I think some of that stems from airlines have similar programs, but they don't have a franchise system to also think about. So I guess would help clarify that perhaps, just one, the programs are based -- maybe you can clarify purely based on top line spend and the number of sign-ups on the card.

There's no profitability component. And then two, you kind of alluded to this, but is there flexibility in how you allocate the total remuneration between the consumers' points that they see, the value of the card, which we can compare and contrast points across programs and see that value, subsidizing or at least helping drive marketing and/or the loyalty program itself and then that fee that we see to come to you. That kind of set in stone? Are those split? Can those be different?

Well, one of the benefits that we have in our program is a transparent award chart. So I didn't mention the win-win is also includes our guests because we have -- as we look at the experience that's provided both as being a member and what is received, the benefits that are received on property, we feel great actually about what we're delivering actually through those benefits and the experience. And we see it through the engagement, right? We wouldn't have the engagement numbers that we have without that type of having. So that is -- that chart, we make changes to it periodically.

And so there are adjustments that are made based on market. And we know that our actual terms are very, very competitive and still very attractive to a lot of members. So that's where I think there's some flexibility only in that we want to do that, be transparent about it so that our members can plan and our owners can plan. And as far as the license is concerned and the split, that's something we evaluate and we do that in a rigorous way with -- this is accounting allocation. So that's done. It's not something that changes, make a statement about the license fee and to book on top line revenue.

And I do think it's -- we are focused on making sure and demonstrating to our owners that this is unambiguously great for them. So we -- this doubling that we talked about has nothing to do, nothing to do with any changes in the royalty rate effectively that we are charging to the program, nothing. And so the increases that we're seeing on our side are even more significant for the funds that are flowing into the program, which allow us to spend on promotions, spend on marketing, spend on advertising for the benefit of our owners. So we feel like that's a really critical dimension.

We have another travel program called Unlimited Vacation Club, and we did extensive exhaustive work to make sure that the owners were benefiting equal measure to our guests and to Hyatt because at the end of the day, that's the lifeblood for future growth. So we didn't -- going and reevaluating something like that is a big deal.

Helpful. Another area of, I think, questions that we get is around the distribution side of the business. You have in the multiyear outlook, low single-digit growth, which is a little bit below the other fee growth in the algorithm. Maybe talk to some of the assumptions, both near term and long term to consider for this segment.

Yes, I'll start off. I think that was really meant to mimic what I would consider a conservative outlook with respect to growth in total travel volumes from here because travel volumes have come off, we are running at a lower rate than '24 to '25, '25 was lower, '26 is now lower. And the reason is twofold. One, we've got -- well, threefold, I guess. One is Jamaica, the hurricane. The second is the security concerns out of Puerto Vallarta in February of this year. And the third is that the 4-star segment of the volume of travelers that ALG Vacations serves has been under a lot more pressure than the 5-star that still represents a significant portion of the total revenue base.

So those 3 dynamics are what has driven the top line, the total volume of travel down. We look at where we are, which is Jamaica being rebuilt. All of our hotels are being rebuilt right now. They will be reopening probably in the first quarter of next year, really fully refurbished. So we'll have the best product. Mexico security concerns have abated a lot and I had a picture from earlier in Puerto Vallarta in April.

All good. I'm making a little pitch here.

Here we go. It's awesome.

And by the way, Americans are notoriously ignorant of...

It's called due diligence folks.

Yes. I would just say Americans are notoriously ignorant of geography. People read about something happening in Puerto Vallarta and they won't go to Cancun. It's like saying there was a disruption in L.A., so you can't go to New York. Literally, that's not an exaggeration, by the way, just look at the map. So it's an amazing psychological phenomenon that we -- at some point, will overcome as a country, we'll see. But the -- so a 2% to 4% total increase in travel volumes from the low points that we're at now, I consider to be a very conservative...

Temporary things that are hitting it this year, but underlying maybe.

Yes. So I think there's -- I really -- I'll say it again, I think it's a very conservative outlook. And I think we're also working on a number of AI initiatives that will increase and improve efficiency. There are some additional opportunities in the white label space that I think we will be pursuing. So across the board, I think there's -- we've taken a low level -- a low bar with respect to the performance that we outlined for distribution.

How integrated is that business with World of Hyatt and other aspects of the overall portfolio?

It's significantly integrated to the Hyatt Inclusive Collection. It represents about 15%, 16% of the volume of something like that into our resorts in the Americas. So it's a significant channel for us.

Did that come down then as...

No. Actually, in some ways, I think it's gone up. I think we're outperforming the market. They're outperforming the market. I think one of the drivers of that is our ALG vacations, actually more and more volume into our...

I love the comment earlier about fees and money and tied to room growth. So the royalty rates are a component of that. But maybe if you can dig into it a little bit double click as they say, maybe puts and takes to think about both international and domestic as we look at royalty rates, how those are currently structured and how they may change over time.

Well, in the U.S., this has been consistent for the contracts that we enter into in the U.S., but there's typically hurdles, right? So we're earning top line -- off the top line primarily. There are some incentive fees in the U.S., but it's 10% of total incentive overall. So most of our incentive fees are outside the U.S. where those contracts are primarily smaller base fee and a larger profit component. That profit component is typically not after a hurdle earned on the first dollar. So as we look into the future, 2/3 of our pipeline -- but 2/3 of our pipeline is full-service hotels outside of the U.S. So that's when we make the comments about the strength of the fees per room that are embedded, the stabilized fees per room that embedded in our pipeline are very strong and are accretive to our existing base. That is about 1/3 of our pipeline coming from select service hotels. That's sort of how you can think about the future of the incentive fee mix -- excuse me, the total fee mix. When we look at non-RevPAR fees, we expect those will be growing at [ LDD.] That's resi, that's UVC, the Unlimited Vacation Club.

How big the resi business be? Is that mainly skewed towards the higher end?

Yes, it is. I have to say this is remarkable to see, but I think we did not actually appreciate the impact that having someone full-time dedicated with a great deal of experience in really business out of branded residential. And we have a great leader on board right now. And the volume of activity has skyrocketed. So we are seeing just enormous demand. So Thomson branded residential program in Mexico, which will translate into other parts of the world. Standard stand-alone residential, we've gotten approach with other stand-alone resi.

The Park Hyatt branded residential activity has really expanded significantly. So we're deliberately going after and really pitching in a very affirmative way where branded residential can make the biggest difference. The new Park Hyatt in Mexico City that will open later this year has a significant branded resi component. So the Thompson and Reforma, so the Thompson in Roma Norte. So we're seeing a significant measure of both lifestyle and luxury properties branded resi [indiscernible] will have a resi [indiscernible]. So this is going to be a growing component piece of our total fee.

The fees there work where you collect a fee when it's sold and then an ongoing management fee going forward?

If we're managing the HOA, then we earn a fee on the HOA management. But for sure, the royalty upfront is...

Are you generally managing those?

We are.

Because I imagine they're also -- they're integrated with hotels?

And even the stand-alone, we are managing the standard HOA, the stand-alone resi because there's no hotel associated with it. But yes, in general, and in the main, we will be managing the HOA.

Great. I'm going to get into the other topic du jour, which is more about demand trends. I guess I'm curious to hear what you're seeing across the environment as we look at different segments of demand, kind of split between small and medium-sized business, large corporate, leisure, any other segments you'd like to dive into?

As we sit here today and as compared to what we said on our first call, we feel really good. The better results than we had anticipated or forecasted in April and even into May, which is preliminary at this point. What's notable is that the U.S. is. So we feel good about what we've been experiencing. It's still short term. The booking windows are not that long. Leisure is a little bit longer. But we see the U.S. being as strong as it is, that gives us great confidence [indiscernible] and into the future. Group also has picked up bookings in the year for the year. Some of that is going to be coming through the summer months and the World Cup, but it's also going into the latter half of the year.

So great numbers coming from the U.S. Outside internationally, still very, very strong in Asia, Europe, Middle East has been the one area, although gotten progressively better in April and now even in May -- sorry, in May compared to April. So it's positive on the full year. We had given some Q2 sort of indication. We said about 3%. We feel very confident about that number better. Midpoint on the fees and EBITDA, mid-single digits growth rate.

I think between small and medium-sized businesses and larger businesses, we're seeing really persistent demand from our larger corporate managed accounts, global accounts. The small and medium-sized businesses also positive, not as much as larger businesses. So the rate renegotiation also yielded single-digit increases for most of our managed accounts or volume accounts. So we're seeing really pretty positive both group and transient travel out of our larger customer.

When you take a step back and think about those trends, which seem really healthy relative to kind of the trend line we have been on for a little while last year, certainly, there was a lot of noise deliberation and otherwise. But I'd say even if we went another year earlier, it would have been similarly kind of choppy. What gives you -- what would make you get more confident that we're going to sustain these higher demand trends? Or what do you think the underpinnings are?

Well, I think there's a tremendous amount of economic -- excuse me, -- sorry about that. A lot of economic activity that's driving the core demand. But I think for a pretty significant chunk of our business because we're serving a higher income household and because leisure is now more than 50% of our revenue base, that is durable. So we don't have any -- we believe that, that phenomenon is a durable, reliable reality for us no matter what happens in the rest of the economy.

The upside and the downside is, in my opinion, revolving around one major issue, which is inflation, which fuel because for lower income households or fuel costs have impact on their travel budgets on their discretionary consumer buying habits. So I would say if we see a more prompt conclusion will be around war and then whatever recovery time and restarting time it takes to get fuel back online, refineries back online, LNG back online and on the water again, that will tend to help bring inflation down. And I think that could be another way to sustain demand longer period. But I generally agree with what you said. It's been choppy and not unremarkable in '24 and '25. I think it feels more solid across the...

Maybe more normal...

Maybe more normal.

Turning to capital allocation. So one of the things that you referenced in the outlook was being investment grade. Why is that a key focus for the company? How do you think about the value of that, especially as you move to this more 95% asset-light and perhaps the business has greater visibility and flexibility?

Well, when you think about policies generally, right, this is very important to maintain consistent diligence discipline around your financial policy. It's been part of our policy for [indiscernible] and we have benefited in times of volatility and uncertainty to be able to maintain our investment grade and rely on that to access capital markets and do it in a very constructive way. So we will continue to maintain that and it's benefit?

Yes. I mean the quip that I always use was first rule, we're in a cyclical business. Second rule, don't ever forget the first rule. And so maintaining investment grade is just a way for us to sleep better at night.

Makes sense. A follow-up to that. If you're looking at investing in growth, is there a range to think about in terms of leverage that you'd be willing to tolerate or even maybe be able to move outside of for a temporary window of time that might be outside of the typical investment-grade band.

We already did and multiple times. When we acquired ALG in 2021, we were outside band, so to speak, which is around a 3x gross leverage. So at that time and then with Playa, too. So we still have -- I mentioned a little bit of deleveraging that we need to do. It's a little bit [indiscernible] but there's a grace period that we have. And frankly, because we've maintained consistency with our financial policy, these types of grace periods and this commitment that we make means something to agencies and to our investors to say what we're going to do and we do it.

Well, the 95% asset-light, that would generally mean higher free cash flow.

You're not committing...

Outlook, outlook.

Illustrative outlook, 95%. But that would still mean that, yes, cyclical business, but less operating leverage than previously

Much less operating.

But that wouldn't change how you think about the leverage profile.

Not at this point. I think we want to maintain investment grade.

So just keep the flexibility.

Well, go ahead. If you had a different perspective, we're open to your input, but right now...

Not yet. Not yet. Maybe in the future.

All right. We'll talk.

Well, please join me in thanking the Hyatt team for all their insights. Thank you so much.

Good morning, and welcome to Hyatt's 2026 Investor Day. It's a pleasure to welcome all of you, both here in our hometown of Chicago and on the live stream. As you may have seen from this morning's press release, we have and the presentation that we posted on our Investor Relations website, we are excited to share why we believe Hyatt is positioned to win. Before we get started, I would like to remind everyone that our presentation and comments will -- today will include forward-looking statements under federal securities laws.

These statements are subject to numerous risks and uncertainties as described on this slide and in our SEC filings. These risks could cause our actual results to differ materially from those expressed in or implied by our presentation and comments. Forward-looking statements in today's presentation are made only as of today and will not be updated as actual events unfold. I'd also like to remind everyone that we filed an 8-K this morning, which includes the full presentation, along with definitions and reconciliations of non-GAAP measures. We posted the presentation to our website this morning, and a recording of the event will be available later today.

We have a compelling lineup plan for today. Mark Hoplamazian will get us started by discussing how Hyatt's differentiated approach and competitive advantages deliver sustainable long-term value for shareholders. Mark Vondrasek, joined by Amar Lalvani; and Javier Aguila will then cover how Hyatt is elevating our brands, and our technology. You'll also hear from Laurie Blair, who will provide a deeper dive into Hyatt's world-class loyalty program, World of Hyatt, and how it creates value for all of our stakeholders. And later this morning, Mark Hoplamazian will return to discuss Hyatt's growth strategy, followed by a panel discussion with several of our development leaders moderated by Joan Bottarini.

Joan will then discuss our illustrative 2028 outlook and explain how we believe our strategy to elevate our brands, talent and technology position us to generate meaningful shareholder returns. And then finally, we look forward to continuing the dialogue with you during our interactive Q&A session. We invite you to send in questions throughout today's presentation using the Q&A section on the webcast page or by e-mailing [email protected].

To begin this morning's presentation, it's my pleasure to welcome to the stage Hyatt's Chairman, President and Chief Executive Officer, Mark Hoplamazian.

Thanks, Adam, and good morning, everyone. I'm glad to see that everyone survived Cindy's rooftop last night. Cindy's by the way, some of you were surprised to learn is actually part of the Hyatt System, as it's an Unbound Collection by Hyatt. And Cindy is named after Cindy Pritzker. So we all celebrate Jay Pritzker as our founder and the first leader of Hyatt and his boss was Cindy. And she proved the indomitable spirit of the Hyatt family by living to 101 years old, last year, she passed away.

So Andy Warhol, I think, captured her image beautifully, in that cinch above the fireplace, and we celebrate her and -- or can do spirit throughout. Before I get started though, I do have to extend a special welcome. I'm going to invite Mark Wagner and Roberto Alicea up on stage with me. Mark is the leader of this hotel and Roberto does all the work to make Mark look really good. Mark is about to celebrate his 30th anniversary with Hyatt in this coming year, not there yet.

Very close.

Very close. Right. And why don't you tell us a little bit about this place that we're in?

Well, good morning, first and foremost. My name again is Mark Wagner. First, let me just say, it's an absolute pleasure and honor. On behalf of the 868 employees that we have here at the Hyatt Regency, Chicago, some of the greatest people I've had the honor and pleasure of working with over the years. We want to welcome you first and foremost, and thank you for trusting us and allowing us to host this meeting, it's truly an honor. But as you may have noticed, we have undergone a tremendous renovation over the course of the last 2.5 years with the 2,032 guestrooms we have, both towers have been fully renovated, all of our ballroom space, and as you may or may not have noticed, there's a little bit of construction out on the sidewalk as well, but that's the finishing touches over these last 3 years. But we are experiencing a wonderful year here in Chicago, not only in the city, but obviously, at the hotel as well, and we couldn't be prouder to be able to host this and highlight once again the city and the Hyatt Regency Chicago. So thank you again for being here.

And before I let these guys go, Roberto and I got to know each other when he worked at Andaz Fifth Avenue. Roberto has an incredible life story. He came -- he grew up in the south side of Chicago in a pretty rough neighborhood and has basically gone from entry-level position to being a hotel manager of the largest hotel in the Hyatt system. And this is -- he's a shining example of what it means to bring people into this industry, and watch them grow and give them support, but he's now passing that along. It's a beautiful thing because he just promoted. He was the Head of F&B. He just promoted a colleague of ours who run F&B here in the hotel. I happened to meet her in Palm Springs, and she was extraordinarily excited to be elevated to this very important position.

As you all know, as you can see from last night, F&B is one of the key priorities at Hyatt, and it has to be excellent, not good, not great, but truly excellent. And Roberto is excellent in every way. And when we gather our people together to help bring people out of the South and West sides of Chicago to employ them, they are enraptured by his own personal life story and inspired by that. So Roberto.

Thank you.

Thanks. So as much as we love sharing our wonderful hotels, we love sharing our people even more. We appreciate your interest in Hyatt and for being here and to hear a little bit about why we see such a compelling future for Hyatt. We have a lot to cover, so we're going to get going now. Let's talk about differentiation at scale and how that defines Hyatt today. For decades, we've been building something special within the hospitality industry, from our premium brands to the guests that we serve to the way we grow, it's a highly differentiated approach to building a scalable premium company. Those two things don't usually go together, but we're proving that they are powerful when put together. Our brand portfolios, our operating model, and our growth strategy, all reflect that approach.

As a result, we built a global portfolio, centered around high-end experience-focused travelers, where we continue to see strong and resilient growth, highly durable growth, and no coincidence, we have the fastest-growing loyalty program in the industry, World of Hyatt. We're continuing to elevate our performance by becoming a more insights-led and brand-focused company. We've cultivated a culture that fosters innovation, and we have scale where it matters. We have a platform that drives durable fee-based earnings, and we have a track record of taking action to realize meaningful growth opportunities on a highly accretive basis.

All the acquisitions that we've done have been highly accretive to value for shareholders. Today, we will share with you our plan to build on that track record and to elevate our performance even further. We believe the actions we're taking today will strengthen our position to win and deliver consistent capital-efficient growth and long-term value for all shareholders. From the very beginning, innovation has thrived throughout our properties across the Hyatt portfolio because of a bold spirit that remains a part of our culture. Differentiation is in the DNA of Hyatt. From our founding in 1957 to today, Hyatt has never tried to win by simply being the biggest or following others.

We were connecting dots that we saw that others might not have seen. While much of the industry focused on scale alone, we chose a different path building a premium portfolio, creating distinctive experiences and staying disciplined about how we grow. Yes, food and beverage is a big part of that, someone mentioned to me last night that of course, they expected the food last night to be great. And it was, I think, we interspersed a bunch of Chicago specialties, but we also provided you with some other really delectable things. That approach has shaped Hyatt for the last 70 years.

It has strengthened the loyalty of our guests, deepened our relationships with our owners and positioned us to drive long-term growth with a brand and business model that stand apart. A philosopher once said, "Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it." And we have been bold time and again, investing in bold ideas that have had big impact. Let me give you some examples. We took a legacy defining risk on the Atrium concept with the Hyatt Regency Atlanta in 1967. The Pritzker's literally bet the company on the acquisition of that hotel. The storing space, which led all other industry players to conclude that it would not work because it was so inefficient to have all this empty space in the middle of the hotel actually was an expansive view that gave guests a sense of awe and true wonder. When they walked in, they looked up and they said, "Oh, my gosh," because it was 20 stories of open space with a towering elevator, complex of elevators running up through to the revolving restaurant on the top of the hotel.

It helped establish Hyatt as the Atrium hotel company because we went with John Portman and started opening big Atrium hotel companies in Houston, in -- at O'Hare Airport, in San Francisco, in many, many locations, and strengthened our position by bringing architecture into the hotel experience, really, for the first time, architecture became important, hence, the Pritzker architecture prize. And we attracted a more premium experience-focused guests. Hyatt was the place to be. In those big atriums, we had the most vibrant bars, the best restaurants and there was a vibe. We've been very deliberate in how and where we grow as well.

In 1969, when the rest of the industry was looking to Europe for international expansion, we went to Asia. That was a big call early that Asia was going to be a powerhouse economic driver engine for the world going forward. And that bold decision led to Hyatt having a stellar reputation and brand strength across Asia to this day. The Hyatt Regency Hong Kong was renowned serving Continental Cuisine in the epicenter of Cantonese cooking. It was unprecedented.

More recently, in 2021, during one of the most uncertain periods in our industry, we acquired Apple Leisure Group. While others paused and played it safe and maybe even took a step back, we took a step forward with conviction, and we immediately became the largest brand operator for all-inclusive resorts, luxury all-inclusive resorts in the world. And through 7 decades of growth, innovation and transformation, our culture has actually remained the key differentiator for us. It's been the backbone of Hyatt since the beginning.

More than a decade ago, before the word purpose or the concept of purpose became a fixture in corporate boardrooms, we articulated our purpose. We care for people so they can be their best. This simple 10-word idea has become our superpower and continues to guide and shape how we lead and how we grow. Our purpose of care is Hyatt's North Star. It's our foundation. It informs our culture and drives everything that we do. Even as we remain steadfast in our commitment to our purpose, and we do, we believe that the opportunities ahead can redefine what Hyatt becomes next. And we have an expansive view of the future. We have powerful competitive advantages that are the foundation of our future.

In short, most importantly, Hyatt serves a high-end traveler across the globe in every segment that we serve, and our portfolio reflects that. Our portfolio of premium brands focuses on the high-end traveler in each segment. Our core guest base has proven to be resilient and consistently prioritizing travel over and over again. Our loyalty program, World of Hyatt drives deeper engagement through guest experiences, not just stays. Our value proposition is compelling to owners, and we have meaningful growth opportunities ahead, supported by multiple levers to accelerate growth, and also a record pipeline of over 150,000 rooms to support that growth.

So I'm going to walk through each of these in more detail. Over the past 5 -- 1 year, sorry, past year, we've aligned our teams around 5 distinct brand portfolios to better capture the growth opportunities that we see across our brands. We organize these brands in these portfolios by the guests and customers who concentrate their stays around those brands and the owners who tend to focus their holdings and developments on those brands as well. This positions each brand portfolio to attract higher-value demand, operate with greater focus and drive stronger performance. More clarity across our brands enables us to go to market in a much more focused way and a meaningful way for guests and owners.

Our luxury portfolio, for example, delivers personalized high-touch experiences for the most discerning travelers. Our Classics portfolio consists of properties just like this one, timeless style, impeccable service and thoughtful amenities. In these types of hotels, we welcome large groups that come together for meetings and events as well as guests who are celebrating some of life's most important moments. Our Essentials portfolio delivers reach into new markets, consistency and efficiency at scale. And we will have our brand leaders for the lifestyle and inclusive brand portfolios joining us later today to highlight what makes their portfolios unique.

Today, our operations, design and development teams are aligned by brand portfolio. This ensures consistent brand focus from development all the way through ongoing operations. This evolution to a brand-focused organization has become even more important as consumers discover and choose travel through tools and platforms that prioritize personalization and intentional experiences. That is why an intent-based generative AI search capability, which we have had in -- which we've had at the front-end of hyatt.com for over 1.5 years, has been critical in allowing us to care for our guests better. And at the same time, it's allowed us to learn so much more about their preferences. We also recognize that our guests engage with Hyatt on many different stay occasions across our brand portfolio. That could mean attending a conference at a Hyatt Regency, staying at a Hyatt Place for a child's tournament over a weekend or celebrating a big event at the Chicago Athletic Association.

Hyatt's portfolio of brands ensures that we can care for our guests on each of these occasions in a more personalized way. We're increasingly seeing guests engage with multiple Hyatt brands over time, and this positions us to deepen our relationships, increase loyalty, and expand our share of their travel wallet. It all begins with our guest base. Today, in the United States, the top 40% of households account for roughly 75% of total travel spend, go to where the money is. And within that group, the top 10% are traveling much more frequently and spending significantly more per trip. Now 70% of Hyatt room nights originate from the U.S. These U.S. travelers are prioritizing travel and experiences over goods, and that's been true for a while. We've been focused on these guests for decades with our positioning anchored in luxury and upper upscale segments.

Our guests are spending more with Hyatt. For example, Hyatt guests spend over 25% more per stay compared to our competitors. Even as U.S. travel demand has recently shown more variability across the income levels, our performance has remained consistent, durable and very strong.

When you pair a premium guest base with a loyalty program designed around our purpose of care, you get World of Hyatt. The program goes way beyond a traditional transaction-based loyalty program, delivering meaningful value and experiences, including differentiated elite member benefits, which Laurie Blair will talk about more later, transparent award pricing and high redemption value. The results of our differentiated approach have led to a significant increase in our membership base and greater loyalty room night contribution for our hotels.

Now turning to the compelling owner and developer value proposition that I mentioned earlier. Our focus on high-end travelers has led to each of our brand portfolios operating at a RevPAR index premium. When you pair this with the high-quality and low-cost distribution mix through Hyatt's direct channels, and you add to that our operational excellence led by people just like Mark and Roberto, you'll see that we drive margins for owners and cash flow for them as well. That's the value proposition in combination for our owners. Our World of Hyatt members now represent approximately half of occupied rooms globally. They spend more, return more often, and by virtue of building engagement with them, drive higher-value demand.

For example, 70% of our room nights are booked through Hyatt's direct channels. And World of Hyatt is a very, very important piece of that 70%. We expect to increase levels of member room nights as World of Hyatt continues to scale, which it has been scaling and growing at 18% to 20% compounded year-over-year. Rooms revenue is just one area of focus. We're also focused on food and beverage, as we've talked about and as you experienced last night, and wellness offerings and how we translate those revenue streams into the bottom line. We focus on optimizing every single line of the P&L. And this leads to enhanced growth opportunities.

We have grown in a meaningful way over the last decade with relevant scale, especially in luxury, upper upscale and upscale chains. And yet, we still have significant opportunities to broaden the choices available for our guests and members to stay with us in existing markets while growing our brand presence in new ones. We built a record pipeline of about 151,000 rooms, which supports our future growth and nearly 40% of our pipeline is in markets where we do not have any brand presence today, 40%.

As we grow, we're strengthening our network driving more demand through the system, leveraging Hyatt's brand equity and increasing the value to guests, owners and shareholders. These opportunities build on the scale we've already have, and give us confidence in our ability to deliver 6% to 8% net rooms growth through 2028. I'm really excited about our momentum, and it's palpable. We all feel it. There's a great deal of excitement and energy in the Hyatt family right now. We have strong competitive advantages and a very, very long runway for growth.

So now let's dive into how we will elevate performance and sustain our -- and really strengthen our competitive advantages into the future. Brands, talent and technology, working together will help us move faster, perform better even in an increasingly dynamic and competitive environment. It starts with our brands. We sharpened our brand focus to strengthen differentiation, improve consistency in the guest experience and drive better performance. This will also make us an even more attractive choice for owners.

Talent, passion is about cultivating our culture of care and performance will help drive our growth. We will develop leaders who relentlessly focus on quality and continuous improvement pairing empathy with action. We will further elevate our technology using tools, data and insights to benefit all stakeholders.

Our approach is grounded in a simple principle. Technology should enhance the human connection not replace critical thinking or judgment or human connectivity. Technology allows us to scale performance and AI is a strategic enabler embedded in Hyatt's operating model across the entire enterprise.

We're using tools, data and insights to better engage with our guests across their travel journey and to support our colleagues by reducing friction in their daily work, taking administrative tasks off of their responsibilities, enabling faster and better-informed decisions. As AI increasingly shapes customer decisions, we believe that companies that win will be those with the clearest understanding of their customer and the strongest brand coherence. That's the way travel distribution is going to work in the future. And that's why Hyatt's evolution toward more insights-led and brand-focused organization is strategically important. It positions us to compete from a place of clarity, consistency and most importantly, trust.

Recent studies show nearly 2/3 of millennials prefer AI-assisted personalized travel planning. We believe utilization of AI distribution tools will become more important over time. So now let's take a closer look at each of these drivers, starting with our brands. And I want to share a few examples with you. The first is the Hyatt Select brand, which we launched last year. The Hyatt Select brand started with two simple insights. First, our guests wanted to stay with us more, particularly in markets where we didn't have a brand presence. We had already identified this phenomenon when we created the Hyatt Studios brand. When our members stayed with a competitor, and we have the data to prove this, it was because there wasn't a Hyatt within 5 miles of that spot.

Second, owners will be -- were looking for opportunities to grow with Hyatt, particularly in a transient-focused upper mid-scale space that was conversion-friendly and could be brought to market quickly and very efficiently. We launched the Hyatt Select brand to meet the needs of our guests, and our owners at the same time, expand our brand presence to serve guests in new markets and generate attractive returns for owners. The momentum we are seeing is incredible.

The first properties opened only 8 months after announcing the brand, and we already have built a very strong pipeline with many more hotels in the funnel. A second example. This is the beautiful Manhattan suite at the Park Hyatt, New York, in one of the most important luxury markets in the world. It is long commanded one of the highest average rates and RevPAR, Eddy Park Hyatt Hotel in our portfolio. And yet, we saw an opportunity to unlock additional value through insights. In 2022, our hotel team, the asset management team, commercial operations and the operating team came together to evaluate what opportunities existed. We were looking to further elevate our most premium offerings and better utilize underutilized space and capture a greater share of ultra-luxury demand. We took a very disciplined and insight-led approach. We refined our target guest strategy and built new relationships, new channels, new access points in the ultra-luxury space.

We also rethought our product offering. We invested $14 million to reposition space in the hotel, and we did create within that budget, a new ultra-luxury suite at the top of the hotel, designed to attract highly discerning clientele. Started with the insight led to the design to serve that guests and the results speak for themselves. The hotel's RevPAR index has increased significantly, and the hotel now ranks #1 in one of the toughest comp sets in the world.

All of the major stratospherically known luxury brands are in our comp set, and we're #1. EBITDA has increased 85%, while increasing -- while realizing significant cash-on-cash returns on the $14 million investment. These are 2 clear examples of the Hyatt Select example in the Manhattan Suite of how we use insights, a brand focus and disciplined execution to expand our network and unlock new growth opportunities for Hyatt.

We're elevating the high end, and we are extending our reach in the upper mid-scale at the same time. The right talent and focus bring these insights to life. When we talk about how talent enables and elevates future performance at Hyatt, it starts with how we lead, namely with empathy. Our culture, specifically our purpose to care for people so they can be their best is a true competitive advantage. It's not a tagline. It's not a marketing gimmick. It's actually who we are, and why we exist. It shapes how we operate, how we set expectations, and how we hold leaders accountable. In practice, that means leaders take ownership of outcomes that they are seeking to achieve, they collaborate efficiently and very importantly, they develop talent and adapt in a dynamic environment.

Roberto -- my story of Roberto is a perfect example of what talent development in action actually is. We continue to reinforce this through disciplined investment and capability building. We focus on the skills that matter most to performance, including how leaders prioritize, how they make decisions, and how they lead teams. The result is a responsive organization that operates as one enterprise, moving faster, executing more consistently and delivering strong performance across the portfolio. Our leadership talent is focused on the highest value opportunities always. It's a constant reflection on reprioritizing and being strict about what we focus on. These include strengthening brand positioning and accelerating growth in priority markets.

Talent becomes even more powerful when paired with the right technology. We've been investing strategically in technology for many years, and we will continue to do so to elevate our performance. We've built the infrastructure, governance and capabilities to operationalize AI across the whole business starting over 2.5 years ago. We use it to care for our guests, customers and owners in a much more personalized and effective way. We're not eliminating humans, we're simplifying and enhancing the colleague and owner experiences to give them more time to care for our guests and customers, and for our owners, to get what they need in optimizing the performance of their hotels. It's not about activity. We don't measure activity. We want impact. We want results. That's what our KPIs are. We're personalizing the guest experience at scale, driving deeper engagement and greater loyalty. And by the way, in segments and for guests where that matters a lot to their decisions about travel. We're streamlining operations and empowering our colleagues, reducing friction, and improving service delivery.

And we're leveraging data and insights to optimize performance, enhancing how we price, how we sell, and how we operate our hotels. Mark Vondrasek will talk a little bit about this in a few minutes. As a result, we expect stronger loyalty contribution, higher revenue per booking and greater hotel performance and profitability. You're going to hear more this morning about how we're applying these capabilities across the business, building on innovations like intent-based search on hyatt.com. Our ChatGPT integration and expanding into areas that drive both guest experience and operational efficiency at the same time. The work we're doing to elevate our brands, talent and technology is sustaining and strengthening our competitive advantages and generating strong financial outcomes for our owners and for our shareholders.

We've delivered the highest RevPAR growth in the industry over the last 5 years straight. That has translated into strong owner returns and economics. We've achieved industry-leading net rooms growth for 9 consecutive years, and we have an extremely long runway ahead of us. And we're seeing strong momentum in our fee-based earnings as well. We expect durable fee growth over time as we elevate hotel performance and expand the system at the same time.

As we scale, our asset-light model will enable margin expansion. And that margin expansion leads in turn to higher free cash flow conversion over time. With most of our earnings coming from capital-efficient management and franchise fees, Joan will talk much more about this during her review of our financial outlook. Wrapping up, it's clear. Hyatt is for many reasons that I just covered, a very compelling long-term investment.

Our model is unique because we have a differentiated approach and differentiation at scale, which is very hard to achieve. And we serve the high-end traveler across every segment in which our brands exist. We have a compelling strategy to elevate performance. We will continue to evolve into a more insights-led and brand-focused organization that sustains and strengthens our competitive advantages and drive stronger outcomes across our portfolios.

In short, we are positioned to win. We built a business model that is scalable, resilient and built for long-term performance, durable long-term performance. The next era of Hyatt is already underway. And you'll be hearing a lot about it from several members of our leadership team this morning. So coming up next, to discuss some of the great things that we're doing to elevate our brands, technology and our technology are Mark Vondrasek, Amar Lalvani and Javier Aguila and Laurie Blair.

To start us off, I'm pleased, thrilled to invite Mark V, as he is affectionately known around the company. I'm Mark H, too many Marks, who is our Chief Commercial Officer and the master of all things. So Mark, welcome.

Thank you, Mark, and good morning, everyone. It is great to be with you again. Mark framed Hyatt's story through 3 verticals: differentiation at scale, elevating performance and truly being positioned to win. And that's really where I want to pick up this morning, how we are continuing to build on our strengths, how our work comes to life through an insight-led approach through our brands, and how we're scaling all of that across our system with the smart use of technology and AI. And importantly, how we win a bit differently from those with whom we compete. At the core of our approach is a fairly simple premise. We listen, we start with, and we're led by insights, we gladly and openly co-architect everything we do with our stakeholders, our guests, our customers, our owners and our colleagues. It's a subtle nuance of approach, true to our purpose of care, but it matters a lot here.

This approach allows us to build stronger, more differentiated brands. You'll see that today, brands that attract higher-value guests and drive deeper loyalty. And we scale all of that through technology, which ultimately drives performance and growth, but let's start with insights because our brands sit at the upper end of the segments they serve, they are designed to attract higher spending and more resilient guests and customers. And we clearly see this outperformance in our data.

Nearly 40% of Hyatt's guests are in Visa's top quintile affluence category, well above the travel benchmark. Our guests spend 26% more on lodging overall and 25% more per stay compared to our competitors. So that higher-value mix is a key insight and an incredibly valuable starting point for us. We build from these insights. We understand what our guests and customers truly value, and where today, those needs are not being fully met across their travel journeys.

Many, if not most of our most impactful initiatives are shaped directly by the people whom we serve. Let me start with what I think is a clear example. We are and have been focused on infusing well-being into our meetings and events. Why? Because what we heard from customers was crystal clear. The more we can embed well-being into a corporate meeting or event, the more we connect to a need our customers had and want for their own colleagues. And that need is to not lose the importance of well-being in people's lives when they travel to a corporate meeting or event. And we believe we have an authentic license to do this well here at Hyatt. This focus on well-being reflects a structural shift as well. The global wellness economy is growing at over 7% annually.

A recent human group study showed that over 60% of Miraval brand guests reported reduced stress even 2 months after they stay with us. I mean that's pretty incredible. We have worked hard to scale that kind of amazing capability across our entire brand portfolio as it relates to well-being for meetings. And it's working. Through our well-being collective now across approximately 200 hotels with over 125 curated experiences, we are bringing well-being to meetings and events for our group customers at scale. One example at Alila Ventana Big Sur in California, one of our best resorts, leadership retreats, take teams into the Redwoods for immersive experiences that foster connection and push them on new ways of thinking about their own teams and leadership. They join a renowned master Falconer to learn about the role of Raptors in the Big Sur environment. They can see a flight demonstration. They even have an option for an up-close interactive encounter with the birds of prey.

And it's not just about amazing outdoor experiences, which I think we do really well, it's also simple practices that we have now embedded thoughtfully into meetings and events, like starting with gratitude offerings and what you're just grateful for today that brings you into that meeting with a clearer mind and intention setting. We've also extended content through partnerships with Headspace, including their content focused on better sleep. We partner with MasterClass and a number of offerings they give us.

And Peloton, where World of Hyatt members can earn points and compete with one another. Meetings are an enormous part of our business at Hyatt. And this work particularly helps our classic hotel brands like the Hyatt Regency that we're in today. We have now scaled this capability, training 1,500 leaders across our properties to offer well-being-infused meeting content. And the impact is clear, greater than a 20-point lift in guest satisfaction. We are growing share with 70% of our top 30 corporate accounts. Same corporate accounts, our competitors compete in, represents nearly $500 million in revenue for us.

Let's take a look at how a few of our corporate meeting customers are experiencing our work in well-being for meetings.

[Presentation]

This work is differentiation at scale. It's born from an insight fueled by a strong authentic wellness brand in Miraval, now translating directly into performance for us. The next few examples I wanted to share this morning are through the lens of 2 of our brand portfolios. Our Lifestyle Group and our all-inclusive portfolio. And so to do that, I would like to welcome up our President and Creative Director of our Lifestyle Group, Amar Lalvani, and our President of our Inclusive Collection, Javier Aguila. And we'll start with Amar. Over to you.

Thank you, Mark. It's good to be here with everybody. Mark and I go way back, and I couldn't imagine 20 years ago, we'd be sharing a stage like we are today. So it's an honor to be here. I want to thank him for his support as well as Mark's support and bringing my team on board. So I thought I'd start first a little bit about my background, not because I like to talk about myself, but because it will give you an insight into how my mind works, and how -- and why I'm so passionate about the direction that we're headed for as a company.

My first job out of college was at Starwood Capital Group. I think I was the third analyst ever hired there. And the reason I went there as the second analyst was a friend of mine, and he said it's an interesting place to be. For some reason, Barry Sternlicht, Chairman of the company, took a liking to me, and I became the first assistant to the Chairman. One day, he called me into his office, and he said, "Go down Greenwich Avenue and buy yourself a tie, we're going to the city." Okay? So I went, bought myself a tie. And he picked me up, and he said, so what are we doing? I said we're going to go buy ITT Sheraton. And over the course of the year, we bought ITT Sheraton, which became -- we became the biggest hotel company in the world for a period of time. I had no idea what I was doing, but I did work on it.

I then went on to work for Blackstone, where I got a real appreciation for capital, capital partners, how capital investment works. And then my journey started on the lifestyle business -- hotel business. I was asked to come back to Starwood Hotel this time and lead the W Efforts in the Europe, Africa and Middle East region. We started from scratch. No Ws. No one knew what I was talking about. No one knew what lifestyle hotels work. It was a bit of a stretch, but we did it. I was then asked to lead the W Hotels initiative globally. At that time, we had the market to ourselves.

It was a very, very exciting role. One thing led to another, and I led a guy -- I met a guy named André Balazs, who founded the Standard brand, and he asked me to come on board to help -- build Standard into a global company, global brand. And I thought the brand had great DNA and so I joined him. Two years into it, I realized he was impossible to work with, and that the only way to do it would be if I bought the company from him.

So I found a way to do that, and that's when we were off to the races. We then bought Bunkhouse Hotels. And over the course of a decades, we built brands with an asset-light global footprint and that were attractive enough for Hyatt to acquire. We had no global distribution platform, no balance sheet to speak of and no loyalty program. It was difficult. The brand had to be our competitive advantage. The brand was all we had. We had no choice. I was -- I'd love to hear Mark's example about the Pritzker bet. For us, we had to nail every single hotel we opened or there would not be another one. So it's not a stress to say that every hotel was a best of company execution for us. And what that taught me, is what brands are capable of, when you treat them as your most important assets, and that's where we're headed.

Having grown without that infrastructure, it was a dream come true for me and for our team to join Standard and broadcast brands to Hyatt's global scale, financial wherewithal, an industry-leading World of Hyatt program. Now let me explain why the brand-led model is so powerful. It's quite simple. It compounds. Let me explain that. Differentiated talent with a guest-centric insight-driven mindset creates brands that deliver experiences on property that guests seek time and time again. What that does is, it deepens guest loyalty, increases their spend, at the same time, it lowers customer acquisition and distribution costs, which collectively when you put that together, it's pretty easy to see that, that drives financial performance. Now to drive financial performance, you attract higher-quality owners and developers who build higher-quality hotels and higher-quality mixed-use developments.

What does that do? That accelerates our growth and improves the quality of our growth at the same time. That's the magic. Now this strategy is not easy to replicate because it's based on a culture, a culture that Mark H. described. And it's based on -- it's enabled by our smaller scale. Our scale is an advantage for both quality and the rate of growth. And that's the really exciting part. We have a wide open playing field across the entire globe for these brands. And that's what gets me excited. Now, this is not just a theory.

We're seeing evidence of this flywheel in effect right now within the Lifestyle Group. I'll give you examples. The Andaz Fifth Avenue, which many of you may know that hotel, we achieved record performance in 2025. Record performance against a very aggressive budget. What did that record performance do? It led to that ownership group choosing to do a new Andaz across the world in Japan, the Andaz Hiroshima, which will be opening, which is under development now.

Another example, the success and cultural relevance of our Bunkhouse properties in Austin created the opportunity with one of the owners to do the Standard in Austin, which is coming soon, to what is one of the highest barrier-to-entry submarkets in Texas. And Joan, it's a quick conversion. The stellar performance of the Park Hyatt in Zurich led that owner who is one of our most important owners to acquire the Standard London.

What does that do? They extended the hotel contract for the -- for our brand's flagship hotel in Europe creating durable cash flows and a beacon property that sparks new development for the brand across the region. Staying in Europe, after successfully opening the Thompson Madrid, that same owner signed the Thompson Seville, who is opening this fall. Yesterday evening, I was talking to Ignacio, who may be here, and he said, "You know what, Spain would be great for your brands." I said, "I totally agree." He said, "It will be great, Seville would be great." I totally agree. He said, "You know what Seville needs?" I said, "What?" A great rooftop. So give me 3 months. So another example, after years as the #1 hotel and TripAdvisor, the Standard Miami Beach helped drive a 225 sold-out stand-alone branded residential project in Midtown Miami.

No hotel stand-alone branded residential based purely on the power of the brand and the experience. We began delivering units to buyers over F1 weekend. It has premium pricing and faster sellout than its competitors. Similarly, the success of the Thompson Cape and Cabo, which is a beloved hotel and residential project there has led to several Thompson mixed-use developments throughout Mexico. These are proof of high-quality owners choosing Hyatt without competitive processes because of the type of customers we serve, the strength of our brands and the performance that they generate.

Now I talked about how it compounds. The next important thing is this model is also scalable. It does not require additional headcount or additional capital. It does not. It requires a reorganization around brands and the reorientation of mindset. A mindset that views the business through a brand and customer lens first and foremost.

And it requires teams that live and breathe the brands as passionately as I do. Approximately 18 months ago, the Lifestyle group took full end-to-end P&L responsibility in the Americas. This is a different structure. And I'll tell you, I'm very proud, the properties experienced no operational disruption, and our brand-centric focus is showing real results across multiple metrics, guest experience metrics, media value, financial performance and pipeline growth, all while reducing the need for capital deployment. How do we do it? We have refined the positioning of each of our brands to make sure they are distinct, truthful, ownable and executable. And I'm thrilled to see that we're coming to life in very tangible ways at our hotels.

Key examples. The new Andaz and Lisbon, which embraced the positioning of the Andaz brand, embodies the Andaz promise, global travel rooted in local culture in real truly immersive ways. For example, the Andaz Lounge downstairs exclusively serves wines made by local female winemakers. You feel enriched when you're there, you learn something, you try something new, and you don't forget it and you want to come back.

The Standard Brussels, we just won more hospitality design awards than any other hotel in the world. Best Uniforms, okay; Best Lifestyle Hotel, great; Best in Show. What that means is the best-designed hotel in the world across every segment. That's a big deal for hotel in Brussels. I'm really proud that of the 3 runners up, 1 of them was the Bunkhouse Hotel Daphne. So 2 of the 4 hotels up for best hotels design in the world were Hyatt brands, which is pretty cool.

