Ladies and gentlemen, thank you for standing by and welcome to the Hyatt Q2 2021 Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Noah Hoppe. Thank you. Please go ahead. Thank you, Blue. Good morning, everyone. Thank you for joining us for Hyatt's second quarter 2021 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 get started, 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 differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday along with the comments on this call are made only as of today and will not be updated as actual events unfold. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks on our website at hyatt.com under the Financial Reporting section of our Investor Relations page and in yesterday's earnings release. An archive of this call will be available on our website for 90 days. And with that, I'll turn the call over to Mark.

Thanks, Noah. Good morning and thank you to everyone for joining us on Hyatt's second quarter 2021 earnings call. During our last call, we shared our optimism about the second quarter. And while we anticipated to see marked improvement, our adjusted EBITDA for the quarter significantly exceeded our expectations. The swift pace of our recovery so far demonstrates the operating leverage within our business, as we translate an improving RevPAR environment into revenue growth and margin expansion. Operating cash flow was positive for the quarter and our owned and leased segment adjusted EBITDA improved over $40 million from the first quarter. We do find ourselves experiencing very different demand profiles throughout the world. The overall recovery thus far has been much quicker than we predicted and leisure demand is at a record high in certain markets; yet demand remains at historic lows in many parts of the world. COVID remains present in both narratives, but it's clear in our second quarter results that when restrictions are eased and people are able to travel safely, the desire to get back to travel and back to hotels is stronger than it's ever been. I want to express my deepest gratitude for the tireless efforts of every member of the Hyatt family working to welcome millions of travelers back into our hotels. The labor environment has been challenging, putting significant pressure on our teams to deliver the high level of service our guests expect from our brands. We're remaining agile in how we are addressing these labor challenges by examining all aspects of how we retain, attract, and train new talent. We’re forming new recruiting relationships and sourcing more candidates from outside of our industry. We're also increasing our pool of nontraditional candidates through initiatives focused on diversity, equity, and inclusion, such as our Rise High program, which focuses on the employment of opportunity youth. As we remain focused on hiring, I'm proud to say that we recently published our EEI commitment as part of the launch of World of Care, our ESG platform. I look forward to continuing to update you on our progress to drive meaningful change within the hospitality industry and across the communities in which we operate. So let's start with the latest trends we're seeing. As I shared at the start, we anticipated the pace of recovery would accelerate in the second quarter in conjunction with wider vaccine availability, but the quarter finished well ahead of our expectations. We've seen growing leisure transient demand and I'll take a moment to review just how quickly it has accelerated this year, but I'll also share how the recovery has varied globally compared to our 2019 results. Starting with sequential growth. System-wide RevPAR grew 58% in the second quarter compared to the first quarter. Demand has steadily improved since January with double-digit RevPAR growth in each successive month compared to the prior month. The most pronounced period of RevPAR acceleration commenced with Memorial Day weekend in the United States and continued through July, driven by a wave of leisure transient demand. System-wide RevPAR was trending approximately 50% of 2019 levels just prior to Memorial Day and it has grown to nearly 75% of 2019 levels for the month of July with RevPAR ending at approximately $100. The RevPAR acceleration has come through higher demand but also bolstered by a significant increase in the rates, which are nearing fully recovered levels. Overall, the swiftness of improvement in recovery is impressive considering major travel restrictions remain throughout the world, business travel, and groups have only partially recovered, and international travel remains limited. RevPAR growth in the United States was the primary driver of the jump in system-wide RevPAR improving by 75% in the second quarter over the first quarter and more than double the 30% aggregate growth rate for the remainder of the world. The United States benefited from widespread vaccine availability and reduced travel restrictions, which unleashed significant pent-up leisure demand. From a global geographic market perspective, the rate of recovery continues to be highly uneven and heavily dependent on successful vaccination rollouts, leading to lower transmission rates of COVID-19 and ultimately the easing of travel restrictions. To give you a sense of the disparity as of mid-July, geographic areas such as Europe, Southeast Asia, and the Middle East are trending at less than 50% of fully recovered RevPAR levels, while the United States, Mainland China, and the Caribbean are over 80% recovered. The surge in our resorts is