And -- but it also shows an example of how much runway we have because the Standard in Brussels is the first Hyatt Hotel in the European capital. It's just an illustration of how much runway we still have for all of our brands. And in Andaz, Miami during Formula 1 weekend. Laurie Blair and her team brought together top tier owners, globalist travel advisers and press in a way that demonstrated the power of the combined World of Hyatt ecosystem with our brands.

So what are we doing with all this? We're using the Lifestyle Group as a proof point for how a brand-led operating model can create stronger guest loyalty, deeper owner relationships, better development opportunities and superior financial performance. Our mission is to help Hyatt turn into the most differentiated and most innovative hospitality company in the industry.

And we are -- we will get there. I can promise that. So -- and why do we do all that? So we become the brand of choice for guests, owners and developers and the company of choice for shareholders. Now I'll show you a little short video that should bring some of my comments to life.

[Presentation]

Thanks, Amar. I'll say what he's too humble to say. I think what's clear is that we didn't just acquire 2 strong lifestyle brands in Standard and Bunkhouse, we have decided to build from them, through Amar and his incredibly talented team. Next up, our all-inclusive collection. The last time we were together, and I think this is a strong example of how we are also expanding our reach while strengthening differentiation.

Last time we were together in 2023, we were just integrating these brands. Today, they've become a very powerful growth platform in our portfolio. to share a little bit more about that growth and platform today. I'll turn it over to Javier Aguila.

Thank you. Thank you, Mark. Good morning, everyone. It's a pleasure to be here. Let me start by saying this. Hyatt is winning in the leisure segment. And more importantly, we are winning differently. As Mark said, we made our all-inclusive debut in 2013. And at the time, we have only 2 resorts. Today, we had 155 and more than 58,000 rooms that contribute to a substantial part of high-end business. And it's driven by some of the highest GOPs per room in the highest portfolio. But as you said, Mark, scale is only part of the story because we already have the most enabled powerful platform in all-inclusive.

In fact, when you combine World of Hyatt, ALG Vacations, and our Vacation Club we have one of the most powerful commercial engines in the industry and in this particular segment. That engine today drives over 60% of revenue across our resorts portfolio in the Americas. And that is an exceptionally high number for all-inclusive. And that number accelerates our journey to become the all-inclusive brand of choice, and that strength is also mutually reinforcing because it stays in our resorts, make our broader commercial engine even stronger. How? all-inclusive properties are among the biggest contributors to World of Hyatt, because we drive almost 1 million new enrollments every year in our resorts.

In 2026, so far, our properties have enrolled roughly 60% of nonmember resort guests, but our ambition is much bigger than that. We want to become the best global organization in all-inclusive in the world.

Let me show you how we are thinking differently about the guest experience because this is a big part of what has helped us win again differently. F&B is key. F&B is key -- is a key driver of guest satisfaction in our business. And a favorite example is Hyatt Ziva Cap Cana, a resort that stands out not only from a guest perspective -- guest experience perspective, but also from a performance perspective. Hyatt Ziva Cap Cana is home to the Blind Butcher and the Blind Butcher is a speakeasy that combines live entertainment with an immersive culinary journey.

Now you may say that the idea of entertainment is not new in itself and that is true, but what makes the Blind Butcher different is the execution, because we are constantly innovating behind the scenes to keep the concept both compelling for guests and profitable for owners by generating meaningful non-package revenue.

In fact, on weekends, a significant number of those visits in the Blind Butcher are not even staying at the resort. And this is the kind of differentiated concept that we're looking forward to replicate across our entire portfolio. Let me give you a couple of more examples. Shinola and Secrets La Romana, where we offer a unique dining experience. Toes in the Sand inspired by the Taino indigenous culture who were pioneers in the use of barbecue-style cooking over open fire. Another one is Casa Adelita, currently under development at Hyatt Zilara Cancun. Casa Adelita is designed to feel like being welcomed into a Mexican grandmother home for an intimate dinner center around personal interaction.

And also at Secrets Playa Blanca Costa Mujeres, the hotel has collaborated with a premium tequila brand to create an exclusive numbered hotel-branded edition available for very special events. And as you can see, we are reinventing all-inclusive F&B while creating non-package revenue streams that go well beyond the typical spa treatment, upgraded wireless or romantic dinner.

And that is part of a broader evolution across our entire portfolio because we are elevating our brands. We are creating greater clarity around what each one stands for, and we are evolving from brand standards to adding stronger brand codes because this is not about having 6 pillows on a bed. This is about how you feel when you lay down. And all of that combined is help us win this segment again differently. This evolution true to our insights-led journey is also backed by some really exciting new consumer research that is helping shape our strategy. Let me share some of it with you. First, all-inclusive is no longer in each category because nearly 7 in 10 travelers had experienced it at least once. And guess what? Once they do, they come back, more than 80% of them come back and they do multiple times, creating very meaningful loyalty.

But maybe the data point that I find most exciting is what we are seeing among very young travelers. More than 70% of travelers under 30 are now more likely to consider all-inclusive than they were 5 years ago. And that tells you -- tells us that it's not only a category that is strong today. It is a category that has an even stronger future. So let me close with this. If you combine a large and growing market, with a strong and proven platform and with the ambition to build the best brands through insight-led innovation and elevated F&B then what can I say? We are very confident in the future of leisure and all-inclusive at Hyatt. Thank you very much.

Thank you to Amar and Javier. Great examples. I think there are both wonderful examples of how insights, scale and execution all centered around differentiation of brands are coming together to help us drive growth here at Hyatt. So when you step back, our insight-led approach, which, as I shared, comes from many people and many places today, clearly allows us to build stronger, more differentiated brands. And those brands continue to attract higher-value guests, drive deeper engagement. And at the end of the day, deliver stronger returns for our owners. And that's less deeper relationships with our guests. And that's what brings us to the World of Hyatt. What we consider to be our most powerful brand. And to share a little bit more about how our World of Hyatt loyalty program is truly driving deeper engagement. I'll invite up to the stage, my friend and colleague, Laurie Blair.

Hello, everyone. I am thrilled to be here today to talk about how we build deeper loyalty with World of Hyatt. Deeper loyalty starts with being member and guest-centric. We designed a program with clear points of difference because we listen to what our members care about and in turn built a program that delivers true value and experiences to our members in meaningful ways. The World of Hyatt loyalty program goes beyond the expectations of the industry, which have treated loyalty programs as largely transactional. On the other hand, our program was designed around Hyatt's purpose of care, defines our brand and is one of the most powerful tools in delivering the highest value guests across the Hyatt system.

Today, I'm going to showcase the World of Hyatt established points of difference and why these differentiators are critical in finding higher-value new members and deepening relationships with our existing members who have more spend, more stays, all driving a network effect not across our portfolio, but within their own communities and why we will continue to lead the industry in elevating loyalty. But first, let's hear from a few of these loyal, high-value and influential World of Hyatt members and globalists. What's unique about the members in this video I'm about to share is that it's their job to raise the bar on loyalty programs and travel experiences to critique them, but also highlight examples that resonate is truly special. And then, of course, to share those experiences through published articles, social media and podcasts.

So let's hear what they have to say.

[Presentation]

It is pretty impressive when the most critical travel and loyalty writers and podcasters have such an emotional draw to World of Hyatt, especially given the importance of influencers, whether paid or, in this case, very much earned in today's media landscape. What you heard from these members showcase how World of Hyatt's meaningful points of difference, drive loyalty and lead the industry in doing so. Our philosophy of building loyalty beyond transaction shows up in both structural and emotional ways. On the structural side, World of Hyatt remains the only global loyalty program with a fixed award chart, an increasingly rare commitment in an industry that has otherwise gone toward opaque and dynamic pricing, and our points remain more than 2x more valuable than our competitive set.

But importantly, differentiation doesn't stop at just earning and redeeming because World of Hyatt is focused on making loyalty feel personal, flexible and importantly, giftable. Our elite tier recognition, member benefits and the delivery of those experiences, especially at our top-tier globalist status, our best in class in the industry giving us a competitive advantage in attracting the highest value travelers. By offering members choice at each award milestone that enables us to deliver benefits that matter most to each member, but also to learn from what our members care about as we think about and design the future of World of Hyatt. But perhaps the most distinct element of World of Hyatt is the ability to gift and share awards.

Our Guest of Honor Award, which enables our most valuable members the ability to episodically gift the benefits they have earned to someone close to them on an upcoming stay is both a member favorite and, as you can see, a powerful tool to meet new high-value members.

When we meet someone as a new member on a Guest of Honor day, they go on to spend 2x more per year on additional stays and are 5x more likely to reach elite loyalty status compared to other new members on an incredibly powerful example of building deeper loyalty. World of Hyatt continues to be the fastest-growing global hotel loyalty program in the industry.

Since our last Investor Day, our membership base has grown by 78% and member penetration by over 400 basis points. And even with our growing footprint and expansion of brands, we have grown our members per property by 45%. More and more guests are converting to members becoming part of the World of Hyatt ecosystem.

And our growing World of Hyatt membership base is also more valuable than ever. Our members have always been deeply engaged, and they're even more valuable now, spending 93% more than nonmembers, up by 20 percentage points. And at the highest end of our engaged member base, we are seeing tremendous growth with a 38% increase in members that have more than 100 nights with us.

The rapid expansion of our footprint offers more opportunities to stay with Hyatt, the introduction of incredibly differentiated brands like the Standard into the portfolio and the continued evolution of the World of Hyatt program, all drive more engagement and offer more experiences than ever before. From more stays leading to more elite and loyal members, more spend on those days and a greater percentage of direct bookings, our members are more engaged than ever.

Now I want to take a minute to talk about what we call the network effect, which is the strength and power of World of Hyatt and delivering for each and every one of our brands. Mark touched on our differentiated brands. And it's important to note, they are incredibly compelling. When we meet a new member from any one of our brand portfolios, whether, say, in a lifestyle brand like the Thompson Hotels or classics brand like Hyatt Regency, they continue to choose that brand portfolio for future stays half of the time, returning to another lifestyle or classic brand. But the network effect across World of Hyatt is powerful as the other half of members' future stays are in other brand portfolios. That member who we met at Hyatt Regency may go on to an Essentials brand or inclusive or luxury brand max. We see our members migrate across our brand portfolios based on their stay occasions, delivering more of that network effect across Hyatt.

And because we serve a premium guest, we meet many new World of Hyatt members for the first time in our luxury portfolio, which includes amazing brands like Park Hyatt, Miraval and the Unbound Collection by Hyatt brands. These new guests are particularly valuable. New members we meet in one of our luxury brands spend 2x more across the Hyatt network. So as we find new luxury guests, we are creating stickiness with our compelling brands and keeping them in the loyalty ecosystem. As World of Hyatt members stay across brands, they're earning far more than they are redeeming. On average, 90% of member nights are for paid nights. And finally, our most valuable members are Globalists, are expanding where they stay with us, an average of 15 unique properties, which incredibly is a 25% increase from just 3 years ago.

As Hyatt grows and expands its footprint, our members are going to continue this momentum with more stays and more spend at more of our brands. Mr. & Mrs. Smith is a great example of how acquisition multiplies that network effect. Mr. & Mrs. Smith offers a global collection of boutique and luxury hotels, all carefully curated across the globe. From English countryside manners to tree-top escapes to family-friendly hotels at top seaside cliffs, we now have nearly 1,300 Mr. & Mrs. Smith boutique and luxury properties in 34 additional countries globally, all integrated into World of Hyatt. We are harnessing growth for the entire Hyatt network with Mr. & Mrs. Smith. These new hotels are -- these hotels are delivering new, high-value guests while increasing share of wallet from our already existing incredibly valuable high-end members.

Members we meet for the first time at Mr. & Mrs. Smith are 4x more likely to stay at another Hyatt brand than a typical new member. And with over 75% of stays made by Elite members or those with at least 10 nights a year with us, it is clear that Mr. & Mrs. Smith is helping us deliver scale where our best members want to be. Our head of Mr. & Mrs. Smith recently sat down with one of our Elite members to talk about the impact that these properties had in concentrating more of his business with us. Here's a bit of that conversation.

[Presentation]

I am certainly looking forward to celebrating alongside Ivan when he reaches that so well-deserved lifetime status. We are redefining loyalty in very specific ways, including with our strategic alliances. We have recently expanded into unique stays with Under Canvas, which are upscale outdoor accommodations near national parks and Acelio Safari camps, 15 luxury safari camps throughout Africa. Our well-being brand alliances continue to offer meaningful connection points to World of Hyatt, both in the meeting space, as Mark V. shared as well as with members through brand integrations and experiential moments throughout their stay journey. With World of Hyatt loyalty is not just earned through transactions but felt through personalized experiences that make our members feel seen, valued, cared for and a part of something bigger.

As a culturally relevant brand that our members truly love, our loyalty program needs to be fully integrated into the lives of the modern traveler. Each of these partners delivers on that through earning and redemption opportunities, shared brand equity, unique experiences and more. But when it comes to the power of our strategic alliances, one of the greatest examples is our World of Hyatt credit card portfolio. As we shared alongside our contract renewal announcement with Chase, we expect to deliver more than double the EBITDA contribution from our credit card programs and third-party fees next year. Our cardholders are the most engaged members we have with 221% more stays compared to other members. And as Mark shared, we serve a premium guest. Hyatt has a portfolio focused on high-end, experience-led travelers, and our cardholders demonstrate this, too.

Our cardholders spend 28% more on their cards compared to other travel co-branded cards. And our credit card portfolio is attracting more millennials compared to competing co-branded cards, while we are continuing to grow our millennial base faster than our competitors. With millennials gaining in their spending power and their desire for experiential travel moments, we are poised to continue to grow and win. Our robust World of Hyatt credit card growth will continue as we are expecting to launch several co-branded cards internationally and expand our United States card portfolio in the next 12 to 24 months. These new card offerings will give members even more reasons to stay with Hyatt and will drive more engagement from members globally. Today, World of Hyatt delivers the value, the expectations and care for the stakeholders and communities that matter most and the momentum that we have within the industry is undeniable.

The future belongs to brands that treat loyalty not as a transaction, but as a relationship, points, not as currency but as connection. World of Hyatt will continue to listen to what members care most about, recognize the value of our members with every interaction and innovate as we continue to define what emotional loyalty means in hospitality. Hyatt is well positioned to win and World of Hyatt is poised to continue to help deliver upon that growth and long-term value. With the rapid expansion of our member community, increased loyalty and spending among our valuable member base, continued net room expansion and strong performance across brands that deliver value for owners and shareholders, the future for World of Hyatt is bright. Thank you.

[Presentation]

Thank you, Laurie, outstanding job. One of our barometers of success is when people who have no agenda to somehow feel compelled to make sure we know something we have created and done here at Hyatt is resonating and is breaking through for them. And that happens a lot routinely with the World of Hyatt program. And if you needed another reason to believe that we are right now building relationships with Hyatt's future guests. I hope you remember 2 statistics between Javier and Laurie around future guests. Javier said of 70% of travelers under 30 are now more likely to consider all inclusive than they were years ago. And Laurie said that our co-brand portfolio is attracting more millennials than competing cards and growing our millennial cardholder base faster than any of our competitors.

I think those are proof points that we are well positioned today, but also incredibly well positioned for durable compounded future growth. So the next step this morning is how we scale all of this across our system, how we continue elevating performance and positioning Hyatt to win, and that's where technology plays a critical role. And I'll spend a few minutes on our work in tech and AI. Technology allows us to scale everything we've built across our brands and loyalty program. And we think about the use of AI and technology in 3 core ways. First, they allow us to scale our platform efficiently. They allow us to drive smarter decisioning and to enable even deeper engagement with our guests. And importantly, we don't think about technology just as infrastructure, we think about it as a growth multiplier. And I'll walk you through just a few examples.

First way we are scaling our advantage is through efficiency gains in our core technology platform. Over the past 1.5 years, we've elevated our foundational technology systems. We're moving from proprietary solutions to best-in-class platforms. We started with revenue management. We replaced our homegrown system with the industry-leading ideas product, which has already delivered a 1.4% revenue uplift across our entire system. It's not just a pricing tool, it's a decisioning engine. It optimizes demand, inventory, pricing and mix across our entire business. We're also migrating the Sabre's SynXis platform for our Central Reservation System, which expands distribution, improves merchandising and reduces our cost and complexity for our owners. And I will say, we approach this work a bit differently. We brought in senior leaders from Sabre to execute this work.

And this has resulted in these large-scale system migrations being completed on time, on budget with little to no disruption to operations and importantly, with no incremental cost to our owners. And I think this talent decision that we made here has made all the difference. The reality is that most companies undergo these transformations and try to pull them off with the same leaders who built their proprietary systems. And I think we knew that the best way to ensure success was to actually bring in leaders who've executed these large system initiatives several times. And for us, this has made all the difference. We will wrap up this work this fall. And finally, our move to OPERA Cloud for our Property Management Systems creates a more scalable and flexible platform across all of our hotels, reduces infrastructure cost, simplifies operations at the hotel level and create a more flexible foundation for future capabilities and for our future growth trajectory.

Taken together, these technology investments are driving revenue. They're lowering costs for our owners, and they're enabling faster innovation across the Hyatt system. We're also enabling smarter decisions at the property level. One example we're really excited to share we call Hotel Heartbeat. And hotel heartbeat is a centrally led AI-enabled self-learning tool that puts data directly into the hands of our property leaders. It integrates more than 70 data points to deliver clear prioritized recommendations to our on-property leaders on where to act across revenue, service and forecasting. Instead of interpreting reports, teams now know exactly where to focus. Here building behind me, you'll see a sample notification identifying a trade-off between high occupancy and slightly underpriced rates at the property level. It's prompting a review of corporate and negotiated pricing to shift from volume to higher-value revenue.

And the engagement with Hotel Heartbeat has been strong across our pilot hotels seeing great weekly engagement and more than half of the signals that come from the center are actually driving action at the property level. And when a recommended action is not taken, our leaders feed the LLM by providing feedback as to why what we recommended was not the optimal choice, and that makes the model smarter over time. We're scaling hotel heartbeat across the entire system. It's an example of how we're turning insight into action with AI. And the final way we're scaling is through deeper guest and customer engagement. We are transforming how guests discover Hyatt through AI. We were the first in our industry to introduce intent-based search.

We can now smart match location, amenities, price points and experiences to what guests really want in travel, and Mark talked a bit about this. The ability now to search for travel options on their terms. I'm looking for Cancun hotels under 30,000 points at night with a wonderful spot. And the result here is a 23% lift in conversion of intent-based search, but more importantly, it gives us a much deeper understanding of guests' intent. This insight we learned through intent-based search feeds our ecosystem now of better informed offers because now we know that this kind of trip appeals to you. It also feeds data to our development teams as we think about future project sites based on demand. We've taken this work a bit further as well. We were also the first to launch an integrated ChatGPT experience, opening a new direct channel to nearly 1 billion users who can now download and engage in our app.

And being early here mattered a lot to us because it allowed us to learn faster and build stronger relationships with our guests. And while the truth is, there is not a ton of volume here yet. But for us, that's just fine. I mean we're learning simply by being early here. And we're learning things like the demographics of our guests using this capability are that they're younger. They have higher income, and they're disproportionately looking for experiences across all of their travels. That insight alone helps us with content creation and future partnerships. We're also using AI to transform how we manage group demand, an incredibly important part of our business. It represents approximately 25% of our revenue here in the United States. And this started with a simple insight again. Our sales teams were spending way too much time, roughly 1/3 of their day filtering and processing inbound request for proposals, RFPs, time that we knew could be better spent for more engagement with our customers. So we developed an AI-powered solution that scores and routes the most valuable opportunities to the right teams and right properties without human intervention. It's now deployed across more than 500 of our hotels today, and it's expanding rapidly.

And the impact is clear. What this does is it removes guesswork, it prioritizes the best opportunities for our sellers, and it helps us sell smarter and faster. Our sellers love it because it's giving them time back. So when you put it all together, technology and AI allow us to scale our platform very efficiently. They've allowed us to make smarter decisions and to engage more meaningfully with our guests and customers, and it's what allows us to take everything we've built across our brands and our loyalty platform and extend that advantage across the entire Hyatt system.

I'll close this section out by reiterating what Mark said earlier today differentiation is in our DNA. It's what our stakeholders demand from Hyatt. And I hope what you're seeing are clear examples of differentiation across our network. We start with insights, we build stronger, more differentiated brands, and we scale them through data and technology. And that's what delivers differentiation at scale, elevated performance and a business that we believe is clearly positioned to win, being the most relatable differentiated and highest quality growth player in this industry is how we win. Thank you for your time this morning.

[Break]

All right. You've heard a lot about growth in many dimensions, growth of our membership, growth of our RevPAR growth of our enterprise, and now we're going to talk about growth as in our system size. First of all, I want to express my gratitude to Mark, Javier, Laurie and Amar for a fantastic session I think you can tell that the backdrop of the technology investments, especially in AI, have now flourished over the last 2.5 years to applications that are spread across the company, as I described earlier in what I described. It's also clear, I think, when we talk about being insights-led and brand focused, they create significant value for all of our stakeholders. And I think you just heard many examples of how that happens. I'm here to talk to you about how that creates value for our owners and our developers.

So let's turn our attention to maybe the most important enabler of our growth as we look forward, which is our system size growth. When we committed in 2017 to be a more asset-light company, we recognize that growth would come through a combination of both organic and inorganic expansion. Since then, we've been highly intentional about how we built Hyatt's growth platform, strengthening our position in high-value segments while expanding our reach through owner focused scalable brands. In fact, all of our brands are owner focused. But when we say owner focus, we literally mean designed with owners, and I'll describe that in a second. First, we strengthened the high-value segments, luxury lifestyle and resorts, primarily through extremely highly accretive acquisitions.

Two Roads positioned us to scale meaningfully in luxury and lifestyle. While Standard International further deepened our lifestyle capabilities and brought with them, Amar's team, which has now taken us to an entirely different level of execution. And as a side note, while it's not listed up here, we bought Miraval in 2017. And you heard from Mark Vondrasek how Miraval is a platform has now been pulled across the enterprise to great effect, both for our group customers and for our transient customers. Apple Leisure Group added immediate scale and established Hyatt as the largest brand operator of luxury, all-inclusive resorts globally. Bahia Principe and Playa built on that leadership. Through these moves, we've broadened our all-inclusive offering across price points and across geographies.

Second, we focused on organic growth. We accelerated momentum with our existing brands and built scalable growth platforms for the future. We launched the UrCove brand by Hyatt which gave us entry into a massive upper mid-scale segment in China. And those representations of that brand are in primary cities. They're in densely populated neighborhoods, very convenient to central business districts that are impossible to develop in absent being in the upper mid-scale.

The Hyatt Studios brand expanded our reach into new markets through a highly efficient owner focused, owner design model designed to generate really strong returns and offer exceptional experiences to our guests. In fact, in the first review model room review our developers were telling us to dumb it down like dial back the design elements of it. And we said, "No, no, no, it's got to be a Hyatt. It's got the Hyatt name in it, so it's got to be elevated. And by the way, it's not costing you any more money."

So we ended up prevailing on that. And the Hyatt Select and unscripted by Hyatt brands added conversion-friendly growth platforms with a large number of hotels in our pipeline and under discussion in less than a year. Together, these actions have enhanced our premium mix, expanded our network into high-value demand segments, we've entered new markets with owner focused and scalable brands and all of this complements our pre-existing brand base of Park Hyatt, Grand Hyatt and Hyatt Regency and Hyatt Centric. This strategy has delivered industry-leading net rooms growth for 9 consecutive years. It's not a mistake. It was the result of these deliberate actions.

And we've delivered net rooms growth averaging more than 9% annually since 2017. I know your initial reaction is, "yes, but you bought a lot of stuff." Well, our organic net rooms growth. I know that's what you're thinking. Our organic net rooms growth was 7%, exceeding the growth of our largest public peers and underscoring the strength of our strategy, [ tell me, if that's impressive. ] Thank you. What differentiates Hyatt is not just our industry-leading growth, but where that growth is concentrated. Today, nearly half of our rooms are in luxury lifestyle and resorts.

Since 2017, in those segments -- rooms in those segments have grown at over 15% per year and accounted for over 65% of our net rooms growth. 2/3 of our net rooms growth in those segments. As a result, we have doubled our luxury rooms, quadrupled our resort rooms and expanded our lifestyle rooms sixfold. We've grown disproportionately in segments that yield deeper loyalty engagement, higher fees per room, something we're very focused on and greater long-term value for stakeholders, including our hotel owners. We significantly strengthened our position in the world's most important travel markets, especially in the top 50 markets, where premium demand is the strongest and most resilient. Our luxury and lifestyle presence in these markets enhances the broader system by elevating brand awareness, increasing the number of high-value hotels available to our guests and enhancing performance across the portfolio, creating powerful network effects. And importantly, we continue to see significant white space for Hyatt brands ahead.

While we have very strong representation in the top 50 global markets, we remain underrepresented across many, many secondary and tertiary markets around the world. And we're not heavily saturated in those primary markets that we have presence in, in markets where our brands already operate. Our largest public peers average roughly 3 to 4x as many hotels as Hyatt. And in many markets, we don't have any brand presence whatsoever. Even including our pipeline, we still see substantial opportunities to grow in existing markets and expand into new ones. This is the opportunity ahead of us. Extending Hyatt's reach in markets where we already compete, and entering new markets where our brands, loyalty platform and owner value proposition position us to win over and over.

Premium growth, strong owner preference and significant white space for Hyatt's brands create a powerful value creation flywheel for Hyatt. As Hyatt expands across more markets, segments and stay occasions, we track more premium guests, deepen engagement with World of Hyatt, helping drive the world's fastest-growing loyalty program. And in turn, it helps to fuel our growth as well. Stronger loyalty and hotel performance increased owner preference for Hyatt supporting additional net rooms growth and further enhancing guests and owner value across the network. At the same time, our premium positioning enables Hyatt to maintain industry-leading fees per room amongst our largest public peers while our opportunities allow us to expand without oversaturating markets or diluting the economics of existing hotels that are owned by our current owners. We can do both without impinging on their economics. Our investments in differentiated brands and focus on premium guests have enabled Hyatt to deliver compounding net rooms growth and expanding management and franchise fees. Throughout today, you've heard us talk about how Hyatt's differentiated approach creates value.

And that same approach underpins our ability to grow. Importantly, this is not growth for growth's sake. It is durable, it is intentional. It is high-quality growth designed to create long-term stakeholder value, including importantly, value to owners. As we look ahead, we believe this strategy positions us to deliver net rooms growth of 6% to 8% per year through 2028, consistent with our historical organic growth rate, even as we grow in scale. Our confidence is driven by 3 pillars. The first is our premium segments where Hyatt has established, differentiated leadership across luxury lifestyle and resorts, where the barriers to entry are the very highest. We've intentionally focused on the areas of travel where demand, gross fees and network effects are the strongest and most valuable.

The second pillar is scalable brands. These brands will enable faster expansion into underrepresented markets and give our premium guests more opportunities to stay with us on more stay occasions. And third, high-growth regions. These regions are where strong demand trends and meaningful opportunities position Hyatt for accelerated growth across many of the world's largest travel markets. These drivers the foundation of Hyatt's future growth strategy and support our ability to continue delivering industry-leading net rooms growth, compounding fee growth and greater long-term value for our guests, our members, our owners and shareholders.

Let's start with the first pillar of our growth strategy, premium segments. We built a foundation of premium brands across our portfolio. More than 50% of our rooms revenue comes from leisure travelers. And nearly half of Hyatt's open rooms and pipeline is concentrated in luxury Lifestyle and resort properties. That's up from less than 1/3 in 2017 and a meaningfully higher mix than our largest public peers. These segments generate stronger demand, deeper guest engagement and greater long-term value, while producing roughly double the fees per key compared to other properties.

Guests staying in these brands also spend twice as much across the broader Hyatt system when they're staying in other -- in hotels and brands of other brand groups. Our concentration is in highly sought-after markets further elevates our brand visibility and brand preference. Over many years, Hyatt has built a differentiated premium platform that we believe is exceedingly difficult, if not impossible, to replicate. This platform provides a strong foundation from which we can continue to scale and enables Hyatt's next phase of growth.

Next, let's talk about our scalable brands. With over 20 years since the opening of our first Hyatt Place hotel, our essentials portfolio complements our strength in premium segments and provide scalable brands that can accelerate net rooms growth and expand fee-based earnings in a capital-efficient manner. As I mentioned earlier this morning, we know that our premium guests have unmet demand for upper mid-scale stays with Hyatt for different types of stay occasions. There are stay occasions where they want the care, the quality and the loyalty benefits that Hyatt has to offer but in markets that we don't serve and at lower price points than we currently offer. Simply put, extending the Hyatt halo lower into chain scales is powerful. And there are almost no examples of extending a brand up into higher premium segments. That creates a meaningful and differentiated opportunity for us given our brand halo.

Our essentials brand, specifically Hyatt Select, Hyatt Studios and unscripted by Hyatt expand Hyatt's share of our guest travel wallet across more stay occasions and across markets. And we're already seeing strong traction. Today, our essentials portfolio represents more than 100,000 rooms. And including our pipeline, that number goes to over 165,000 rooms. Within the portfolio, we are seeing particularly strong developer demand from newest brands, Hyatt Select and unscripted by Hyatt, which are fundamentally conversion brands, allowing us to rapidly scale. On a trailing month basis, signings for essentials rooms were up approximately 80%.

And in the first quarter of 2026, the pipeline expanded 25% year-over-year. There's momentum in this space, and we're feeling it, and we are seeing it. This growth is expanding our system in ways that matter strategically nearly 70% of our first quarter signings this year. Our newest brands in new markets for Hyatt and 85% of those signings are with new owners, new owner relationships, this proves 2 things. First, there's real demand from owners for this type of Hyatt branded product. And second, Essentials is giving us a powerful way to grow faster across more markets owners and stay occasions.

Now let me turn to the third -- to the largest high-growth regions, our third pillar, where we believe Hyatt is especially well positioned to win. The United States, Greater China and India. More than 70% of our hotel pipeline is concentrated in these 3 markets, which are among the most important travel markets in the world and benefit from strong domestic demand today, along with substantial long-term outbound travel potential into the future. Starting with the U.S., the opportunity is very clear expanding Hyatt, where we have historically been underrepresented. Today, Hyatt has no brand presence in over 300 submarkets in the United States. And our essentials brands are helping us to expand into those markets more quickly and more effectively. More than 100 Hyatt Studios, Hyatt Select and unscripted by Hyatt Hotels are already open or in the pipeline as of the end of the first quarter of 2026.

Greater China represents a different but equally important opportunity. It is expected to remain one of the world's largest travel markets, and Hyatt benefits from decades of strong brand reputation and strong owner relationships. We've been operating in China for over 40 years. And today, our pipeline exceeds 120% of our existing hotel base. In India, where we also have been operating for over 40 years, we believe that favorable demographics that will be true for the next 30 years, rising travel demand, which we are already seeing and strong owner relationships position Hyatt well for the long term. And we're investing more and more in our India growth strategy as we speak. Hyatt strength in groups meetings. And if you know anything about business -- hotel business in India, you know that weddings are maybe the most profitable segment, and that's where we have staked our ground. That really aligns well with the emerging demand profile, helping drive room signings up nearly 90% in 2025, and that momentum is carried through into the first quarter of 2026. Together, these regions represent some of the most significant long-term growth opportunities for Hyatt globally, allowing us to expand our reach, deepen loyalty and increase the value of our network. As this map builds, the starting point reflects Hyatt today. The additional dots represent our global growth opportunity.

When you combine our premium mix, scalable brands and acceleration into high-growth regions, the further scale -- future scale of Hyatt becomes very clear. We've identified approximately 2.3 million rooms globally, over 1,800 submarkets where we believe Hyatt is well positioned to expand including over 1,000 submarkets that would be entirely new markets for Hyatt. What is especially compelling is how broad and diversified that opportunity is spanning primary, secondary and tertiary markets around the world. The U.S., Greater China and India alone represent more than half of that opportunity. And importantly, Hyatt is well positioned to capture this through the strength and breadth of our existing brand portfolio. The growth opportunity ahead of us is substantial, and we are positioned to win. We have built a brand portfolio that gives us the ability to grow the -- across the segments, markets and stay occasions where demand is strongest. We believe in our ability to execute given the meaningful white space for Hyatt in markets where our current and future guests want to stay with us. And our owners want the value that Hyatt can bring.

Importantly, realizing this opportunity is not dependent on any single segment or geography and is supported by all of the competitive advantages that we are in the process of strengthening right now. Delivering strong performance and durable returns for owners gives us confidence in our ability to expand Hyatt's global reach while maintaining high-quality growth. To sum up, it's simple. We are well positioned to continue to compound growth and drive value into the future. Thank you.

[Presentation]

And now please welcome to the stage, Joan Bottarini and panelist.

Good morning, everyone. This is -- growth is a topic that all of us across the leadership team, particularly myself and the finance team spend a lot of time on. So excited to talk more about this topic with some very accomplished leaders from our growth organization and operations organization. Mark just outlined how Hyatt's growth strategy is centered on a differentiated approach that accelerates our high-quality network and creates value for guests, owners and, of course, shareholders too and to bring that strategy to life for all of you and how we're executing, I'm joined by Julienne Smith, Catie Cramer; and Javier Aguila. I'd like for you all to just introduce yourself for everyone and tell -- or share a little bit about your background and your area of responsibility. So Julienne, I'll start with you.

Yes. Thank you, Joan. And I'm thrilled to be here with all of you. Thank you for coming to Chicago for this great day. So Julienne Smith, I'm Head of Americas growth. I actually started my journey with Hyatt in 2005 when we launched our franchising program. At the time we were growing Hyatt Place and what became Hyatt House. I stayed for about 14 years, and then I left for a few years, and I've been back now 2 months. And many people ask me kind of why did you come back? And there is an expression that says, culture eats strategy for breakfast. And what's great about Hyatt, and I think you've heard a lot about it today, is we've got a tremendous strategy, particularly for growth, which is what my focus is.

But our culture is deep and big and long storied and many of us have left gotten some great experience and come back because it's really the people here who make the magic happen. So today, I'm responsible for growing and maintaining our footprint here in the Americas region across all of our brands, except for inclusive, which Javier oversees. And it's an exciting time to be at Hyatt. We've gotten a tremendous runway.

Catie.

Yes. Good morning, Catie Cramer, I oversee luxury and lifestyle development in the Americas. I originally joined Hyatt through the Two Roads acquisition in 2018, like Julienne, I spent some time away, but jumped at the opportunity to come back early last year. And I truly think that Hyatt has the best luxury and lifestyle brands in the industry. And I know that because selling against them for a number of years was a truly terrible experience. And so I'm thrilled to be back and so happy to be here today.

Thanks, Catie. And Javier, we've already seen you on stage, but maybe a little bit more about your background.

Hello again. I'm Javier Aguila, and I have the pleasure to lead all aspects of our inclusive collection like to refer our inclusive collection as the segment of happiness, given how many very good and special moments our guests spending the resorts. I also joined through an acquisition. In my case, through ALG. And before that, I had worked in private equity and founded a resort platform in Europe that became one of the largest in Spain and in Europe was integrated as part of ALG.

Before my current role, the first one that I took at Hyatt was actually leading Europe, Middle East and Africa, as Group President, overseeing all brands in 40 countries. And besides a lot of traveling, I also had the opportunity to experience like Julienne mentioned, Hyatt unique culture. And that was certainly one of the reasons only that made me decide to stay, but also to take on this new very exciting global role that I'm just taking.

Terrific. Okay. So we're going to cover 3 topics: our differentiation, the opportunities we have to grow and why we remain confident in our long-term runway. So starting with differentiation. Julienne, I'm going to start with you. You lead our biggest region. And Mark mentioned that the United States is a high-growth region for us. Owners have more choices than ever today. So why are they choosing Hyatt?

Well, first of all, owners are looking for a return on their investment, and we sell performance. We have many brands that is -- that shines through that, but it's really about performance that is their focus, right? So what -- why? What does that mean? Loyalty program, delivering premium customers, which is a differentiator for us, focusing on the scale that we have, creating long-term cash flow for their opportunities of return on their investment when they want to exit that -- that's all the things that they look for. And I know there's a couple of owners here in the audience as well. And then most importantly, which many of us have mentioned already today, is our ability to cultivate long-term relationships.

We have many owners who have multiple properties with us, as Amar mentioned on stage and Javier as well, there are owners who have one hotel with us and then they immediately want to do another one or maybe a couple of years later, I want to do another one. So that growth algorithm that we have here is pretty special and owners seek us out because of it.

They do. And I just want to because let's just stay in the U.S. for a minute, a lot of questions we get about the financing environment and the impact that's having on growth for you and your teams today within the United States. Can you just comment on that, what you're seeing and how you're dealing in that with that situation?

Yes. We are really fortunate to have brands that are conversion friendly. I would say many, if not most, of our brands are conversion-friendly but we have some that are specifically set up and launched for that opportunity. And that's where the lenders really favor the environment today because new construction is tough. You betting on future performance where conversions you have existing performance or you have a cash flowing asset likely and we have an opportunity to create some upside there. So -- and there's some lenders in here I know, really appreciate that.

So that's allowed us to grow, add to our scale quickly and efficiently with intentional design, right, it's not a fast conversion because we're not focused on great design. We are design and the customer offering, right? But the ability to add to our pipeline quickly, create that ROI for an owner more quickly has been great for us. And unscripted has been a great growth opportunity for us. That's one of our essentials brands, but we have conversion opportunities in every single segment that we serve. And actually, Catie you've had some great success with the growth of our collection brands.

Yes. Yes, thanks for the shout out. I appreciate that. But you're right. We had great success last year, and I think we're building a lot of momentum. Conversions are really king right now. And I would say we have fantastic collection brands in the luxury and lifestyle space, specifically JdV and Unbound. And they haven't been watered down or put on every street corner. And so I think that's a really big differentiator between us and some of our competitors. Those brands have been great growth vehicles for us. They're incredibly powerful. They combine local identity and storytelling with Hyatt system. But I would just reiterate that I think we're pretty selective.

And then Mark, Amar and Javier obviously earlier touched on some of that. I think -- I mean when I look at last year and early this year, I think one of the best examples of that is the Georgian Hotel in Santa Monica, which we recently brought on to the Unbound platform. We had our eye on this property for years because we just saw it would be the perfect fit for Unbound. And we actually turned down a number of opportunities in the market or shifted them to other brands that were a better fit within the Hyatt portfolio.

So then when the owner was finally ready to brand, we were in just a perfect position to capitalize on the opportunity and I think what's interesting is in talking with the owner, he sort of cited 3 things. It was that Hyatt hadn't completely saturated the market that we had other brands, but they were in a completely distinct category and a completely distinct customer. We had not diluted the unbound brand, which is, I think, critically important. And we really focus on kind of experience-driven concepts which was aligned with what he tried to do with that property. So it really put us in a unique position to win, and I think it's representative of the types of opportunities we're seeing moving forward.

And of course, those fees are accretive of course, right away. That's a great thing about conversions. Okay. Moving to Javier, staying on the topic of differentiation. All-inclusive has become one of the most differentiated growth platforms by Hyatt in the past 5 years. So tell us about the view of our position from the owner's perspective in the segment.

Thank you, Joan. Before answering the question, I'd like to reinforce one aspect that Julian did a couple of minutes ago and Amar in his earlier presentation is how strong is our owners loyalty and for our brands because I mean, inclusive collection around 30% of our owners have 4 more hotels. But what's beautiful is how they have got to that position, and it's by building or buying one, being successful, then going for another and so on and so forth.

And obviously, we own that. But going back to the differentiating factors that make actually those owners choose us and among other competitors. I would say that for the good collection, it's definitely scale and network effect, our unique commercial engine and the differentiated and elevated guest experience that I shared a little bit earlier to it.

In terms of network effect and scale, we are the largest in the segment. I mean, we are 14,000 bigger than the next competitor. And that's incredible if you take into account that we just started in 2013.

But what is more interesting is that the opportunity is still huge because even in the Caribbean, our biggest market, we only have 16% of market share and outside of the Caribbean, the opportunity is just immense. If we go back to the commercial engine, I alluded earlier that -- mentioned earlier that 60% of our sales come from our internal channels, which again is no other competitor has that in the market for all-inclusive. And I don't want to repeat, the only thing that I want to reinforce is how in World of Hyatt, the loyalty flywheel for all-inclusive goes both ways because out of the 66 million loyalty members that we have, 4.3 million enrolled in our resorts since the ALG acquisition, which is a huge, huge, huge number. And for the differentiated guest experiences, I already gave a few examples before. So again, I don't want to repeat myself.

But I want to mention that we also collaborate with Michelin starred chefs and we have 55 resorts that have been awarded with a AAA Diamond recognition, which is remarkable, and 7 of them have been awarded 5 stars, which I think is super. We want more.

Great. And so how is that all driving value to owners?

So it's very easy. So if you have your commercial engine, the scale that I mentioned about differentiated experiences and tremendous execution, what do you get? You get very high ADRs and very strong GOPs per key, and that creates true value for our owners.

And that's the flywheel for the net room growth that Mark showed us earlier.

Okay. So now we're going to move to the topic of scale. I'm going to start again with you, Julienne. And can you tell us Mark shared about the opportunity around Essentials and Scalable brands. But I just wanted to hear from your perspective, you're on the ground with -- your teams are on the ground with owners. So tell us a little bit more from your perspective.

Yes. Well, first of all, we have always been and continue to be focused on purposeful growth, building in the right markets with the right brands and being selective, as Catie described, in the Georgian example, being really selective about where we want to be and with what brand. We also have, as Mark mentioned earlier, 300 undeveloped for us markets in the U.S. alone. That's an incredible landscape opportunity for us.

So we're focused on that. We're focused on growing where we are losing our customer because we simply don't have product. So within the last 6 months, we've signed our first 2 deals ever in the state of West Virginia. We've signed new deals in new markets. Glendale, Arizona is one, Williamsburg, Virginia, Steamboat Springs, all markets you're familiar with, where we didn't have products to be able to develop in those markets we do now.

All of those examples that I just mentioned are with the Hyatt Select and Hyatt Studios brands. And what's great about that for what I do is and the team does is we now have offerings for all of the premium customers that we serve in many markets. So the runway is just incredible for growth.

Yes. And the momentum is really, really growing up. Catie, so for luxury and lifestyle, with all of the growth opportunities that are coming across your desk, I know in your team's desk, how are we balancing growth while protecting brand equity?

Sure. Yes. I mean I constantly tell our development teams and our owners that we don't need to grow these brands for the sake of growth. We're very, very intentional, I would say, about where and how we grow because protecting the identity of those brands is just as important as growing them. Each of our luxury and lifestyle brands have a distinct customer, a clear point of view, a different guest experience. Amar alluded to that earlier. And so I think maintaining that is really important.

I think both guests, owners, I mean, everybody can really feel when a brand becomes too broad or inconsistent. And so that's what we're really trying to stay away from. And so as you mentioned, we see a lot of opportunities come across our desk, and it's certainly difficult to turn things down sometimes in development after all. But we view long-term brand equity as truly one of Hyatt's greatest strengths. And so we'd much rather grow thoughtfully than just chase growth at the expense of the brand experience over time.

Lining that up really leads to profitability and cash flow. And if that's not going to be the actual outcome or impact, we will be setting ourselves up for difficult conversations. So it makes sense. Okay, Javier. Let's talk about the opportunity for all-inclusive, whether conversions or new representation globally.

The opportunity for both conversions and new beauty is huge. First, demand is working for us because it's very strong. As mentioned earlier, the fundamentals are in leisure are outperforming other segments. And all-inclusive is a segment of not only a great presence, but also a huge future given the interest that newer generations are having.

And second, despite we are the global leaders, our opportunity remains massive in -- if we talk about the total addressable market, for all-inclusive is around 350,000 rooms. And that's not the market that could be addressable in general but the one that which is much bigger, the one that we've identified that our brands would fit perfectly. And given our strengths that we've talked earlier, we think we are uniquely positioned to capture a big part of that market. So the prospects are very good.

350,000 rooms. Can you just give us an idea of some of the top markets, a few of the top markets that you think there's great opportunity.

Of course. I'll start with the Caribbean. We're already very strong, but as I said, only 16%. But there, the keyword is being intentional, like in general, we're doing for all of our development because there, we have the opportunity with the incorporation of the Bahia Principe brand to grow further in segments that were slightly below our key Ziva, Zilara presumed brands that are a little bit more premium. And that's going to be especially important as we grow our Essentials portfolio because there's going to be a flywheel between both of them.

So I think we all lost that. There's going to be an opportunity to help each other to grow. And with [indiscernible], we're targeting, in particular, those newer generations offering something that is different. Not only -- it's not about having -- you need to tailor the whole experience to them, both F&B, entertainment, et cetera. And then of course, we see an opportunity to continue to push Ziva, Zilara and Secrets, our premium brand in very specific locations.

If we move to Europe, Middle East and Africa, obviously, we want to bring our premium brands into Europe more and our representation there is still not as strong, and we see a huge opportunity, mainly in conversions because there's a lot of existing hotels already there.

We want to enter new markets. I think that there's a great opportunity in Turkey and North Africa and also in the Middle East, although obviously, we need to wait until the geopolitical situation stabilizes, but we believe that there's some markets that started to be very promising for all-inclusive like Ras Al Khaimah.

And if we move to APAC, obviously, Thailand, Vietnam or India are huge opportunities. We've already signed 2 resorts in Thailand that we hope to do their groundbreaking this year. And there's a huge opportunity there. We are aware that the demand in those markets is going to be mostly regional and we're going to have to adapt those hotels and those products to that demand. But we already have a lot of experience being successful in opening and localizing these brands to new markets.

Very exciting. Okay. Julienne, I'm going to move back to you for a moment. We spend a lot of time talking about essentials, luxury lifestyle, all inclusive. I want to spend a minute on Classics. Like Grand Hyatt, Hyatt Regency, these are foundational brands that have been around for decades and decades. Why are they still strategically important to our growth strategy?

Yes. I mean history matters. Mark mentioned earlier our entry into Asia, Hong Kong and then decades ago, China and our footprint was able to expand internationally before many of our competitors were. And we've been able to really dominate in the group meetings business. I mean, this hotel is a great example. There's 2,000 rooms. It's the largest in our system. Think about the amount of business that's done in these hotels and the events that happen here and the significance that has across our industry really.

And that is oftentimes an entry point for people, right, come to a meeting and then maybe go on a vacation later and become a World of Hyatt member. But that significant portion of our history allows us to give credibility to all these other brands that we've acquired or launched over the years. So again, history matters. And we're able to grow with long-standing owners in a meaningful way as well.

Yes, for sure. That's true. Okay. So I want to move into a lightning round now on the third topic. As you think about the next phase of Hyatt's growth, what gives you the most -- what makes you most excited and gives you the most confidence in our long-term opportunity? I'll start with Javier.

Three things give me a lot of confidence. The power of our network, our unique commercial engine and our ability to create truly unforgettable experiences. Bringing all that together, we're going to create an ecosystem that is going to be very appealing to our customers and to our owners and contribute to the rest of the portfolios.

And Catie?

Get out to that. But also, I think we have a really differentiated position when it comes to luxury and lifestyle. Our brands have a halo effect across the broader industry. We have dedicated brand-led support teams, and we have a very engaged customer base through World of Hyatt. And so I think that, combined with being large enough to have global scale, staying small enough to maintain our brand experience, it all creates just an absolute winning combination that I think really sets us apart.

And Julienne?

Really, no matter where you turn, we're underpenetrated, and that's super exciting for me and my team focused on growth. So our runway, which I've said many times today, is vast and the opportunity is incredible. And we have people on the development team who are really focused on relationships and growing those and growing in a meaningful way. So pretty excited about our runway.

So powerful. And what you all have just heard is that our growth strategy is highly intentional. I think you all actually commented on that word. We're focused on building a global network that drives higher fees per room, strengthens owner preference, expands loyalty engagement and creates durable long-term shareholder value. And we still have a substantial runway ahead. So thank you very much, Javier, Catie and Julienne for sharing your perspectives and the opportunity that we have to win.

And now would you please welcome back Hyatt's Chief Financial Officer, Joan Bottarini.

I hope you've all found that the information we've shared so far to be very clear and compelling proof points of how Hyatt continues to differentiate itself for guests, owners and shareholders, too. As Mark outlined, we've built a business with true differentiation at scale. We serve the high-end guests across the segments in which our brands operate. Mark V. shared how we're elevating our brands and our technology, and Amar and Javier shared how they're delivering performance through more insights-led and brand-focused organization. Laurie spoke to the power of World of Hyatt and our unique loyalty experience platform that benefits all stakeholders.

And finally, we just heard from Julienne, Catie and Javier about the meaningful growth opportunity ahead for Hyatt. I'm now pleased to share how this all comes together from a financial perspective, dive deeper into our model and outline how this translates into our 2028 outlook.

Our message is straightforward. Hyatt is a high-quality, growing and increasingly cash-generative company with a clear path for further shareholder value creation. We've expanded our differentiation at scale and strengthened our position serving the high-end guests. We've elevated our performance and have become a more insight-led and brand-focused organization. And we believe this positions Hyatt to win with compounding fee growth driven by premium RevPAR and meaningful opportunity to expand net rooms growth.

Consistent free cash flow growth, generating cash to invest in growth and return capital to shareholders. And we have further opportunity to unlock embedded value for additional growth and returns.

Taken together, these factors underpin our confidence in Hyatt as a compelling long-term investment. Since our last Investor Day in May of 2023, we've completed several key initiatives that have further transformed Hyatt, delivered strong results and positioned us for long-term success. As you've heard, we've strengthened our brands through our strategic brand alignment. Our brand strength and execution have allowed us to lead the industry in RevPAR growth for the last 5 years. And we've delivered strong net rooms growth, which has compounded annually by 7% since 2022.

2025 marked the ninth consecutive year that we've led the industry in growth. And we invested in asset-light growth, including the acquisition of Standard International and Playa Hotels & Resorts. And as you heard from Amar and Javier earlier, these acquisitions further strengthened our position in lifestyle and luxury all-inclusive and contribute accretive fees per room.

We sold a majority interest in the Unlimited Vacation Club, simplifying our reporting while increasing our fee-based earnings. And since 2022, gross fees have grown by 14% per year. This is the highest compounded annual growth rate among our larger peers, and our fees per room are the highest among that peer group. And while we benefited from fees derived from M&A, our 10% organic fee growth also exceeded the total fee growth of our larger peers over the same time period.

At the same time, we have significantly increased our asset-light earnings mix, and this has reduced our capital expenditures and our earnings volatility. And we expect asset-light earnings to be over 90% in 2026 with the potential to increase to 95% by the end of 2028. Given our outlook on fee growth and the asset sale opportunities that we see ahead of us, this is how we get to that 98% -- excuse me, 95% expectation.

Together, these actions have fundamentally reshaped Hyatt into a higher quality, faster-growing and more cash-generative business as evidenced by our strong free cash flow conversion since our last Investor Day. We've paired this transformation with disciplined capital allocation, and we've driven long-term shareholder value. On this slide, you can see that since 2022, we've generated $1.2 billion of free cash flow. We've modestly increased our leverage, and we realized over $1 billion of proceeds from asset sales, net of investments that we've made in asset-light M&A platforms.

In the aggregate, this has generated $2.3 billion of cash. And we've returned $2.1 billion or over 90% of that cash through -- to shareholders through dividends and share repurchases over that time period. This clearly demonstrates our ability and track record to invest in growth that drives accretive value while also returning significant capital to shareholders.

As further evidence that we are confident in our ongoing shareholder returns, we announced this morning that our Board has authorized a $1 billion increase in our share repurchase authorization and we are excited about the future ahead. As you heard throughout this morning's presentation, our durable competitive advantages, coupled with the execution of our strategy to further elevate our brands, talent and technology directly fuels what is already the strongest part of Hyatt, our fee business. We believe that we -- by successfully executing this strategy, we can deliver on our premium RevPAR growth, which, again, as I mentioned, has led the industry for 5 consecutive years and continue to deliver industry-leading net rooms growth.

We believe this combination will translate to even stronger fee growth and our asset-light business model will continue to deliver strong free cash flow conversion. And we have further opportunity to unlock additional shareholder value through continued asset sales and realizing returns from other investments. By doing all of this, we believe we will continue to create long-term value.

Now I'm going to walk through our illustrative financial outlook for 2028. Let me start with the 2 key drivers of our fees, RevPAR and net rooms growth. Our outlook assumes that broad-based macroeconomic growth remains stable and consistent between now and 2028. More specifically, in the U.S., this assumes real GDP growth is consistent with what we see today. And of course, this is really important because you heard what Mark said earlier that 70% of our global revenue originates from our guests living in the United States.

We believe global system-wide RevPAR could grow at a compounded rate of between 2% and 4% between 2025 and 2028. And this outlook for RevPAR is supported by our portfolio of premium brands, which serve a strong and resilient higher-end guests.

On the development front, we expect our portfolio of rooms to grow at a compounded rate of 6% to 8%. Mark outlined the reasons behind our confidence to deliver this level of net rooms growth. Our pipeline is strong and fees per room from hotels in the pipeline today are accretive on a stabilized basis to our existing open hotels, allowing us to expand our already high fees per room well into the future.

We believe these factors, combined with the strength of our development teams and proven owner value proposition position us to achieve our net rooms growth objectives. In addition to the illustrative RevPAR and net rooms growth expectations, we've also made the following assumptions. The impact of the hurricane in Jamaica and the recent events in Mexico and the Middle East don't impact our long-term growth prospects.

Our strong pipeline of international full-service hotels. We do not -- because of our strong pipeline of international full-service hotels, we don't expect a significant shift in the makeup of our portfolio by 2028 and the mix of our fee types will remain relatively consistent. Today, 90% of our incentive fees are generated from hotels outside of the U.S., and we don't expect that mix to change materially. We also expect gross fees will continue to benefit from non-RevPAR fees such as our co-branded credit card programs, the Unlimited Vacation Club and branded residential fees.

Taken all together, we expect to generate a very strong 3-year compounded growth rate of between 9% to 13% for gross fees compared to 2025. While most of our earnings are now generated from our core fee business, we recognize it's helpful to share some additional detail. We remain disciplined on managing our cost base and that we expect adjusted G&A to grow at a 3-year rate of between 2% to 3% through 2028. We expect owned and leased adjusted EBITDA, that growth to broadly track with assumed RevPAR growth.

And in the Distribution segment, we expect adjusted EBITDA to grow between 2% and 4% compounded annually compared to 2025. The disruptions in 2026, we believe are temporary. We remain focused on ensuring that we will use key money for strategic growth and that growth will deliver outsized returns and amplify our brands, especially within luxury, lifestyle and inclusive brand portfolios. We expect key money to average around $150 million to $170 million per year, CapEx to be between $135 million and $140 million per year.

Given the opportunities that we see ahead of us for asset sales, we expect CapEx will decline from these levels in the coming years. And finally, we expect our effective tax rate to be between 27% and 30%. These drivers translate into our expectations for strong earnings and free cash flow growth. We expect adjusted EBITDA to grow at a very strong 3-year compounded rate of 11% to 16% through 2028 and adjusted free cash flow to grow at a compounded rate of between 14% to 18%. This represents an adjusted EBITDA to adjusted free cash flow conversion of 55%, consistent with what we have delivered on average between 2022 and 2025. Importantly, we believe this reflects the strength of our asset-light model and our continued ability to convert earnings into free cash flow.

We remain committed to an investment-grade profile. We believe that we have a strong balance sheet and continuing to have a strong balance sheet is important to preserve optionality for growth opportunities and to provide flexibility in uncertain environments. We will have some modest deleveraging in the near term and believe that we will have capacity to take on incremental debt starting in 2028 while maintaining our investment-grade profile.

And on a cumulative basis, we expect to generate between $2 billion and $2.2 billion of free cash flow between 2026 and 2028. We expect to have the capacity to increase our debt in the range of $200 million to $500 million by the end of 2028 compared to current levels. And this level of durable free cash flow supports both investments in growth and returning excess cash to shareholders.

While our business model has evolved over time, our capital allocation strategy remains balanced and focused on maximizing shareholder value. And consistent with our track record, we'll continue to prioritize opportunities that create the greatest value, whether that's growing our business through asset-light investments or share repurchases.

In addition to our focus on the core business to drive free cash flow, we have other opportunities to enhance value. Our own portfolio consists of a high-quality group of assets. And based on recent valuations, we estimate our portfolio is valued between $2.2 billion and $2.5 billion. This translates to a multiple of 18x to 20x 2025 adjusted EBITDA, 18x to 20x, which is significantly above some models that I've seen published attributed to our owned and leased segment. This is even higher than the blended 15x multiple that we've realized from the $5.7 billion of real estate that we've sold since 2017. And it does not include the long-term value of management or franchise contracts we expect to maintain in every single instance upon sale.

As we said previously, there are no hotels we must own and we are actively evaluating opportunities to further reduce our ownership of hotels beyond the Hyatt Grand Central New York, which is currently under contract. As I just mentioned, we anticipate that asset-light earnings mix will approximately be 95% by the end of 2028 through a combination of continued fee growth and additional asset sales. And we will continue to prioritize transactions that drive the greatest value for our shareholders.

We also have 3 unique investments that I wanted to cover that are valued at about $700 million or $7 per share to -- $7 per share to our valuation. While these are not included in our 2028 outlook, we believe that we could realize the value of these investments over the next 5 years. Each of these investments is a great example of how we have executed on transformative deals in a way that created immediate shareholder value at the time that we executed the deal and provide opportunities for us to realize further value over time. We believe our durable competitive advantages have driven and will continue to drive our premium RevPAR growth, industry-leading net rooms growth and fee growth that continues to compound over time.

In closing, you've heard from several members of Hyatt's management team today about how Hyatt is differentiated at scale and positioned to win. We've built a differentiated growth platform and a durable fee-based earnings model. We are confident in our strategy, confident in our outlook, and we look forward to realizing the clear and substantial opportunities to generate continued long-term value for shareholders. I'd like to personally thank each of you for your interest in Hyatt.

And now I'd like to invite Mark Hoplamazian, Mark Vondrasek

And Adam Rohman back up to the stage, and we will take some Q&A.

We have online questions, too. All right. Well, thanks, everybody. We're now going to start Q&A. We're going to handle this in a couple of different ways. We're going to take live questions from the audience. We've got wonderful folks out in the audience with microphones, so they'll be around to hand them to you. If you can please raise your hand, they'll bring the mic over to you. If you could please state your name and the company that you represent for the benefit of those on the webcast, we'd appreciate it. We would love to answer everyone's questions.

So we request if we can just do one question at a time. And if time permits, we'll take follow-up questions at the end of Q&A. And then we'll also weave in some online questions as well. So happy to start with any questions in the crowd. Brandt, crowd. It looks like I saw you first. So we'll bring a mic over to you, and we'll start with you.

Great. Brandt Montour from Barclays, and thank you for this wonderful event so far. So a question, if I'm just doing one would be on the development side, you clearly are looking for acceleration or re-acceleration in net rooms growth through '28. Can you break out that re-acceleration versus '25 in terms of how much of that is Essentials? How much of that is conversion versus new construction? Just because it looks like a lot of it is Essentials. And so just wondering how much depth and breadth you have across the portfolio in terms of that second derivative and how much confidence you have in those targets?

So I think it's important to just quickly mention that it varies by geography quite a lot. So Essentials will be the primary driver in the U.S., and I think it will ramp outside the U.S. It's also important to recognize that the pipeline is currently weighted outside the U.S. weighted towards full service and luxury hotels. So we're going to have a balance. It's not going to be dominated by essentials, but the rate of growth for Essentials is going to be very high because we're starting from a smaller base. Within the Essentials growth rate is a significant number of conversions because of the intense interest in Hyatt Select and Unscripted by Hyatt has been surprising to us, and we have a huge number of projects under discussion right now, and the conversion rates look very healthy.

So I would say that embedded in our organic growth outlook would probably be something between 35% and 40% per year of conversions. And the remainder would be new-build openings. Yes, new-build openings have been relatively more sluggish in the past, but we continue to work really hard to find alternative financing structures that are not involving either banks, regulated institutions or funds. In both cases, either bureaucracy in the first case or return requirements in the second case, impede capital formation. So we're looking for non-bank financial institutions. And we've advanced our dialogues along those lines, and I think we have some really great solutions that we will be launching very, very soon. So that is a significant part of our growth within that a significant part is going to be conversions.

Okay. Shaun, I saw your hand earlier.

Great. And echo -- first of all, Shaun Kelley from Bank of America and echo my thoughts. Thank you for hosting us today. Mark, maybe a bigger picture strategic question for you and for anybody on the panel. But Hyatt demonstrate their willingness to take a few strategic shots or think a little differently. I think that's been something which permeated throughout the presentation. We can talk about what you've done with Playa, what you did with all-inclusive broadly.

Maybe even stretching a little bit further back. What's that appetite like today as you think a little bit more about the business? Are we in a healthier place to now really focus on that organic piece of the algorithm, which is sort of the heart of the last question? Or do you still think there are a couple of more strategic shots, maybe bolstering, franchising, or some of those opportunities that may still exist for Hyatt given your willingness and your history of doing that?

Thank you. First and foremost, Joan made a special point of pointing out that 100% of the outlook that she just presented is all based on organic growth, period, end of story. So anything that we do in this domain is going to be additive. And there are specific geographies and specific areas where expansion of our existing brand portfolio could benefit from potential acquisitions. So we will not shy away from them, nor is it our #1 priority. I think we have been -- we've taken bold bets. It's true, but we've been very selective about which bets we take.

And we've also been very deliberate to say the customer base that we are adopting and bringing into the system has to look really close to what our existing customer base is to strengthen it or have to extend it in terms of either age cohort or geography. The World of Hyatt growth has been phenomenal. It could be even more phenomenal if we started to really significantly expand membership in places like Europe and further expand in Asia. So I think as we think about where the network effects take hold and where we could benefit from more representation, that would be in markets like those. But right now, we feel super confident about the outlook that Joan outlined, with our existing brands as is, all organic.

Great. We can go to Trey.

Trey Bowers, Wells Fargo. Maybe if you could just dig in a little bit the range of 6% to 8%. 8% would be a fantastic number over the next 3 years. And what would need to happen to bring you guys in at the high end of that range?

I think the primary thing that would need to happen is that the conversions that I discussed earlier in answering Grant's question actually would be even more high velocity than we are expecting currently. We have a pretty good handle on what we're seeing coming across the trends, and we know what our success has been in the last several years on conversions. And conversions remain an important part of the equation because capital formation remains an issue, especially in the upper-midscale and upscale segments.

So I would say the thing that could break us out to the upside -- top side of that is further conversion activity. And right now, the momentum we're seeing in Hyatt Select and Unscripted suggested that's not a pipe dream. I don't -- I wouldn't sit here and tell you we know for sure we're going to hit 8% because we're going to really amplify the conversions. What I would say is there's a path there that if the interest level that we've seen, and as Julienne pointed out, the number of markets that we are not present in, that starts to take hold and really starts to accelerate, that's when you get to the upside of that range.

Do you want to add anything?

I would just add on the conversion front. We've also been successful in some small portfolio conversions. So, we did one with Unscripted last year in Vietnam. And it was 5 hotels, I believe, that we did in the fourth quarter, that just demonstrates that the strength of the brand, these are capital-zero opportunities. And there's many, many of those globally that would qualify for our brands and the customer base that Mark described.

And we've done it before also with JdV. I mean the Story Hotels in Scandinavia. So, we found small chains that really have decided, as Catie pointed out, from the owner of the Georgia, they finally decided they wanted to affiliate with the brand, and we took the entire portfolio. Yes, small, 3 or 5 hotels, 6 hotels in the Wink, I guess. So -- but you start adding 3, 5 hotel chunks at a time and you get an acceleration.

Okay. Dan, I saw your hand earlier.

Dan Politzer, JPMorgan. I wanted to talk a little bit about the loyalty program and penetration there. I think you're around 49%, 50%, and your peers are 65% to 70%. How do you think about the path to growing over time there? And do you think that's a real estate place you could get to? And if so, how does that kind of impact the whole ecosystem?

Yes, I'd say -- 2 things. First, as we've added more product and more network effect, we've been able to accelerate our loyalty program penetration. I do have to say there was a time and a place where in this industry, we all counted loyalty room night penetration similarly. And I'm not sure we're at that exact place today. We have competitors who think about if you were on their website and you then went and booked an OTA through Expedia, somehow that with an influenced loyalty number that now accounts for penetration. Group blocks that are being a bit automatically enrolled. And so we did a little bit of work.

And if we equalized our number, and we're not going to do that because we think about penetration through the owner lens purely. Doesn't matter if we influence someone and they were on hyatt.com. They go to Expedia and they booked through Expedia. That cost of distribution through an owner lens is much higher than had they come directly through us. And there's not a lot of interest for us to cloud that. And so in spirit of complete transparency on an equalized basis, we're a heck of a lot closer than what our near 50% number translates to.

But as far growing as far as the way we think about it, the more that we add network capability, whether that's through our own organic growth or even through alliances like Smith, that just added reach from a World of Hyatt member in Europe that allowed us to step-change our contribution in that part of the world because our members now can access more properties through an alliance were -- all of that adds to the network effect. But I'd be careful on the apples-to-apples, I'm not sure, unfortunately, it's completely the same measure between us and our largest competitors any longer.

I would just add that the direct channel that we shared, that 70% number is really relevant because when you think about what this means, it means that the cost of acquisition of that customer is lower throughout the entirety of the 70%. And some of it is Group for us, talking about the importance of Group. So that number is quite significant and leads to great economics at the owners' P&L.

3 months ago, I was traveling, and I was in a market in which our primary owner owning several Hyatt properties in that market, own many, many other hotels. A couple of concentrations in some of our largest publicly traded competitors. And the asset manager was in the meeting and started off the meeting. The asset manager came from one of our competitors, by the way, started off the meeting in a very accusatory way about our penetration. So we asked a few questions. Like, can you tell us what the conversion from gross rate to net rate realization is our portfolio versus theirs? Answer, ours was higher.

And we asked and we're -- who has higher margins? We did. So we said, well, okay, so you're beating us around the head about a penetration number that's lower than this other competitor, but where is the money? And they couldn't answer that question. So that goes to Mark's point. This is a live example, and this is a group of 20 hotels in a very vibrant market, very competitive market. So I would just say we are paying very close attention and Javier has brought us huge discipline into the company about GOP Per Available Room because that's the way -- that's the primary metric that inclusive owners and developers look at returns.

They know how much it cost to build per room, they look at GOP per room, they do some simple benefit. So we're very focused on not just trying to publish the highest penetration number so relevant. Like we want to know what the results are, which is net rate and margin. And I think if you did some adjustments, we feel very good about where we are. And I think we have a lot of momentum to even -- to grow much higher over time.

Conor Cunningham from Melius Research. Just curious, Joan, you mentioned the 90% capital returns to shareholders through the 2025 target. So your authorization, I think is 1.5. You have a dividend on top of that. Just curious on the methodology that you would think -- you have a lot of conviction in organic growth in general. So Joan, you kind of talked to Shaun's question around -- on the organic side, inorganic side. But if you could just talk about the capital return profile and how you view it?

We showed that slide very, very intentionally because we wanted to illustrate our track record of balance, and balance is really how we're going to be focused. We know when there are opportunities for us to invest in the business to grow, that is going to have lasting halo impact it has. We've made those decisions that have generated exceptional shareholder value on those investments. And so we will consider those timing-wise, if we have excess cash, we're going to return it through share repurchases. So balance is key and is how we will continue as we proceed forward.

Great. Lizzie?

It's Lizzie Dove at Goldman Sachs. You touched on it a little bit, but I'm wondering if you could expand on how you think about the non-RevPAR contribution to the overall algo. And specifically on credit card, I think you mentioned there's going to be several new international launches in the next 12 months, more expansion, in the U.S. And so just how you're thinking about that long term now, post-the renewal last year?

So I would say that what's built into our outlook is what we have today. And those rates of growth are consistent with our ranges on the overall fee side that we expect from our existing in-place programs. What the opportunity is for us to expand even within the U.S. and internationally, that's all upside. So we'll keep you posted, and we're excited. We think it's a real opportunity for us, and that will be upside to our outlook.

Maybe I would just add a little bit of color. So as you think about card expansion. We're targeting Germany and Spain. We're also exploring U.K., Japan. You can expect a mix -- a market like Mexico, where we picked up a lot of members to ALG and that acquisition. So we're at an inflection point to rapidly expand the number of cards and the geographies that we have over the next 12 to 24 months; those are the places you should expect to see us early. And none of that is priced into any of the EBITDA doubling in '27. That is all incremental as we move forward.

David?

David Katz, Jefferies. I appreciate all the commentary around technology and AI, in particular, obviously, moving super fast. And there's just as much commentary out about around concerns over it. For specifically your business, it's clear what it can do for you. Can you just talk about guardrails, concerns, or areas you want to make sure it doesn't impact.

Sure. We have undertaken a pretty methodical and extensive training for people in the company. We have thousands of Enterprise licenses available to colleagues. So what we're trying to do is demystify try to actually demonstrate practical applications that have great productivity associated with them. Basically, it will allow people to do their jobs with more ease and less time spent on what I would describe as administrative tasks that a machine can do better.

Adam, and I were in a brief conversation yesterday about a colleague of ours, who is spending a lot of time doing some work in the SG&A team. And the comment was, yes, actually, we want to basically replace a chunk of that person's time from doing what I would describe as rote work to free them up to actually spend their time thinking about more insights that we could derive from the data that we're actually seeing. So the -- I think the potential for there being colleague concern is outweighed in our case, by really being transparent, open, and forward-leaning in terms of training and demonstrating what examples exist.

The one thing that I did not anticipate, which has been a massive inspiration to me is, as I traveled around the world and talk to a bunch of hotel teams about how they're actually implementing? How they're using AI, I have discovered amazing things going on. So one team has actually showed me this model that they built on their own within our environment. So we have a safe, secured environment, private cloud, and we have an Enterprise license in this case with ChatGPT, but it could have been another one. And they -- in this case, our Zurich officer and from Chicago.

Another example, another team said, we're coming up on our union negotiation that is outside the United States. I wonder if there's a way we could create war gaming like a war gaming exercise to create a mock negotiation. So they poured all of the correspondence that we've had with union representatives plus the contract into an LLM.

And they created in an entire war gaming exercise to understand what the particular priorities would be from the union based on published newspaper articles and statements that they have made and correspondence that they have within our system. And we ended up with a phenomenal deal as a result of that. So these are the applications that we would never have dreamed could be possible. What that word gets around. So people are inspired to go towards it and really explore it.

Now in terms of safety, security, control environment, governance, we put that in place 2.5 years ago, and we continue to strengthen that at every turn. So there's -- in terms of the external threats that might exist, we're doing everything that we possibly can. Our partner at the time to get all the setup was IBM, but we've used many, many other cybersecurity experts. And I feel really good about the environment that we've created. I was -- I actually personally led the team at the beginning of '24 to put all this together because I wanted to have tremendous level of visibility into it. And our General Counsel, Margaret Egan, was on that small team. So the governance and the control environment is built into how we actually create the environment that we operate in today. I hope that's responsive to your question.

Great. Mike.

Mike Bellisario at Baird. On key money, can you help us understand how you came to that $150 million, $170 million range? When do we start to see some positive operating leverage as your system continues to grow? And then just help us understand what you're investing in, how much of it's new-build versus conversions? How much of it is gross adds versus contracts you might be protecting and preventing exit from the system?

Yes. So as we looked at the -- looking out a couple of years, we obviously have visibility to contracts we have signed that have embedded key money that's payable upon opening. So we're tracking that over the next -- as long as -- or large as the pipeline is for the next several years. So that's a baseline. And then what we did in our model is we basically said, let's look at the levels we have today and put some cushion in there with a little bit of growth.

What I would tell you is maybe there's some opportunity in that number, but we recognize that it's still a tool that is important in certain regions for us to grow. And it's competitive. These conversions are competitive. And so, it is a real use of capital that's important as we look at conversions that are the right conversions for our brand.

Great. Stephen?

Steve Grambling from Morgan Stanley. This will be a follow-up to David's question on AI. He referenced the tools that you all highlighted here today. Maybe if you can just elaborate on some of the insights as you think about agentic AI's impact on distribution, loyalty, both thinking about mix and cost, as well as any implications for the system fund broadly, because we've seen some of your competitors start to actually lower their system fund charge-offs.

Yes. I think Mark and I will have to tie team on this one, but I'll just make a couple of comments on agentic distribution or distribution in the agentic world, and then I'll turn it over to Mark to address both the system cost question you had and also how it might interface with loyalty. So I think we are in the beginning phase of a migration towards a much more agentic-led-travel distribution environment.

I mentioned this during the discussion about why are we still hyper-focused on brands and clarifying and solidifying our brand positions. It goes to how we believe travel distribution will work in the future. And that is moving away from the traditional funnel where those who had the most control the OTAs, let's say, had the top of the funnel for aggregation. Their primary value-add was aggregating supply. And so when someone wanted to come in and explore, or investigate, or discover, they had a massive pool of aggregated supply.

In the future, if you fast forward 5 years, we believe that it is going to be dominated, not exclusively, but it's going to be -- a lot of that funnel activity will be translated into an expression of intent, something like what Mark demonstrated in the examples, translated through your own personal AI-enabled agent into booking. And there won't be funnel, it will be a direct connect between intent expression and booked stay.

So what's really important there when -- once you've expressed your intent, whether you speak it into your phone or type it into your search bar, the ability for your agent to find us and match that your interest, your desire for different experiences. And of course, they would take -- your agent will take into account your past stays and a lot of details like what status you are in Hyatt -- World of Hyatt program, and whether you have the credit card or not and et cetera.

And frequency knowing where you stayed before in given markets. So I would say we believe that this is essential for us to actually outperform in an agentic world. And we're well on our way because we have GEO-optimized everything across the entire system, but we've also gone straight into agentic booking through ChatGPT.

So Mark, maybe you'll cover that.

Yes, we'll just take the second half of that question, Stephen, on System Reductions and what it's meant for owners. We, too, have taken some of the obvious low-hanging opportunities in the AI space. And I think at the end of the day, AI got to work on the efficiency side and it's all got to play a role in innovation and unlocking new revenue opportunities.

But our contact centers are a great example, where through agentic. We took millions of dollars out of the operation, allowing guests to interact with us to through agentic AI platforms on their terms, not for every brand, when they want, not in an intrusive way. And we have given that back to owners. We probably don't talk about a lot of this, but for a property that's plugging into us or getting stood up, we've waived a lot of the traditional start-up costs for system capability that historically we had charged.

And we think in that vein, we're doing incredibly well competitively. But I think you can expect for us, as we free up economics and find the efficiency side of this, we will, of course, look for ways to give that back to our owners and are already doing that, in my example for new-builds or for new openings that are coming into the system.

Yes. And I think it's also important that the investments that we've been making in AI are not additive to our system funding those.

[Audio Gap]

And going forward, would you expect to enter similar arrangements in order to expand your footprint or to get asset sales over the line?

I'll answer that first question is that there in accordance with those arrangements that we had entered into with the buyer, particularly in those first 2 instances, which is Orlando and the prior real estate sale. There are certain conditions upon which performance will be met, and we will realize the returns. So, the dates are in the future, beyond the period, but could be accelerated based on the performance of the assets. And I'm pleased to say that we're tracking to realizing those investments. So that's why we pointed those out.

And with respect to our common interest in Juniper Hotels, that's really a decision that we would make when we believe that it is valued at the -- at values that are attractive in that market. So with what we're seeing happening in India, we believe that, that's a potential for us too. And that timing could be, frankly, any time.

And whether we would do that in the future, absolutely, if it delivers value with respect to an asset sale and is with a strategic partner that we're going to be in a long-term relationship with. And it helps to finalize the deal, confidence in future earnings is realization in a finite period of time in the future.

Great. Steve, I saw you.

Steve Pizzella, Deutsche Bank. Just on the distribution business, which has faced some near-term headwinds, but also provides some easy comparisons at the same time. Can you walk us through how you arrived at the 2% to 4% growth CAGR? And maybe is there anything that prohibited from getting back to 2024 levels?

So within our modeling, if you take out all of what is temporary, that the hurricane what happened, the security concerns in Mexico, all of that has really been a headwind in 2026. Of course, the hurricane started in Q4 2025 or was an event in Q4 2025. When those properties come back online, it's -- there's a lot of reconstruction that's happening in Jamaica, but there's a lot of also demand that's pent up that wants to get back to the island.

We believe those are temporary and getting back to 2025 levels and slightly ahead is a very reasonable and consistent with underwriting performance levels for the business. There's other opportunities we're always looking at with respect to the business as far as partnerships are concerned. So there could be upside to that number, but we feel like that's a good, reasonable assumption.

There's an expression, built with a crisis go unappreciated or untaken advantage of. So we've been spending a lot of time alongside Javier. This platform generates enormous revenues for our inclusive hotels, so it's very important to us.

Meanwhile, necessity being the mother of invention, we went to work on how further AI enablement might actually allow us to reduce costs, but be more effective and do more innovative dynamic revenue management for packages, which doesn't exist in any other package software platform in the world.

And we're super excited about that work. We're just getting started on it. It will also allow us to be a much better, more effective, more powerful white-label partner. So, I would say the 2% to 4% is business as usual, but we haven't -- we're not leaving any rock not turned over to identify ways that we could potentially grow much more significantly in the future.

We'll change it up with Patrick. I saw your hand up.

Patrick Lobo with Ashler Capital. Expanding on that last question a little bit. Can you talk about the benefits of the all-inclusive platform, both with UVC and the distribution business today in terms of how that benefits owners and how that differentiates Hyatt when competing for deals?

Yes, for sure. Owners value both of those platforms enormously. The ALGV platform is the biggest tour operator travel platform in North America has been for many years. So, the volume of traffic that we see coming across that platform is enormous. We have pretty significant visibility into flight schedules and fleet planning amongst major airlines, as well as some of the other airlines that like Frontier and so forth, that actually dedicate some of their aircraft to charter operations.

Meanwhile, it's a very, very effective and efficient channel. UVC members are extraordinarily engaged and active and loyal. They are the first people who came back, those members are the first people who came back after COVID. They are the first ones to book immediately into any new resorts that we have that we open. So, they actually help us ramp our hotels much faster because they're on it.

They -- the whole benefit that we have available to us that nobody else can replicate is that we've got a very large network of hotels that they can trade amongst. So we've got probably 60 hotels in the Americas, and nobody else has that kind of a network for a Travel Club like that. So owners really like it and the owner economics.

We've done exhaustive work on this by the way, because I wanted to verify that the guests and members are getting real value for their membership and that owners are getting real value for participating. And in both cases, and of course, we benefit because we're making money off of it as well. But it's very clear that the first 2 statements are true.

Great. We have time for a couple of more questions. Chad, I saw you.

Chad Beynon from Macquarie. Thanks for everything today. Just wanted to ask broadly around your industry segments for business travel. We've talked about AI a lot on the positive. Obviously, the companies are experiencing changes. There's been some tech layoffs, and must expect for some of that to come. So as we're thinking about who your traveler is and how that's evolved as you filled in the map, can you talk about any additional reliance on that tech sector? And if you do see a decline from travel from that area, kind of where you'd fill that in from?

We haven't seen a decline from that area to date. It's actually -- they continue to be some of our most important those kinds of companies really the most important segment that we currently serve. What I will say is, as we've looked and seen how the ebb and flow of different sectors has done, when I joined the industry 20 years ago, pharma was, by far, the biggest by far. It was probably twice the banking sector, which was second in line, and tech was like fifth.

So it's evolved tremendously, Guess what's back? Pharma, because a lot of companies are actually relaunching different therapies that require sales forces. Well, sales forces -- that's where the bread and butter that big pharma gatherings or the big pharma gatherings are all about. And I think that interestingly, if you really want to get conceptual about it, AI is going to probably accelerate drug discovery. New chemical entities that will turn into therapeutics that require sales forces to sell.

We're hosting AstraZeneca here in this very hotel today. We have a very large program with another pharma company in Florida as we speak. So, pharma has really, really shown some great strength. Banking, to be honest with you, it kind of ebbs and flows based on the sentiment of the moment and how healthy the markets are and so forth. So, I wouldn't say that that's been durable. But pharma is coming back as a pretty reliable and significant sector.

Ben Chaiken, Mizuho. You've talked about white space a lot as an opportunity for the network. You quantified it on Slide 58. Can you maybe help us contextualize where the opportunity is of the medium to long term? And then part 2, I think if I heard you correctly, you made a comment that 85% of signings within Essentials were new owners. Can you talk about how this impacts the overall flywheels, as I imagine they're very much related.

They are. So, the kinds of markets that we identified when we were doing all the research for Hyatt Studios were secondary markets, and we had no presence because those secondary markets didn't have rate levels that would support building, say, a Hyatt Place or Hyatt House. They do support building a Hyatt Studio, Select or -- well, maybe not Unscripted, it depends on the level of the Unscripted property. So, we believe that the bulk of that first wave of expansion is going to be in secondary markets, sometimes in tertiary markets.

Julienne actually named 4 or 5 brand new markets for us. I mean, never having had a hotel in West Virginia in our in our entire history is kind of a strange thing. But a lot of strange things exist, like we're not present in a whole bunch of markets that you would think that we should be. So that's the first wave.

And I think that the new owner groups that are -- that really concentrate their investments in upper midscale is what we are now leaning into. And that's an owner group that's an owner community that we have not had historical strength with -- but Julienne, while she took her a brief hiatus from Hyatt, unfortunately, but thrilled that she's back, has a lot of experience with that in our group. So we have now back leading the Americas, someone who really has great knowledge base and understands that owner group very well. That's just the U.S. commentary. I think ultimately, as we progress, that Hyatt Select will show up more and more in tertiary markets as well.

We will never be as proliferated in highway locations or remote locations, maybe rural locations as our competitors are because they just continue to proliferate in part to sustain net rooms growth, but they have lower and lower chain scale opportunities. We're not in the lower mid-scale economy and we're not going to be there anytime soon. We believe, and Mark has really countered this into my head, the best way to grow a powerful loyalty program is to grow by the adjacent segments.

If you leap from upscale to lower mid-scale or economy, you end up with a bimodal distribution, it does not work, just doesn't work. And I'm not going to go into the details, but you can look at companies that have bimodal distributions, just by virtue of what their product line is. Their contribution at either end of the spectrum. Well, the contribution of low end tends to be high. The contribution to the hand is very low because the price point differential is so great. So we believe in contiguous growth.

Great. We're going to go with Kevin, and then we've got one online question and then we'll wrap up.

Kevin Kopelman from TD Cowen. You highlighted RevPAR index a couple of times in the presentation, and I was wondering if you could give more color on how RPI has progressed over the last few years. And if you see more opportunity for upside in RPI in the coming years?

Yes. So what we said is we've led RevPAR growth, actual growth rate for the last 5 years almost by definition, that means you're gaining share, which is what's happened. And we continuously grow share. And we're running a RevPAR premium Index lies across each of our brand groups. But I have to tell you that we are increasingly focused on net room realization -- net rate realization, sorry, and margin because, again, back to the questions that were being asked before about, well, shouldn't you be at 60% penetration and isn't that cheaper delivered cost? The answer is not necessarily, you have to really look harder at how people are counting penetration.

And for us, getting to 60% or 70% loyalty penetration with worse margins is idiotic. Like, that doesn't serve our owners. And we're not here to serve someone's notions that penetration is the only thing that matters. We're looking at dollars. That's why this whole hyper-focus, and I'm sorry to preach about this, it's like somehow Net Rooms Growth by itself, completely and totally detached from the economics that are associated with fee growth, is not sensible. Net rooms growth doesn't create dollars. Fees create dollars. And Joan mentioned that our fee growth has been higher than any of our competitors over the last -- since our last Investor Day.

Since '22.

Since '22. So we're focused not just on net rooms growth. We're focused on net fee growth. That's much more important to you as an investor. It should be.

And that was organic, too.

Yes. Our organic growth rate in fees, organic is higher than the total fee growth for our competitors. There's a reason for that, higher fees per key and translation into dollars. We're not doing -- you know how they say when you eat celery, it's empty calories. Yes, some of the net rooms growth that's being reported is empty calories. We're not interested in empty-calorie. We want nutrition. That's called money.

Well, what I will say to ensure that everyone in the audience gets incremental calories at lunch. We'll take one last question, and then we'll wrap it up. This is actually for Mark. I think this is a really good one to wrap up on.

Mark, what's your point of view on the loyalty landscape and what ultimately differentiates and separates Hyatt?

Thanks, Adam. World of Hyatt, and you heard Laurie say this has really ownable points of difference. And not because we thought that made sense, but because we do spend a lot of time listening. And what our members have said and they continue to say to us is that loyalty programs feel a lot more one-sided than they ever have before. And if I ask you to think about in your own lives, the most loyal relationships you have, most of you would think about a family member. And what I guarantee you doesn't happen every January 1, is that you don't reset your barometer with them and tell them, we had a good last year. Now let's see what you do this year.

And if and only if you accomplish certain things, we'll have another loyal relationship and so calendar turns. And yes, that's exactly what's happening. And I think what you're seeing in a World of Hyatt, whether it is choice when a member works hard to stay with us and get to 10 nights or 20 nights, what they don't want is a prescriptive gift of what you think matters to them. What they really value is Give me a choice. It may be points, it may be an upgrade, it may be a free room-night, but let me decide. And then maybe the ultimate barometer or point of difference is the hallmark of Guest of Honor, which just changes the definition of loyalty. Loyalty programs today recognize one person, the person who gives them frequency.

And yet here and very true to our purpose of care, if you're important to us and shouldn't somebody who is important to you, by definition also be important to us. And that's what Guest of Honor does, and it's the only benefit of its kind in this industry. And these points of difference, I believe, we believe, are resonating. We have welcomed members into World of Hyatt at a record pace in the last few years, and we're welcoming many who honestly grew up in somebody else's loyalty program who feel a little lost or a little unheard, and we love the space we sit in today. We think World of Hyatt has a very clear point of difference.

Great. Mark, I'm going to turn it over to you then for any closing remarks.

Yes. I'm just going to stand for a second. I'm going to build right on the back of what Mark just said. So Guest of Honor is not -- it's not a coincidence that we are the company that's doing this because Guest of Honor when you think about it is a profound expression of gratitude. We are grateful to those members that have achieved that highest level. And one way to show that is to allow them in turn to show their gratitude to people who are important in their lives. That gifting capability has a massive profound impact on you. I don't know if you've all experienced this, I'm sure you have. When you express your gratitude for someone, the feeling you get back is actually much more powerful than what maybe you thought it might be, and it's a 2-way street.

And that leads me to my closing comments, which is expressions of gratitude. First, I want to thank Joan and Adam, Ryan, Kira, so many members of our and Catia. So many members of our IR team who worked tirelessly on this event and pulling the data together and making sure that is a coherent story and cogent story. I am blessed with -- I think I've done over 65 earnings calls so far. I'm blessed with an incredible IR team, Hyatt is blessed with one and a phenomenal finance team.

So my first gratitude goes out to them. Many members of my team, my direct reports, are here. And I personally think, of course, I should think this if I didn't, I would have to do something about it. I think I have the best team in the industry, and many of them are here now. And we are totally less aligned and really working coherently and cohesively as a team.

We developed just to give you a little insight into how we actually think about our own behavioral norms amongst ourselves. We came up with a simple expression of what it means to be a part of the senior leadership team at Hyatt, and we crafted something called PACT, P A C T, Prioritization, Accountability, Collaboration, and Transparency. That's -- those are the norms, the behavioral norms and the relationship norms that we hold each other accountable to. And so, my gratitude for my team is endless.

The hotel team.