unlike anything we've previously experienced. In January, comparable US resort RevPAR was down 75% versus 2019. In June, just five months later, RevPAR was 11% above 2019 with strong average rate growth in June of over 25% compared to 2019 levels. The leisure transient surge has extended well beyond our domestic resorts. Hotels in Mexico and certain parts of the Caribbean are also at higher RevPAR levels in June relative to the same period in 2019. Additionally, we've experienced a notable improvement in our urban and suburban markets in the United States. This trend has only accelerated further in July with leisure transient nearly 20% ahead of 2019 levels in the United States and even stronger in Mainland China. The outside contribution from these two markets is driving system-wide leisure transient revenue that is now slightly above 2019 levels across all comparable hotels. Moving on to business transient and group. These segments lag behind leisure, but the momentum is growing, and we are encouraged by the steady improvement. Our system-wide business transient RevPAR in June has nearly doubled from the first quarter driven by strength in the United States and Mainland China. Notably, our RevPAR performance is now trending at 60% of 2019 levels at the end of June compared to just 40% two months prior. Business transient remains approximately 40% recovered globally and demand varies significantly by market. In the United States, dense urban markets such as New York, Washington D.C., Chicago, and San Francisco are still only 20% to 30% recovered, while the majority of other urban markets are trending at a 50% recovery level or higher. Regional businesses and some of our smaller corporate accounts are recovering the quickest, but we're also seeing acceleration in our corporate accounts and continue to expect a more robust recovery in the fall. As for groups, the trends are very encouraging. More groups large and small have been returning to our hotels and ballrooms. Importantly, we're seeing room blocks actualizing above expectations and the general size and mix of groups returning to more normalized levels. We continue to expect demand to strengthen into the fall as evidenced by recent booking trends. Group revenue booked in June for events that will occur in 2021 has reached approximately 90% of 2019 levels in our Americas full-service managed properties with the rate of cancellation diminishing to only a fraction of the levels we experienced just a couple of months ago. As we look to 2022, while group is down in the mid-teens compared to 2019, our leads are tracking 30% higher, which suggests that our pace deficit should improve. Additionally, we're pleased to see group business booked in the second quarter for 2022 at an average rate that is 5% higher than the same period in 2019. In summary, as we look across the world, growth remains uneven. The geographic areas that have eased restrictions and are furthest along vaccination rates are seeing a surge of leisure demand. While business transient and group are trailing in the recovery, the momentum we have seen to date coupled with forward-looking indicators and conversations with our largest customers provide us confidence that the recovery of these segments will accelerate in the fall. As we welcome millions of travelers back to our hotels, I'm excited that our guests have an opportunity to visit our expanding portfolio of new properties. We've opened 100 hotels over the trailing 12 months, a record level of organic expansion leading to net room growth of 7.1% in the second quarter. Even with our rapid rate of hotel openings, we've maintained our pipeline of signed deals in a challenging environment, closing the second quarter with a development pipeline of 101,000 rooms representing over 40% of our existing lease base. As we've highlighted in previous quarters, conversions are a key ingredient to our growth. Our independent collection brands including the Unbound Collection by Hyatt, JDB by Hyatt, and Destination by Hyatt accounted for all eight conversions in the quarter and in high barrier to entry markets such as Los Angeles, Toronto, Beijing, Sweden, and Valencia, Spain. Demand for all of our brands remains strong amongst our development community, but I'm especially pleased with the integration and growth of the brands that we acquired through the acquisition of Two Roads Hospitality: Alila, Thompson, JDV by Hyatt, and Destination by Hyatt. By way of reminder, we acquired Two Roads Hospitality in late 2018 and spent much of 2019 integrating the brands and back-end technology into the Hyatt ecosystem. We clearly define the purpose and profile of each brand alongside our existing portfolio. We continue to be focused on scaling these brands, and our hard work is resonating with developers around the world. As a result of the successful integration, 2021 is shaping up to be a banner year of openings for all four brands. Already through the first half of the year, the number of hotels in these four brands have expanded by 20% and we expect to end the year with growth of 30% or more. It's exciting to see how these brands have been so quickly adopted by our loyal guests with the World of Hyatt program driving over 40% of room nights. This loyal member base has been a key catalyst for market share gains. The RevPAR index for comparable former Two Roads hotels is up 13% versus 2019 through the first half of this year. The successful integration of these former Two Roads brands has contributed to the broader