We already acknowledged Mark Wagner and Roberto Asia, but there are a lot of people who made this come to life. A couple of other people, Steve Enslin, who has actually technically retired, although I told him when he was doing that, he would never really retire, and he's right here as he has been for every meeting that's been important to Hyatt since he was a child a long time ago. It happens that we both share a passion for the same bands, so going to concerts with him is a blast.

And sitting behind Steve, we have Mike Walsh, whose company has been our indefatigable partner in production. Producing the stuff seamlessly and consistently over time at this level of quality isn't a mistake. So, to him, to Tracey, to Brady, to Lauren, to Cass, to Savannah. The whole team has come together and done something really special.

My final and most profound expression of gratitude to all of you. I think if you not learned anything other than this, you need to understand during this presentation, you need to understand, we cherish that which we're delivering for shareholders, it's absolutely critical to lifeblood for us. Yes, it's true that the Pritzker family has a massive stake in the company. So growing up, as I did, with the people whose money you're responsible for and accountable to sitting next to you in the office next door. Let's just say that it's not a stress-free environment.

So my focus on delivering returns has always been at an extremely high level. I used to be about 6'2 and had black hair. But seriously, we have such profound gratitude for the time that you've all taken to be here, for your interest in the company. For the work that you all do, I mean really, really intensive work and to all of our shareholders.

So that's really what I wanted to say in closing. So thanks for being here and enjoy your lunch.

Good morning, and welcome to the Hyatt First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you, and welcome to Hyatt's First Quarter 2026 Earnings Conference Call. Joining me on today's call are Mark Hoplamazian, Hyatt's Chairman, President and Chief Executive Officer; and Joan Bottarini, 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 under the Financial section of our Investor Relations website and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation on our Investor Relations website this morning containing supplemental information.

Please note that unless otherwise stated, references to occupancy, average daily rate and RevPAR reflect comparable system-wide hotels on a constant currency basis and closed hotels in Jamaica are excluded from comparable metrics in 2026. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will now turn the call over to Mark.

Thank you, Adam, and good morning, everyone. We appreciate you joining us today. Before I begin, I want to acknowledge recent events in the Middle East. We are closely monitoring the evolving situation and remain in regular contact with our hotel teams who've done a remarkable job of managing operations during trying times. And I'm extremely grateful for the professionalism and care with which my colleagues have conducted themselves throughout.

The quarter also saw isolated security concerns in Mexico and Hyatt colleagues, guests and our hotels were thankfully unaffected. The safety of our guests and colleagues remains our top priority, and I'm proud of the care and resilience that our teams continue to demonstrate. At times like these, our purpose to care for people so they can be their best, continues to guide our actions. Turning to operating results. This morning, we reported first quarter system-wide RevPAR growth of 5.4% and performance exceeded our expectations, driven by continued strength in our luxury brands globally.

RevPAR growth in the United States was ahead of expectations, and we saw strong growth across most international markets. Leisure demand from premium customers was exceptionally strong in the quarter, increasing approximately 7% compared to last year, with the strongest demand realized by our luxury brands. Business and group travel was also solid with business transient RevPAR up 2.4% in the first quarter and group RevPAR up nearly 4% compared to last year.

Our core fee business remains durable and our diverse global portfolio has proven resilient in the face of demand fluctuations, including certain macro and geopolitical disruptions. Our differentiated brands continue to deliver results over the long term and reinforce our position as a preferred brand portfolio for guests. We continue to see this preference reflected in our World of Hyatt loyalty program. We ended the first quarter with approximately 66 million members, an increase of 18% compared to the first quarter of last year. And World of Hyatt members accounted for nearly half of total occupied rooms globally during the quarter. World of Hyatt's success goes beyond scale.

We are focused on generating higher value demand. When our members stay with us, they spend nearly twice as much compared to a nonmember, highlighting the engagement from our premium customer base. The value proposition of our loyalty program continues to resonate with our members. Enhancing Hyatt's attractiveness to owners and developers. Development activity during the quarter was very strong, we ended the first quarter with a record development pipeline of approximately 151,000 rooms, up more than 9% compared to the first quarter last year.

We continue to see strong interest in our newest brands with owners recognizing the value of our brands and the strength of our commercial engine. In the first quarter, we signed a number of new franchise agreements across Hyatt Studios Height Select and unscripted by Hyatt brands in the United States and have many more in discussion. In total, the pipeline for new hotels in our Essentials Brand Group increased nearly 25% compared to the first quarter of 2025. Outside the United States, our development engine is strong. with significant signings activity during the quarter.

We're seeing broad interest across our brand portfolios throughout the world, reinforcing our confidence in our ability to drive durable, capital-efficient fee growth over the long term. We achieved net rooms growth of 5% for the first quarter of 2026, in line with our expectations as we lapped a quarter of outsized openings last year. We had several notable openings in our lifestyle brands, including the Anda Lisbon, which strengthens our lifestyle brand presence in Europe, Diana's Shanghai ITC a luxurious and modern addition to our already strong brand presence in Greater China and the Livingston, our first hotel in Brooklyn, New York.

These openings reflect our continued focus on expanding our portfolio in high demand markets with differentiated offerings. With many exciting additions to our lifestyle portfolio slated to open in 2026 and further strengthening our position as a leader in lifestyle offerings at scale. We also continue to see strong momentum in our Essentials brands, entering 7 new markets during the quarter. This included the expansion of our upper mid-scale portfolio with several UrCove by Hyatt openings as well as the third Height Studios property in the U.S. These brands are an important driver of our growth strategy, allowing us to expand our brand footprint in markets where we have significant white space while also offering attractive economic returns to owners. We expect our net range growth to accelerate over the course of the year as we benefit from meaningful opportunities to convert hotels into our system, along with openings from our pipeline.

Now shifting to an update on transactions. We continue to make progress on the plan to sell Hyatt Grand Central New York and could be in a position to close that transaction in the fourth quarter of 2026, if various closing conditions are satisfied. We will continue to provide updates on this transaction as we reach key milestones. During the quarter, we elected to terminate the purchase of sale agreement for the sale of the Anda London Liverpool Street. And separately, we are no longer under contract for two other properties that were previously signed, our decisions not to move forward were specific to the individual transactions and reflect our continued discipline around pricing and terms.

To be clear, our broader plans for additional asset sales and our confidence in the transactions market remain unchanged. We remain active in the market and are in discussions regarding certain assets to further realize value from our owned portfolio. Our approach remains consistent with our previous track record, ensuring we realize attractive values when we sell hotels and ensuring we execute transactions in a disciplined manner that retains the sold properties within our portfolio and increases shareholder value. As we look forward into 2026 and beyond, I'm confident about our future.

We have significant competitive advantages that drove the strength in our core business in the first quarter. We are focused on elevating Hyatt so we can respond faster, innovate more and perform at a higher level. in an increasingly dynamic environment. At its core, elevating Hyatt and maximizing our potential comes down to three integrated areas working together, our brands, our talent and our technology. Increasing brand equity is a key component of how we drive value for our stakeholders. Our sharpened brand focus strengthens differentiation, enhances the guest experience and drive stronger performance across our portfolio.

This makes it that much more attractive to owners and developers supporting our expectations for long-term growth and growing free cash flow. Brands create the most value when they are executed consistently, and that comes down to our people. We are focused on developing leaders who could execute at a high level while continuing to innovate as enabled by our culture. We've built an organization grounded in quality, responsiveness, performance and continuous improvement. Strong brands and great teams performed best when enabled by the right data and the right technology that we are leveraging to uncover deeper insights.

These insights will allow us to better engage with our guests, support our colleagues and enable faster, more informed decision-making. We navigated a very dynamic quarter with several events requiring speed and responsiveness that our colleagues handled exceptionally well. I'm proud of our colleagues around the world who live our purpose every day, which I truly believe allowed us to deliver such strong quarterly results.

I'll now turn the call over to Joan to provide more details on the quarter. Joan, over to you.

Thank you, Mark, and good morning, everyone. In the first quarter, RevPAR exceeded our expectations, increasing 5.4% compared to last year, driven by strong demand across our global portfolio and continued strength of the high-end traveler. In the United States, RevPAR increased 3.3% compared to last year. Performance was led by our full-service hotels, which benefited from strong leisure demand, including at our resorts, which had a particularly strong March. Group RevPAR was up 1.2% in the face of more difficult comparisons in Washington, D.C. due to the January 2025 presidential inauguration.

We also saw improvements in select service RevPAR, which increased 1.8%, led by business transient demand. Outside the United States, RevPAR growth was even stronger, increasing over 8% and reflecting robust international travel demand. Greater China grew RevPAR over 12% in the quarter, supported by improved domestic leisure demand, particularly during the Lunar New Year holiday in February. Along with improved international inbound travel, including from the United States.

Asia Pacific, excluding Greater China RevPAR increased over 11%, driven by strong inbound travel and demand across key markets. Europe continued to perform well, with RevPAR growth of 7.5%, supported by strong leisure travel and solid group demand benefiting from the Olympics in Milan. RevPAR in the Middle East and Africa declined by approximately 4% compared to last year due to the conflict in the Middle East. Net package RevPAR in our all-inclusive portfolio increased 7.4% and compared to last year despite the security concerns in Mexico beginning in late February. Overall, our first quarter results reflect strong demand for premium leisure travel globally and a healthy commercial travel backdrop.

Turning to our financial results. Our core fee business continued to perform well in the first quarter, supported by our top line performance, with tell level profitability, increasing scale and the quality of our portfolio. Gross fees increased approximately 9% to $333 million, driven by strong performance across our managed portfolio, fees from newly opened hotels and the newly structured management agreements from the Playa portfolio. We also grew incentive fees approximately 14%, reflecting solid hotel level profitability, particularly in international markets.

In the first quarter, owned and leased segment adjusted EBITDA declined by approximately $2 million adjusted for the impact of asset sales. Distribution segment adjusted EBITDA declined versus the prior year due to temporary factors, including the closure of hotels in Jamaica because of Hurricane Melissa and lower demand in Mexico due to security concerns. The distribution segment was also impacted by lower demand for 4-star properties a dynamic we have shared that will take time to return to previous levels as travel spend improves for this consumer segment. Overall, adjusted EBITDA for the quarter reflects the strength of our core fee business.

As of March 31, we had total liquidity of approximately $2.2 billion, including $1.5 billion of capacity on our revolving credit facility. In the first quarter, we repurchased $135 million of Class A common stock, returning approximately $149 million to shareholders through share repurchases and dividends. We ended the quarter with $543 million remaining under our share repurchase authorization. We remain committed to our investment-grade profile and our balance sheet is strong. Looking ahead to the rest of 2026. We are operating in a dynamic environment that varies from region to region.

RevPAR in the Middle East is expected to be down significantly compared to last year, impacting fees by approximately $10 million for the balance of the year. Pace for our all-inclusive resorts in the Americas is up in the low single digits in the second quarter due to lower demand in Mexico. While we expect positive net package RevPAR growth in the Americas, we do not expect to see the same level of growth for the remainder of the year compared to the first quarter due to the disruptions from the security concerns in February.

Overall, these disruptions are expected to have a modest impact to results. We are increasingly positive about the outlook for the United States. Forward-booking trends in the United States are strong for the balance of 2026 with group pace for full service hotels up in the mid-single digits for the remainder of the year. We continue to hear positive feedback from our group and corporate customers about their intent to travel this year, and we expect the strong leisure trends to continue. We are also seeing improved select service trends as we lap easier comparisons starting in the second quarter.

Outside of the United States, we also expect performance in Greater China and the rest of Asia to be very strong in the balance of 2026. We believe the improved performance in the United States supports increasing our full year system-wide RevPAR growth outlook to between 2% to 4%. RevPAR in the United States could grow between 2% and 3% for the full year, reflecting the improved trends that I just reviewed. We expect moderately higher growth in international markets compared to the United States overall, but growth will be lower compared to our expectations last quarter, primarily due to the impact of the conflict in the Middle East.

We expect net rooms growth of 6% to 7% for the full year with continued momentum behind our new brands, driving another year of strong organic growth. We are raising our gross fees outlook for the full year and expect fees to grow between 9% to 11% in the range of $1.305 billion to $1.335 billion. We are maintaining our full year adjusted EBITDA outlook range and we expect adjusted EBITDA to grow at a strong rate of 13% to 18% in the range of $1.155 billion to $1.205 billion. This outlook reflects stronger performance in our core fee business, offset by revised expectations for the Distribution segment, which we believe will decline by approximately $25 million for the full year compared to 2025. including $15 million in the second quarter from the impact of the security concerns in Mexico.

We are maintaining our adjusted free cash flow outlook for the full year in the range of $580 million to $630 million an increase of between 20% to 30%. This reflects the conversion of adjusted EBITDA to adjusted free cash flow of at least 50% for the full year. Finally, we expect to return between $325 million and $375 million of capital to shareholders for the full year through share repurchases and dividends. For the second quarter of 2026, we expect global RevPAR growth of around 3%, which reflects solid growth in the United States, including the start of the FIFA World Cup in June and continued strength in international markets, except for the Middle East.

Gross fees could grow in the mid-single-digit range in the second quarter compared to last year. We expect adjusted EBITDA for the second quarter to be up in the mid-single digits compared to what we reported in the second quarter of 2025 after removing $17 million of pro rata JV EBITDA consistent with our updated definition and $14 million of owned and leased adjusted EBITDA for the period of ownership of supply portfolio.

Please refer to Schedule A 9 in this morning's earnings release for the 2025 adjusted EBITDA baseline by quarter which excludes pro rata share of JV EBITDA and asset sales that were completed last year. In closing, our first quarter results reflect the strength of our core fee-driven earnings, our results demonstrate the performance of our brands and the resilience of our premium customer base across brands and geographies in the face of a dynamic operating environment.

As we look ahead, we remain confident in our ability to deliver continued growth, supported by our strong pipeline, differentiated brand portfolio and disciplined approach to capital allocation. We believe we are well positioned to navigate a dynamic environment while continuing to deliver meaningful long-term value for our shareholders. This concludes our prepared remarks, and we're now happy to answer your questions.

[Operator Instructions]. Our first question comes from Lizzie Dove with Goldman Sachs.

So we've seen, obviously, this really meaningful positive shift in the U.S. demand dynamic. There's been some talk of the C-shaped economy, but it also seems like your higher-end customer is still doing very, very well. And so, maybe you could just unpack a little more about what you're seeing real time, what's embedded in that 2% to 3% you raised it to in the U.S. in terms of business in leisure and how you expect that?

Sure, Lizzie. Yes, we had a result in the first quarter that exceeded our expectations and leisure transient in the quarter in the U.S. alone was up 4%, and group RevPAR being up 1.2 with the comparison we had to the inauguration last year was a strong result and even probably more, I guess, in excess of our expectations was select service RevPAR was strong, and that was driven by business transient improving. So all of those trends that we saw that were in excess of our expectations.

We're looking at the second quarter and the rest of the year. and factoring that into our outlook. I mentioned that we expect the U.S. in the second quarter to be between 2% to 3% growth. And that's going to be helped in part to by the group business that we're seeing from FIFA in June, and that will carry over into July a bit too. So for the full year, we believe we have a strong and reasonable expectation given what we're seeing, I mentioned group up in the mid-single digits for the remainder of the year in the U.S. and business transient and leisure transient, the booking windows are still modest, but we feel really confident about our outlook now for the U.S.

I'll just add a couple of comments, Lizzie, thanks for the question. First, on the group front, we have sequentially over the last approximately 9 months grown group share. And our RevPAR realization has steadily increased over that period of time. Part of that has to do with a new approach into -- in terms of how we go to market. And that reflects the quality and the positioning of the groups that we are actually attracting differentially.

Secondly, whether you look at STR chain scales or you look at the luxury brand group that we've defined for ourselves, they were the strongest RevPAR growth sectors -- segments in our portfolio. If you look at our brand group, for example, we were up in the double digits, RevPAR growth in the first quarter. And we also had the most expansive index growth, so market share growth, almost 5 points of increase in share in the first quarter.

So we really -- if there's any sign of weakness in terms of the high-end customer, we have not seen it. Of course, I think we are playing the game differently and also really focused on the clients that we serve and how we go to market. And I think our relative performance is a reflection of that.

Your next question comes from the line of Stephen Grambling with Morgan Stanley.

I wanted to turn to the distribution segment a little bit. I recognize that you had some kind of one-off things that are impacting it. But how should investors think about the drivers of this segment longer term? And separately, do you still see synergies from this business within the overall portfolio, if you will? Or is this more kind of a standalone at this point?

Thank you, Stephen. First of all, the way we think about the business is, it has been -- it's been hit by a couple of isolated issues that have had an obvious impact. And you heard what we -- what our outlook is for the year. There's some FX in that as well, but a lot of it is the change in volumes that relate to Jamaica being largely shut down in relation to the core bookings that we had last year into Jamaica before Hurricane Melissa. And then secondly, the Mexico security concerns.

I would say that we view both of those as isolated. The second thing is we see actually more -- if I had to say, do we see more opportunities than risks. The answer is absolutely yes. and they really derived from 2 things. One is, in the same way that we have revamped how we go to market in certain areas within our core business. We have done the same in relation to ALG vacations. And we have an AI strategy road map for new capabilities that we're building that will make us more effective and more efficient and I think drive more volume.

And the platform itself is highly enabled to be able to serve others on a white label basis. And we see growing opportunities in that domain because there are a lot of larger -- there are companies with large customer bases that are looking to offer more and different types of services to their customer base. And package travel is one key area. So we see really significant opportunity. Having said all of that, the principal reason we own this business is because of its interface and integration with IC, the height inclusive collection because it's still a significant revenue generator for that business, and it strategically serves a purpose of being able to have greater visibility into things like Lyft. We buy, I don't know, I would hazard a guess, it's in excess of $1 billion, probably more like $1.5 billion of airline seats every year as part of the packages.

So we have extremely close relationships with all the carriers as well as charter operators. That visibility gives us a lot to go on in terms of how we forecast and what the outlook looks like for each market. So I would say there is a strategic rationale. It does fit with the inclusive collection. If that were not true, I'm not sure that we would own this business, but it is true, so we own it. It happens that we are not looking at this as sort of just a cog in the wheel. We're looking at it as a real business with a real opportunity in the future.

And the only thing I would add to what Mark said -- sorry, the only thing I would add to what Mark just said is, structurally, about half of the business serves 5 star locations and half of the business serves 4 star locations. So when you think about the performance of our portfolio and the demand that we saw despite the securities concerns in Mexico, that there was redirection of a lot of that business into other locations.

So that is something that has benefited our portfolio, but on the temporary side with respect to Forestar we're seeing actually after the disruption late February and into March, that pick up, stabilize and grow. So when we look at the second half of the year, that's where we're seeing the impact from the first year -- excuse me, from the first quarter and the second quarter to get much better and particularly into the third and fourth quarters of this year.

So while we're on this topic, I do want to provide a couple of pieces of data that I think will provide context first. In terms of gross fees, Mexico represents about 10% of our total gross fees. The Dominican Republic represents about 6% and Jamaica represents about 1%. And so as we talk about these markets, I think it's important for everyone to understand the relative size. Secondly, we were positive the heightened [indiscernible] had positive RevPAR growth across each of those markets -- sorry, not Jamaica. Jamaica is still wildly disrupted, so let's leave that out.

But up 3% in Mexico, up 11% in the Dominican Republic, really where you saw the massive change was March. So Mexico was down 5%, but the Dominican Republic was up 16%. And that is a direct reflection of the channel shift that we actually played a big role in because we have the largest tour operator in North America. To actually cascade business that wasn't going to Mexico because of security concerns into the Dominican Republic. So that's just a hard data point for you to actually understand in terms of the strategic value that ALGV provides to the business itself.

Your next question comes from the line of Michael Bellisario with Baird.

Mark, on the demand front and sort of your big picture outlook kind of taking those together. Just how are you thinking about or maybe sensitizing just the whole potential range of outcomes with all the macro uncertainties out there, just higher gasoline, higher airline ticket prices, reduced flight capacity. Just how are you thinking about that? Are you seeing anything yet in the booking pace that maybe gives you any pause?

Not at the moment. I think we're very sensitive to what's happening with airfares because airlines will have to adjust their affairs to accommodate fuel price increases. And of course, the biggest issue is the persistency of the current situation overnight last night, oil moved quite a lot. And -- but again, I think there's a danger in trying to make predictions off of momentary strategy -- or sorry, policy positions that the participants and the board might be taking. So we are looking at a situation in which if there is a persistence of higher oil prices and that keeps going up.

I think the biggest hit in terms of demand will be at -- in -- amongst lower income households. That's true across retail as well as hospitality. It's -- that's really where a disproportionate amount of the pain will be felt. I think airfares have already gone up. And depending on what market you're looking at, they've gone up between 5% and 10%, maybe a little higher than that in certain markets. And that hasn't really affected our volumes. They've shifted as I just described, but it hasn't affected our volumes. And I think, once again, this goes back to the actual client base that we have. We're not serving primarily the market of lower household -- lower household incomes relatively speaking. It's really very concentrated in higher-income households. And also households that have financial assets, investments in the stock market and so forth. So there's a [indiscernible].

And so -- we don't see any significant demand shifts at this point. But we are paying close attention to this because at some level, ever-escalating oil prices and inflation will have an impact.

Your next question comes from the line of Richard Clarke with Bernstein.

Just want to follow up a little bit more on some of the Caribbean dynamics. So I think at the full year results, you would have expected the Jamaica hotels to reopen by the end of this year. I think it looks like that's going to move to early '27. So what impact does that have on this year's numbers? And just on Mexico, are you seeing demand there now normalizing? Is that what you're saying for the second half that Mexico will be back to normal levels of demand beyond the second quarter?

Richard, I think you were referring to Jamaica. And we have removed Jamaica for this year. So impact to this year is nothing greater than what we've presented in our EBITDA and fee outlook. And we provided a walk during our investor presentation -- in our investor presentation in the fourth quarter on that specifically. So that's the story with Jamaica and we'll keep you posted as far as reopening and our expectations in 2027.

With respect to Mexico, we are seeing a moderating of the impact that we -- that I mentioned that we saw in late February and into March. So we feel good about what we're seeing in the last couple of weeks. So week-on-week, we're actually seeing pace getting better. And as Mark mentioned, airline capacity has not gotten larger, but airlines are actually managing this with load capacity. So there's still quite a bit of demand that's going into these markets as we look out into future quarters. So the second half of the year, we feel good about that we'll be able to pick up -- and our outlook overall is positive for the Caribbean and for our net package RevPAR in the Americas. Part of that is due to the improvement in Mexico and part of that is due to some of this redirection of travel into other markets where we have hotels.

Your next question comes from the line of Shaun Kelley with Bank of America.

I just wanted to ask about some of your global expectations. Could you just give us a little bit more color on how you're thinking about Middle East and Africa trending through the balance of the year? And then just maybe some of the offsets globally as -- I don't know if Asia is seeing any redirected business is now staying more in that market and not kind of crossing over to Europe or just how you see some of those kind of global puts and takes.

So I'll start with what our outlook includes Sean. And then maybe Mark will want to add as well as far as the macro. But Middle East, right now, what's built into our outlook is a more pronounced impact in the second quarter, which is embedded in our EBITDA outlook that we -- that I shared -- so we expect demand in the second quarter to be more impacted and then to improve in the second half of the year sequentially quarter-over-quarter.

So kind of by the end of the year, getting closer to maybe flat, but we'll see because it's very uncertain as far as how this will evolve over the coming quarters. But that's what's embedded within our outlook. And the one region that has been exceptionally strong is China. And I mentioned the growth in the quarter of 12%. And the region overall, excluding Greater China, is up 11%. We're seeing strong results into April on a preliminary basis. So that has also been a region that has exceeded our expectations. In China, this is -- we had the Lunar New Year holiday in the quarter, which always gives a boost, but we're also seeing group slightly up and BT about flat. So across all demand segments, China looks like a region that we can continue to rely on growth for the remainder of the year.

The only region I would add a little commentary to about Europe. Which was up 7.5% in the first quarter stronger than we anticipated. There are ongoing. There's more and more talk about fragility, economic fragility in Europe, especially around energy prices and the escalation of energy prices. Again, this is an example where I think there's going to be a difference between how economy budget mid-scale performs in Europe versus full service and luxury. And so we actually have a positive outlook in Europe for the remainder of the year. It seems like in 20 -- I remember thinking in 2022, the '23 would be Europe's big breakout year. It turned out to be true. I thought '24 could be good. It turned out to be great. '25, I thought couldn't beat '24, it beat it. -- so Europe has actually been, at least for our portfolio, have been very resilient. And I've learned over the last 3 years that counting your about is a mistake. So I would say we have a pretty positive outlook on Europe.

Your next question comes from the line of Smedes Rose with Citi.

I appreciate all the color around Mexico and the Middle East. Maybe just kind of switching gears a little bit. I was just curious as to your comments at the beginning of the call about terminating your sale of the Andaz in London and not moving forward with a couple of other asset sales. Could you maybe just -- I don't know if you can provide any more color around what sort of broke those deals that would certainly be of interest.

But then also, how are you just thinking about the transaction environment overall? Is it getting more favorable relative to your last call and maybe this time a year ago? And any kind of I don't know, would you like to be able to complete additional asset sales, I guess, as we move through the balance of the year?

Sure. Thank you for the question, Smedes. I think with respect to Liverpool, for those of you who don't know, the hotel sits on top of rail lines that are part of network rail. That's the U.K.'s national rail system and adjacent to the liver posted station. And the redevelopment that we had a part in with respect to a developer coming together with the MTA from Hong Kong to redevelop the entirety of that site had a number of conditions associated with it, including approvals from network rail that didn't -- were not issued.

We don't believe the opportunity is dead. We believe that the deal that we had signed up doesn't have the authorities that it needs to move forward. I don't believe that, that means that there won't be a redevelopment, I believe it will take a different shape. And you can imagine, we remain in very close contact with all the parties involved. And I'm actually optimistic. It's a great location and a great hotel market. adjacent to some of the biggest businesses in the city of London. And when I say adjacent, I mean literally across the street from.

So we have great corporate drivers and the hotel has got a great reputation as a social event destination. So I'm very optimistic we can find our way to a different type of deal, but it will take some more time for Network Rail to make some additional decisions about how the sequencing of that project unfolds and so forth. In the meantime, the hotel is performing very well. So we don't -- we're getting paid to wait, so to speak. So that's really the whole story there. And I would describe it as a setback, not a not something that we are turning off because we won't be able to sell it.

Secondly, we won't -- we will not do the redevelopment by the way. We will only participate by way of selling the property into a redevelopment plan. That's -- so we're not going to undertake a mass redevelopment in the City of London. The other hotels actually were relatively small deals. We mentioned a few calls ago that we have a few hotels that are -- we would put in the category of portfolio cleanup. They happen to be unleased property. So it's a ground lease that the hotels operate on.

So they're not material we ended up with market-specific reasons why we elected not to proceed with two of those properties with two properties that we had previously had signed. And we believe that the markets will perform well this year will get paid to wait. And we will we will look to put another deal together in the future. Finally, yes, we are working on other opportunities to have additional asset sales. So when I mentioned our plans with respect to asset sales and our outlook on the transaction market remains unchanged. What that means is our intention to continue to sell properties. And I do think that the market for property sales is much more constructive this year than it was last year.

Your next question comes from the line of Duane Pfennigwerth with Evercore.

So just low singles EBITDA growth in the first quarter. It sounds like mid-singles in the second quarter. Can you just big picture walk us through the building blocks of why we would get so much acceleration in the back half?

Sure. The -- as we look at the core business, we've been talking about how strong we have been performing and how we anticipate continuing to perform, including our net rooms growth expectations. So when you look at the total year RevPAR, total year net rooms growth, that's going to lead to very strong fee growth for the year. And in the second half, I mentioned that the distribution segment will recover. There will be better performance, particularly in the fourth quarter because we are experiencing easier comps in that quarter. So there's a couple of factors related to all of those items built into the second half of the year.

There's also structurally -- if you'll recall, we renegotiated the Playa contracts. And in the second half of the year, we don't have the headwinds from the franchise fees that we had in the first quarter. So that helps us in the pickup on the fee growth into the second half of the year. So there's a couple of structural items. There's improvement in the distribution business that we're confident in and in the core fee business will remain strong going into the second half of the year.

Also, I would mention, Duane, the G&A that we posted in the first quarter was a little bit higher than our expectations, mostly due to timing. So as we look at the last 3 quarters of the year, we'll have lower G&A expense as well.

Your next question comes from the line of Dan Politzer with JPMorgan.

I think you spoke a little bit about general drivers of demand, but something that I think we came into the year hearing a lot of that was World Cup, Americas 250th things of that nature. So I mean has there been any change in kind of the outlook there as it impacts your business, especially in the kind of the peak summer season?

No, I think there's been no change in the outlook, it's positive. The pace that we're seeing into the cities that are hosting World Cup, are very strong. And we -- New York is, I think, a significant driver of that because that's where the finals will be. So the July pace for New York is really extremely strong. And interestingly, we've got real group business, significant group business that's also pacing well ahead in those cities. So it's not just transient, which is inherently shorter term.

And so our visibility to how much transient we actually pick up between now and the time that we get to World Cup is low, but our visibility on the group side is quite good. And the pace increases for those markets is in the mid-teens in terms of group pace. So I would say we thought it was going to be strong in those particular cities, and we continue to feel that way.

Your next question comes from the line of David Katz with Jefferies.

I wanted to just go back to technology and AI, in particular, it's obviously a growing topic across the industry. Mark, I'd love your perspectives on sort of where you're at, where you'd like to get to and how you see it evolving for Hyatt in any industry.

Sure. We have really made significant progress over the last 2 years, more than that, about 2 years and 4 months now of really putting together our entire environment and then building out a number of genic platforms. I would say one should never measure success based on how many agents you have deployed in your company. And I don't believe that any particular platform or tool is a durable competitive advantage. So however, what I do think is if you combine advanced advancements and facility with building platforms that have actually generated real impact to date, which we have. And we become more and more practiced at the human elements that are required in order for that to really generate value.

I think that's really where competitive advantage can be uncovered. So there are two dimensions to that. The first is the level of expertise and, frankly, reps repetitions of creating great tools and great platforms. And being able to pivot and continuously modify and optimize those platforms even as the models themselves learn, they're self-learning embedded in that, as you know. The second dimension is the expansion of the adoption of regular use of AI tools. We have enterprise-wide licenses on a few platforms, and we are looking to extend and expand.

And I have to say every -- literally every week that goes by in my team meeting, I hear new and different applications that hotel teams have come up with that I'm blown away by. And I think it's true that the adoption rate and level of expertise varies across the company. But we've heard about some really remarkable advancements. And I think it's the combination of that enablement at the center with a special focus on expanding and scaling adoption with the entrepreneurship at the local level, the combination of those 2 things is really where magic can happen.

And so we continue to see revenue focused activity is our #1 focus. It happens that in every case, every revenue-facing initiative that we've undertaken has also resulted in productivity gains. And the question is, what do you do with that productivity gain. And in many cases, we redeploy those resources to actually optimize further and hone and get more specific around insights that we've derived on our customer base to be able to go to market differentially. And I think that's why our performance has just -- in our core business has strengthened over this period of time, and I think it's 1 key driver of that is the application of AI.

So that's our philosophy. That's how we're approaching this. We see the big opportunity is to actually really elevate the level of humanity and the interactions that we have with our guests and our own colleagues by taking a lot of administrative work out of the system entirely. And that's really a powerful motivator for us given that we're very much a purpose-driven business.

Your next question comes from the line of Chad Beynon with Macquarie.

Great to see the increased pipeline of executed MNF contracts that you announced in the print -- just with respect to the Middle East conflict, should we expect any type of construction start delays or overall activity delays? Or do you think this pipeline should be executed kind of as planned?

Yes. Given the nature of what we've got in the region, which is more concentrated in Saudi than anywhere else, we don't see any impact in 2025 -- sorry, '26. I forgot what year we're in.

Your next question comes from the line of Trey Bowers with Wells Fargo.

This is [ Nick Wikel ] on for Trey. I just want to dig in a bit more on NUG, and try to figure out like which brands you're seeing the most uptake in, maybe the mix between like conversions and newbuilds for the year and you just hit on the impact or potential impact from the Middle East. So any color would be great.

Yes. Super encouraging. When we look at the pipeline increase year-over-year the activity level has gone up a lot. A lot of that has been in our Essentials brands, our slot service brands, up 25% in terms of pipeline size year-over-year, which is notable to say the least. We've had a sequential improvement in hotels under construction. It's up 10% quarter-over-quarter. About 1/3 of our hotels are under construction now. I would say as we our outlook currently includes about 2/3 of our room openings this year gross room openings this year coming from our pipeline and 1/3 or maybe it's 65, 35 or something like that being in the year for the year.

And of that, in the year for the year openings figure, we already have 60% that we've identified and have opening dates for. So we feel really good about where we stand at the moment. And yes, the activity in the U.S. in the Essentials brands is really, really strong right now. I think we've hit a vein with Studios Select and unscripted. Of those brands select has really taken off. And we have quite a few, if I count them correctly, probably over 30% of the conversions that we see already planned for the year are select -- Hyatt select hotels.

So -- and I think it will grow from there. So I'm encouraged across the board, but I have to say in the U.S., the Essentials portfolio is really the strongest category. Which will really help us fill in a lot of markets in which we have no representation whatsoever. We opened 7 new markets in the first quarter, and I think we're going to end up opening a huge number of new markets this year.

And the final question will come from Meredith Jensen with HSBC.

I was hoping you might speak a little bit more about the loyalty program. I know you gave the membership and the strong growth. But I was hoping if you might dig into a little bit more about spend, redemption behavior, how that's evolving kind of over regions and customer cohorts and perhaps adding any insights you might be getting from your credit card partnerships, that kind of thing, that would be great.

SP1772067257 Sure. First of all, in terms of the nature of the spend, I think it's like 60% or 65% of the room nights are paid for. with the remainder being redemption. So it's a very healthy ratio of our guests actually there as paying guests and not simply as redemption. Of course, we not only welcome but celebrate those who are redeeming their points because that is the flywheel with respect to loyalty.

The demographic profile of our membership base continues to grow stronger, and we see that in the total spend of our members versus our nonmembers. I referenced some data in my talking point, so you can refer back to those. But roughly speaking, it's -- they spent twice the amount that nonmembers spend. And that relates to both engagement and also total spend per stay increasing over time. The other thing that we have really been intrigued with is as we work closely with partners of ours and sponsorship initiatives that we've undertaken, we're seeing not only high engagement, but also more interrogation, more data fidelity and robustness of the data on our customer base that is really attractive to other high-end platforms.

And there's an adage where you want to go to where the money is. And so I don't remember the exact percentages, but a very high proportion something like 75% of the spend -- travel spend is represented by the top 40% of travelers. And that we play primarily in the top 20% of the travelers. So they are the highest spending guests. And I just think that we have new and different ways in which we're going to be able to add value for them. and it's primarily through experiences. And our focus on -- within that continues to remain very tightly focused around well-being.

So I think that's how we think about it. It's some comments I made about experiences and emotional connectivity versus transactional caught a lot of attention. And really, I didn't mean that the transactional aspects were not important they are. But that's not how we think about what's most meaningful and most valuable for our members. It's really about the emotional connectivity we can establish the care that we can extend not only in through well-being and other experiences, but also in just how we approach our members. So that's our approach.

We are small enough and differentiate enough to really make this model work very powerfully. And I think that's why you're seeing such persistent significant growth in the membership base, which will continue to evolve to our benefit. So thank you for that. I want to thank everybody for all of your time this morning. We're incredibly excited about where we stand and the principles that -- and the strategies that have left us in a very strong position I do want to remind everyone that we have an Investor Day in Chicago on May '28, and I have a request. If any of you who are coming are not currently world of hype members, first I'm shocked,

Secondly, please sign up and join. And then after you've joined book through the World of Hyatt app or hyatt.com because many benefits will flow in your direction if you do. And then for those of you, most of you, if not all of you, who are already world of Hyatt members, thank you. And don't forget to book through your World of Hyatt or hyatt.com. So thank you for that support, and I wish you all a great rest of the day.

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

This is webcast, correct? Okay. All right, just to make it sure. Are we -- good afternoon yet? At least -- we're about there. Good afternoon, everyone. We're thrilled to have Hyatt here today. We have CFO, Joan Bottarini, and then Adam Rohman, SVP of IR and Global FP&A and Treasurer.

I think we can probably start off pretty high level. There's obviously been some news lately in the world on the geopolitical front. Can you just talk about what you're seeing across your business globally in terms of Middle East exposure? I know it's a very fluid situation, for sure, but kind of how are you seeing the business evolve over the past couple of weeks? Any interruptions? And then can you talk about also the other regions that could be kind of indirectly impacted by what's been going on?

Sure. Well, first, let me start out by saying thank you, Dan, for the invitation. This is a great conference, and my flight last night was fully booked, which is great.

So there's a good [indiscernible] for Vegas.

Yes. Yes. I love to see that all the time as far as travelers getting on the road and a lot in suit jackets, so the business travelers getting on the road is good, too. So let me just start, maybe take a step back before getting into the events.

Core business has been very encouraging, strong end to the year last year and the first couple of months this year, we're seeing strength as well in leisure travel, in particular, which has been -- as we've said, our anticipation for the first quarter when we talked about this on our fourth quarter earnings call was that we had really strong pace going into our all-inclusive regions, in Mexico and the Caribbean and business being somewhat flattish but continuing to not get worse than that, but be strong and our corporate customers really saying, they want to travel. They want to continue to travel. It's just -- that's the 1 customer segment where we don't have as much visibility because of the booking windows and then group remains healthy. So core business remains very, I think, encouraging, and we saw the first couple of months of this year continuing on the path with respect to all the customer segments.

Now the events, so the war in Iran and the impact to the Middle East, we reported from a -- well, first off, from a guest and customer safety and well-being, we spent the first couple of weeks since the war started, making sure that everybody was safe and that their well-being was taken care of. We had a actual fully occupied hotels in the region because for that reason, for what we have to do in the communities that we operate. And we've got very tenured folks managing these hotels who know exactly the playbook that you need to follow when there's this kind of events happening in their community and in their country and region.

So that was what we saw. It's a very fluid situation. We have seen occupancy levels go down as people have -- whether they were -- whether they're traveling outside of the country and getting to their homes and obviously, less travel inbound. Now it's about, on an annual basis, our fee revenue from this part of the world is less than 5%. So impact to the business from a macro perspective is not as significant but it's a big travel hub. So we're watching that, and we'll see the duration. There's been different messages that have been shared about that and speculation. So we don't know yet. So we'll stay very close to it and monitor the situation and our teams on the ground will continue to do what they know what they need to do to take care of any guests and obviously, our colleagues in the region. And then just a point on Mexico...

Right. That was going to be my...

So we -- after what had happened in Puerto Vallarta that was like now 3 weeks ago, I think. We did see actually some impact and some cancellations happening right away. I think there was a little bit of anxiety around traveling to that region, Mexico, in particular. And we've seen that -- that was a quick impact and a short term from a window perspective. And we've seen that plateau. And recently, in recent days, we've seen actually bookings come back up.

So the other point I would raise about the region is that when people have made their commitment to travel there, they -- when rebooking or changing, we have a lot of resorts and -- in a lot of locations in the region, in Mexico and the Caribbean and in the U.S. where people are rebooking. So we're seeing that behavior taking place. So there's offsets as people are committed to their spring break vacation in the month of March, in particular, and as they look forward.

So again, the safety and well-being has been the focus at the beginning, taking care of our guests to make sure that their vacation plans get taken care of and I think we're seeing things now improve from a booking pickup perspective. It will take some time. And again, that will be something that we update all of you on our first quarter earnings call as far as impact.

Yes, I think generally, the quarter has played out differently than we expected in terms of where business is coming from and going to but the overall shape of the quarter is not too terribly dissimilar to what we talked about on the last call. So we'll see how the next 15 days go and then like Joan said, have more to share about the rest of the year in a couple of weeks.

What were -- I mean, we talked a lot about the negatives, but some of those kind of near-term bright spots. Obviously, you mentioned you've seen rebookings within the system? What are the other kind of areas where you've seen maybe things trend a little bit better than you maybe had originally anticipated.

I mean the U.S. looks solid. I think when we were thinking about the shape of the year during our last call, recognizing that the first quarter last year for both the U.S. and globally was our strongest quarter of the year, especially from a RevPAR standpoint, there was sort of an expectation that given the tougher comp, Q1 would probably be the more difficult quarter for the U.S., especially knowing some of the bigger events taking place this summer. And I think you obviously see the Star Data U.S. performance, especially within luxury and upper upscale where we have a lot of exposure has been solid.

So I think that's helped offset some of the near-term headwinds that we've seen. And then when you go to other parts of the world, especially Asia, performance has been very good, and Europe continues to be a bright spot. I mean Europe has been incredible just given how strong performance has been for the last couple of years. So it's the benefit of obviously being globally diversified both across location and chain scale. So yes, we'll see where the year goes.

And then as you think about kind of the segments, the group, right, business transient, leisure and -- leisure has been very strong for you. It sounds like it continues to be resilient. Are you seeing any kind of real evolution in terms of group versus business transient? And then on the leisure side, stimulus, is that something that has shown up? Are you anticipating it to show up? And could that be impactful?

So maybe I'll just start on the consumer. We are -- we operate and serve the high-end consumer in each segment that we operate. So that consumer has been very, very resilient and has said they intend to travel and spend a large part of their scretionary income on travel, and that's exactly what they've done. And we've seen nothing that has impacted those numbers. When you look at our results and you look at them by chain scale, you can see a very stark differentiation between luxury upper upscale results and what we've seen on the upscale and upper midscale, which even those segments have been flattish to slightly up.

With our luxury and upper upscale growing in the mid-single digits and maybe even higher than that in some quarters. So it's definitely been a difference of consumer base, even for us, but 2/3 of our existing rooms are in the upper upscale and luxury. So that has led to higher RevPARs and higher growth rates for us consistently for -- basically for a decade. So we continue to outperform and that is because of the guest base that we have and the health of that consumer.

And then on the business transient side and group side, We, again, are serving high corporates, the top 10 consulting companies and other highly prolific travelers from a corporate spend perspective. And they are also -- I mentioned group earlier that is healthy. This is because of that -- also that corporate customer base that we have that is bringing people together, seeing the value of groups coming together and we're realizing those benefits.

Yes. The other thing, as you really think about Hyatt and how we differentiate ourselves is the all-inclusive portfolio that we have, really, we feel is a great indicator of the health of the luxury leisure customer. And whether you look at the performance of our net package RevPAR in 2025 or the pace that we talked about heading into the year, really a strong, resilient segment for us that's outperformed even the sort of traditional luxury segments that we serve.

So I think there's good proof points that the luxury customer, the higher income demographic customer is prioritizing travel the way that they have been for really the last 5 years and probably even before that. And our positioning really sets us up in a way that's differentiated that allows us to have a lot of success.

Can we move a little bit to the development side, your 6% to 7% unit growth I mean, I guess, you're a big player, but not the biggest. So you're growing at this elevated pace. I mean how sustainable is that? And to what extent do you feel like you have a differentiated unit growth strategy than some of your peers?

Well, let me start first on what we've accomplished over the course of the transformation that we've made where we've realized proceeds from assets that we've sold and reinvested. And over that course of that time between inorganic and organic growth, we have, and keep me honest here, Adam, we have doubled to almost tripled the size of our luxury portfolio.

Our resort portfolio has tripled our lifestyle portfolio has grown by 5x. So we have actually grown in segments that our existing customer base is wanting to travel to. And we've been very intentional about that growth strategy. We've looked towards those markets and segments like all-inclusive as part of that resort growth that we've had. And we've built a distribution that is very attractive to our existing World of Hyatt members who are really important to us, obviously, and have brought in new members into our into our program into our loyalty program.

So in growing in that intentional way and looking at the acquisitions that we've made in that way that we can actually create a more effective network effect, that has made us even more attractive to developers and owners because they see that our membership base is so highly qualified and that, joining our system actually will enable better performance for them for their hotel. So our conversions have been very successful because of that, because developers have been drawn to the portfolio and to the customer base.

So that has helped us as we've grown over the last 10 years to be even a more attractive place for developers to convert into. Maybe, Adam, you want to cover the upper mid-scale and the growth there?

Yes. I think -- because we get a lot of questions about, well, you're positioned towards a high-end customer, 70% of your rooms are luxury, upper upscale, so why upper mid-scale. And the answer is, is we're going where our customer is going when they're not staying with us.

So we did a lot of research on customer spend behavior a couple of years ago and found that in, I think it's 3/4 of the instances where our members were not staying with us, and they were staying with another hotel company they were staying in locations where we didn't have a hotel within 5 miles.

And the reason we didn't have a hotel in most of those locations was because we didn't have a brand that could be built, that could be supported by the price point of that market. So if you think about going into a secondary or tertiary market, a Hyatt Place might not be able to deliver the returns for an owner that an upper mid-scale brand could. So we launched Hyatt Studios, which is our extended stay upper midscale brand in 2023. Last year, we launched Hyatt Select, which is our transient upper midscale brand. And so really finding a way to engage with our customer base and our members in a deeper way, also meeting new members along the way which just gives us that much more ability to grow in a way that positions us for the future because where we have so much domestic white space really is in the secondary and tertiary markets.

So if you think about a business traveler, who might stay at the Park Hyatt in New York when they're there for a meeting. They may also be going to a secondary market to visit a store or a factory. And so it's not that they don't want to stay with us. It's that they don't have a location to stay with us and they will now in the future. So if you sort of think about our brand portfolio, it's really 1 customer with a lot of different purposes of visits, whether it's a luxury stay, that's personal, you're going with your spouse or your partner versus an all-inclusive vacation where you're taking your family or maybe a fun get-away for a lifestyle opportunity, Hyatt Regency or Grand Hyatt for a group meeting like this or going to a Hyatt Select to stay, while you're traveling for business. It's making sure that we've got brands and purpose of visit for every stay occasion.

So I think that both dimensions, we are really, really excited about the future opportunity for our continued growth. And if you -- we have a couple of slides in our investor presentation that we post every quarter that shows the opportunity that we have because of our lack of penetration and distribution in many markets around the world, yet when you look at the top markets, the hospitality markets, travel markets, we're in every single 1 of those. It's just about the depth of our penetration. And so the opportunity for us to grow across all the segments is really compelling.

You've targeted a 90% asset-light mix. We're not quite there today. Are we getting there organically? And then to what extent is their appetite to do another a Playa-esque deal comes across your desk? I guess, how -- what degree of confidence can we underwrite getting that 90% within a couple of years? Or is this where you continue to be opportunistic to the extent there is something like that out there?

Okay. So let me unpack that because I think the first piece on the 90%, we have confidence that we are going to achieve that this year with our results this year. And that is as you mentioned, Dan, it is organic. It is as we grow our fee-based business, which last year grew at a 9% rate, very strong on the core business front, and our range for this year, you'll have to remind me, Adam, is between...

6% and 8%, I'm looking at Ryan. It's very solid.

Fee-based growth this year as well, and that is what we'll add to and gets us to the 90% -- 8% to 11%.

8% to 11%. Thank you.

Thank you, Ryan. So that is what will lead us to the 90%. Now another sell down is something we get asked. We are not making a formal commitment, but we have been very, very clear that we continue to sell assets. We expect to sell into strength we've realized great returns from the assets that we've sold, the $5.6 billion that we've sold over the last 8 years at a 15x multiple.

So we will continue to sell into strength and take advantage of opportunities to develop strategic relationships with potential buyers. So that is a focus of ours and that will continue to increase that mix over time as that is appropriate as we look at the strategy, the disposition strategy that we have going forward.

On your -- with respect to your question about Playa, our -- as we think about capital allocation and we think about the growth of the company and all the opportunities that Adam and I just went through as far as how we grow. This is a focus of ours. We want to continue to grow. We want to continue to invest in growth. We do not anticipate anything of any material size but there are opportunities, portfolios. It's a global fragmented market still, and we still have for the reasons we described about our customer base and our existing footprint and our opportunities to the fact that we're not overly penetrated in markets.

For all of those reasons, we have great opportunities to continue to invest in growth, and that will be the priority. It will be asset-light growth. So Playa...

Asset-light in terms of buying and selling or asset-light at the onset?

That is the goal. Playa was a really unique opportunity for us to really control and convert some contracts that we were already franchising, brands that we were franchising into management contracts and knowing the space that we did. We had a fantastic execution last year by ending up with buying and selling the real estate. That was quite unusual and not something we intend to do again.

Okay. The -- in terms of the distribution business, I mean, this has been -- I think -- well, let's take a step back. You've gone to great lengths and had a pretty good success in terms of simplifying the business getting rid of some of the [ Harrier ] stuff out there, the UVC stuff. And here we are and it seems like distribution that segment has been kind of the sore spot or the headache. I mean how do you think about that business, the opportunity there, some of the interruptions and how much of this is a one-off? And how should we think about the growth trajectory for that going forward?

So we've always been very clear that when we acquired the business, we recognized fully, and I'm talking about the broader ALG business in 2021. This was 1 part of that, it's a business that existed within the entire platform and what it delivers to our all-inclusive business and our all-inclusive owners is a very, very strategic lever that we can use to actually drive business to our hotels.

It is a distribution channel that they have the opportunity to tap into, and they're delivering 15% of the inventory from the U.S. consumer because they are the largest distribution channel driving business into Mexico and the Caribbean. So this is under our ownership, and there's great value to a very big part and an important part of our leisure presence, and our U.S. customer from this business.

So the important thing to know about the distribution ALGV, ALG Vacations is that it also serves not just 5-star, which is our properties in the Mexico and Caribbean market but also the 4-star properties. So as most of you know, the differential between the demographic and what we're seeing in demand in the different categories is different.

So about 50% of the customers that they serve are in each category, 5-star or 4 star and below. So when we see some pressure, this is the temporary pressure that we all believe will ease coming from that demographic of consumer that we're just seeing smaller or lower demand levels. So that's the reality of the business but it's highly strategic, actually provides us a lot of data about what the U.S. consumer, the leisure consumer is doing and where they're going. So there's multiple dimensions of strategic value that it provides to us.

One other thing that I'll mention is that we have talked and we talked publicly about the fact that we would be open to some sort of very strategic relationship potentially with this business, but that would have to be -- it's a very careful consideration and we would still want to preserve all of the strategic value that we've benefited from and our owners have benefited from. So we'll keep you posted over time, if there is something that looks that could be beneficial with respect to a partner that could help us amplify the impact that we're providing for the business and for our owners.

Yes. The other thing I would add on this is -- and you're right, it's a piece of the business that we get a lot of questions about there's a focus on don't lose sight of the fact that the vast majority of our business has outperformed for the better part of a decade relative to others, whether it's having the highest RevPAR growth in 9 out of the last 10 years, having industry-leading net rooms growth for 9 years in a row, the fact that our organic fees have grown close to 8% since 2017 since we started the transformation.

Like there is a story here about the quality of our fee business that I think sometimes gets missed because there's this hang up on a very small but strategic piece of the business. And so I just would invite folks not to forget about the core business and how well it has performed and how well we think it can continue to perform given the way we've positioned ourselves.

Okay. Let's turn to kind of another ancillary but a bright spot, the credit card deals. So you announced a credit card deal late last year. I think more recently, you announced a new credit card with that program a higher -- I saw it on a forum. So...

We don't believe what you read on the forums, nothing has been announced yet.

Disregard. So I guess what are the levers there as you think about upside over time in terms of the credit cards bearing in mind you gave numbers and they're out there but what are the kind of the variable pieces as we think about kind of the growth rate?

Yes. I think the 2 most important pieces are, having a really strong customer and consumer base that spends on the card, which we know we have as well as making both the loyalty program and the benefits of the card attractive to have more card members over time. So I think those are the 2 pieces where we believe we have the ability to deliver and have results that are in line with what we've talked about previously and maybe even better as we go forward.

And then when you think about different opportunities that are out there, you alluded to the fact that we don't have a premium credit card, I think that's certainly something that our customer base would find really attractive. So that could be a way to add to how we think about the upside opportunity going forward.

Obviously, there's the ability to add more card product in other locations besides the United States that we don't currently have. So those are all great opportunities that we have. But ultimately, it really does start with having great brands, having a wonderful loyalty program that offers great benefits to our members and to prospective members.

And if you do those 2 things really well, it will attract more members to the program as well as more consumers that are interested in signing up for the card, which benefits us over time. So we really try to think about these pieces holistically and not 1 by each.

If we pivot to AI, right? That's obviously been incredibly topical, and I'm sure you guys have a lot to say there. I guess as we sit here today versus 3 months ago versus a year ago, what has been the areas of greatest surprise and what most excites you about this opportunity, whether it's a distribution side or even some internally for the cost stuff.

It has -- wholly excites us, and we've been working on it. I would say we've been working on it for years, actually. And it starts with being a company that's focused on data insights and that driving decision-making. And so in order to do that, you have to have great data and you have to invest in your data and have structures that enable your teams for a global large company to be able to tap into that resource.

Now 2 years ago, and Mark mentioned this actually that we've been working on it for 2 years, and he's been leading at Mark, our CEO, has been leading this effort on our capabilities with respect to AI across the company. And what we did is, at this time, as we looked at all of our opportunities and there was dozens and dozens, and we focused on a few that were revenue generating because we said this is going to have the biggest impact to the business, and it's the best place for us to really focus because we have this great platform with respect to our data and our structures, we could go fast.

And we had to just build our capabilities internally and gather the high talent, scientists, engineers, all of that in-house to start experimenting and using practices to develop where that most and greatest opportunities are. You mentioned distribution, for sure, it's in distribution. We just launched an app within ChatGPT. So if you go into your ChatGPT app, you can go and download the Hyatt App. And you can use that generative technology that most people are familiar with and actually search in the way that you're comfortable searching for your next trip with Hyatt.

Oftentimes, it's for leisure but could be for any purpose of visit and we're 1 of the first hotel companies that have done this. So we're pushing forward. We're focusing and we are finding opportunities to be more efficient, and a lot of that is powered by different types of AI application to invest in the technology that's going to help our hotels and increase their performance.

So this comes from engaging in the way that people and our guests want to engage, delivering higher conversion at a lower cost to our owners. And the flywheel can accelerate from that type of investment and that type of focus.

So what I would say is I provided 1 example, but there's multiple examples that we're working on. And this is where to a large degree, our focus is giving us an advantage, but also our size is giving us an advantage because we can do this quickly, and we've proven that. And so we'll continue to do that.

And some of these -- the realization of some of these benefits are quite competitive. So we don't want to share all of them. But over time, as we see all of them have an ROI, and we will be sharing that with you over time.

Okay. One last 1 before we open it up to the floor. Asset sales, that's been so -- billions of dollars of assets over time. I think there's still...

$5.6 billion to be specific.

What's the multiple?

Come on, you haven't memorized yet?

No, I know that. I was [ tee-ing ] you guys up. So I guess, where do we sit today in terms of that asset transformation, not the 90%, but more kind of like what's still do you have left to sell? Is it U.S. stuff? Is it international? Kind of how are you thinking about the asset still left to go, so to speak?

Yes. I mentioned earlier that we have to -- in order to realize those values that we just described, we've had to be very strategic about how we look at the actual products itself, the assets we have and selling into strength, whether that's that market or that demand profile. And there's certainly opportunities for us to turn to.

We do have a lot of luxury high [ cash ] assets in our own portfolio. So those create really unique opportunities for us to engage with strategic buyers that maybe we could do something even bigger with potentially. So if a buyer were interested in an asset and they had a portfolio of luxury assets, potentially it could be even a bigger relationship. So I think that's how we are approaching it because we recognize that we've invested in these assets. They're very, very high quality, high performing.

So we will take a very thoughtful approach to make sure we're maximizing shareholder value. And of course, those proceeds would be -- well, it would be prioritized into growth opportunities, but excess cash would definitely be a buyback opportunity.

Great. We'll open it up to the floor for questions Okay. All right. I think that's all we got. Thank you so much.

So thank you so much, Dan.

Thanks, everyone.

Thank you.

Good morning, everybody. Thanks for showing up. My name is R.J. Milligan with Raymond James Equity Research, and we're very pleased to have Hyatt here to present. What I'd like to do is try and make it as interactive as possible. So after a brief overview, feel free to raise your hand, and we'll get through as many questions as you have. There's a lot of interesting dynamic things going on with Hyatt. And obviously, there's a lot of things going on in the macro world. So feel free to ask any questions that you might have.

And with that, I'm going to turn it over to Joan and Adam. Thank you guys for being here, and we'll have some Q&A in a little bit.

Terrific. Thanks, R.J., and thank you also to Raymond James for hosting this conference. We always have a great experience and great interest at this conference.

I'm just going to spend a couple of minutes. I know that some of you are generalists, investors and just a couple of minutes on the background of Hyatt Hotels. A little bit of disclaimer on forward-looking statements. We're a global hospitality company. We have over 15 hotel -- 1,500 hotels in over -- in 83 countries around the world. That is represented by over 370,000 rooms in our inventory today, open and operating and 148,000 rooms in our pipeline, which are expected to open over the coming years. This is a record for us, the number of executed contracts that are sitting in our pipeline. We have the world's largest portfolio of luxury branded rooms and resort locations around the world. And we serve the high-end traveler in each segment, each brand segment that we operate.

I want to just go through a couple of investment considerations for you. First, I'll start with the second one here on the slide. We have a global portfolio of premium brands. I talked about us serving the high-end customer in each segment that we serve. And these brand categories are across 5 different categories, our luxury, lifestyle, all-inclusive, classics and essentials categories. And so organizing our brands and our focus and resources towards our brands, especially this year as we double down on that focus is intended to actually serve our customer base in each of these segments more explicitly. And what that does is that drives a differentiated approach to our customer acquisition, which drives higher rates and values to our hotels and better cash flow for our owners and ultimately, better outcomes for our shareholders as well.

We have a program, our loyalty program, the World of Hyatt program, which is award-winning and has been leading the industry in growth rates for the last 8 years running, over 20% on an annual basis over the last 8 years. And we invest in this program. We have the best member benefits. We have the best operational execution of delivering those benefits on property. And these members are high-end travelers that enjoy and spend longer with us and stay more with us at our properties around the world.

Next, our white space that we have around the world represents our less than penetration in each market that we serve, particularly in the U.S. You'll see a couple of slides here that are posted on our investor website. We have representation in every large global market around the world. However, there's many markets and particularly in the U.S., where we are either underpenetrated or don't have penetration today. So when we think about our ability to grow beyond the pipeline that I just mentioned, the 148,000 rooms in our pipeline, we also have a long runway for organic growth into the future because of this underpenetration that we have in markets, particularly in the U.S., but all over the world.

Our asset-light business model, we have been undergoing a transformation over the past 8 years, and we are now an 80 -- excuse me, a 90% fee-based earnings mix company. So as we think about the benefits of that relative to our strategy going forward, higher predictability in earnings, lower capital intensity. And with all of this runway to grow, it's an incredible opportunity for Hyatt going into the future. Just to put a finer point on that asset-light business model, we have here almost doubled the size of our free cash flow and also have a conversion rate of over 50% of our adjusted EBITDA to free cash flow. This is in line with industry competitors and a very strong result for us. We've mentioned in the last couple of years that this was a target, and we reached it at the end of 2025.

Just a minute on our capital allocation strategy as we think towards the future. What we have done is we have unlocked through our transformation the assets on our balance sheet, and we've realized in those asset sales a 15x multiple on those assets that we've sold. We've invested in asset-light businesses at a lower than 10x multiple, created a significant amount of shareholder value. And along that same time line, we have also returned capital to shareholders in significant amounts every single year over that period. This is what we continue to plan for, which is investing in growth, our capital allocation strategy. We want to continue to grow the company, and we plan to, with excess cash, continue to return excess cash to shareholders. All the while, it has benefited us to maintain an investment-grade profile with a strong balance sheet, and that's what we plan to continue to do.

As we think about 2026 -- going into 2026, we're going to continue to invest in our loyalty program and build our membership base and keep those growth rates growing by building out a network where our members want to travel and delivering those benefits to them on property. And also our growth strategy will be focusing on the network effect, which is complementary to our existing distribution, but where our guests want to travel. And of course, I mentioned our asset-light earnings mix, which is delivering great free cash flow for us into the future, and we expect to expand that conversion rate over time.

Very excited about what 2026 will bring and the health of our business and the health of the high-end consumer on a global basis. I just wanted to comment to, while I have you all, is that we're very excited that we are going to host an Investor Day later in May, on May 28, we're going to be sending out invitations soon. We'll be able to share more about our strategy and our outlook for the future and how we intend to continue to deliver strong shareholder returns well into the future. So I wanted to make that comment.

And I think we're going to then move to Q&A.

Thanks, Joan. For everybody's -- where is the Investor Day going to be?

In Chicago.

In Chicago, and the date again.

In our hometown.

Excellent.

May 28.

Excellent. Probably the first question or first place I'd like to start is maybe just a state of the union in terms of where you see the consumer, what the recent performance has been. Obviously, you reported earnings a couple of weeks ago. Maybe just give us an update on the different brands and what the outlook is, what you've seen in January and February and March so far?

Sure. Well, maybe I'll just start with macro overall, and then maybe you could talk, Adam, about what we're seeing in January and February. We reported in our fourth quarter earnings that the leisure, the high-end leisure consumer has been very strong for us. And we've seen it both in our net package RevPAR into Mexico and the Caribbean and we've seen it on a global basis around the world. So when you look at the segments that we serve, and I'll speak to the Smith Travel categories for the hospitality industry, you'll see luxury and upper upscale for us, very strong and differentiated.

As you go down the chain scales, the rate of growth has been lower at lower chain scales. This is what's been broadly reported, the K-shape -- we're experiencing it, too. However, 2/3 of our existing inventory is in those higher-end chain scales. So we report very strong growth rates on RevPAR, top line RevPAR relative to the rest of the industry. And the fourth quarter was no exception. I think that's been a record going for us for 10 years now.

So leisure traveler is about 50% of our mix. And then the remainder is business travelers and group business. Group business as we look into 2026 also remains very healthy. We've got, obviously, in the U.S. where we have significant distribution. We've got the World Cup that is going to provide a boost to group this year, but we also have healthy demand coming from corporate customers. And the business traveler has been basically flattish to last year. We saw some growing momentum towards the end of the year into the first quarter. So with the short-term nature of that business, all of you are traveling on a business purpose of visit. And so it's good to see that this conference is at a record this year because that means people are getting back on the road and seeing their clients and that's what they're telling us they're going to do this year. So overall, healthy consumer across the segments that we serve.

Yes. And we mentioned on the earnings call, January, solid results from a RevPAR standpoint ahead of our expectations. Preliminary February results also look very good, really kind of across the globe. We're clearly living in a little bit of a challenging environment right now with events over the last couple of weeks. So we'll see how that unfolds over the next couple of months. But in terms of our core customer, our fee-based earnings, looking solid, good momentum. U.S. may end up being a little bit better than what we thought just given the current macro dynamics.

Can you talk about some of the demand drivers you're seeing in 2026? Obviously, supply is very low on the lodging side. But I think demand drivers you see there?

Yes. I mean, Joan mentioned group pace coming into the year was solid and has been trending very positively for the last few quarters. At least for our customer base, we continue to see sustained demand for leisure travel. So that continues to be healthy, obviously, just growing at moderate rates, but growing positively as has been the case for the last couple of years now. Business travel continues to be a little uneven. But I think as you get past the first quarter, we may see better opportunities there just as we lap Liberation Day essentially. As you think about the macro setup, at least for the U.S. As Joan mentioned, we've got the World Cup this summer. You've got the America 250 celebrations.

There's a lot of CapEx investment being made, as everybody knows, in data centers and other areas to support AI investments that are taking place. So certainly, the macro in the U.S. is shaping up in a way that it could bode well. Obviously, the counterbalance to that is there has been some persistent inflation. Obviously, the jobs numbers we continue to monitor. So on the margin, net-net, I think it sets up well, but we're obviously living in a dynamic environment and continue to monitor all of those items. But from a demand standpoint, it looks solid.

Excellent. Good time to ask the audience if there's any questions, and let's try and make it as interactive as possible. Yes. I'll repeat the question.

Sure. The question was about Mexico, some of the recent events there, what's Hyatt's exposure and the expected impact there?

Sure. So maybe we can tag team this one, too. I would just start by saying the events in Puerto Vallarta were deeply concerning -- good news that guests and colleagues were all safe and accounted for and it appears now that there's stability there in that market. We have seen -- it's early to tell on impact actually. Adam can share kind of the mix of the concentration that we have today. But actual impact is something that we're monitoring very closely. What we're seeing is sort of cancellations in the very near-term.

And we're also seeing because we have the largest portfolio of luxury rooms and resort locations, we actually have a lot of places for people to rebook, and that's what we are seeing a lot of, not just in other markets within the Caribbean, meaning in all-inclusive markets, but in Bahamas and Aruba and resorts in the U.S. So that is the dynamic that is harder to put a pinpoint on the impact. So I think we're watching it closely, and it appears to have at least the situation there have stabilized and there's every reason that we will continue to monitor it very closely.

Yes. And in 2025, Mexico represented high single-digit fees for us.

Annually.

Annually. So I would not expect the impact to be that amount. As Joan mentioned, we are seeing other areas where rebookings are taking place, not only in the Caribbean, but also even in the United States as you think about Florida, Southwest part of kind of the Sunbelt states in the Southwest part of the U.S. So the net-net benefit to fees or impact to fees as of right now, it doesn't look too material. The distribution segment, our ALG Vacations business is probably one area where we expect a little bit of near-term headwind for the next couple of months, but we're still evaluating the overall impact.

But as we look at these situations as they've taken place in the past before, they tend to be temporary. You see rebookings taking place into other locations and longer-term, the markets recover. So we'll provide more as we evaluate the situation, but don't feel as though the impact is going to be significant to 2025 or 2026.

Additional questions? Yes. Sure. So the question -- I'll just repeat them. The question is, what does the transaction market look like, your ability to get attractive EBITDA multiples on asset sales? What's the outlook for that? And can that continue?

Sure. Just maybe just a little bit of background. Since we started our disposition program where we said we were going to actively commit to selling down real estate and then reinvesting that real estate or returning excess to shareholders. We realized proceeds of $5.7 billion on a net basis at an average 15x multiple and invested in all asset-light acquisitions of $4.4 billion over the past -- since 2017. And those asset-light acquisitions have been made at a stabilized less than 10x multiple. So significant shareholder value. And along that same period, we returned $4.8 billion back to shareholders. So that's sort of the magnitude of the transformation that we undertook.

And so that -- as we look forward and in reference to that portfolio, a very diverse and high-end portfolio that we have -- that we had sold, luxury hotels and group hotels, international hotels. As we look at the portfolio today, we similarly have a diverse portfolio. So it's only 10% of our earnings now, but we have the opportunity, and we have reported that we are in the process now, we're under PSA for a couple of assets. They are not material assets, but we continue to evaluate opportunities to sell the assets on our on our balance sheet, and we will only do that. The reason why we realize such great multiples is because of the quality of the asset, but also the timing.

So we sold into strength in every occasion. And we sold those assets subject to a long-term management or franchise contract. So it's same thing as we go forward. We will sell into strength. We've got a very diverse. If you look at our filings, you'll see there's luxury, high cache, there's group assets. It is still diverse. So we have a lot of opportunities going forward. And again, back to the selling into strength and making sure we retain the distribution that is there and retain a long-term management contract, which is incremental value to the 15x I described.

Additional questions? I think maybe it makes sense to maybe spend a few minutes talking about World of Hyatt, very differentiated. Can you talk about the loyalty program, why it's so important, why it's differentiated? And then maybe that's a good transition into talking about the credit card and the renegotiation and the impact there.

Sure. We -- so we relaunched our World of Hyatt program back in 2017. And since that time, it has been growing at a compounded rate of over 20%. It's exceptionally attractive to new members that we're bringing in and existing members, their engagement actually existing members in the program has been -- you'll be able to quote, Adam, the stat we gave on the earnings call because the most -- the members that stay with us the longest have been growing at the highest rates.

That's right.

So we're doing both. We're actually deepening our engagement with existing members and growing the program at industry-leading rates. This is partially -- there's a variety of reasons for this, one of which is the fact that our member benefits are award-winning and the best in the industry. If you read the blogs, you'll see that we have designed the best benefits. We're very transparent with our rate chart. and we also deliver those benefits when you arrive on property. So it's sort of a commitment we've made to the members and they get back to us in the engagement that they have with our properties.

We also -- the other factor that's very important is that as we've also delivered industry-leading growth rates, net rooms growth rates, we have intentionally grown in markets that our members want to travel to. So we've done the work, done the studying of where our members want to travel. And in order to deepen our engagement with them, we have to be there. So that growth in luxury lifestyle and resort properties that we've accomplished, those investments with that $4.4 billion that I mentioned and our -- in addition to our organic growth rates, has enabled this distribution that has just made us extremely attractive to new members bringing them into the system.

Yes. And on the credit card deal, great outcome for us, extended our relationship with Chase, who's our credit card provider. We will ultimately end up doubling the earnings that we get from our credit card programs from 2025 to 2027. So very, very happy about that. And I think it's just a reflection of all of the great work that's been done across the company to really position Hyatt in a differentiated way from the acquisitions that we've done to building out the high-end portfolio that we have to the work that we're doing to expand our presence through the upper mid-scale segment, especially in the United States. This is just one of the catalysts that we see for Hyatt as an investment opportunity.

And in fact, we get a lot of questions about, well, what's the next catalyst that's coming? And the answer is it's Hyatt, like what we've done to position our brands to have the white space to grow over time is really the catalyst of what makes Hyatt so compelling going forward. So as you think about us and the quality of our loyalty program, the ability to drive net rooms growth into the future, it really does set us up in a way that we feel is differentiated and will ultimately drive higher fees, greater cash flow over time.

And then as Joan mentioned, with our capital allocation priorities, gives us the ability and the flexibility to both invest in growth as well as return excess capital to shareholders. So something we're very proud of and very excited about as we think about the future.

Additional questions? Yes. Sure. So the question is on AI, which is obviously a very popular topic across all of these presentations. How does it -- how are you using it to help run your business? And then how are you using it or thinking about it when it comes to bookings, dealing with the OTAs? I think just a general overview would be helpful.

Well, I would say we have a long track record of investing in our data and focusing on insights to drive action and decision-making, long time. So in order to be able to do that, you have to invest in your data structures. And I think a lot of companies have found that now I have to invest in my data structures. Well, we've been doing that for years and years because we have always been a data insights-driven company. So a couple of years ago, and Mark actually, our CEO, described this on our fourth quarter earnings call is we've been at the actual AI capabilities and use cases for about 2 years. He led actually a steering committee within the company. And so when it comes from the top, you know that it is getting the resources it needs, the attention it needs in order to be able to invest in use cases. And all of the use cases, while there were dozens and dozens that we came up with, all of the ones we invested in were revenue generating and will touch our customer.

And so your question specifically is around search. One example that I will give you is we are one of the first hotel companies where you can actually go to your ChatGPT app right now and you can download the Hyatt intent-based search app. And when you do that, it will allow you to type in as you prompt as you've all gotten better and better at prompting with the vacation that you want to take, and then it will take you to Hyatt so that we can find the right resort for you based on your intent and your purpose of visit.

So we are forward with these initiatives because of the investments that we've made over time. And we are operationalizing other use cases at the same time. And as we think about this as we've built the data. We have a strong data foundation. We've built the capabilities in-house. So while we leverage expertise and vendors who are supporting and providing the technology, we're doing it all in our ecosystem, very safe and disciplined. And we're able to actually experiment and pivot and modify as the technology changes because we've got the capabilities in-house, and it's been ongoing for many years.

Yes. The other thing, too, is at the end of the day, what we're trying to do is deepen the relationship with our customers. So as we're leveraging this technology, part of it is also just going to the places that our customers are seeking out to find us and making sure that we're present there. We still want to have a deep connection with our customers, with our members because we feel that's the best for us to provide the award-winning service and loyalty program that we have. So we think about this as an accelerant to behaviors that we're already doing well and think that the opportunity ahead of us can be really powerful and also do it in a way that is really great for the customer experience.

Thanks. And we have time for one more question. If no additional questions, we will have a breakout session immediately following this. Feel free to join us, and we'll get all those questions answered. All right. With that, I will thank you, Joan. Thank you, Adam. Appreciate it. Thank, Hyatt, for being here. Everybody, have a great day.

Thank you.

Thank you.

Good morning, and welcome to the Hyatt Fourth Quarter and Full Year 2025 Earnings Call.

[Operator Instructions]

As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Roman, Senior Vice President, Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you, and welcome to Hyatt's Fourth Quarter 2025 Earnings Conference Call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini, 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 under the Financial section of our Investor Relations website and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation on our Investor Relations website this morning containing supplemental information. Please note that unless otherwise stated, references to occupancy, average daily rate and RevPAR reflect comparable system-wide hotels on a constant currency basis in closed hotels in Jamaica, are excluded from comparable metrics in 2026. Percentage changes disclosed during the call are on a year-over-year basis, unless otherwise noted. With that, I will now turn the call over to Mark.

Thank you, Adam. Good morning, everyone, and thank you for joining us today. I want to begin by expressing my sincere gratitude for and pride in the entire Hyatt family. Our teams around the world navigated a dynamic macroeconomic environment in 2025, guided by our purpose. We advanced our evolution to a more brand-focused organization, 1 that uses sharper brand positioning and deeper insights to go to market in a more meaningful and differentiated way. This approach allows us to serve our guests and customers on more stay occasions and become an even more attractive brand choice for owners. We closed 2025 with momentum and we believe we are better positioned than ever to create lasting value for our shareholders.

Now turning to operating results. This morning, we reported fourth quarter system-wide RevPAR growth of 4% and driven by the continued strength of our luxury brands. Leisure transient RevPAR increased approximately 6% to last year as our guests continue to prioritize leisure travel. This was especially true across our luxury brands, where we saw leisure transient RevPAR grow by 9%, with strong growth across the world. Business transient RevPAR declined 1% in the fourth quarter, driven by select service hotels in the United States, while full service hotels delivered low single-digit growth led by hotels in international markets. Group RevPAR increased 3% compared to last year, in line with our expectations and supported by a more favorable calendar in the United States. We continue to see exceptional engagement from our World of Hyatt loyalty members a key driver of our commercial performance. The role with Hyatt program is consistently recognized in the industry as best in class, and we are proud to have been recently recognized as NerdWallet's best hotel rewards program and at the [ Point guys ] best hotel elite status in the industry.

World of Hyatt continues to grow in both scale and significance. We ended 2025 with over 63 million members, an increase of 19% compared to the end of 2024 and World of Hyatt members accounted for nearly half of total occupied hotel rooms across the world in 2025. And as we've sharpened our brand focus, we're seeing loyalty drive not just scale, but higher-value demand. particularly among our most frequent and loyal guests. In 2025, we saw a 13% increase in room nights from members who stayed with us for 50 or more nights over the course of the year. It's clear that the value proposition of our loyalty program resonates with current and prospective members, which we believe makes Hyatt very attractive to hotel owners and developers as they look to brands that are growing in value to them. Turning to development. We achieved industry-leading growth for the ninth consecutive year with net rooms growth of 7.3% in 2025 excluding acquisitions, net rooms growth was 6.7%, a meaningful acceleration from 2024.

During the fourth quarter, we surpassed 1,500 open hotels and resorts globally and welcomed several notable openings, including the Park Hyatt Cabo de Sol and Andes One Bangkok, our newest upper mid-scale brands are starting to make an impact marked by the second [indiscernible] hotel opening, along with the debut of our first I select hotels. Both brands provide the foundation for our upper mid-scale expansion in the United States. We also welcomed several unscripted by Hyatt hotels during the quarter, and we're excited about the opportunity to grow this brand across the world. We ended 2025 with a record development pipeline of approximately 148,000 rooms, up more than 7% compared to the end of 2024. In the United States, we achieved the strongest year of signings in the past 5 years with 50% of those signings in markets where Hyatt does not currently have a brand presence. Our 3 new brands, unscripted by Hyatt, Hyatt Studios and Hyatt Select accounted for nearly 2/3 of the signings in the United States, demonstrating the compelling value proposition for owners and developers and the clear opportunity for Hyatt to expand into new markets.

Outside the United States, we continue to see strong interest in our brands, and we expect Greater China and India to be significant drivers of future growth. In Greater China, we are seeing strong interest across our select service brands, with signings growing by more than 50% compared to 2024. In India, we are seeing great interest in our full service offerings. Our strong pipeline and momentum in upscale and upper mid-scale brands reinforce our confidence in achieving durable and capital-efficient fee growth well into the future. Now shifting to an update on transactions. On December 30, we sold the remaining 14 hotels in the Playa portfolio to Tortuga Resorts for approximately $2 billion and entered into long-term management agreements for 13 of those properties. This transaction strengthens our position as the global leader in luxury all-inclusive offerings and is another example of delivering on our commitments and emerging with a value-accretive asset-light platform.

During the quarter, we also completed the sale of 3 [ Alua ] properties in Spain, which we acquired in late 2024. As part of this transaction, we entered into long-term management agreements and the new owner plans to invest additional capital into those properties. We continue to make progress on the sale of additional owned properties and we currently have 3 hotels under purchase and sale agreements. We expect to close these transactions in the second quarter of 2026, subject to certain closing conditions, and we will provide further updates as these transactions progress. We are also evaluating opportunities to sell additional assets beyond those assets already under contract. Since announcing our first asset sell-down commitment in 2017, we have realized over $5.7 billion of real estate disposition proceeds at an average multiple of 15x. And we've invested approximately $4.4 billion into asset-light platforms at a blended multiple of less than 10x. We've returned $4.8 billion to shareholders over this period of time, proving that we can return significant capital to shareholders while also investing in growth that creates long-term value.

We are now fully transformed into an asset-light business, and we expect asset-light earnings of 90% and in 2026. As I reflect on the year, I'm incredibly proud of what we've accomplished. We achieved strong operating results and organic growth, advanced our brand-focused organization, and completed the Playa transaction in a fully asset-light manner. But what stands out most to me is how our purpose has remained our North Star. While Hyatt has evolved significantly over the past decade, expanding our portfolio, entering new markets and transforming our business model, what has never changed is the foundation that drives our decisions and defines our culture. Our purpose is embedded in the way our colleagues care for each other, our guests and our owners every day around the world. It's what enables us to meet people where they are to lead with empathy and to deliver differentiated experiences.

Our purpose shapes how we invest in our brands and loyalty program, where we choose to grow and how we allocate capital. We've been deliberate about investing in the parts of our portfolio where we see the strongest demand, the best owner economics and the greatest returns. That discipline has strengthened the durability of our fee-based earnings and increased our scale over time. As we look ahead, we believe this positions Hyatt as the most responsive, innovative and ultimately, as the best-performing hospitality company, one that can continue delivering consistent performance, capital-efficient growth and long-term value for our shareholders.

I would like to close by thanking each of our colleagues around the world who bring our purpose to life and deliver value to our stakeholders every day. Joan will now provide more details on our operating results. Joan, over to you.

Thanks, Mark, and good morning, everyone. In the fourth quarter, RevPAR exceeded our expectations, increasing 4% compared to last year. As Mark noted and consistent with the trends we have seen throughout the year, high-end chain scales produced the highest growth. In the United States, RevPAR increased 0.5% compared to last year. Full service RevPAR increased 2%, benefiting from a more favorable calendar while RevPAR declined for select service hotels reflecting softer business transient demand.

Outside the United States, RevPAR performance remained strong, led by leisure transient travel. Asia Pacific, excluding Greater China, led all regions with RevPAR growth of more than 13%, fueled by international inbound travel. Greater China had the strongest quarter of RevPAR growth for the year with domestic travel up in the mid-single digits, a positive shift compared to trends we saw earlier in 2025. Europe continued to deliver great results supported by high-end leisure demand. Our all-inclusive resorts finished an exceptional year, growing net package RevPAR 8.3% compared to the fourth quarter of 2024 with excellent performance in both the Americas and Europe. Our results reflect sustained trends seen throughout 2025, outperformance in luxury and full-service brands, strength in international markets and growing demand for premium all-inclusive experiences.

Turning to our financial results. Gross fees in the fourth quarter increased approximately 5% compared to the same period last year to $307 million. Gross fees for the full year increased 9%, finishing at $1.198 billion. Our fee business has become the engine behind Hyatt's earnings model and this is especially true when it comes to organic fee growth. From 2017 through 2025, organic growth fees have grown by almost 8% on a compounded annual basis demonstrating the strength of our underlying core free business. In the fourth quarter, owned and leased segment adjusted EBITDA declined by approximately 2% adjusted for both asset sales and the Playa transaction, while Distribution segment adjusted EBITDA declined versus the prior year due to Hurricane Melissa and lower booking volumes from 4-star below hotels. Fourth quarter adjusted EBITDA growth was solid. Despite headwinds from Hurricane Melissa and on a full year basis, we achieved another strong year of adjusted EBITDA growth, increasing over 7% after adjusting for assets sold in 2024 and Playa owned hotel earnings.

As of December 31, we had total liquidity of approximately $2.3 billion, including $1.5 billion of capacity on our revolving credit facility. During the quarter, we repaid the notes due in 2026 and issued $400 million of notes due in 2035. We used proceeds from the Playa real estate sale transaction to fully repay the outstanding balance under our $1.7 billion delayed draw term loan in accordance with the terms of the agreement. In the fourth quarter, we repurchased $114 million of Class A common stock and for the full year of 2025, returned approximately $350 million to shareholders through share repurchases and dividends. We ended the year with $678 million remaining under our share repurchase authorization. We remain committed to our investment-grade profile and our balance sheet is strong.

Before I cover our full year outlook for 2026 I'd like to highlight that beginning in the first quarter of 2026, we are updating our definition of adjusted EBITDA and will no longer include Hyatt's pro rata share of owned and leased adjusted EBITDA from unconsolidated joint ventures. We believe this change not only aligns our definition with our peers, it reflects our strategy and evolution of our business. To help you with modeling our outlook for 2026, we've provided bridges from 2025 reported results to our 2026 outlook on Pages 18 and 19 in the investor presentation published this morning. As we have turned the calendar to 2026, we're encouraged by full year forward-looking trends. Group pace for full service hotels in the United States is up in the mid-single digits for this year and is expected to benefit from large-scale events such as the World Cup.

We continue to hear positive feedback from our group and corporate customers about their intent to travel this year, particularly for customer-facing travel. Pace for our all-inclusive resorts in the Americas, is up over 9% in the first quarter, reflecting the continued strength of leisure travel. We expect full year system-wide RevPAR growth between 1% to 3%, and we anticipate trends in 2026 will be similar to 2025. This includes higher growth in international markets compared to the United States and luxury to be the strongest chain scale. In the United States, we expect full year RevPAR growth between 1% and 2%, led by our full-service hotels. We expect net rooms growth of 6% to 7% continued momentum behind our new brands, driving another year of strong organic growth. Gross fees are expected to grow between 8% to 11% in the range of $1.25 billion to $1.335 billion. Our outlook reflects strong contribution from our core business and incremental fees from the Playa Hotels along with the impact of temporarily closed hotels in Jamaica and moderate FX headwinds from properties in Mexico.

Adjusted EBITDA is expected to grow at a very strong 13% to 18% and when adjusting for the removal of pro rata JV EBITDA and asset sales in the range of $1.155 billion to $1.205 billion. This reflects strong fee growth and a net positive benefit from the extended co-branded credit card terms. Our outlook assumes continued pressure in the distribution segment which we expect will decline by approximately $10 million compared to 2025. Adjusted free cash flow is expected to increase 20% to 30% and in the range of $580 million to $630 million, and reflects the conversion of adjusted EBITDA to adjusted free cash flow of at least 50%.

Finally, we expect to return between $325 million and $375 million of capital to shareholders through share repurchases and dividends. For the first quarter of 2026, we expect global RevPAR growth around the midpoint of our full year range, with international markets growing at a higher rate than hotels in the United States. Gross fees could grow in the mid-single-digit range and adjusted EBITDA could grow in the low single-digit range compared to what we reported in 2025 after removing pro rata JV EBITDA. As a reminder, we are lapping a very strong first quarter of 2025 expect approximately half of the impact from Hurricane Melissa to our fee business and distribution segment in the first quarter. To close, our 2025 results reflect the strength of our asset-light business model, the power of our brands and the disciplined execution of our strategy.

As we look ahead, we expect our competitive advantage will continue to expand fueled by the attractiveness of our network and the opportunities to grow across geographies and chain scales. We enter 2026 with confidence supported by the best team in the business and a clear focus on driving meaningful value for our owners, guests and shareholders. This concludes our prepared remarks, and we're now happy to take your questions.

[Operator Instructions]

Our first question comes from Dan Politzer from JPMorgan.

Mark, I wanted to touch on the net unit growth at the 6% to 7% that you gave. I think it was last quarter, you talked about maybe being more glass half full here. I wanted to check if that's still the case. And then maybe you can talk about the drivers for this outlook, it's conversion, midscale. And then along with that, your appetite for larger partnership deals within this guidance.

Yes, glass is still half full. I feel really good about the momentum that we've seen. We had a really significant signing quarter in the fourth quarter. We have tremendous momentum in the newly launched brands. So in Hyatt Select's case, for example, we went from having 9 hotels to in the pipeline. And of those, we've got some new construction, by the way, in the Hyatt Select brands. Some are prototypical good construction, but most of them are conversions. So we have 3 under construction, but we have 27 under design and many of those will be conversions. Studios went from 5 under construction to 10, but we also have 31 under design. And so they will advance and get shovels in the ground soon. And unscripted went from nothing to having open and in the pipeline.

Right now, 3 under design, 3 under construction. So of the 8, 6 are quickly. And then [indiscernible] we have 72 hotels opened by the end of the year and 93 in the pipeline. So the entirety of the upper mid-scale side of the equation has tremendous positive momentum. And I'm particularly encouraged to see the advancement of so many projects through design into construction for studios. So that's one piece of the equation. The other piece of the equation is that our mix, as you know, is about 70% luxury and upper upscale have existing open hotels. It's also true that, that is the mix of our pipeline. -- is luxury and upper upscale. And 70% of the total pipeline is outside the U.S., where we're seeing less sensitivity to new builds.

So we're opening new projects in China throughout Southeast Asia, in Europe and even in the Americas. So we opened the Park Hyatt Los Cabos just this past quarter. And we will -- we have other openings in Mexico that are not -- are not the all-inclusive resort side of the business, but EP hotels coming this year. So I feel like there's great momentum and that the positioning that we've got, yes, financing is still difficult in the U.S. Yes, construction costs have gone up. But frankly, that's already been taken into account a large measure. You might have seen some recent articles about housing starts actually lagging and housing construction actually lagging. And I think that might change. But right now, it takes a little bit of pressure off of construction materials costs, factor costs themselves.

And we're working really hard to uncover other sources of financing to help our developers who are under design, get under construction. So we've got so many levers that are all working right now in a positive manner that I feel really good about the overall growth profile organically looking forward. In terms of portfolio deals, which was your last question, yes, we continue to look at portfolio deals. We are very focused on making sure that they are real, meaning we really are not happy to just affiliate. We want to have a deeper relationship and make sure that we are under contract in a way that is providing the owners the best value proposition, which is really to be plugged into our systems and under our franchise arrangement or under management arrangement.

So we've got several discussions underway right now on portfolio transactions. Some are quite large, and they would be full-blown management or franchise agreements. Others are smaller. We are still working hard to fill in Europe on the full service side as I keep -- it feels like refrain every quarter that I say it remains a focus of ours. But it's true. So sorry for the long answer, but I feel really good about where we stand.

Our next question comes from Ben Chaiken from Mizuho.