evolution of the Hyatt portfolio as an industry leader in the luxury lifestyle space. In the span of just three years, we tripled the number of lifestyle properties from approximately 50 to 150, accounting for nearly 40% of total hotel openings over that time frame. Furthermore, we significantly expanded our resort presence. Since 2017 we've grown our resort room count by 45%, with well over 80% of that growth in the luxury segment. Ultimately, as we look at the Hyatt portfolio today and our signed pipeline, we're excited about the positioning of our portfolio to take full advantage of the demand coming back to our hotels. This transition to a heavier leisure-driven portfolio has been very intentional and complemented with a variety of enhancements such as the launch of High Prive which is our luxury travel adviser program, the expansion of benefits within the World of Hyatt programs such as the addition of small luxury hotels properties, the ability to use points for experiences such as Midland exhibitions, and our strategic relationship with American Airlines. Most recently during the quarter, we announced the launch of our relationship with Built Rewards, a new rewards program with access to millions of urban renters who are now able to earn global Hyatt points just by paying rent. Our portfolio of brands complemented with a best-in-class loyalty program and digital platform is clearly resonating. Our base of loyalty members is the largest it's ever been and has grown 14% since the same point last year. Our co-brand credit card spend is trending well above 2019 levels and our enhancements to our digital platform are driving hyatt.com booked revenue more than 20% higher than 2019 levels which is outpacing OTA channels. Our portfolio and programs have us well positioned to be the preferred brand for high-end leisure travelers now and well into the future. Finally, I want to provide a brief update on transactions before turning it over to Joan. During the quarter we announced the disposition of higher agency loss times for approximately $275 million, a price that was above our pre-COVID-19 expectations. We also acquired Ventana Big Sur, an Alila resort for $148 million securing our brand presence in a highly sought-after resort destination. With the completion of these asset transactions, we've realized net proceeds of approximately $1.1 billion since the time of our announcement in March of 2019. In addition to these transactions, I'm pleased to note that we are in advanced stages of the disposition of two other assets in the aggregate amount of $500 million. Should we successfully close these two transactions, we will exceed our $1.5 billion asset sell-down commitment and do so well before our target date and at an aggregate multiple in the high teens. In total, from the outset of our asset sell-down strategy announcement in November of 2017, and assuming the closing of the sale of the two properties in process, we will have sold over $3 billion of assets at an average EBITDA multiple of just under 17.5 times, demonstrating the valuations realized in our disposition efforts are materially in excess of the implied valuation the market has placed on our owned and leased business. We look forward to updating you on the progression of these sales and future plans, relative to our sell-down program during our next earnings call. I'll conclude my prepared remarks this morning by saying that our outlook remains optimistic. Around the world, things remain uncertain and we remain vigilant, as we maintain the health and safety of our colleagues and our guests. It’s clear and it's been validated repeatedly across markets and cultures that when people are able to travel and reconnect, the commitment to do so drives customer behavior. While we expect starts and stops, we remain confident we are on the path to full recovery. I'll now turn it over to Joan to provide additional detail on our operating results.

Thanks, Mark and good morning, everyone. Late yesterday, we reported a second quarter net loss attributable to Hyatt of $9 million and a diluted loss per share of $0.08. Adjusted EBITDA was $55 million for the quarter, a sharp improvement from the adjusted EBITDA loss of $20 million in the first quarter of this year. As Mark mentioned, the operating leverage in our business has enabled us to translate improving demand into a strong increase in earnings. System-wide RevPAR was $72 in the second quarter, representing a 50% decline compared to the same period in 2019 on a reported basis and a 58% increase compared to the first quarter of 2021. Both occupancy and rate contributed meaningfully to the sequential RevPAR growth with roughly 60% of the improvement coming through occupancy and 40% through rate. Leisure transient was a key driver of our improved results for the quarter, leading to a material increase in our base, incentive, and franchise fees, which totaled $77 million in the second quarter, a notable acceleration from $49 million in the first quarter. In June, system-wide comparable occupancy eclipsed 50% and as of June 30, only 18 hotels or less than 2% of hotel inventory remained closed. Moving on to our segment results. Our management and franchising business delivered a combined adjusted EBITDA of $63 million, improving over 90% to $33 million in the first quarter. The Americas segment accounted for the vast majority of the growth led by our resort and select service portfolio but also increasingly for our business and convention hotels as more cities