Mark, at risk of getting too technical, for AI travel, how do you envision the ranking system working as consumers search for hotels to the extent you have a view, do you think this will be a traditional kind of like CPC auction model or traffic goes to the highest bidder? Or do you have a sense that order will be determined purely on the relevancy of the search. Obviously, it's early, but what will be your opinion on how this plays out.

It's interesting. I think the answer is, we'll see. I actually don't know yet. What I would say is we began last year building an intent-based search natively into our own digital channels. And we -- because we recognized early that guests actually wanted to search in a more with Pros as opposed to city, state and availability date metric or framework rather. But it's very much language-based. And that's been live on hyatt.com for some time.

Secondly, we are early. One of the very few hotel companies that's already launched an app live on Chat GPT. And we're learning a lot, just watching and learning from how people are actually using that app in relation to search. And so we're studying it. What I would say is that our architecture -- so a little bit of history, we've been at this at this being AI enablement for 2 full years. We -- in the first quarter, starting January -- in January of 2024, I actually chaired the effort, but we put together a steering committee. We set up our infrastructure and built it -- when you set up governance, we set up our control environment, and we identified use cases, 4 of which have already been executed as large-scale agentive platforms. And we're moving forward on a number of different initiatives at the same time.

With respect to search specifically, we've been working with open AI for months, which is why we've advanced to getting an app up and running with them. so quickly. And of course, everybody in the world is at the table with Google and everything else isn't it. You can assume that every -- all suppliers are engaged with all providers of platforms, LLM based platforms. And I personally think that the natural language search capability is going to continue to grow in popularity. And we have seen -- we've got now longitudinal data over a couple of quarters which clearly demonstrate that the booking conversion rate, and the total revenue being generated through the native search capabilities, intent-based search capabilities that we built into hyatt.com, are having a positive impact.

So higher conversions, higher revenues per booking, longer length of stay. And so we're seeing the actual evolution of search, the way search is being done translate into value. And I believe that it's hard to extrapolate that to an app proposed within Chat GPT. Although if you go through and actually access that up, you'll see that there's a live link to hyatt.com so you can terminate your booking in hyatt.com because Chat GPT doesn't have any they've never indicated that they are prepared to be a merchant of record, and you can't terminate the -- or complete the reservation in that environment. But that's fine with us because it brings a sense into hyatt.com. So if I had to guess I would say there's a more than 50-50 chance that will be attribute-based and intent-based as opposed to strict value. I would also say that we are cognizant that both will have some place in the ecosystem, and we're prepared for both.

I'm sorry for a long answer, but this is something that we've been working very intensively on for a long time, and I thought you'd benefit from a little bit more context than just the AI-based vehicles.

Our next question comes from Shaun Kelley from Bank of America.

Mark, at risk of going even further down the rabbit hole, I think that AI and generative AI is clearly the topic across a lot of different sectors right now. So can you just talk a little bit more about your actual relationship with open AI or chat GPT, Kind of what do you get from that in terms of like ability to actually see behavior.

What do you kind of own versus what do they own in that a little bit in that relationship? And then kind of what are you -- like how does it monetize or how is that different than what we might think of when we think of just traditional SEO based -- I start with kind of a very open browser-based search like how is this fundamentally different when you kind of see what people are actually doing on the app?

Yes. So trying to think about how to best order my answer. First of all, you're asking specifically about OpenAI. So let me just address that, but then let me actually expand that. Because OpenAI is just one of the LLMs that we're using for Agentic platforms. We've been licensed to others, Microsoft, Google, Anthropic and open AI for use in different agentic platforms that we've already built in that are a lot -- they're in production at the moment they're live. And so the way it basically works is I'll keep it super simple, but the infrastructure that we've built is all private cloud based.

So what you end up doing is in-licensing an LLM and that LLM then is in your environment. and you're paying a license fee to whomever provided it, but that's the LLM that is used that we then apply our own training to. We train that model to be ours, and it remains ours within our environment in a protected way. And the reason why you use different LLM is because different LOMs have different attributes, both in terms of how they've been trained, but also their trainability. And so we've got, for example, a agent platform for our group sales force. And it's allowed them to value every piece of business. So a couple of years ago, I think I may have mentioned this on a prior call, we responded to over 1.5 million RFPs. And we wanted to actually automate a lot of what we're doing. So now we have the ability to value every single piece of business that comes in, rank order them in terms of desirability from a total revenue perspective and a profitability flow-through perspective, but also it takes into account our overall relationship with the actual party that's requesting space for a meeting.

So if it's a top 5 customer, but a relatively small meeting, it gets prioritized because we want to maintain greater share with the biggest and most important customers to us. What that's allowed is for us to -- we've grown group market share every month since we launched this. we are realizing higher revenue per group booking. And we picked up almost 20% productivity for the group sales force folks at hotel level. So that's like a day a week, if you can imagine how significant that is. So that's just one of several examples. I'm not going to go through all of them. Among other things, there's some competitively sensitive ones that I'm not interested in sharing. But with respect to the app, I think what's going to end up happening is you'll have several agentic interfaces. Yes, we have fully thought through agent to agent booking where you end up with individuals, individual travelers or even corporate travel managers or meeting planners that have their own agents and being able to have agents on our side that interface and can complete reservations without any intervention whatsoever. So we are prepared for that.

We already built the capability to do it, and that's what we're advancing at this point. So what I would say to you is we are agnostic. We're not agnostic. We care about which LOMs we use. We're deliberate about it, is what I should have said, not agnostic. But we are going to work with everybody. And I think the advancements have yet to come. We're just seeing the beginnings of this on the agentic side, and Google is probably the one that has is continuing to really focus their time and attention on this, and they have yet to really sort of disclose the full suite of options that they will have. So we're paying close attention to that. But of course, we're in discussions with them every day. And all of what I just described as sort of revenue focus. We've also implemented some genetic platforms that are very much efficiency focused and both are in play right now for us. So again, sorry for the long answer, but that's where we are.

And maybe just as a very short follow-up, but just because it's something we get all the time across again, lots of companies and industries. But obviously, you are -- you have a very strong G&A program this year to keep costs under control. Is some of the efficiency gains that you're seeing here directly related to some of these AI initiatives? I mean the group sales force comment that you made. -- does seem really tangible. So are we seeing that directly? Or is that a little aggressive to connect those 2 dots?

No, it's not aggressive. There are -- some of the things that you're seeing in G&A are enabled by automation. And we've already deployed a number of things that allow us to do better. It's not just about saving costs, by the way. It's about elevating the quality, robustness and fidelity of the data and the analytics and the insights that we can derive from the data. So it's actually being better, not just being more efficient.

Secondly, there is a whole bunch of things -- there are a whole bunch of things that we have already realized through automation, mostly machine learning applications as opposed to true genetic AI. Although some through genetic AI to in our call center operations, for example, which have already had a significant impact in our cost structures with respect to our hotel services, which do not show up in our G&A. So we've got hundreds of millions of dollars of money that we spend every year supporting our hotels. And we have freed up capacity within funds to be able to invest further in AI enablement, automation and machine learning, and that's exactly what we're doing. So you're not going to see that in G&A. But it is a significant unlock for additional value creation within our chain services environment.

Our next question comes from Richard Clarke from Bernstein.

And apologies for bringing a bit more back to the Brazil. But I guess, back in 2024, you were able to guide to a 54% conversion of EBITDA into free cash flow and then conversion of free cash flow into capital return. So those are worth for '26 than they were for 24 despite you being more asset light. So just help us bridge why that has dropped down. And I guess also the disconnect seems to be on RevPAR between your commentary of sort of mid-single-digit growth positive on all segments and a sort of low to midpoint of 1% to 2%. Is there anything in there like refurbishments that are going to weigh on RevPAR to get you down to that level?

So Richard, let me take these one at a time. The cash flow commentary that you provided, we expect in 2026 to be back to those levels of conversions, which is low to mid-50s, you look at the percentages that I described in my prepared remarks. So we are absolutely back there. We also have opportunity above and beyond that. We are looking to have some delevering over the next couple of years to get us back into our investment-grade ratios. So that will take some interest expense out of the equation and obviously, opportunity because of our asset-light position now and where we expect to grow, including the contribution from the credit card into -- of course, into 2026 and into 2027.

And as we previously described. So on the RevPAR, switching to that topic, we provided a bridge so that you could see very clearly how we anticipate RevPAR to grow the top line expectations that we provided in the outlook is 8% to 11%. And if you look at the contribution of Playa and the impact of the restructuring of the credit card earnings our core brand earnings into our results, we end up with a midpoint of core fee growth that is exceptionally strong. It's 7.5% at the midpoint. And we also provided in the materials that we distributed this morning that we have had a core growth in our fees over the period of time since 2017 on a compounded base almost at 8%. So we are exceptionally proud of how our core growth in fees is -- it has been growing, and we expect it will continue to grow. So we just wanted to make sure that highlight was well understood, which is why we provided the breakdowns that we have. And I hope that answers your question.

Maybe one final part. Just the capital returns of [ $350 ] midpoint. So am I to understand that is because you will be deleveraging this year and so hence, some of the free cash flow goes to deleveraging rather than capital return.

As we sit here at this point in the year, our capital allocation strategy has not changed. We expect to invest in growth for the platform and return excess cash to shareholders as appropriate. And of course, retain our investment-grade profile. So as we sit here now, we think that's a healthy start to the year. And as you've seen us do time and again, we have -- and for the past decade, return capital to shareholders when there is excess cash.

I would just point to when we had the signing bonus in the fourth quarter of 2025, we did what we said we were going to do, which is return that directly to shareholders as excess cash. So that will be how we proceed with this year as well.

Next question comes from Brandt Montour from Barclays.

So the industry has largely cited a better December than expected and that was the best month of the quarter, I think for most folks. You guys had a really impressive 4% globally for the fourth quarter overall. And then if I look at the first quarter guidance, you're pointing to the midpoint of your full year guidance. And so you're looking for, let's say, 2% in the first quarter after doing 4% in the fourth quarter.

So I guess the question is with the context that one of your larger peers yesterday called out a sort of a real-time firming or sort of inflection or something within business transient, which I know is a smaller segment for you guys -- they're seeing some first quarter pick up, essentially December and the first quarter. So just the question would be, are you seeing that? And then is there anything else in the first quarter that we should think about quarter-over-quarter in terms of comparisons?

So Brandt, why we ended up at that sort of middle point of the range is that we're seeing a continuation of trends. We're absolutely seeing net package RevPAR very strong in the first quarter. So leisure transient is as we described and actually, January has come in a little bit better than our range at the top end of our range. And with respect to the breakdown of that, BT has improved slightly, still a little bit flat in January.

So it's been an interesting comparison because, of course, last year, we had the inauguration and so as we look at the quarter and we consider the conversations that we're having with our big customers, we're absolutely hearing that they are still intending to travel. It's just as you look at the booking windows, BT remains the shortest. So we're about flattish in January. The overall for January is at the high end of our range. And that package RevPAR is really strong, which is a great sign for leisure.

There are 2 things that I would say are true. [indiscernible] Don't forget, we are lapping inauguration last year. So that actually has some impact. So excluding Washington, our U.S. BT would have been better than -- because USBT overall was down. but it would have been better by a significant measure because of the comparison in DC. The second thing I would say is that our pace such as it is, it's short term is positive in both February and March, even though the total revenues that are booked right now are not huge proportions of total BT expected revenues, but they're up in both cases, above the top end of our RevPAR range for the year.

So BT looks like it's going to be firming for the remainder of the first quarter. Leisure as Joan pointed out, is very strong, especially our exclusive resorts with pace up around 10%. And so we're looking at a situation where as much as we can tell at this point, it looks like we've got more positive momentum on the BT front in the near term at least, anything beyond 2 months out is really relevant because the booking window is so short. We're also going to be heading into Liberation Day lapping liberation day that is. So we'll see what impact that's got in terms of the comparisons when we hit April.

Next question comes from Smedes Rose from Citi.

I just wanted to ask a little more on your decision to no longer include EBITDA from nonconsolidated joint ventures in your definition. I know you said part of it aligns with peers, but it also, I think you said reflects strategy and evolution. I'm just wondering, is this -- I assume these are -- because they're nonconsolidated, these are minority interests that you hold. Would it make strategic sense to kind of go to your partners and sort of try to get bought out over time as a way to kind of maybe get more simplicity in your overall model?

And I guess the benefit of these JVs or nonconsolidated JVs will just come to you through the EPS line, which I think most people focus less on you guys relative to peers just because there's lots of reasons, it's very difficult to model versus just getting to an EBITDA number. So I'm just wondering if you could just maybe talk about that the decision there a little more.

Yes, a good question is one for which I have an answer, a great question is one in which I get an idea of throwing me that we're actually already implementing. So thank you. I would say in 2017, when we started going down the path of the program to sell down more methodically the asset base. We concurrently really shifted our strategy because up until then, we were actively using real capital like we had allocated $200 million back to fund JV interest to help PROPEL getting high centric in great locations with great partners. And those investments turned out to be good investments. Much -- many of them other than a couple have already been monetized.

And the same was true for a few high places in key locations like Austin, Nashville, et cetera. And so we have used capital through JVs to help propel and accelerate growth for individual brands. What I'll tell you is we are not I believe that we will find other opportunities to do that, but it is not a proactive strategy that we are pursuing. We are actually pursuing what you described, which is looking at monetization of all of our JVs over time. As you say, in some cases, we are -- we have the ability to actually control an exit. In other cases, we have bought out partners so that we can control the hotel and then be able to pursue a sale.

There are several examples of that where those owned hotels are currently in our portfolio. JV partners have been bought out. And then finally, we've got 1 public situation, which is Juniper. I think our market cap of our holdings is somewhere the $240 million to $250 million range, which is a staggering return because we only put in maybe $40 million into that investment to begin with. But I think over time -- and that's after a significant decline in the Indian market. So we believe that value will recover because performance in India continues to go from strength to strength, and we will look to monetize that over time. So your suggestion is accepted, and the mandates set, and we're going to be going to work.

And I would just add that similar to the program for any asset sales, we have retained management and franchise contracts on every single transaction. And this portfolio is also of a very high quality and we have high-quality partners. So as we consider all of the future actions we might take that Mark laid out, we would retain management and franchise contracts on all of these.

That's helpful. Can I just ask just a quick follow-up separately. You mentioned the impact of Hurricane Melissa it's in your numbers. You haven't -- I mean do you have any business interruption insurance claims? Or is there anything that might offset that?

Yes, we sure do, Smedes. And we have -- as you can imagine, in this part of the world, this is a risk that we're faced with owners, while we were owning the Playa Hotels and our owners also have good insurance in this location. So we have not included that in the outlook that was your next question. We're not sure when those proceeds will come in, but we'll keep you posted.

Okay. But that impact could be modified somewhat by -- I know the timing is always difficult in the announced is difficult, but -- it will be either.

It will be. The amount and timing is what is still under discussion.

Our next question comes from Steve Pizzella from Deutsche Bank.

Mark, I wanted to ask about how you think about the ALG vacations benefit to the business today? And whether that's something you would consider selling out right or to a partner similar to UBC where you can manage the business. I guess just more curious broadly about how you think about the benefits to the broader business. Is it an acquisition tool for new oil and cruise resorts because you can tell owners you'll drive people to your destination? Or is it just that integral to the existing portfolio, you like maintaining the control?

The answer is yes and yes. So let me give you some data. First, we -- the HIT portfolio has outperformed the overall market. every year since we've owned ALG. And part of the reason that's true is because of ALGV's capabilities. I think that plus UV members who are the most dedicated and loyal are driving outperformance for our HIC hotels.

And finally, World of Hyatt is growing significantly across our all-inclusive resort in terms of penetration. We believe I think it's up 290 basis points year-over-year in terms of penetration. And I think we have a lot more room to go. So I think that over time, you'll see World of Hyatt also be a major contributor. So between those 3 avenues, which are wholly owned, we have real ability to drive business where and when we need it. And the underlying business itself is actually a profitable and really good distribution platform. For context, HIC represented about 30% of ALGV's total hotel revenue in '25. And ALG represented about 16% of HICs total rooms revenue in 2025.

So just to give you a sense of proportionality, that's the -- so it's a channel that represents fully 16% of our total volume rep rooms -- sorry, net package revenue volume. And we -- our own portfolio represents about 30% of ALG's total volume. So the answer is yes, it is extremely helpful in new property acquisition. Yes, it is extremely helpful and vertically integrated into how we sell currently. And I would say the other major benefit is that we get tremendous visibility, tremendous visibility into Lyft. We represent something like 13% of all the platelets in Cancun Airport. The largest market share of anybody, and we are similarly #1 in [indiscernible] So we've got an incredible relationship. We buy hundreds of millions of dollars of airline tickets every year from all the major airlines.

And so we are plugged in, in a way that gives us great, great visibility route planning and to flow. So your question. Yes, my answer is we are always open and always evaluating potential strategic alternatives for ALGV, but there are certain conditions. One, we have to maintain it -- we have to maintain the strategic attributes that I just described, too. It really needs to be something that would be an enhancement of their business model not just the financial transaction because there are many players you can imagine that would bring different dimensions to ALGV's business, whether that be geographic expansion or product type expansion.

And finally, ALGV has, for the last 2 straight years, been working on AI enablement. And we believe that they've made some great advances, and we have a lot more to do this year. But I think we're going to end up seeing some real opportunities there to improve the internal economics of the business itself but also improve the market positioning of ALGV. So there's more -- I look at it and say there's opportunity to actually do better with what we have. And yes, we are open to strategic alternatives meeting those conditions that I just mentioned.

And maybe, Steve, I'll just add with respect to the guidance that I provided in my prepared remarks, I mentioned that there'd be about a $10 million headwind for 2026 related to the business, and that is in part because of the impact of Jamaica and in part because of what we're experiencing with the 4-star and below demand. So just to give you a little bit of color, in addition to what -- to that $10 million for the year, we expect on a net basis, that full amount to be recognized in the first quarter because we are lapping such a strong quarter relative to 2025.

And so as you look at the rest of the year, we sort of moderated post liberation day. So Q2, Q3, maybe a little bit down but -- and an upside in Q4. So that's kind of how you can think about it across the year, which we think will be helpful because I think there's been some questions about how to model the business.

Yes. And if I could just -- look, we're not running the company for the first quarter of this year. This Jamaica impact is a '26 issue period. We have plans with the owner Tortuga and the other owners in Jamaica, it's primarily Tortuga. They've got a great fantastic insurance program as we had they will have the money. I've met with the Minister of Tourism 2 weeks ago in Spain, and they have assured and we know that airports are open, roads are open, the water supply -- potable water supplies restored, the grid is restored. They did this in record time, just remarkable.

In addition to that, the government is taking action to facilitate getting building products brought in without undue tariffs and taxes and labor. So they are really supporting -- the government is backing up the truck to make sure that all of the reconstruction can be done in the most efficient and fastest way possible, most efficient, most cost efficient and fastest way possible. So what I believe, yes, we're going to take a hit in 2026. We've already been very explicit about what that is. But I think the real point is what does that position us for, for 2027. We're going to have fully refreshed freshly newly rebuilt and renovated and upgraded hotels in Jamaica, which is going to have a very strong year because the government is going to make sure it does. There are too many jobs that are dependent on this industry for the government not to throw everything they have in the kitchen sink of this for 2027.

So I believe that, yes, 26% is what it is. And it's not it's not a persistent issue. It's not a fundamental structural issue. It's a point in time. 2027 has the opportunity for us to far exceed what our own underwriting was out of those resorts when we did the deal and so -- and when we sold the properties. So I look at it and say, I'm excited about the prospects for Jamaica. I'm excited about financial prospects for those properties as we head into 2027. And if you're here to buy the stock for what we're going to do in the first quarter, you probably shouldn't -- my view is you're -- that don't -- that's a trading question, and I'm not going to engage in trading questions. I would say this is about an investment where the profile sets up beautifully for a great 2027.

Our next question comes from Lizzie Dove from Goldman Sachs.

I wanted to go back to rooms growth. You mentioned, I think it was Dan's question earlier about being open to portfolio deals. -- to confirm, is your assumption then that, that 6% to 7% wouldn't necessarily be all organic? And then you also mentioned some of the newer brands where you've got traction, Hyatt Select, unscripted, et cetera. Curious how you -- how big do you think those can be over time as a contributor?

We believe that the 6% to 7% is the organic growth number just to be clear. The fact that we have brands that are designed for conversion is taken into account. So portfolio deals are different, though. So when we're building Hyatt Select pipeline, which has expanded dramatically and when we're building the unscripted pipeline that's sort of one by each hotel. Sometimes we do so many portfolios. So we brought Wink hotels in Vietnam, 6 hotels that joined unscripted and December, that's a mini portfolio deal, but it's really treated like a regular way development deal.

So our organic growth includes the brand portfolio that we currently have, which includes conversion brands. So I would say you can expect that, that is how we think about that. The portfolio deals that I'm talking about are larger and have more infrastructure associated with them. These are management platforms, either because of geography or type of hotel where we would do a deal bring on a larger number of hotels either under its own brand or to be included under one of our collection brands or to be rebranded, and we would also bring on capabilities and people who are engaged if it's in a geography in which we have relative modest representation, which is exactly the kind of deals we should be doing because in order to grow our reach and our points of service to all of our guests and how we care for our guests, we end up focusing on the places where we don't have representation.

And I think 1 of the 2 of us, Joan or I talked about the fact that 50% of the either pipeline or openings were in markets where new markets. So that just goes to show that the strategy shows up in the data as well. So thank you for that, Lizzie.

I want to thank all of you for your time this morning. As you've heard, I think, throughout today's call, we're really proud of what we've accomplished. We're really proud of the Hyatt family, and we're really excited about the momentum that we have in the business. The fee-based aspect of our business is going from strength to strength. I think there's only been 1 year in the past 10 years where we have not led the industry in RevPAR growth. I would just focus everyone's attention on the fact that, yes, we've done a lot of M&A over this period of time, yes, we have looked at -- there have been -- as the headlines have continued to point out, there are some moving pieces. And my answer is we have been very explicit about what they are. Everyone knew what they were going to be because we've been very explicit.

We provided bridges. We provided all the information to simplify so that people can understand what we've done and where we're headed, but do not mistake that significant value growth through inorganic activity don't let that distract you from the fact that the core business is extremely strong. And our cash flow conversions are going up our returns to shareholders will continue to go up and our ability to delever and open up more capacity in the future or relever and return more to shareholders is before us. So stay tuned. We appreciate your continued interest in Hyatt. And we certainly look forward to welcoming you into our hotels and for any of you -- and I'm sure there's nobody in this category who are not members of the World of Hyatt, please join. It's a phenomenal program, and you can read about it on any blog. People love this program. So I don't take my word for it, just go redevelop. Thank you, and have a great day ahead.

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

Good morning, and welcome to the Hyatt Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you, and welcome to Hyatt's Third Quarter 2025 Earnings Conference Call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini, 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 under the Financials section of our Investor Relations website and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation containing supplemental information on our Investor Relations website this morning. Please note that unless stated, references to occupancy, average daily rate and RevPAR reflects 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. With that, I will turn the call over to Mark.

Thank you, Adam. Good morning, everyone, and thank you for joining us today. I'd like to begin today's call by expressing my deep appreciation for our Hyatt colleagues around the world, especially those recently impacted by Hurricane Melissa. Our thoughts are with them and their families and we're hopeful for their continued safety and well-being. I want to thank the many colleagues who have stepped in to provide care and support, including financial assistance through the Hyatt Care Fund. This care and compassion from the members of the Hyatt family reflects the very best of who we are.

Over the past couple of months, I've had the opportunity to visit teams across both Europe and Asia Pacific. I came away deeply inspired by how our colleagues around the world embrace our evolution to a more inside-led and brand-focused organization and continue to bring Hyatt's purpose to care for people so they can be their best to life.

Turning to the quarter, I'd like to provide an update on our transactions activity, starting with the sale of the hotels acquired as a part of our acquisition of Playa Hotels & Resorts. On September 18, we sold a property in Playa del Carmen to a third-party buyer for approximately $22 million and net proceeds were used to repay a portion of the delayed draw term loan. This was 1 of 2 properties that were not subject to long-term management agreements with Tortuga Resorts. We remain on track to close the real estate transaction with Tortuga for the remaining 14 hotels by the end of the year.

We also continue to make progress to sell several of our owned properties. We have three hotels under contract with signed purchase and sale agreements and three more hotels with a signed letter of intent. We expect all six hotels to close in the early part of 2026. We will share additional updates as these transactions progress. And we remain on track to exceed 90% asset-light earnings mix in the near term.

Now turning to operating results. This morning, we reported system-wide RevPAR growth of 0.3% for the quarter, which was impacted by a holiday shift and lapping with onetime events last year. Our luxury brands continue to generate the highest RevPAR growth consistent with trends that we've seen since the beginning of the year. Leisure transient RevPAR increased 1.6% to last year and was up approximately 6% across our luxury brands. Our all-inclusive portfolio continued to deliver strong results, with net package RevPAR up 7.6% compared to the third quarter of 2024, demonstrating the strength of luxury all-inclusive travel.

Business transient RevPAR was flat in the quarter, but we saw improved performance in the United States, which grew by 3% compared to last year, with select service delivering positive quarterly growth for the first time in 2025. Group RevPAR declined 4.9%, in line with our expectations, which assumed difficult year-over-year comparisons, including the Olympics in Paris and the Democratic National Convention in Chicago, and the shift of [ Rasashana ] into the third quarter of 2025 compared to the fourth quarter of 2024. Group pace for the fourth quarter is up approximately 3% as we lap easier comparisons due to the holiday timing and last year's elections in the United States. While we are still in the planning stages for 2026, we are encouraged by the forward-looking booking trends.

Group pace for full-service U.S. hotels remains up in the high single digits and is expected to benefit from special events like the World Cup and America 250 celebrations. Corporate negotiated rate discussions are ongoing, and we expect average rates to increase in the low to mid-single-digit range in 2026 compared to 2025. Pace for our all-inclusive resorts in the Americas, excluding Jamaica, is up over 10% in the first quarter, reflecting the continued prioritization of leisure travel. We look forward to providing more details on our 2026 expectations during our fourth quarter earnings call.

Turning to growth. We achieved net rooms growth of over 12% during the quarter or 7% when excluding acquisitions. Notable openings included the stunning Park Hyatt Kuala Lampur located in the tallest skyscraper in Asia Pacific, along with the Park Hyatt Johannesburg. In the United States, we welcomed Hyatt Regency Times Square to our system, following an expansive multimillion dollar transformation, marking the first Hyatt Regency property in Manhattan and our 30th property in New York City.

We ended the quarter with a strong development pipeline of approximately 141,000 rooms an increase of more than 4% to last year. Momentum across our Essentials portfolio continues to build following the introduction of the Hyatt Select and Unscripted by Hyatt brands earlier this year. We signed a number of new deals for each brand during the quarter and have many more in discussions.

In addition, we signed a master franchise agreement with [ Homeinns ] Hotel Group to develop Hyatt Studios across China. Further expanding our upper mid-scale brand presence in China. Under this agreement, [ Homeinns ] plans to open 50 new Hyatt Studios hotels over the coming years while building a robust pipeline to fuel future growth across China.

At the end of the third quarter, upper mid-scale brands now represent 13% of our pipeline, up from 10% at the end of 2024 and more than half of Hyatt Select, Hyatt Studios and Unscripted by Hyatt opportunities are in markets where we currently have no brand representation, helping to drive organic capital-light growth and increased network effect across our global portfolio. Our strong pipeline and the momentum we are seeing in our upscale and upper mid-scale brands underscore the significant white space that we believe will support strong growth for years to come.

Before I close, I want to spend a few minutes highlighting one of the most powerful strategic assets of our business, our loyalty program, World of Hyatt. During the quarter, World of Hyatt surpassed 61 million members, an increase of 20% year-over-year. World of Hyatt continues to be the fastest-growing major global hospitality loyalty program with membership having increased nearly 30% annually since 2017. Today, we have more than 40% more members per hotel compared to our closest competitor, we proof of the deep engagement and strong preference we've earned from high-end travelers.

While growth and scale matters, what truly sets world of high apart is our purpose. Our program goes beyond transactional awards to create an experience platform that delivers meaningful personal connections, whether it's through our guest of honor program, which allows members to gift their top-tier status to others, or the introduction of award gifting, we've redefined what loyalty looks like by making it personal.

Being personal also means that our members receive the most consistent and guaranteed benefits in the industry. In addition, we reward deep engagement through our milestone Rewards program, which delivers differentiated value even after a member achieves the highest elite status. The expanded agreement with Chase, which we announced yesterday, is a compelling proof point of how our differentiated loyalty program can deliver value to shareholders while providing rewarding experiences for members across all stay occasions. The significant increase in economics will be driven by the expanded collaboration with Chase, the continued growth of World of Hyatt membership, the strength of Hyatt's global portfolio of premium brands and Hyatt's robust pipeline.

Adjusted EBITDA recognized by Hyatt related to these economics is expected to be approximately $50 million in 2025. We expect this to grow to approximately $90 million in 2026 and more than doubled to approximately $105 million in 2027, and we anticipate continued growth in future years.

We also expect to deepen engagement with our members and continue to evaluate additional card products in the future, building on the success of our current co-branded cards. When a loyalty program is designed with care at its core, it leads to greater guest preference and helps support a powerful commercial platform that delivers more direct bookings and makes Hyatt more attractive to owners. And as we continue to grow our portfolio and expand it into new segments and markets, we believe the power of World of Hyatt will continue to fuel preference and long-term value creation well into the future.

As I look ahead, I'm encouraged by the momentum in our business and the performance of our brands. Our evolution to a brand-focused organization is designed to position Hyatt to be the most responsive, innovative and highest performing hotel company. and I'm incredibly excited for our future. I will close by expressing my gratitude to all Hyatt colleagues who care for each of our stakeholders every day. Joan will now provide more details on our operating results. Joan, over to you.

Thank you, Mark, and good morning, everyone. Over the past year, we've taken steps to align our above property and corporate teams in support of our brand-focused evolution, and we are confident these changes will deliver long-term benefits from multiple stakeholders. Our commercial teams have identified greater capacity to invest in initiatives that are expected to benefit our owners, including technology innovations and marketing efforts to further improve the performance of our brands.

We also expect to realize lower run rate adjusted G&A costs over time. We expect adjusted G&A in 2026 will be moderately below full year 2024, and despite 2 years of inflation and the addition of incremental payroll and other costs from acquisitions over the last year. As a result of these initiatives, we expect to incur approximately $50 million of restructuring charges this year the majority of which were recorded in the third quarter.

Now turning to third quarter results. RevPAR grew 0.3% compared to last year, in line with our expectations shared during our second quarter earnings call. In the United States, RevPAR declined 1.6% to last year, in line with our expectations, driven by select service hotels and the timing of [ Rasashana ]. Business transient RevPAR grew low single digits in the quarter, an improvement over the decline we saw during the second quarter. Full-service hotels were negatively impacted by the holiday timing, which led to lower group contribution in the quarter, while select service hotels were below last year due to softer leisure transient demand.

RevPAR outside of the United States performed well, and we saw continued strength in international markets. Europe saw positive RevPAR growth driven by strong international inbound travel despite lapping a tough comparison from onetime events last year. Greater China grew RevPAR to last year due to increases in leisure transient demand. Net package RevPAR growth at our all-inclusive properties grew 7.6% in the quarter, highlighting the continued strong demand for leisure travel.

Pace for our all-inclusive hotels in the Americas excluding Jamaica, is up over 8% in the fourth quarter and for the holiday festive period is up over 11%. As Mark mentioned, the sustained demand for luxury all-inclusive travel gives us confidence as we look ahead to 2026. We reported gross fees in the quarter of $283 million, up 6.3%, excluding the impact of the Playa Hotel acquisition. Gross fee growth was driven by international RevPAR performance, new hotel openings and non-RevPAR fees.

Owned and leased segment adjusted EBITDA increased by 7% and when adjusted for the net impact of asset sales and the Playa Hotel acquisition. Distribution segment adjusted EBITDA was down to last year from lower booking volumes and lapping a onetime benefit related to [ ALGV ] vacation credits from last year. The decline in travel from 4-star and below hotels led to lower booking volumes and earnings flow-through despite higher pricing and cost mitigation initiatives. In total, adjusted EBITDA was $291 million in the third quarter, in line with our expectations.

During the quarter, we repurchased approximately $30 million of Class A common stock and have approximately $792 million remaining under our share repurchase authorization. During the quarter, Net proceeds from the sale of a hotel in Playa del Carmen were used to repay a portion of the delayed draw term loan, and we expect to close supply a real estate transaction by the end of the year and we'll use the net proceeds to repay the outstanding balance on the delayed draw term loan. As of September 30, 2025, we had total liquidity of approximately $2.2 billion including $1.5 billion in capacity on our revolving credit facility. On October 30, we executed a new credit agreement that replaces the prior facility and provides for a $1.5 billion senior unsecured revolving credit facility, which will expire in 2030. We remain committed to our investment-grade profile and our balance sheet is strong.

Before I cover our full year outlook for 2025, please note that we continue to include additional schedules within the earnings release related to our expectations for Playa in the fourth quarter of this year. We've lowered our fourth quarter outlook for Playa by $7 million at the midpoint of our range as a result of Hurricane Melissa, while the full year outlook remains unchanged after a strong third quarter. For modeling purposes, our outlook assumes that we will own Playa's real estate for the entirety of the fourth quarter.

I'll now cover our full year outlook for 2025 and which does not include the impact of the Playa acquisition or planned real estate sales transaction. The full details of our outlook can be found on Page 3 of our earnings release. We were encouraged by the performance of our hotels over the course of the third quarter. We expect full-service hotels in the United States to deliver higher growth in the fourth quarter compared to select service hotels due to easier group comparisons. We also anticipate our luxury portfolio and international markets to perform well in the fourth quarter, supported by strong demand trends and high-end consumer resilience.

We've tightened our RevPAR range and expect full year 2025 RevPAR between 2% to 2.5%, which implies RevPAR growth in the fourth quarter between 0.5% and 2.5%. The quarter is off to a good start with October RevPAR increasing in the United States by approximately 1% and globally by approximately 5%. For the United States, we expect RevPAR growth for both the fourth quarter and full year 2025 of approximately 1%. We expect fourth quarter RevPAR growth outside of the United States to remain an area of strength, especially in Europe and Asia Pacific, excluding Greater China.

We're increasing our net rooms growth outlook range to 6.3% to 7% and which does not include rooms added from the Playa acquisition. Gross fees are expected to be in the range of $1.195 billion to $1.205 billion, a 9% increase at the midpoint of our range compared to last year. We've lowered our adjusted G&A range to $440 million to $445 million reflecting the run rate cost efficiencies that we've been able to achieve throughout the year. Adjusted EBITDA for the full year is expected to be in the range of $1.09 billion to $1.11 billion, an 8% increase at the midpoint of our range compared to last year when adjusting for the impact of asset sales. As a reminder, owned assets sold in 2024 accounted for $80 million worth of owned and leased segment adjusted EBITDA last year.

Our full year adjusted EBITDA outlook implies growth in the fourth quarter of 9% at the midpoint of our range. Adjusted free cash flow is expected to be in the range of $475 million to $525 million, which excludes $117 million of deferred cash taxes paid in 2025 relating to asset sales that took place in 2024. In the fourth quarter, we'll receive upfront cash of $47 million as part of the amended agreement with Chase. And we are increasing our full year outlook for capital returns to shareholders and expect to return approximately $350 million in 2025, inclusive of share repurchases and dividends.

Our capital allocation priorities remain unchanged. We are committed to our investment-grade profile, identifying opportunities to invest in growth that creates shareholder value and returning excess cash to shareholders in the form of dividends and share repurchases.

In closing, our third quarter results reflect the strength of our business model and the effectiveness of our long-term strategy. Looking ahead, we believe our talented brand-led organization, strong development pipeline and differentiated loyalty program provide meaningful advantages in today's dynamic environment. As we continue to expand into new markets and segments, we're confident in our ability to drive sustained growth, enhance profitability and deliver attractive returns to shareholders. This concludes our prepared remarks, and we're now happy to answer your questions.

[Operator Instructions] Our first question comes from Steve Pizzella from Deutsche Bank.

Just wanted to start on net rooms growth, if we could. Good to see you raise the core [ NUG ] guidance for the full year and the pipeline increased. As we start to think about next year, realizing it is still early, but with the trends you are seeing in your pipeline and the positive commentary, how are you thinking about net rooms growth going into 2026 and beyond?

Thanks, Steve. I appreciate the question. The headline here is organic growth is extremely strong. We are on track to more than double our core organic growth rate from last year to this year. Last year, we had a number of inorganic adds to our portfolio. This year, we are seeing tremendous strength in organic growth, and that's thrilling. We have real momentum in signings as we head into the fourth quarter. That's really the new brands that we launched this year, Hyatt Select and Unscripted are based on the momentum that we're seeing right now, we are expecting continued acceleration of signings through the fourth quarter.

In terms of net rooms growth, we have about 38 hotels that we have planned to open in the fourth quarter. Seven of those were opened in October. Just for reference, we actually opened 34 hotels in the fourth quarter of last year, and we feel really good about completing those openings.

Now I'll say what I say on this call every year, which is if some hotels end up opening in early January versus December, the growth story and the momentum has not impacted whatsoever. Even if it may impact the actual calculation at December 31. And as you all know, opening a hotel is a complex thing and an educated guess until the first guest actually spends a night. But having said all that, it really looks good at this point based on what we're seeing across the globe.

The pipeline additions are also coming about 35% in Asia Pacific and 35% in the U.S. So we're seeing good strength across the board. And very, very confident about 6% to 7% growth again next year. And if I had to take up that, I would say there is more glass half full than glass empty in that number.

Our next question comes from Smedes Rose from Citi.

Thank you. I guess I just wanted to ask you a little bit about kind of what you're seeing so far in terms of group pace in the U.S. and kind of internationally for 2026, anything you can share on that.

Do you want to start? I'll start and Joan can provide additional commentary. So we ended the year -- sorry, end of the quarter, third quarter with pace into '26 up in the high single digits. October was a stunning month in terms of total bookings. Full cycle bookings were up 15% in October, which is quite significant. Having said that, the bookings for 2026 specifically, were actually weaker than we expected them to be. But we have over 60% of the business on the books. In fact, it's probably closer to 65% now. And we have really, really attractive date patterns remaining in 2026 to book. So our confidence about group business coming through really strong into 2026 is very high even in spite of the fact that October itself was somewhat weaker in terms of '26 bookings. But again, full cycle across '27 -- '26, '27 and '28, very strong in general. So really seeing great progression there.

And then with respect to Global Group, we've had, I think, pretty consistently strong group ex some difficult comparisons like the Olympics last year, lapping that is impossible to -- it's impossible to lap that positively. And -- so we're seeing group actually alive and well across the board. And Joan, do you have anything that you entered?

The only thing I would add is you didn't mention this, met, but we've obviously are encouraged by what we're seeing in Q4, which is what we had expected all year round because of the holiday shift. So we're up 3% in the production that we saw in October is strong for really short-term, high-quality corporate bookings. So we feel really confident about Q3 -- excuse me, Q4. And Mark had mentioned several years out, we're seeing increased levels of booking activity, really, really strong booking activities out, which is positive because that means associations are booking and confident in their future outlook into future years?

Yes. I mean I think in terms of the actualized business in October, group was up almost 4%. So we're seeing very, very strong group actualized business.

Our next question comes from Ben Chaiken from Mizuho.

I want to clarify the G&A comment earlier. I think you said 26% -- if I heard you correctly, I believe you said 26% down moderately versus 24%, is that versus the $445 million of adjusted G&A, just so we're on the same page. And then can we touch on maybe what's driving that lower?

Sure. So Ben, we talked about some organizational changes that we made this year and also some other efficiencies that we realized along the way throughout the year. So that's why we took down our numbers, our expectations for 2025. And the reference below 2024 was for 2026. And so yes, we expect to be slightly down in 2026. We're still in the planning processes for 2026, and we'll give you the full guidance range in our Q4 earnings call. But -- what is really notable is the M&A activity and some incremental resources that we've added. We've been able to look at a 2-year period and expect to be down in 2026. good results coming out of our organizational changes and outcomes for us.

Our next question comes from Richard Clarke from Bernstein.

Just a question on the $50 million uptick in capital returns. I guess you've got the -- is that coming from the extra $47 million you're getting from Chase and how you're factoring in the $50 million restructuring charge. Just how -- where is that extra $50 million come from? And I guess that's going to mean you're going to return somewhere around sort of 70% of free cash flow back to shareholders this year or adjusted free cash flow. Any reason why that percentage can't edge up next year to maybe closer to 100% of free cash flow going back to shareholders in '26?

So Richard, do you have the offsets exactly right. We factored in that bonus that we realized in the negotiation of the new card agreement. And also the offset for this year is for those restructuring charges, which is all incorporated into free cash flow. As we look ahead into next year, we are on track to move much closer to our goal of 50% conversion on free cash flow to EBITDA. So we feel really good about that. We had some onetime items impacting us in 2025, but we're on path for 2026.

Our next question comes from Stephen Grambling from Morgan Stanley.

I was hoping you could maybe outline a little bit more on the assumptions that underpin the EBITDA step-up from the co-brand credit card '26 and '27. As we think about changes in the terms of deal versus future sign-ups of new cardholders or even increased spend in cardholders? And do you include the fees that you'll recognize from the upfront payment?

So okay, a couple of things to unpack there, Stephen. I'll start with your last question that the accounting for the upfront payment will be amortized over the life of the agreement. So that's just the accounting recognition. So just a point on that.

And then yes, we are really, really pleased with the outcome of the new agreement. And the benefit is clear, as we've outlined -- actually, Mark outlined that doubling our earnings by 2027. And really strong result. And also, it is a benefit to not only HHC but also to the World of Hyatt program, which, as Mark outlined, all of the benefits that, that program provides to our members, but also to our owners. It's a win-win actually across the board with respect to all of our stakeholders. What we would say about the estimates that we put out while they're very strong.

We've seen really, really incredible growth in the World of Hyatt program and also in our rooms growth. So as both of those factors increase over the coming years. We think there's upside to these numbers in the credit card fees that we will earn over time. But we've taken a very reasonable assumption related to 2026 and 2027. And we'll continue to update you as those results come in.

Our next question comes from David Katz from Jefferies.

I wanted to ask about the master agreement with Home Inns. Number one, a little more color on the economic intensity of those Presumably, it's lower because of how those structures usually are. And then secondarily, how are we thinking about it in terms of net unit growth today and what that could provide over time.

Great. Thanks, David. You know that we've been in business in a partnership with a JV with [indiscernible] in for 5 years now. We launched our [indiscernible] by Hyatt in 2020, I believe. And the brand has been remarkably successful. It took a while to really start to gain momentum for obvious reasons given the launch timing. But the brand itself is resonating with Chinese travelers the attractiveness of the brand within the Homans portfolio and for [indiscernible] as a company is very high because it is the highest quality highest end brand that they have in their entire portfolio. And we are also concurrently growing our World of Hyatt base, which was exactly the intention of being able to serve that next tier down, essentially an upper mid-scale brand in U.S. parlance.

The locations of UrCove by Hyatt are extraordinarily attractive. They are adaptive reuse office spaces almost without exception. There are a few new builds, but many, many of them are adaptive reuse offices. In very key locations in primary cities. So the kind of customers that we're going after and being able to attract the World of Hyatt is very, very strong.

Now at Hyatt Studios, the program there will be new build and primarily. We have the ability to do adaptive reuse as well, but a lot of them will be new build. And the ability to gain as much momentum for Hyatt Studios in China would not really be available to us without a partner who has basically a development and construction machine, a significant organization that is excellent at what they do. And we've seen the quality of what they've actually produced with UrCove, which gives us tremendous confidence in where we see this going. In both cases, we -- well, there are different economic structures because in one case, it's a joint venture, we earn fees directly. And on top of that, we own half of the venture. In the other case, it's fees. So we will be earning fees on the Hyatt Studios that open. They will benefit from the development of those properties and really being able to utilize an existing resource that they've got. And it helps their network as well because it gives their own over 100 million members of their loyalty program, brands to trade up into. And frankly, over time, we expect those same clientele to trade up further up into our full-service hotels.

So as a network effect matter, it's very significant. We will be fee positive for Hyatt studios and we earn fees directly and have a JV -- 50% JV interest in UrCove. So I think it's been a great partnership. It's expanding, and it's not a situation in which we're basically making $3.50 a year on something that is just for the sake of having a bunch of rooms.

In terms of total impact, we're talking about 50 hotels of about 100 rooms a piece maybe 125. So it's not going to actually have a massive impact on our net rooms growth. So we're not doing this because we can -- with smoke and mirrors, add to our net rooms growth figures. This has got real commercial impact.

Our next question comes from Shaun Kelley from Bank of America.

Mark or Joan whoever wants to take it, would love just a little bit more insight on the cost program that your initiatives there. I think we talked about strategically a little bit what you're doing, but just kind of what catalyzed the decision sort of the why now question, it's obviously encouraging, but it takes a lot to move a big organization. And what are some of the key building blocks or things that this is going to allow you to do a little bit more efficiently, maybe specifically on behalf of the owners, we sometimes hear feedback that these things can have an impact and help streamline some communication there. .

Thanks, Shaun. The ultimate goal here is to move towards an insight-led and brand-focused organization. That sounds like corporate speak, but it's real in the sense that we are going deep on being able to understand the different customer groups that we serve across our portfolio, and they are different. How we get to them, that is distribution channels and marketing are different as well.

So we broke our business down into five brand groups. And those five brand groups will be the way in which we actually operate the business going forward. It happens concurrently with a significant elevation of our practice of agile ways of working, which we have been working on for 4 straight years, which is designed to move more quickly, test and learn and experiment and innovate more quickly.

And then the third element is artificial intelligence, expanded use of machine learning and models. We've built several Agentic platforms already internally. Some have been solely focused on driving top line. Some have been really focused on cost efficiency and many. They're all focused on driving performance, including providing a platform that our hotel teams can use to help optimize or improve, I would say, maximize performance of their hotels, which is a direct impact on owners.

I just got back from Europe, during which we had an owner's Advisory Council meeting, and I went into some detail about the work that we've done on that last platform that I just mentioned. And there are direct measurable impacts that we can point to -- actually across all the things that we've done so far. So we have positive results. We're leaning into doing those. When we put these things together, that is the practice of Agile, which is inherently cross-functional, we append all the work that we're doing with all-inclusive, and we then look at how we are in service of our brands in a different way than we were before. how we organize the company had to change.

And in the course of reorganizing the company, we found tremendous levels of efficiency in how we're staffed. So a lot of that cost gain was in staffing. Some will be also in third-party costs because we are automating a significant number of functions and processes that really are able to be automated at a fraction of the cost of paying third parties to do it for you. And we've just scratched the surface. We are leaning into this very heavily, and you will see this as a tailwind for us for the years to come.

Our next question comes from Duane Pfennigwerth from Evercore ISI.

Joan, I appreciate your comments on capital allocation. Maybe you could speak to priorities in the intermediate term. Does the order maybe change is deleveraging more of a focus, capital return, maybe less emphasis on finding opportunities that will accelerate your growth further?

Sure, Duane. I think with respect to the leverage comment, we've have a commitment in the near term to delever, we are required with the asset sale proceeds from the Playa sale to actually pay down that late draw term loan, which I noted in my prepared remarks. So that is on the horizon. And we've also made a commitment reach investment-grade leverage by the end of 2027. And we've got some asset sales that we're working on right now and some that we expect to also complete by the end of 2027. So that will improve our leverage with those asset sale proceeds.

Now I'll let Mark comment on the M&A front and opportunities that we see. But with respect to returns to shareholders, we have been consistent in delivering those returns when we've had excess cash. And that will be the approach that we continue to follow going in. We'll obviously give you some insight into 2026 and our quarter earnings call. But we've realized some incremental free cash flow through this -- through the credit card agreement, and that's the driver of what improved our capital returns guidance for this year for 2025. So we are taking those excess cash and doing exactly what we've committed to.

Yes. I would just point out that I think it's very important to look at history and our behaviors. You can, I think, have a higher level of confidence that we say what we do and we do what we say. Since 2013, we have consistently continued to prioritize investing reinvesting in our own business and returning capital to shareholders initially strictly through share repurchases and then more recently, through both dividends and share repurchases. We repurchased stock every year for the last 12 years in a row despite the fact that we've executed over $5 billion worth of acquisitions. In fact, it's probably close to $6 billion and have transformed the balance sheet in the process. So we believe that return of capital to shareholders is a key priority.

We also believe that we can maintain that even as we find strategic opportunities to grow our business, in businesses in segments that are very, very profitable in which we can have a differentiated competitive position. So you can expect us to continue to do that in that way. And with the elevation of the conversion to free cash flow that John talked about earlier, you can also expect that we will find more opportunities to return more capital to shareholders over time.

Our next question comes from Michael Bellisario from Baird.

Just on loyalty, can you remind us just how the room night contribution from World of Hyatt has tracked year-to-date, I think it was at 45% last year. And then just looking at how do you keep narrowing the gap to peers? And kind of what does that do for the value prop for owners and developers.

Yes. Thank you. First of all, penetration has continued to increase. we're still in the mid-40s, but there's incremental progress year-over-year. And the membership growth has continued to be extremely strong. we're compounding currently at over 20% per annum pretty much every quarter that goes by.

I think the relative importance continues to grow, because the engagement level of our members, especially our lead members, is very, very high. They stay longer, spend more and are more frequent guests. So the value of our Elite membership base is extremely high. And the value of the overall membership base is very high, as demonstrated by the card arrangements that we just renegotiated because we have a higher end customer base. And they are -- have higher household incomes and investment portfolios. I think in terms of the evolution, we believe that we are going to continue on an upward trajectory in terms of penetration. That's important in many dimensions.

I just want to remind you that we have maybe the highest group composition in the United States, let's say, about 40% of our business is group, and group customers are not eligible for World of Hyatt point earning and therefore, they don't really count in the context of penetration. And I would say that the -- I would say that even despite that, our total direct channel delivery is in line with our peers. This is an interesting dynamic because when you look at our total delivery through group channels, which is direct, World of Hyatt, hyatt.com and Hotel Direct we are in line with our peers at a fraction of their size. So this is one area everyone talks about size and scale being the magic. Well, this is one area in which apparently being 10x our size doesn't matter. And I think part of that has to do with the compelling platform that we've created and the fact that World of Hyatt creates delivers on great experiences, but also great value.

The final thing I will say is that we are -- we manage a bigger proportion of our total network than any of our major larger competitors. And that matters because we have very consistent delivery, very, very consistent delivery of benefits. Our Elite members do not find wide variability across our hotels. Why? Because we directly control it. We're not influencing we are actually directly controlling the delivery of benefits at the hotel, and that matters.

Our next question comes from Brandt Montour from Barclays.

So a couple of your peers were willing to sort of give some insights or sort of early thoughts on how next year's RevPAR could shape up in the U.S. or globally. And just curious, Mark, from what you're seeing in business transient, you're seeing in group, what you're seeing in leisure and of course, we have the World Cup. Sort of how do you kind of confidence you guys have going into next year in terms of the RevPAR environment reaccelerating?

Yes. I mean, I think Joan and I will tag team this. So look, there are a number of tailwinds heading into next year between World Cup and America 250 celebrations. The infrastructure build continues to pace. Hyperscalers are moving from planning stage to construction phase in their data center constructions. And the minimum size of investment in those projects is $5 billion. Some of them are much, much bigger than that. So there's a tremendous level of activity in terms of mobilization of resources to lead into the data requirements of AI of the future. So I think there's a lot of tailwind into economic activity in the United States. As we look forward, part of that, I think, is anticipated. And maybe driving some of the group pace that we see into next year. Joan?

I would just add on -- we are still early in the planning cycle, but the backdrop that Mark just described in the U.S. has given us confidence that we will be at or incrementally positive in the U.S. going into next year. Group is significant factor to that because you layer in on top of those strong pace numbers and it helps improve with rate. And the demand that, as you look at this year, where we had some of maybe easier comps in the second quarter and the third quarter going into next year for the U.S. is what we would expect.

Outside the U.S., we've posted very strong results this year. And what we're hearing from our teams is that we expect those results to be good, continue the momentum that we're seeing demand in international markets continues to be very strong. So while we may be lapping a little bit of tougher comps on that side, we still expect overall globally that we'll be incrementally positive in 2026.

Yes. Just one final comment, Leisure demand continues to be very strong. We've mentioned all of the various data points that in our script. But leisure just taking a real-time gauge of this. leisure demand in the U.S. was up 3% globally up 7% in October. So this is not abating. I think there's been incessant questions about can leisure really hold up? Can you really maintain pricing levels, et cetera, et cetera. And the answer is the data continues to prove it. So I'm not sure what else -- what other proof is required we're seeing it in all of our numbers. And yes, we do serve a different customer base. So I'm not making any comments about scale and below. I am making a comment about us.

Our next question comes from Patrick Scholes from Truist Securities.

Good morning, everyone. Mark, 3 months ago, you had noted you were feeling cautious and conservative and cautious and conservative about China. How are you feeling today about that market?

I feel incrementally better. Part of it is, I just got back from China a couple of weeks ago. So every time I'm there, and I'm talking to my teams about what's happening and what they're seeing in the marketplace. It does give me a lot of energy, but even adjusting for that sort of near-term boost of positive five.What I would say is a couple of things.

One, some of the things that we have been known for in China continue to shine in ways that I think are notable. We just opened the first Urban Alila hotel in Shanghai, and it is absolutely world-class and stunning in every dimension, not just the physical product, which is amazing, but also the guest experience. we're running materially more than 20% ahead of the brand that used to occupy that hotel, which is a super luxury brand, mono-brand. And that's in a relatively weaker market. And so I think our performance has continued to be exceptional, and I think that is driving continued openings that really are meaningful.

So I toured a brand-new Andaz in Macau, over 700 rooms, more hotels going into Macau in the future. toward the Thompson, which just opened, so it was preopening and Unbound collection hotel adjacent to the Thompson and this is at a location adjacent to a mini central business district, which is right next to the convention center. So you might think that there's a lot of hand-waving about driving net rooms growth through lower chain scales. But for us, we're seeing strength actually in our core strength, our core strength there, which is the upper upscale and luxury brands. our food and beverage revenues have been hit hard, I think, based on what's going on in the marketplace. The general pressure from the government remains persistent and that is causing people to be very cautious about, I would say, conspicuous consumption is the way to put it. And therefore, we have adjusted like our whole philosophy is to be agile and pivot and adapt, and we are. So banqueting is weaker, Food and beverage is weaker, but rooms business is very strong for our brands in the upper upscale and luxury. And of course, we're not ignoring the upscale and upper mid-scale through the comments that I made earlier on Hyatt Studio.

So I would say, in terms of operating dynamics, I think it's positive, the government has shown signs starting to pivot from a policy perspective to be more constructive to support consumer things that drive consumer purchases because it's consumer has grown as a proportion of their total economy. They are hyper aware of that. And finally, they are another year into at the relatively slow path of resolution of the ever ground debt overhang. And so capital markets are still not restored to pre ever grand levels. But a lot of the properties that I mentioned, not Lilo Shanghai, which is a private developer, but many of the others are state-owned enterprises. And so a lot of our inventory is growing there. So our opening schedule and now I'm talking more broadly about Asia Pacific is very strong, but a lot of it is greater China. So I feel actually incrementally better. I do.

Our next question comes from Conor Cunningham from Melius Research.

If we could just talk a little bit about free cash flow conversion. I think you're targeting about 40% this year, and then you're saying that you reiterated the plus 50% next year. It seems like you've had a lot of incremental positives from the credit card deal. You've talked about G&A today. RevPAR reaccelerating into next year. It just seems like the plus 50% feels like a pretty easy threshold for you to get to. So if you could just talk a little bit about the free cash flow conversion, if there's anything on the working capital side or the hotel sales are limiting that a little bit. Just anything there would be helpful.

Yes, Conor, you picked up -- obviously, the credit card deal is going to be helpful into next year. And we had the onetime items impacting us this year. So we're getting back to a normalized rate in 2025. And excuse me, 2026. And remember, we will also have incremental fees from Playa going into next year post the asset sale transaction. So that will be helpful and be a meaningful addition to our free cash flow conversion.

Our next question comes from Chad Beynon from Macquarie.

Mark, I wanted to ask about the impact of the government shutdown so far in the fourth quarter and then on the back of, I guess, it's fairly real time on the back of the FAA's announcement to further cut some airline traffic starting this week, how that could affect travel in the fourth quarter.

Sure. Thanks for the question. A couple of things. One, government -- direct government business in the Hyatt system is relatively small. So it's not having a material impact on our results. and wouldn't. Government-related is actually positive because a lot of defense contractors and other service companies that are serving key elements of the government I wouldn't say it's uniform, but it's -- in general, it's been positive because there is government activity that continues despite the fact of a broader shutdown. So I think that the key at this point has to do with agility and hotel teams being prepared to pivot. Our hotel teams are relied upon in our world to track their revenue base, their sources of revenue looking forward and to basically insulate themselves as much as possible from things that could be potential risks and rebalance through revenue management and through tapping different distribution channels. We're making that easier for them using some AI tools that are an overlay to our revenue management system. So I have every expectation that whatever impact there actually would have been would be mitigated because they'll pivot on a continuous basis.

Looking forward, I think it's naive to think that reduction in air travel won't have an impact on travel. By definition, it does. There are less people flying. And at the same time, I think what I said just a minute ago about agility and being able to pivot is really, really important. There are drive to resources that we often tap. We learned this muscle and strengthened it tremendously during the early stages of COVID. So they will be -- I'm talking specifically about leisure travel now. And so therefore, I think there will be some mitigating factors. I also would just point out that my recollection is when we had a long government shutdown some years ago, the air traffic control dynamics is actually what led to finally getting back to a reopening of the government. And so I think with reduced mobility, there might be more back pressure lawmakers to come to the table. That's speculative, of course, but just a reference to what happened last time around when there was an extended shutdown.

So yes, I think there's a potential risk here because, again, it would be naive to say no, there won't be any risk whatsoever when something like 10% of the capacity is coming out of the system. So right now, lift into some of our key markets is not based on what we can tell from our engagement with our key carriers talking specifically about Cancun, Putian on the all-inclusive side, really remain encouraged by what we're seeing, and we always have options with respect to Charter, if we need extra air capacity.

Our last question comes from Meredith Jensen from HSBC.

Just circling back to what you just mentioned about the ALGV business and all inclusive. I was hoping knowing the importance of optimizing that distribution strategy from ALGV. If you could take a little bit more about this channel and what you're seeing in terms of broad B2B consumer and potentially how broadening the offering to ALGV through Playa programs. I know they introduced like ALGV Lock can continue to increase the mix of buy it within the ALGV.

Yes, I think I might have lost you at the very end there. But generally speaking, ALGV is a critical distribution channel. I think the visibility it provides to us in terms of what the dynamics are in leisure travel are tremendous. Over 2.5 million individual customers are booking through that platform. hundreds of thousands of travel agents and advisers are linked directly into our systems. And so it is the biggest packaging platform in North America. So it really is a strategic asset in every way. I think we've -- the team has done a superb job of really maximizing the potential of that business through really being disciplined about which markets they serve and getting out of unprofitable markets, but also the pathway that I described earlier with recycle automation and the utilization of has also just begun there, too.

So what we expect is to be able to render that business into a more and more efficient platform with much better predictive analytics embedded in it and much more higher signal-to-noise ratio and actionable insights from AI that we can actually utilize to make the booking path for travel agents and advisers that much more compelling. So what we are seeing in general is what we have said in the past, which is Four Star of the low has been weaker. That's really been the key message our direct production into our own resorts is up year-over-year, has continued to rise every year since we've owned the company. And that is telling because it's both primarily Five Star, which is our portfolio. And secondly, it is an offering. Now you're right, expanded by the Playa hotels, which is super attractive to the customer base that is booking through ALGV.

And with that, I just want to thank you all for taking the time this morning to be with us. We, of course, appreciate your interest at Hyatt and really look forward to hoping and hoping that you will visit our hotels and resorts, and you can experience the power of Hyatt Care firsthand. So have a good rest of the day and good rest of the week. Thank you.

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

Good morning, everybody, and thanks for continuing to join us. Our next fireside chat is going to be with the management team from Hyatt Hotels. To my right, President and CEO, Mark Hoplamazian. Mark, thank you for joining us.

Thank you.

And to Mark's right, Joan Bottarini, Chief Financial Officer. So Joan, welcome. Thanks for joining us.

Thank you for inviting us.

So yes, where should we start? All right. Anything needs to be said or just mean to make sure we have these...

[indiscernible ] disclaimer about forward-looking statements, everyone. You've seen these. Please read it full before we begin. I'm just...

There will be a quiz online 7. Okay. So I guess where we'll start is, do you have any hotels in Antarctica.

No. Actually, we don't. I was fascinated, but Marriott is opening one and I don't know where in Antarctica. I think the supply chain is pretty tough there.

It is. The cost is going to be a little elevated. So....

I told them I can't wait to see him on drive to survive though.

Have you done -- no, is Hyatt an F1 sponsor in any...

Not at this time.

Not until we get the grand free Chicago? And then we're in.

No, I don't think it's Chicago dependent. We actually operate in 23 of the 24 places where F1 races occur.

Really?

Yes.

So one of the hardest ones, but one I definitely remember for Hyatt is Azerbaijan. Where you've had like legacy going back for either owned and operated hotels. I do remember vividly having to ask, okay, where is this? Until drive to survive. Then we all know. So let's just start with the macro. Easy, big picture, but help us think through a little bit of -- we're coming out of the summer lull. Second quarter, things were on the travel demand side. Softened a bit after kind of Liberation Day. What are -- kind of how are we feeling as we start to move to the back half of the year here just give us your kind of 30,000-foot level view.

Yes, I'll do 30, I think Joan has a few data points that would be really interesting to talk about. But we described on our last earnings call that we had a very constructive outlook for the rest of the year. Even though the total growth is going to be relatively modest, but it's -- where we stand right now is consistent with what we said before. And the shift that we saw in July is that after that Liberation Day malaise, corporates in our world means larger corporations, we're back on the road with clarity and with conviction, both group and business transient.

Second, leisure continues to hold up really well into the -- as we look forward into the remainder of the year. So we had said that we have every expectation that business transient will come back beginning in September. And 2 days into it, it's too early for me to declare that anything that's meaningful. The group has held up. Group into next year is very strong. But I think overall, we feel really good about travel demand. Not wallowing in that second quarter malaise, but actually feeling a little bit more directional.

What I would add to just what you said, Mark, is that we're really looking at the windows that we are seeing across all of the segments, right? And business transient is the shortest window that we're seeing today. It's shorter than it was last year. And so as we look at pace, it may be a little distorted because it's a little bit lower and then we see the pickup.

So it's just that's the dynamic we're facing with business transient. But as Mark said, it's still looking healthy since our earnings call, and we anticipate that into the last months of the year.

And then as far as leisure where there is some greater visibility, we look out into festive. And we're seeing in our resorts in the Americas, mid- to high single-digit pickup in pace. So relative to last year. So still healthy high-end leisure in the Americas. So that's continuing to be solid and what we anticipated, frankly, on our second quarter earnings call.

For group, which has the longest booking windows. We see the fourth quarter, we mentioned that it was positive low single digits in the fourth quarter and next year is mid- to high single digits. So group, we're seeing still healthy bookings, and that gives us a good foundation looking into 2026.

And just to add one data point, which is our all-inclusive business in the Americas is up 9% for festive. So really, really strong.

So a few different things I want to unpack. Let's start with leisure. So one of the big patterns we've been seeing all year and really probably going back into last year as well is the bifurcation between high and low end. Now you're positioning here definitely has skewed to it, largely to that higher end. But help us see what you're seeing a little bit as you break that down? And is there any stabilization that we're able to call out or say that we're seeing in that kind of that low end customer because this gap has been wider empirically, we look at it as analysts, they look a bit wider and for a bit longer than we've seen in prior cycles or mid-cycle slowdowns, if we were to call it that.

Yes. We are definitely -- as we look -- I'll just give U.S. numbers we ended up positive in the second quarter. We saw the high-end business being -- luxury business being up in the mid-single digits and then our upscale business being slightly below a 1% decline. So the gap has been big and has been wide. And it's a reflection of discretionary income at those traveler dynamics, demographics.

So still spending money on travel. And we're still seeing healthy luxury performance in those hotels. So the gap is been wide, and we expect that to continue into the coming months of the year.

Mark, I know you're a big student of the industry, just macro-wise, when these types of patterns go on, we always have this habit of asking is it different this time? What kind of -- what do you see or kind of what are you seeing that's interesting out there about either reasons that this pattern should converge, and we're just on the cusp of that or maybe we haven't seen it yet. Or could there be something a little different in the patterns that we're seeing out there? Just kind of what's your gut feel tell you about like what's happening? And again, any interesting research or academic views you might have?

Yes. I think two separate topics. I propose what Joan was just talking about with respect to the dispersion. I think there's -- the consistent question we keep getting is with respect to leisure or luxury, how long can rates hold up? And the answer is for a long time to come because the compounded growth rate of rates for luxury has not really far exceeded inflation it's above inflation, but not much from -- if you measure from pre-pandemic times.

So when we look into the future and we're looking at festive, a big chunk of those increases in bookings is rate. And so I don't -- and concurrently, two things are happening. Supply is very limited in luxury and resorts are hard to build. We've got -- we don't have a supply -- new supply growth problem in all-inclusive, by the way. So that goes to how we -- what our outlook for net rooms growth looks like into the future.

And secondly, you've got a larger community of people who have a lot more discretionary income. Now it also means that the wealth gap in the United States is increasing that's not great from a societal perspective, but from a travel perspective, something like 75% of total travel spend is in the top 2 quintiles of the household income.

So we're playing where the money is, basically, and we see that sustainable. Second, with respect to midscale and upscale that's a much bigger market. And I think the -- it's highly dependent on, I would say, a sense of confidence in the corporate world. And I think the confidence in the corporate world has been sufficiently shaken that has a knock-on effect or a reverb impacts on the travelers there who don't have a big investment income who don't have a big portfolio who are dependent on their jobs and their income to actually support their travel.

So discretionary spending has changed. I don't think that's permanent. I think that's circumstantial. And when economic cycles change, you'll see that revert to a mean.

And Joan, you alluded to all-inclusive and obviously, the strong trends you're seeing there. Just remind us, because there's sort of as I think about Hyatt portfolio, definitely correct this if I'm off the mark, I kind of think of 2 groups, I think, of the broader distribution segment that sort of you are powering through ALG broadly. And then I think of the resorts that you manage, which tend to, I think, skew decently higher. So help us kind of work through are you seeing different trends between maybe those 2 subsegments? Or is all inclusive as a category, and we definitely see this through cruise demand when we look at broader industry stats, just the right place to be the right value proposition for this customer when you nail that, then actually, the demand curve looks different.

Yes. The proportion of our presence in Latin America and the Caribbean for all inclusive is the team here will correct me, but it's 70% to 80% Five Star. So that's our legacy sort of ALG and Playa businesses that -- where we operate there. So that's where -- when you see that 9% growth in pace, it's coming from that particular segmentation within all-inclusive.

Now our Bahia Principe resorts that we added to the portfolio, those are primarily 4-star, which provides a benefit to us to be able to serve an expanding customer base that we're building in the U.S. with our entry into mid-scale.

So I think over time, this will continue to deliver sort of that network effect for Hyatt. But those resorts are high performing. A lot of the traveler base going into that brand is coming from Europe and Canada and growing awareness from the U.S.

So it's -- we've got a mix now. Now our comparable numbers don't include Bahia Principe because the joint venture was closed in December of last year. But those results are just slightly lower than what we're seeing in the 5 star. So definitely a bifurcation and of course, our ALG vacations distribution business is serving across the customer base.

So what I commented on our earnings call was the fact that we are seeing in the distribution business, very strong results in the 5-star in those markets. Which serve our -- many of our managed on inclusive properties, but a bit of a pullback in demand at that 4-star level.

And you're probably uniquely situated to see this. I'm not sure if your teams have cut this for you, but just what are you hearing or seeing about Canadian travel and some of the fallout from international inbound, one of the clear beneficiaries we saw in some anecdotal data points, and this is a little data now looking back a couple of months, but was certainly at that kind of first moment with some of the geopolitical tension.

We saw what I call a Canada flyover effect where -- but all of a sudden, Dominican Republic spikes and some of the Caribbean destination spike because people still want to go on vacation, you still want to be in the sun and probably the middle of the Canadian winter.

So have you seen that across some of the dynamics you're seeing? Is it continuing even now? Or is some of that -- some of that immediate, let's call it, fall out changed?

We saw it Mexico, Caribbean -- Mexico, Dominican Republic and Bahamas as well, significant increase in Canadian occupancy versus American in terms of the total pie chart of demand and concurrently, a significant decline in Canadians in our U.S. resorts. So we absolutely saw it and it persist.

And it persist. Okay. So let's move over to the development side of the equation. Obviously, this is probably the biggest single question I get from the investor base in the hotel universe. And the high-level question at its finest point is we're at 1% or below U.S. supply growth, how do we continue to put up mid-single-digit growth on the net unit growth side if that's a number you're still comfortable with, right? So help us think through this, the kind of broad math equation market at the highest level.

Hyatt's got a unique advantage in terms of base, right? So the percentage base number you need to achieve that's a little bit different some of the bigger footprint. But let me -- let's do it in your words a little bit, what do you need to achieve? And how are you able to continue to put this on the scoreboard for the next several years, not just for the next 12 months?

Yes. So first of all, the supply dynamics that you mentioned, the data is absolutely correct and starts -- construction starts are weaker. There's you don't -- you can just read lodging econometrics or whatever source you like. And that's just a fact.

The fact -- the other fact is that a majority of our pipeline is outside the U.S. and we don't see supply growth or construction lagging in any market outside the U.S., including our all-inclusive resorts. We've got -- we've had some variability in China in terms of projects that had started to get back into construction and then new starts that has started to come down and then come back again.

And I think that's just riding the wave of Chinese policy and what's going on in relation to capital formation on the debt side of the equation. But I think that's going to stabilize, and we'll see a more consistent basis. But it's also true that some of our growth in China is conversions. These are adaptive reuse for your code by Hyatt from an office building into hotel.

And so it's not really dependent on putting a shovel on the ground. So I would say a majority of our pipeline and our outlook for growth is based on international and all-inclusive, another chunk of it is conversions.

So actually, U.S.-based construction starts is not -- it's a minority of where we're seeing sources for new growth. Having said that, our new brand launches, some of which are conversion brands, Hyatt Select and Unscripted, specifically in the upscale category. And Hyatt Studios, which has now got a number of multiunit -- multi-property developers who are putting shovels in the ground.

I expect to see that start to increase over time. So that will be additive to a baseline that absolutely keeps us in that mid-single digit, 6% to 7% range for our foreseeable outlook.

And organic growth or net rooms growth on the all-inclusive side was a big -- this kind of pipeline opportunity was, I know, a big feature of kind of how ALG worked for you originally and a big reason for that deal. So what do we see there today, especially if you kind of were to put in at different price points, maybe the fundamentals have leveled off, but are the -- whether it's the cash-on-cash returns, it's harder for us sitting on the outside to underwrite.

And I think is a place where investors fall through a little bit, it's harder and much harder to underwrite international ROIs than it is to kind of think about U.S. domestic kind of 4-wall economics. So do these projects make sense right now? And are we seeing that development climate remain because over years, the rate growth in those markets was phenomenal if we look over, I think, 3 and 5 years, right? So the absolute returns in a place, so we're still attracting capital to build in those markets.

The answer is yes. The economics are still very compelling. The stability of the returns is very high. And I think that's the perception issue that drives lower multiples applied to the property values. So our sale of Playa real estate was in the 8s in terms of multiple. So very high yielding, I think our -- the investors to whom we sold it will realize great returns.

They're getting paid for the perceived volatility that is in some ways offset by the model itself.

But that's the prevailing rate at which the all-inclusive model is more stable and more predictable over time, so you can manage costs better. So you end up yielding higher margins. That's what I meant by that. So what I see is a market that's absolutely -- already happened in Europe where you have institutional capital coming in size Blackstone being a major player.

And in the U.S. market, the very beginning of institutionalizing ownership, yes, we will still have Mexican families and Spanish families and Dominican families that are the core owners. But we're starting to see and we will see more interest from institutional capital private equity to begin with. And then we'll see. I think there'll be more and more institutional capital that comes into the market, so there's more liquidity for owners who want to release capital to go and build additional hotels.

The only issue that has caused some level of headwind on has been the weakening of the U.S. dollar relative to the Mexican peso because all revenues are in dollars and all expenses are in pesos. So we've seen that impact. We saw it more acutely in 2023. And where the pace of...

Cost headwinds?

Exactly. And this year, it's been generally better than last year, but the dollar is not holding up. So I think that's something that we're both well aware of and I also have new tools in our toolkit to manage that relative to what we went through in 2023 with respect to cost management. So I think that it's still compelling. I know it is because we're seeing a lot of new opportunities, both new builds and portfolios that we are pursuing at the moment.

I think it's interesting you sort of the feature set and the movement of institutional capital into this because if there was one single point of contention or concern for Hyatt going back, especially when we hit a bit of the speed bump around Liberation Day, it was, oh my gosh, can we sell $2 billion of real estate, right? I can't imagine how many times for Adam had to field that question over a 2-month period.

Mark, can you help us write the postscript on this a little bit in terms of were you ever nervous? What are these partners looking for? How does this all come together? Because ultimately, it's exactly what you said you would do.

And to the dollar number of, I think, what we were all thinking in terms of $2 billion on the real estate side, but it felt so uncertain to such a large part of the investment community that like what were you seeing are more confident than we were at that moment in time? And then like what does that mean for future deals like this for Hyatt, meaning the ability or desire to go, let's call it, capital heavier upfront and then find this capital-light elegant solution on the back end.

Look, I think to reduce it to one comment, it's a time frame. So in August of 2021 and November when we closed the ALG acquisition, what happened between those 2 periods of time is Omicron. The Omicron strain came to an end and Delta began. So when you think about a period of uncertainty, a lot of people sitting around saying, what is going on here? You could imagine that very few companies might step forward and say, we're going to actually make the biggest acquisition we've ever made.

Which has been transformative for the company. But this is in the long string of, I would say, maybe atypical moves that we've made since the founding of the company.

We were the first company to ever do a very large scale Atrium hotel that everyone in the industry thought was going to fail. Which turned out to be like [indiscernible] the thing to do. We started at an airport hotels at the beginning of the jet age when everyone was in city centers. We went to Asia first out Europe when we expanded internationally.

So you can go chapter and verse since 1957, and we've taken our own path. And my confidence was derived really in the FIAS instance, by confidence in the ALG acquisition to begin with was superior economic model and form and format for resort. The only resort format that was growing in the most difficult areas for growth or resort construction because of hurricane coverage and whatever, namely Mexico and the Caribbean, and the clear evidence that we had with data that high-end leisure -- high-end resort was the first category to come back after every single downturn.

And we were right. Not because we're brilliant, but because we're students of what's happened before, and we have a long-term perspective. If we were a company trading on what was going to happen in the fourth quarter of 2021, there's been a chance we would have bought the company. But it's turned out to be a massive value creator for our shareholders. And the same is true for Playa I mean we know this market extremely well. We are the biggest player by far. We know the players on the real estate side.

We deeply understand what's going on in the demand side through ALG vacations, and we deeply understand how money is made at the resort level. So my confidence level was extremely high. Now if you had said, are you confident you can get it done in the third quarter of this year, I would have said no. But I'm 100% sure I can get it done in the next 12 months.

So I had no doubt. I was never concerned about it. Not to mention the fact that because we're in the market and talking to all these players all the time, we already had a sense for who the buyer universe is going to be. And so we had already had pretty clear visibility that there was great demand for that asset base because that asset base is a premier asset base. They've got some of the best locations and at least the Hyatt Ziva and Zilara that were founded back in 2013, the highest quality hotels and the highest-performing hotels highest-rated, highest-customer service satisfaction scores, highest TripAdvisor ratings.

So these are -- this is a premier portfolio. So that's the other thing that was clear to us. Anyway, so yes, that's where the confidence came from.

And I would just say the buyers who we ultimately signed with recognize that the high-performing quality of those and location of those -- that portfolio, linking it more directly into the Hyatt ecosystem meaning the distribution channels that we provide, which were not provided previously, just creates more incremental value. So there's more value to be gained with that transaction because of integrating the platforms together more directly. So it became a no-brainer on both sides.

Joan, can you just elaborate a little bit because I think this is important. I mean, what are those strategic synergies or kind of those things that when you looked at it or when some people -- I'm a little bit uniquely advantaged, I actually covered Playa. So we saw some of these pieces come together, right? I think a big one is your distribution engine through ALG, which was not a pipe that they had. And 1 thing we knew Playa had always struggled with was direct bookings, right?

The wholesale channel is such an important way you source demand for this specific vacation type. But is that the one what were some of the other features or functions that you looked at when you kind of did your underwriting like -- this is why this makes sense for Hyatt. This is why it makes sense for us to run these hotels.

Well, we already had realized really, really strong penetration from World of Hyatt. So we already knew that our guest base was highly attracted to this product and these properties in particular. And when you plug into the Vacation Club, right, which we still manage and are still driving significant room nights to the all-inclusive resorts there.

The Playa team, they did not have that option, obviously, being just a franchise, and they did not participate in [ ALGB ] which is the largest tour operator in the U.S. into these markets. So they were performing as well as they were even not tapping into that channel. So if you think about the need periods and compression and just creating more demand, just a huge opportunity for those assets.

So UVC was the additional big value driver in addition to the ALG vacations? Plug in.

So Mark, this is interesting because this kind of brings me to where I wanted to go, which is -- so you found UVC, which was sort of a separate and kind of unique business within like, I think, the 3 pieces of ALJ, right?

Yes.

It caused a few headaches for the investment community largely because of something I'm sure Joan knows better than anybody what's accounting, right, in terms of cash flow and this and that, just the timing of these functions. So help us think through -- and you found an elegant solution, elegant home for that business, a way to kind of manage that within, I think, much -- within Hyatt's portfolio. Where does that leave us as it relates to distribution. Here's a business that is another unique business as it related to at scale.

Again, you're going to add to that scale at Playa. But long term, does this need to sit within high? Does it make sense? Is it just so fundamental to the nature of what you're trying to drive there? Or can you find another like sort of the right place for that business again as you get more comfortable running and operating these hotels through the management agreements?

Look, I think from the very beginning, we've been thoughtful about the potential to find other alternative solutions for how we retain the strategic benefit of ALG vacations, Apple Vacations because it is an important distribution channel to continue to have in the vertical integration of services that we offer.

We never believed it was necessary to own 100% of it. In order to be able to retain that in the same way that UVC, we found a solution in which we continue to manage it for the benefit of the hotels, but we don't own 100% of it.

The first rule is it has to be good for shareholders. Like we have to do something that would be accretive to shareholders. The second role is never ever, ever forget the first rule. So we're not going to do a stupid deal to try to control ourselves to change the way in which it shows up. The opportunities are very interesting because we are the biggest in North America.

There are other opportunities. There are other travel platforms globally, which could create some interesting opportunities and benefits. So that's one possible avenue. Financial partner is another possible avenue or and a financial partner could come in many different forms and formats.

So I would say we are very open to exploring these things, and we have -- we haven't found -- we haven't come across one that was super compelling to us yet, but I have every confidence that we will continue to explore that not just because we understand that it's from an accounting and a composition perspective of distraction, but also because of the point that I made -- that you made, which is you don't need to own 100% of it in order to get the strategic benefit out of it. As long as the thing that you do with it or the partner you bring in can add value to the platform, make it stronger.

What we don't want to do is weaken the platform or diminish its impact. which does have strategic value within Hyatt. So that's really the long answer to your short question, but that's the direction.

And maybe let's kind of take the whole thing out now. I mean all of this comes back to your journey to asset-light is something that was sort of the key theme of your Analyst Day, I think your corporate strategy over the last any number of years and frankly, even on this journey as long as I've been working with Hyatt 15 years. It's pretty amazing. So give us kind of the update on that medium-term milestone. Was it take for us to get to -- can we get to 90%? What does it take us to get to the 90%? And what's our updated time line with the real estate -- with the Playa real estate sale behind us.

We -- I don't know if we've given numbers for -- yes, 27% for 90% asset light, and that was disclosed as part of the real estate sale for Playa, our expectations that we would as Mark said, we would absolutely get it done in the next couple of years, and now we've accelerated that. So we've got a number of assets that are in different stages of disposition for us, LOI or conversations in market. So we're still very active on that front. And we've always said nothing is precious in our real estate portfolio.

So we will continue to evaluate transacting on the real estate portfolio, but doing that where we are evaluating each property type and actually selling into strength. Every single asset that we have sold in the time that you have been covering us we have sold with a managed or franchise contract. These are high-quality assets. They are high performing. And so when we think about the disposition strategy, we will make sure that we're preserving those -- that distribution.

So that's -- we have taken time to do this, but we have realized great value for shareholders. I'll just remind you that we've sold $5.6 billion -- We've realized $5.6 billion in proceeds and have done that at a multiple in excess of 15x. So you do the math, the value of...

I would just say Q2 punctuation points first. There is 0 chance that we will not get to 90-plus percent fee-based earnings by 2027, none. There's no chance we won't. Second, you can think about this as a glad path. This is not a -- once we get to 90%, we're just going to sit back and kick our feet up and have...

Accomplished.

Right. This is a glide path towards being much more deliberate about whittling down that real estate portfolio even further. I don't think we'll ever get to 0. I think you will find us episodically going and buying assets but it will always be with an eye towards recycling.

And you're going to be able to resell those assets in the future. I just don't want to pretend that we're not going to use our balance sheet in the future because that's not realistic. There's no competitor in our industry that's not used their balance sheet. And so we will, but it won't be a material piece of our earnings base.

All right. I'm going to come back to that in a minute, but I did want to comment that I did lose a bit to Adam on a big chunk of your $5.6 billion the underwriting of Orlando. So I owe you a glass tequila from Mexico.

Wow, I did not know you scored a glass of tequila. Good job, Adam.

Bottle will pass the test that we're allowed to do.

Make sure he buys it at a Hyatt Hotel.

Yes. For sure. So kind of last area, Joan, and I'm sure you get this one in just about every meeting, but I'm going to go down the credit card. Lightning round, credit card, what can you share at this point? Again, these are important negotiations. Just help us put a few parameters around this because we know these co-brand cards have become increasingly important value streams for you on this side, but also for our World of Hyatt members.

Yes. The program has grown exceptionally since 2021 when the last time we sort of re-upped the original agreement that was signed in 2017. And we're in a position now that we believe is a very strong one given our customer base and the attractiveness of our network to cardholders. And so that's Hyatt cardholders and others that are using their points to stay in our hotels.

So I think that, that strength is something that we're we are considering as we are entering into these negotiations, and we will be able to update you by the end of this year, early next year, the latest.

And just remind us your current co-brand partner on the card is on banking relations?

[indiscernible].

Okay. Thank you very much. Joan and Mark, appreciate your time. Thank you for coming and joining us.

Thank you.

Good morning, and welcome to the Hyatt's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you, and welcome to Hyatt's Second Quarter 2025 Earnings Conference Call.

Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini, 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 under the Financials section of our Investor Relations website and in this morning's earnings release.

An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation containing supplemental information on our Investor Relations website this morning. 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.

With that, I will now turn the call over to Mark.

Thanks, Adam. Good morning, everyone, and thank you for joining us today. I would like to start our call by saying how proud I am of our team's accomplishments over the last quarter. I'm thrilled that we closed on the acquisition of Playa Hotels & Resorts and entered into an agreement to sell the entire Playa real estate portfolio. I would like to extend a warm welcome to the Playa colleagues who joined the Hyatt family. We are very excited for what lies ahead and the expertise they bring to Hyatt.

Our operating results this quarter are a testament to the power of our brand-focused strategy, the strength of our network and the dedication of Hyatt colleagues across the globe. For the 12th consecutive year, Hyatt was nominated to Fortune's 100 Best Companies to Work For, underscoring how we've been able to maintain our culture of care, even as we have significantly grown and transformed our business. I want to thank all of the Hyatt colleagues across the globe for their continued care for our guests, customers and each other.

Before I cover results, I'd like to provide an update on our transaction activity, starting with the acquisition of Playa Hotels & Resorts, which was completed on June 17. This transaction included the acquisition of 15 all-inclusive resorts including 8 existing Hyatt Franchise Resorts under our Hyatt Ziva and Hyatt Zilara brands. On June 30, we announced that we entered into an agreement with Tortuga Resorts to sell the entirety of the real estate acquired as part of the Playa transaction for $2 billion, with the ability to receive an additional $143 million if certain conditions are met.

We are pleased to be entering into this agreement with an ownership group that has deep knowledge and experience in the luxury all-inclusive space. Concurrent with the sale, which we believe could close by the middle of the fourth quarter, we will enter into 50-year management agreements for 13 of the 15 resorts. In 2026, we expect to earn an additional $60 million to $65 million of management fees net of franchise fees that we previously would have earned from Playa. We also expect to generate earnings through our distribution platform. Upon stabilization in 2027, we expect the implied multiple on the net purchase price for the asset-light business to be 8.5x to 9.5x, a very strong outcome consistent with our stabilized valuations on asset-light acquisitions since 2017.

We are extremely pleased with the terms of the transaction and the speed at which we were able to execute. We expect the transaction to be accretive to shareholders in the first full year. This transaction demonstrates our commitment to our asset-light business model while continuing to strengthen our brand portfolio and leadership in the luxury all-inclusive segment.

We also continue to make progress to sell several of our owned hotel properties. The three hotels that were under our formal marketing process last quarter are now subject to an exclusivity agreement, and we expect to sign a letter of intent soon. We also have one property that is under a signed PSA and two that are under a letter of intent. We remain under contract for the sales of Hyatt Grand Central New York and Andaz London Liverpool Street, but we do not expect either of those transactions to close this year. We will share additional updates as these transactions progress, and we continue to expect our asset-light earnings mix to exceed 90% by 2027.

Now turning to operating results. This morning, we reported system-wide RevPAR growth of 1.6% for the quarter or 2.2% when adjusting for the shift of Easter from the first quarter in 2024 to the second quarter in 2025. The RevPAR growth was strongest among our luxury brands as high-end consumers continue to prioritize travel. Leisure transient RevPAR was up 2.6% to last year, reflecting the shift of Easter and increased approximately 6% for our luxury brands. All-inclusive net package RevPAR increased 6% compared to the second quarter of 2024 in the Americas, highlighting the continued strength of luxury all-inclusive travel.

Business transient RevPAR was flat in the quarter with the United States declining by 1.5%, driven by select service hotels. Business transient RevPAR was up in the low single digits for our full-service U.S. hotels as well as hotels in Europe and Asia Pacific, excluding Greater China. Group RevPAR in the quarter was up 0.3% to last year and increased 1.1% when accounting for the timing of Easter. Group pace for full-service managed properties in the United States is approximately flat compared to 2024 for the last half of the year.

The third quarter, which is lapping 6% year-over-year growth in 2024, has a challenging year-over-year calendar comparison due to special events like the Democratic National Convention in Chicago and the timing of Rosh Hashanah, which falls in September of this year compared to October of last year. Pace for the fourth quarter is up approximately 3%, and we should see easier comparisons due to the timing of Rosh Hashanah as well as lapping last year's elections in the United States.

As we look further out, pace in 2026 is up in the high single digits, and we are seeing positive momentum in bookings for 2026 and beyond. Although booking trends in the second quarter were softer compared to the first quarter, we're seeing an uptick in future bookings for both leisure and business transient travel. Our group and corporate customers have shared that travel continues to be a priority, especially for customer-facing meetings, and we expect U.S. RevPAR growth to improve after Labor Day.

We continue to see exceptional engagement from our World of Hyatt loyalty members a key driver and differentiator of our commercial performance. Since 2017 through the end of 2024, we have grown loyalty membership by approximately 27% per year, significantly outpacing the growth of our largest competitors. We ended the second quarter of 2025 with over 58 million members, an increase of 21% compared to the second quarter of 2024 and spend on our co-brand credit card continues to be strong. This sustained growth underscores both the benefits of our loyalty program to high-end travelers and the desirability of our network.

As we expand our brand footprint in new and established markets, we are delivering more opportunities for our members to engage with Hyatt. The World of Hyatt program remains a powerful growth engine, deepening guest relationships reducing customer acquisition costs and reinforcing our value proposition to owners and developers.

Turning to growth. We achieved net rooms growth of 11.8% during the quarter including approximately 2,600 rooms that joined the Hyatt system as part of the Playa acquisition. The additional rooms from Playa add approximately 70 basis points to our full year 2025 outlook, which we have raised to 6.7% to 7.7%, inclusive of the Playa rooms. During the second quarter, we delivered net rooms growth, excluding acquisitions, of 6.5% and had several notable openings reflecting the strength of our brands across key segments and geographies.

In Europe, we expanded our resort offerings with the opening of resorts on Greece's Agean Coast and in Bulgaria. We also added to our Essentials portfolio, opening new UrCove hotels in China and new select service properties in Canada. We continue to be very busy on the development front and ended the quarter with a pipeline of approximately 140,000 rooms, an 8% increase over last year. Signings increased by over 30% compared to the second quarter of 2024 and included several exciting projects such as two Zillotry resorts, 10 UrCove hotels in Greater China and two Grand Hyatt hotels in India to highlight a few.

We are encouraged by the level of development interest in our brands, which we expect to translate to greater expansion of our pipeline especially within our Essentials brand portfolio and continued organic growth over time. We expect to accelerate the growth of our Essentials portfolio with the introduction of our newest brand, Unscripted by Hyatt. This brand fills a key white space in Hyatt's portfolio, allowing us to grow in more markets and at an accelerated pace. The brand is designed to unlock growth through conversion-friendly opportunities, and this approach gives owners a flexible path to benefit from our global distribution and the World of Hyatt loyalty program.

We're seeing great interest from the development community and we expect Unscripted by Hyatt to scale rapidly through conversions and complement the recent brand additions in our Essentials portfolio, Hyatt Select and Hyatt Studios.

As we look to the future, we remain confident in our strategy and our ability to deliver value across economic cycles. We believe our brand-led and agile approach enables us to respond to shifting market dynamics on a real-time basis while continuing to care for our stakeholders and create meaningful differentiation in a competitive landscape. We built a high-end portfolio of brands through deliberate and disciplined expansion in the luxury, lifestyle and all-inclusive spaces. Our luxury chain scale rooms mix has increased by 1,000 basis points since 2017, while our largest competitors have seen their luxury mix stay flat or decline.

Our growth has been intentional. We have cultivated deep commercial and operational expertise while attracting and growing a high-end customer base. This has yielded meaningful differentiation for Hyatt with more than 70% of our portfolio in the luxury and upper upscale chain scales, a position that we believe is difficult to replicate and provides a competitive advantage. This sets us apart from our peers and positions Hyatt among the most recognized and respected names in global hospitality.

This strategy has attracted a valuable customer base with greater disposable income who seek out quality experiences, engage deeply with our brands and demonstrate strong loyalty. The strength of that engagement is reflected through the compounding growth in our World of Hyatt program, increased co-brand credit card spend and high fees per room. Having built this foundation and transformed to an asset-light business model, we are now at an inflection point, poised to scale with efficiency and speed. As we further expand into the upscale and upper mid-scale segments, brands like Hyatt Select, Hyatt Studios and Unscripted by Hyatt, will allow us to grow with intention in markets where we have significant white space.

In the U.S. alone, we are absent for more than 50% of STR tracks, and in tracks where we have a presence, our hotel count is approximately 20% the size of our largest competitors. This white space gives us robust growth opportunities allowing us to provide existing members with more ways to stay with us while introducing new guests at Hyatt.

I'm incredibly excited about Hyatt's future. We have an unmatched global portfolio of premium luxury lifestyle and resort brands that has driven significant loyalty membership. Our significant white space for growth is expected to increase our fee-based earnings, further improving our capital efficient asset-light model. We believe we are positioned to generate durable, growing free cash flow and deliver significant shareholder value.

I would like to close by again expressing my gratitude to all Hyatt colleagues who live our purpose every day by caring for each of our stakeholders, especially through changing market dynamics. Joan will now provide more details on our operating results. Joan, over to you.

Thanks, Mark, and good morning, everyone. RevPAR growth in the second quarter grew 1.6% compared to last year. in line with our expectations shared during our first quarter earnings call. As Mark mentioned, similar to the trends seen in the first quarter, the Hyatt then chain scale outperformed with our luxury brands up over 5% in the second quarter. In the United States, RevPAR was flat to last year driven by the lower chain scale and the shift of Easter from the first quarter last year to the second quarter this year.

The luxury chain scale performed well, up over 4% in the quarter from strength in group business. Upper upscale hotels were negatively impacted by the timing of Easter, which led to lower group contribution in the quarter, while upscale hotels were 1% below last year due to softer business transient demand. RevPAR outside of the United States performed well, and we saw continued strength in Europe and Asia Pacific, excluding Greater China. International inbound travel continues to be an important driver of results for these regions.

Greater China grew RevPAR for the second consecutive quarter due to increases in leisure transient RevPAR. Demand for leisure travel remains very healthy within our all-inclusive portfolio. Net package RevPAR growth at our all-inclusive properties in the Americas and in Europe was exceptionally strong during the second quarter. Pace is up almost 5% in the Americas for the third quarter, and we're excited about the sustained demand for luxury all-inclusive travel for the remainder of the year.

We reported gross fees in the quarter of $301 million, up 9.5%. Our strong fee growth was driven by international RevPAR performance, new hotel openings and growth in non-RevPAR fees. The second quarter demonstrates our ability to generate sustained fee growth in a lower RevPAR growth environment, highlighting the strength of our premium brands and industry-leading net rooms growth. Owned and leased segment adjusted EBITDA increased by 1% when adjusted for the net impact of asset sales and the Playa Hotel acquisition.

Distribution segment adjusted EBITDA was flat to last year as higher pricing, effective cost management and favorable foreign currency exchange offset lower booking volumes in the 4-star and below segments served by ALG Vacations.

In total, adjusted EBITDA was $303 million in the second quarter, an increase of approximately 9% after adjusting for assets sold in 2024. In the quarter, we recognized approximately $14 million of adjusted EBITDA related to the Playa acquisition for our period of ownership in the second quarter. During the quarter, we financed the Playa acquisition through a combination of cash on hand and drawing on the term loan we entered into early in the second quarter.

Upon close of the real estate sale of the Playa assets, we'll use the net proceeds to repay the term loan as per the terms of the agreement.

As of June 30, 2025, we had total liquidity of approximately $2.4 billion, including approximately $1.5 billion in capacity on our revolving credit facility and approximately $900 million of cash, cash equivalents and short-term investments. In the second quarter, we paid a quarterly dividend of $0.15 per share and have approximately $822 million remaining under our share repurchase authorization. We remain committed to our investment-grade profile and our balance sheet is strong.

Before I cover our full year outlook for 2025, I'd like to note that we have provided additional schedules within the earnings release and the investor deck, which include our expectations for Playa in the third and fourth quarter of this year. And these schedules and for simplicity, Playa's results post acquisition are included for the entirety of the balance of the year, with the assumption that the Playa real estate sale transaction does not close before the end of the year. However, based on current expectations, we anticipate the Playa real estate sale transaction could close by the middle of the fourth quarter of this year, pending antitrust approval in Mexico.

I'd like to note that approximately 60% of fourth quarter adjusted EBITDA for Playa's real estate is forecasted to be earned in December.

I'll now cover our full year outlook for 2025, which does not include the impact of the Playa acquisition or planned real estate transactions. The full details of our outlook can be found on Page 3 of our earnings release.

We continue to monitor the dynamic macroeconomic environment and as the second quarter progressed, consumer confidence improved. However, lower chain scales underperformed our full-service chain scales, especially in the U.S. We expect lower chain scales in the U.S. to underperform luxury and international markets in the third quarter, which is in line with the expectations that we shared during our first quarter call.

Our full year 2025 RevPAR range of 1% to 3% implies RevPAR growth for the balance of the year of between flat to up 2%. And we expect the third quarter to be towards the lower end of our balance of the year range and the fourth quarter at or above the high end of our balance of the year range. For the United States, we expect RevPAR for the balance of the year to be around flat compared to last year. We expect third quarter RevPAR growth to be flat to down slightly, and we expect to return to positive RevPAR growth in the fourth quarter led by group and business transient as we lap the presidential elections last year.

For Greater China, visibility remains limited. But as we lap easier comparisons to last year, we believe RevPAR could be up in the low single digits for the balance of the year. We anticipate our properties in Asia Pacific, excluding Greater China, will have the strongest growth in RevPAR of any geographic regions as they continue to benefit from significant international inbound travel.

In Europe, we expect RevPAR growth to be flat for the balance of the year with RevPAR growth contracting in the third quarter as we lap difficult comparisons, including the Olympics in Paris last summer. We expect RevPAR growth to be positive in the fourth quarter.

We are maintaining our net rooms growth outlook range of 6% to 7%, which does not include rooms added from the Playa acquisitions. Gross fees are expected to be in the range of $1.195 billion to $1.215 billion, a 10% increase at the midpoint of our range compared to last year. Adjusted EBITDA is expected to be in the range of $1.085 billion to $1.13 billion, a 9% increase at the midpoint of our range compared to last year when adjusting for the impact of asset sales.

As a reminder, owned assets sold in 2024 accounted for $80 million worth of owned and leased segment adjusted EBITDA last year. Our full year adjusted EBITDA outlook implies a balance of year growth of 6% at the midpoint of our range. We expect most of our year-over-year growth of adjusted EBITDA, excluding the impact of asset sales balance of the year, to occur in the fourth quarter as we lap easier comparisons, especially in the U.S., which has a more favorable calendar, as well as higher onetime G&A costs last year that will not repeat this year. In the third quarter, we expect weaker demand among lower chain scales impacting select service RevPAR in the United States as well as earnings in the distribution segment.

As a reminder, our owned Park Hyatt properties in Paris and Chicago benefited from the Olympics and Democratic National Convention, respectively, in 2024.

Adjusted free cash flow is expected to be in the range of $450 million to $500 million, which excludes $117 million of deferred cash taxes paid in 2025 related to asset sales that took place in 2024. We are reinstating our full year outlook for capital returns to shareholders and expect to return approximately $300 million in 2025, inclusive of share repurchases and dividends.

Our capital allocation priorities remain unchanged. We are committed to our investment-grade profile, identifying opportunities to invest in growth that creates shareholder value and returning excess cash to shareholders in the form of dividends and share repurchases.

In closing, we are proud of our second quarter results and the strong execution around the Playa acquisition that will deliver asset-light earnings at a very attractive multiple, once the sale of the real estate is completed later this year. We believe our commercial and growth strategy, the quality of our brand portfolio and operational agility position us well to navigate this dynamic environment, and we remain committed to delivering against our long-term financial and strategic objectives.

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

[Operator Instructions] We'll take our first question from Conor Cunningham at Melius Research.

Very been very busy over the past couple of months. So again, I appreciate the detail in the slide deck too on just the outcomes for the low and high end as well. So just on the improvement that you expect through the remainder of the year, I'm just trying to understand it a little bit better. It seems like you expect some weakness in the third quarter. Is that mostly isolated to July and then things get better? I'm just -- it just -- there's a lot of comp headwinds and whatnot. It seems like the biggest swing factor is on the BT side. So just any thoughts on the moving parts as we move throughout the year. What gives you confidence that things get better towards the year-end?

Sure, Conor. I'll just summarize some of what I said in my prepared remarks. As we look at the second half of the year and relative to the EBITDA guidance that we provided for the full year, the second half would suggest a -- would reflect a 6% growth in EBITDA for the second half. And I mentioned that we expect the majority of that to be earned in the fourth quarter because, as you said, in the third quarter, as you mentioned, there are some, in particular, tougher comps, several onetime events including the Olympics and the Democratic National Convention. Those onetime events will -- as they were realized in the second -- excuse me, the third quarter of last year, that is one of the headwinds that we will have in the third quarter.

We also have slower group pace growth in the third quarter that we're seeing right now. So it is slightly negative. As Mark mentioned earlier, our group pace is flat for the remainder of the year. And so the third quarter is negative as of right now. And then there's some slower pickup in our lower chain scales, and that impacts our upscale business in the U.S. as well as our distribution business. So that is sort of the headwinds in the third quarter, just to give a little bit more color.

And then on the fourth quarter pickup, yes, there are easier comps because of onetime events in the fourth quarter, including some of the holiday shifts and the presidential election in November. So easier comps there in the fourth quarter, we're seeing some better pickup on the BT side that we expect to realize post Labor Day into the fourth quarter, that's still a shorter-term business. But as we talk to our top corporate customers, they are confident in getting back on the road post Labor Day. So that is what we're hearing and what we're seeing in the numbers recently.

The group pace numbers, I mentioned that while we're flat for the full -- for the entirety of the second half of the year, the fourth quarter is positive. So that gives us confidence. Obviously, we have more visibility to group pace. So that's a positive in the fourth quarter. So there's quite a few reasons for the difference in the growth rates that we expect in the third quarter and the fourth quarter. And we feel really good about our expectations based on what were the bookings that we're seeing and those estimates that we provided for the remainder of the year.

I would just add that if you pick your head up from this year into next year, the group pace into next year is extremely strong with a lot of it represented by rate increases. So while I think Joan explained the profile of the remainder of the year with great detail, I think maybe the more important message is that we see an improving picture heading into 2026 in addition to all the things that Joan just mentioned.

Yes, the accerlerating rate is certainly encouraging. But maybe I can ask another one. Just on the co-branded credit card negotiations, I mean I'm just trying to understand a little bit better on the time line and what you guys are trying to accomplish from an outsider's perspective, you obviously have a ton of growth in luxury. Your loyalty members are up over 400%. It just seems like you're in a pretty good negotiating position. So just any -- if you could level set us there, that would be great.

Conor, we will update you as soon as we have something to update. As we've mentioned, we do feel good about what we'll be able to accomplish, but we'll provide more specifics on our expected economics as soon as we're able to do that. And I would expect maybe we'll be in a position later this year, early next year.

We'll move next to Stephen Grambling at Morgan Stanley.

Just I know you've done a lot with getting the Playa real estate sale done here or on the path to being completed by the end of the year. But as we think about other hotel dispositions, maybe remind us of where you stand and how you think about capital allocation from any proceeds that could come out from that?

Sure, Stephen. Thanks for the question. The proceeds, Joan mentioned this, but the proceeds from the sale of the Playa real estate will go entirely to pay down debt that's outstanding associated with that. It is -- it does actually satisfy the goal that we set for real estate dispositions at $2 billion. Having said that, you heard that we've got a lot of activity in other assets, and we will continue to stay focused on further dispositions and that will certainly allow us to have more flexibility with respect to return of capital to shareholders.

And we expect that picture that is the return of capital to shareholders to continue to improve as every quarter that goes by, we become increasingly fee-based in our earnings mix and the conversion to free cash flow is going up. And it's also true that we have a fortress balance sheet as it is post the paydown of the debt that we took on for the Playa acquisition. So I think that's what you can expect to see you over the next 18 months.

And one very quick follow-up. You talked about the improving free cash flow conversion. Maybe I missed this in your opening remarks, but how is the Big Beautiful Bill potentially going to impact your cash taxes and how you think about cash conversion over the next couple of years?

It will have some impact. We have the benefit, like everybody else does, of accelerated depreciation. And while the form of the capital that we're spending is much less about bricks-and-mortar and investments in hotels and more about technology. That -- those are all qualified for accelerated depreciation as well. So I think we will realize some benefits with respect to our cash taxes as a result of that. Beyond that, I'm not sure that there's much to talk about.

No, just to reinforce the fact that free cash flow as we sell real estate -- continue to sell real estate and get to our 90% expectation for asset-light earnings that will have greater and greater levels of free cash flow conversion over time.

We'll move to our next question from Shaun Kelley at Bank of America.

Mark or Joan, maybe one place to start would be just kind of -- can you help us with the building blocks for next year overall? I think for the most part, the investment community gets some, but there is a lot moving around. So if we think about kind of part one being the clean Playa fees once the real estate is divested, part 2 being the credit card deal, part 3 being some amount of organic net unit growth. And then part 4 being -- trying to think about owned and leased pieces that are kind of net or maybe we need to annualize. Can you just help with some parameters around sort of each of those areas just as people are starting to kind of look out a little further and want a clean look at what a Hyatt really can do on the earnings power side next year? That would be great.

I think we'll split this up. Joan, you can take the first two, and I'll jump in after that.

Okay. Shaun. I'll take the first two. So Mark had mentioned the expectations that actually we published when we announced the deal, the Playa acquisition deal that ultimately the contracts that we're entering into, the 50-year contracts with the Tortuga buyer reflects about $50 million to $65 million of fees on an incremental basis. So when you look at that on a full year basis, what we were realizing pre-acquisition was about $15 million to $20 million of franchise fees. So that is the increment for 2026 relative to Playa.

And with respect to -- that's on the fee side. And with respect to the credit card, I'll just reiterate what I just responded to, which is that we will provide you insight into economics as soon as we're able to do that as soon as we have a deal to share. So later when we provide guidance for 2026, more officially, we'll be sure to give you some insight into that.

And then on the other two points. First, the asset sale impacts, we've laid out on Page 15 of the investor information deck that was released this morning. The quarter-by-quarter adjustments for 2024, we will continue to report these adjustments out on a quarterly basis to facilitate everyone's ability to understand what the impact is on a year-over-year basis. I think the baseline as we head into next year is established. The foundation is established with really strong group pace and a continuing positive outlook for leisure travel, especially in the luxury leisure segment.

I know that overall leisure numbers have been weaker, but that's primarily driven, if not entirely driven or maybe more than 100% driven by lower chain scales. So that's not where we live. And if you include Europe in the outlook with respect to leisure, it's actually even better. So we were -- U.S. resorts were up mid-single digits year-to-date. If you include -- and all-inclusive resorts in the Americas were up almost 7%. If you include Europe, it's up 8%. So that's year-to-date, but the outlook continues to be very strong pace into the remainder of the year for our HIC high inclusive collection, hotels is strong, as is the pace outlook for the Playa Hotels that we now own.

So I think the most important thing in terms of the outlook heading into 2026 relates to those dynamics where we've got big chunks of our business that all have positive signs. And I don't remember what your fourth -- NRG, of course, how can I forget? We are on pace this year to a great outcome, in my opinion. With the 70 basis points that we added to the outlook is -- has to do with the Playa transaction. But our feeling and our sentiment, especially given the increased signings pace in the second quarter and some of the dynamics that we're seeing in some of the traction that we are starting to see really grab hold in the upper mid-scale for us. And our focus on that area is, in my opinion, going to continue to be the tailwind.

And so I think we'll have wind in our sales with respect to NRG heading into next year and the year after that. And I'm increasingly confident that we'll be able to maintain those levels of growth as we look forward.

Yes. And I would just add for your modeling purposes, Shaun, the confidence that Mark just described about the business and our growth. This all leads to our confidence in the holding up. So I think that helps with respect to what you're looking for, for modeling into next year.

Yes.

I know that was a long one. Just a clarification, Joan, and I won't go any deeper. But just for the incremental fees from Playa in terms of the numbers that you gave, I think that you had originally laid out $55 million to $60 million. Just to be clear, that's the incremental fees. In addition, you keep the fees that you already had, right? So -- but that will be the incremental bump for '26 over 2025.

Yes. The incremental -- that number is the incremental -- first of all, it was $60 million to $65 million fees, top line fees that net of the franchise fees that we would have received from Playa.

Right, which is why I provided those because when you actually look at the second half of this year, when you consolidate Playa you're going to see a -- which is you'll see that on Page 3 of the earnings release that on a consolidated basis, for the second half of the year, we don't earn any fees because we own the real estate.

We own the real estate, yes.

So that is why I provided the $15 million to $20 million, which was the pre-acquisition fees, franchise fees that we collected from Playa. The $50 million to $55 million that you're referencing, Shaun, that was an EBITDA number that we provided.

Yes. So yes, just to be clear, the $60 million to $65 million is the gross fees. That number is net of $17 million that we would have otherwise received. And the $50 million to $55 million is the EBITDA that's implied from those -- from the $60 million to $65 million of fees. Is that clear?

We'll move next to Michael Bellisario at Baird.

Mark, two-parter for you. on the recent brand acquisition. First on Standard and Principe, where are we in the process of integration of various milestones that you guys worked through? What is it bookable on Hyatt channels, how is loyalty contribution trended so far? And then that $11 million of fees that you referenced in the press release, how was that relative to your expectations? And then secondarily for Playa, what sort of integration time line there for the converted hotels and then also your expected step-up in the associated distribution earnings over time?

Thanks, Michael. With respect to standard, we are live across the portfolio. There may be one hotel in their portfolio that's not live on World of Hyatt, I'm not sure. The Manor, I think, was the last hotel to convert or to be brought live. So as I sit here, I just don't remember, but it's a single hotel. The early results are quite remarkable. Omar Lovani, who runs our Lifestyle team, ran development and was a key leader for W when W were launched when he worked at Starwood. And so he understands exactly how a premier world-class sort of loyalty program with the right customer base can actually interface with a lifestyle group, where you don't end up with sort of condition dissonance when you walk into our hotels.

And so there's a profile of customer that is going to be attracted to standard. But the early results are really better than we expected in terms of contribution. The standard hotels are performing extremely well. That strength is maintained through our acquisition of the company. So everything that we are looking at is displacement of more expensive channels. So the owners of those hotels will benefit a lot from World of Hyatt members now staying in their hotels. And we expect that to grow further over time. So we will buttress and strengthen the overall earnings profile for those hotels and reduce distribution costs all at the same time.

So we're really very favorable about that -- on that. As for the corporate integration work, that will continue to unfold during the remainder of the year. Amar and his team have done a complete inventory of all of our lifestyle hotels and also identified a lot of runway. So they're sort of tag teaming their time through getting the integration work done and growing all of our brands. And we've already seen some really significant activity in our lifestyle brands, including branded resi, which has been super encouraging.

With respect to [indiscernible] pay, likewise, that is fully managed out of the JV that we have a 50% interest in. And that integration work continues I think we did fast track World of Hyatt integration into those hotels. I don't know whether that's taken hold quite yet. If it has, it's been only literally in the last few days. So we have yet to really see significant impact with respect to our customer base into those hotels. Having said that, the business is performing quite well, at least as well as our underwriting and pro forma expectations.

And the third one -- the third area that you asked about was or is it just standard?

Well, the third is just on the Playa Hotels that you're going to convert.

Yes. Sorry. Thank you. Yes, there is disruption with respect to the rebranding. All of that will -- we will be fully ramped by the end of the year. So that is that's underway, and we are turning on the channels that we have unique capabilities and including ALG vacations. And so yes, there is disruption there. Any time you change brand groups, you're going to end up with disruption, but all of that will be fully behind us come January of '26.

We'll move next to Smedes Rose of Citi.

I have one more question around your Playa acquisition. I think as part of that, you kept a $200 million preferred interest in the assets. And just going forward, I assume that the -- I don't know if you can give any kind of scope on kind of the interest you expect to receive there. And I assume that's not included in the fees that you've lined out going forward? Or again, just sort of thinking about building blocks for next year, will that be a significant sort of economic interest for you?

Yes. So quick summary. The returns associated with that preferred are not fees, period. So they don't show up in the fee line. That's not -- we're not conflating anything or recharacterizing anything, just to be super clear about that. Second, the way that, that piece of paper is structured, it will encourage the buyer to refinance and repay that over time. So I'm not going to go into the specifics about at what rate the paper is issued at this point. But structurally, it has features in it that over time, we'll step up. So we expect that the refinancing will be available.

One of the reasons we were so confident about the sale of this real estate, first of all, we know the market extraordinarily well. We're the largest player in this asset class as manager. And secondly, the yield profile for these assets is quite high and it's quite high relative to anything that you might find in the United States, for example. And I think that over time, people will come to understand and the institutional community, as evidenced by our sale by the way, will not only understand but take advantage of that. And that is what allows you tremendous financial flexibility. So yes, the buyers will earn a very attractive yield, and that's in part because that's what the market is.

It is also true that the free cash flow that results from that gives them tremendous financial flexibility. So they're set up for, I think, a very good rate of return, and we're set up for getting our capital back.

That's right.

And 50-year management agreements for the hotels that are staying in our system.

Right. And before we move to the next question, I just wanted to clarify. Adam just clarified the point I made earlier, and this is in reference to Shaun's question. Our EBITDA expectations for 2026 for Playa are $55 million to $60 million. And that has not changed since what we've previously published. So I just wanted to make sure that, that was clear.

Yes. Sorry, that was $5 million lower than what I said. So that was my mess up. Sorry about that, Joan.

No. We haven't changed our expectations.

Can I just switch over for a moment to -- I know Hyatt Studio has been a big focus that's kind of your rollout, and I assume it's an important part of your net rounds growth expectations. Any kind of change or updates you can provide there in terms of how that rollout is going?

Not really, it's more of what we described last quarter. We have more hotels under construction. We have a lot more in the funnel. And so we are very focused on converting into signed contracts and then into construction. But the early results in Mobile are very, very strong. So we feel good about that. And I would point you to Pages 6 and 7 of the investor information pack that we -- deck rather that we published this morning. Really what that demonstrates pretty starkly is just how big the opportunity is for us.

The whole strategy has been based around building and strengthening the halo that Hyatt has enjoyed for many years as a premier player and as a high-quality player and as a high-rated player, so we've established the top end in a proportion that is vastly in excess in terms of our system that is to our competitors. And now as we lean into all of these markets in which we have no representation, we believe that we're going to find tremendous take rate because the network effect for us is inviting a lot of people to start staying with us and existing members to stay with us since we'll have something in those markets.

They already -- we already have in place the resort portfolio and the luxury portfolio that provides the aspiration for all of our World of Hyatt members, that's partly what's driving a 27% compounded growth rate from 2017. And cumulatively, we're growing at 20% every quarter that goes by almost 60 million members, which is more than twice the number of members that SPG had when Marriott purchased Starwood. So we are really seeing tremendous traction in both World of Hyatt and the interest in our brands in these wide open markets. but I would definitely take a look at Pages 6 and 7. That will give you a very clear picture about where we stand and why we're so confident about our growth rate going forward.

We'll go next to Ben Chaiken at Mizuho.

You've 3 additional assets you referred to in the prepared remarks. I think you said -- I believe you said one hotel signed and 2 under LOI. If you dispose of more this year, would that increase your shareholder return expectations? And then I don't know if you want to touch this or not, but is there any way to size that opportunity for those 3 hotels? And then 1 follow-up.

Yes. We -- our practice is to provide specifics once we close transactions. So we'll wait to do that. But the answer to your question is, first, you've heard us repeat, I don't know how many times, that we're committed to an investment-grade profile. We are well on our way to doing that with the pay down of the debt once we close the Playa real estate transaction. So those transactions, assuming that they close this year could open up additional opportunities for us. And as we look into next year, as I mentioned earlier, we do have an expectation that we will be able to lean more heavily into shareholder returns for all the reasons that we discussed earlier.

Got it. And then just one quick follow-up. Just what are you seeing in China either by chain scale or customer segmentation? Any color would be helpful.

Yes. The word of the day in China is caution and conservatism. The impact of the current policies that are in place plus concern over the potential impact from continued friction over tariffs has led to, I would say, a tremendous level of caution, more significant than we experienced in the U.S. Depending on what quarter you look at, we've seen sustained demand in business transient and then more recently, leisure, but in fact, what's happening is that a lot of the higher-end customers in China are actually spending more as they travel outside of China. But outside of China is not spending in China because inbound traffic remains very low.

So right now, I would say, name of the game is caution and conservatism, and I think that the -- there's an increasing expectation that there will be some policy shifts. Beijing is very -- historically, the government is very responsive and sensitive to customer sentiment. So there's a growing expectation that there will be some policy shifts and possibly some more clarity around the tariff picture. So I would say that we don't have a tremendous level of the crystal ball because everything has shortened up in terms of bookings. But we don't see really any significant holes as we look forward, nor is there a way for us to predict that we're going to see a massive recovery in this year. And by way of a reminder, total fees that we earn out of China are roughly 7% of our total fee base.

We'll go next to Patrick Scholes at Truist Securities.

Now that the Playa transaction is closed, and it seems like it is going well and as intended. Would it be completely unrealistic to think there could be a similar opportunity with the public hotel REITs, which seem to be trading below NAV, the opportunity for you to be -- to flip the real estate and then enter into similar long-term management contracts? Again, would that be completely on your list to think that might be something you'd be interested in it?

Patrick, thanks for that. I'm 100% sure I can't comment on your question.

I know it's a little less...

I don't know what the realm of possible explanations is or responses is, look, I can tell you that we are really focused on our organic growth and also focused on the things that are really in our wheelhouse. So I really -- I'm not sure that I have much to say beyond that.

Okay. It was just some investor chatter there that I wanted to ask the question. A more standard question here for Joan. I didn't hear you mention about -- unless I missed the expectations on the Caribbean for the rest of the year. I wonder if you could talk about that.

Yes, we're very encouraged with what we're seeing on the bookings side in the Caribbean. We have -- I think Mark mentioned in his prepared remarks that our pace going into the third quarter is in the 5% range. And the Playa portfolio is also performing really well. I think it's in that same mid-single-digit range, maybe...

Maybe it's lower because of the rent conversion.

Yes. The rent conversions is having a little bit of an impact, but very strong bookings. So we're very encouraged by the level of activity we're seeing going into that market.

We'll move next to Richard Clarke at Bernstein.

Just some questions, I guess, on the last division you not talked about, which is the distribution. Revenues down year-on-year maybe despite an expected ease to boost. And just the mechanics, you said you think you can make some more money in distribution post the acquisition of Playa. How does that work? Is it more volume or better returns? And just to clarify that any of that in your guidance for this year, some boost to distribution from the Playa side?

Yes. You heard right, Richard, that absolutely, there's an opportunity to better utilize that distribution channel from the Playa hotels. They -- from a competitive perspective, they did not utilize that in their revenue management distribution strategy in those hotels. So now the combination provides a great opportunity for us to fill in into inventory in those properties, leveraging the expertise and the abilities of ALGB to find good spacing and booking windows to optimize for those hotels. So that will be recognized for us into 2026. We're still ramping into that shift in strategy.

And so that would be included in the EBITDA numbers that I just reiterated from our expectation for next year for Playa in the $55 million to $60 million for 2026 would include some distribution earnings as a result of that strategy.

And the decline this year year-on-year in the quarter despite what we might think could be an ease to boost to that business?

Yes, we had mentioned at the first quarter earnings call that we expect to be flat. Based on what we're seeing, which is the continued momentum of lower chain scale in those markets, actually realizing some bookings that are a bit softer, that's going to impact distribution in the third quarter. And we still anticipate being flat to slightly down, maybe between 0% to 5% down in the distribution business for the full year. And that's because of the structural lower chain scale performance that we're seeing in that business.

We'll move next to Duane Pfennigwerth at Evercore ISI.

Just a couple of quick ones. One on SG&A. As you -- your comment about an inflection point kind of caught our attention. Is the story more about scaling your current SG&A with top line growth? Or is there an efficiency opportunity? And for my follow-up, can you just remind us what the remaining asset sale target is after Playa? Is there any way to think about that on an annual basis?

So Duane, the way I would answer your SG&A question is when we had set forth our guidance for this year, that guidance actually is the decline on a, call it, year-over-year comparable basis, 2024 to '25. So we've been very disciplined around SG&A. And so the growth rate has declined on the core business. The increase -- the slight increase that you see in the guidance relative year-over-year is due to assets entirely due to acquisitions. So that's how we're managing G&A. We have a little bit of timing. You'll notice that the first half is a bit smaller as a proportion to the full year estimates. That's just a little bit of timing in the second half, timing and cost.

Got it. And then just on the remaining asset sale target after Playa, is there any way to think about that on an annual basis as we think kind of longer term?

No. Our practice has been to optimize results that is sales results and be really diligent about and thoughtful about who we're selling to. We've executed this way since 2017 at multiples far in excess of anything that's been attributed to our real estate portfolio. We have every expectation of doing that because we have clarity around what our assets are worth. So we will be disciplined in that, but we will stay leaning forward into executing. So you can expect to see a steady stream of dispositions over time. But I dare not try to guess at what the volumes of that might look like because that's beyond my pay grade.

And can you just remind us, is there a total amount remaining that you're targeting?

No. We -- frankly, on the 1 hand, I would say everything is for sale. So there's no -- there are no sacred cows. On the other hand, I've said in the past, and I'll just reiterate now, I don't think that we will ever get to 0. That's an unrealistic expectation and not evidenced anywhere in the industry.

Thanks. I just want to say thank you to all of you for your time this morning. We appreciate your interest in Hyatt and we certainly hope to see you all showing your lovely faces in our hotels so that we can even do better and report better results next quarter. So enjoy the rest of your day. Thank you.

And this concludes today's conference call. Thank you for participating, and have a wonderful day. You may all disconnect.

Good morning, everyone, we're going to get started. I'm Mike Bellisario, senior research analyst at Baird, covering the global hotel brands and travel companies. Today, we have Hyatt. Joan Bottarini, Chief Financial Officer; and Adam Rohman, SVP, FP&A and IR. This is Session 3. So if you have questions, e-mail [email protected]. Joan is going to start with a few slides, and then we'll jump into Q&A.

Thanks so much, Michael. It's a pleasure to be here, and thank you for all of you attending, for your interest in Hyatt. We really appreciate the invitation to this conference. We have experienced great investor engagement. So I think you put on a really great conference, thank you. And one other shout out to you, Michael, is we really appreciate the quality of the research that you have done. We have talked about it a lot that you go deep, and it's really high quality. So thanks for that.

Thank you. More to come.

Great. Great. So for those of you, this is all posted on our website. I just wanted to make a couple of comments. We only have a couple of slides, but 2 really key points on where we are today and our strategy go forward. So this is our footprint basically where we're located globally, been in business for over 60 years.

When you look at our distribution, our hotels and our rooms, we are -- 70% of our mix is in the upper upscale and luxury segments. This has been created from the beginning, our entrance into these types of product categories and has been cultivated over decades of time. So now where we are, and you would have seen us perhaps launch a new brand earlier this week in the upscale space, which is not in that 70% category.

Earlier this year, we launched a brand in upper mid-scale. And 2 years ago, we launched a brand in upper mid-scale as well. So 3 brands over the course of the last 2 years, which when you think about the opportunity for Hyatt, because of our extensive mix in the categories of upper upscale and luxury, we are now building out our portfolio in upscale and upper mid-scale, which are adjacent to those segments, and we're very excited about the opportunity.

We are under-penetrated in virtually 250 markets and in every market around the world because we have a smaller footprint, but we have a mighty footprint in all of the countries that we operate. Just about the growth over the last -- this is over the last 8 years. The reason why 2017 is relevant is that's when we undertook our transformation to an asset-lighter platform. And so the growth as we've unlocked the value in our balance sheet and have reinvested in asset-light platforms has been extraordinary over that time period.

And so now today, we are -- this number here, 79% is as of 2024. This year, we are well over 80% asset-light mix. And so that creates great opportunities for us to generate more and more cash flow. And we also are very, very confident about our ability to continue to grow at the 6% to 7% organic growth rates into the future. So with that, I will conclude my introductory remarks.

First, on the fundamental backdrop. Can you maybe just give us a lay of the land? Sort of what changed? January-February, so strong. March to April and then where is everything at today as we sit here in early June?

Yes. Obviously, the first part of the first quarter was a continuation of what we saw in the fourth quarter. For us, it was a continued strong demand from the business traveler, leisure was very strong in the first quarter, especially given the mix that we have in Mexico and the Caribbean where our all-inclusive resorts are located primarily. There's been some macro noise that's taken place in March and April, and that created some concerns about visibility, especially in the short term, which has really led to a much shorter booking window. Pace into the future for business transient and leisure transient was down the last time we spoke during our earnings call.

What we've since seen is that while pace was down into the future, we've just seen a shorter-term booking window and more bookings being realized at the last minute. So visibility still remains fairly short term in the business transient and leisure transient space. And this is primarily a domestic comment -- U.S. comment. Group continues to look solid. Bookings into 2026 and beyond for our customers for group have been very healthy. And then when you take a step outside of the United States into key international markets, we continue to see very good strength across our non-U.S. geographies.

Europe is going to have a pretty tough comp this year just given the mega events that took place last summer. Greater China has a little bit of an easier comp in Q2 and Q3, which we think will help us see some growth. So overall, I think we feel good about the outlook that we put out during our earnings call. Nothing's changed that is making us rethink how we view the rest of this year, either positively or negatively. And given the short-term nature of the environment right now, certainly possible for an acceleration. And if things stay the same, we believe the downside risk is relatively low.

Health of the consumer, we get that question a lot, high-end performance, low end performance, what is driving each of those and the divergence that we've seen recently?

Yes. We've certainly experienced a divergence amongst the 70% mix that I was referring to and the lower brand scales. So it's about the decisions that are being made. The uncertainty in the environment is creating cautionary behaviors from guests. And so that's leading to the short-term behavior that Adam is referring to. But we think that could continue to persist, that bifurcation and the higher end is still actually prioritizing travel and experiences and it's showing up in our numbers.

We had really strong luxury growth rates in the first quarter and then in the upper upscale space, it was slightly lower than that. But -- so that's where we're seeing that bifurcation really show up. And as Adam said, outside the U.S., our footprint is largely in that upper tier brand categories. So that's where a lot of that strength is coming through on a global basis outside the U.S.

In terms of revenue management strategies, are you seeing more people prepay, any trade down within categories? Any other sort of nuanced revenue management, consumer booking behavior changes you've noticed?

We have not seen any trade downs because the health of those upper tier brands has been very strong. So that continues to persist in the numbers. And again, our concentration at the upscale levels is such that we're not in the economy space, we're not in upper midscale yet in the U.S., but we're building. So there continues to be demand. It's just a matter of short term and slightly lower than those upper brand categories.

Switching gears a little bit on Playa, maybe high level. So just remind us the strategic rationale and sort of what's the end goal and the end game here? When this ultimately gets closed and we're talking 24 months from now?

Yes, that's right. So in our strategy -- in our growth strategy and in every acquisition that we've undertaken, we've said this has to be a complementary guest base. This has to have an asset-light model or a path to asset-light. And so Playa is no exception in that regard. There is a lot of real estate. It's a public company. You can all do the work to see that it's a large asset base that is owned.

And the strategic rationale for us is, first, we have to have confidence that we'll be able to sell the real estate. And so when we entered into the contract to buy Playa, we did the research, and we engaged with the broker to say, help us understand, this is a market where there's not a lot of publicly available trade information, you will not be able to find it easily. So we engaged with the broker who does have a lot of experience in that market and we started to engage with potential investors, and the amount of interest and affirmation of our underwriting that we received gave us confidence that we will be able to undertake this disposition strategy that we've committed to in a period of time.

We've given ourselves until 2027. But you know Michael, over the past 8 years, we've done it in advance of our committed period and at levels -- we've basically overdelivered in every single one of our commitments. So where does that leave us? The ability to sell the real estate critical. That leaves us with an operating company and a management company for the 15 resorts that Playa today owns, half of those are our Hyatt brands. They're franchised today. So the incremental value creation for shareholders is the transition of those franchise contracts into long-term management contracts with a significant incremental fee base.

We will also -- and then we will be introducing the brands that are non-Hyatt branded that we will control because we'll own them into the Hyatt portfolio. So that's incremental fees and incremental rooms. And then furthermore, there's opportunity for us to scale our platform accordingly with respect to our resource base and meaning synergies and then also introducing the distribution platforms that we acquired from ALG into the Playa assets. They had not previously been leveraging the Unlimited Vacation Club and ALG vacations. And both of those distribution platforms will add incremental value for our ultimate real estate owners after we sell the assets.

And all of that put together, incremental fees, tapping into the distribution platform and synergies across the resource portfolio leads to a great deal of shareholder value, which we will tell you about as soon as we have the information about our closing and the progression of our real estate discussions.

And the closing conditions are what?

So we have to -- there's a tender offer out there with a requirement to reach over 80% on the tender, which in our last expiration we did, and there is also a regulatory hurdle through Mexican antitrust.

The real estate is separate. That is not a condition to closing the transaction?

That is not a condition to closing and we cannot enter into an agreement officially to sell the real estate until we actually own it.

Right, yes. And then just more broadly on the asset sale front. I know you've mentioned, I think there were half a dozen other hotels. What's the landscape like and buyer interest like today, especially versus a pre-liberation day and then all the volatility we experienced in April too?

There's been a lot of talk, especially this week at the conference around the transaction environment. And that's a very broad -- it's a big industry with asset classes and product types across -- if you're just referring to hospitality assets. So you really have to consider the fact that the quality of the asset, how well it's performing in this market today and how well capitalized owners are with respect to their ability to finance.

So all of those factors lead to this environment not creating any challenge -- unusual challenge relative because these are incredibly high-quality assets in great locations with very strong cash flow. So this is what makes them highly attractive. The real estate investor pool that we've been talking to is high net worth families that already own in all-inclusive markets in Mexico and the Caribbean and institutional investors alike.

So it's a broad interest pool, and it's a highly attractive investment even today considering the environment. That's what gives us the confidence in our ability to meet and exceed our commitment.

Right. $2 billion, Playa and legacy Hyatt combined?

That's right.

Switching gears a little bit just to net unit growth, just sort of the 6% to 7% organic range you've talked about. I guess, what needs to happen to get back to that on a more consistent basis?

Yes. There's -- if we think about this year and maybe the next couple of years, a couple of things. We're seeing greater acceleration of openings out of the pipeline, which is very positive and beneficial for us and what is coming -- it's starting -- and it's already starting to arrive are the new brands. So we opened our first Hyatt Studios property in Mobile, Alabama in March -- sorry, February after launching the brand about 2 years ago. We've got a significant number of hotels in the pipeline already, and we'll continue to see more and more openings plus a lot of conversations that are taking place with developers, real conversations. These are real deals that we expect will happen.

You've got Hyatt Select, which we announced in February, which is primarily a conversion brand in the upper mid-scale space. So more on the transient side, which is complementary to Hyatt Studios. And those are 2 brands in chain scales, upper mid-scale, where we have no presence in the United States before this year. And there is significant white space for us where a developer, an owner may be looking at the pool of different brands that exist in the market today, and they don't have a Hyatt property or there's maybe 1 or 2 Hyatt properties versus a lot more saturation of other brands.

So they're looking at our customer base, they're looking at the quality of the world of Hyatt member, their ability to spend and their ability to travel and that makes it very compelling argument to do deals with us. And then last Friday, we announced the Unscripted by Hyatt brand, which sits in the upscale space. Very light touch conversion brand. So this is not a -- you've got to get the hotel renovated before it can come into the system. These are independent, unique hotels where they're leveraging our commercial engine, so they can sign, get executed and convert into the system pretty quickly.

So we're going to be able to leverage these types of brands on top of a high-quality portfolio of pipeline of hotels, especially in the luxury and upper upscale chain scales, especially in international markets that are going to allow us to grow organically for a long period of time. So if you sort of think about what we've done over the last 7 to 10 years, we've spent a lot of time investing in building out the brand portfolio that we have today and a lot of strength in the high-end aspirational brands that we've either developed on our own or acquired over time. And there's significant white space for us to grow in the upscale and upper mid-scale segments, which are much less capital intensive.

We have a lot of white space and opportunity to grow. And so we have a lot of confidence that domestically, we're going to see great growth in the sort of select service space, which will complement the strong portfolio of full-service hotels in the pipeline that we have today.

Development headwinds? Is that still a predominantly U.S. problem headwind? And then what are the developers asking for or needing from you today?