eased restrictions as the quarter progressed. The Asia Pacific segment experienced improved performance, doubling its adjusted EBITDA in the first quarter, as hotels in Mainland China rebounded strongly after the easing of government restrictions. It's important to highlight that Mainland China, through a combination of RevPAR improvement, strong operating margins, and net rooms growth, generated more base incentive and franchise fees than any previous quarter on record. As for our Europe, Africa, Middle East, and Southwest Asia segment, adjusted EBITDA was modestly lower than the first quarter as travel restrictions were prevalent throughout the region. However, the pace at which demand is currently improving, especially in Europe, as we progress through this summer serves as another proof point that, when restrictions are eased, people are ready and excited to travel. Our owned and leased hotel segment, which delivered $12 million of adjusted EBITDA for the quarter, improved by more than $40 million from the first quarter of 2021. The swift path back to profitability highlights the strong operating leverage within our owned and leased portfolio. Owned and leased RevPAR was $87 for the second quarter, experiencing strong acceleration throughout the quarter with RevPAR improving from $73 in April to $107 in June, nearly doubling the rate of improvement of our system-wide portfolio. Our owned and leased resorts were a key driver, surpassing adjusted EBITDA generated in the same period in 2019. Furthermore, the acceleration in group business throughout the quarter had a material positive impact. This was most pronounced in June, our strongest month in the quarter, as group room nights accounted for 25% of the total room night mix, up from just 18% in May. As we turn toward July, owned and leased RevPAR continued to strengthen. Preliminary RevPAR for the owned and leased portfolio in July is approximately $135, up nearly 30% from June, and nearly 85% recovered versus the same month in 2019. Importantly, the average rate in July is above the same period in 2019. Our comparable owned and leased operating margins improved to 13.9% in June, finishing above 19%, a sharp improvement from the negative margins last quarter. We continue to closely monitor the labor environment, and are working hard to get open positions filled. To date, we've seen some pressure on wages and our general managers have made specific adjustments based on competitive factors, but it varies by market. As we assess the potential impact of inflation on our business, we believe the increase in daily room rates will at least offset increases to wages or other costs. Our revenue management practices and teams re-price inventory on a continuous basis allowing us to quickly respond to changing market conditions. This is evidenced by our ability to quickly realize stronger rates, which were up 20% at our owned and leased resorts compared to 2019 in the second quarter. I would also point out that valuations of hotel assets benefit from an inflationary environment, and this is a positive for us as we execute our owned and leased disposition strategy. I'd also like to provide a brief update on our liquidity and cash. Operating cash flow, including interest payments, was positive for the quarter and exceeded our expectations. We anticipate our operating cash flow will continue to improve from the second quarter levels as RevPAR strengthened. We have and will continue to invest in the growth of our brand, including capital expenditures. Our cash investments in this area have remained in the same approximate range as the prior two quarters, about $10 million to $15 million per month. We expect monthly investment spend to trend higher consistent with our expected strong year of openings and signing activity. As of June 30, our total liquidity including cash, cash equivalents, short-term investments, and combined with borrowing capacity was approximately $3.2 billion with the only near-term debt maturity being $250 million senior notes maturing this month. We received a $254 million US tax refund in July related to 2020 net operating losses carried back to prior years under the CARES Act. We intend to use this tax refund to pay off our senior notes upon maturity later this month. I'd like to make a few additional comments regarding our 2021 outlook. Consistent with our communication in the first quarter, we continue to expect adjusted SG&A to be in the approximate range of $240 million excluding any bad debt expense. Further, we continue to expect capital expenditures to be in the range of $110 million. Given our confidence in the recovery, we are evaluating pulling forward selected renovation projects to take advantage of seasonality and lower displacement than we expect to have in the future. This may increase our capital expenditure estimate modestly and we'll update you further next quarter. Turning to net rooms growth, earlier this quarter in connection with our pending agreement with Service Properties Trust, which extended our management of 17 Hyatt Place hotels that we previously forecasted to exit the system; we increased our net rooms growth projection to approximately 6%, up from greater than 5% as previously reported in the first quarter of 2021. We're updating this expectation of net rooms growth to be greater than 6% for the year. While there is some degree of uncertainty related to supply chain issues, which could push certain openings into early 2022, we remain very confident in our ability to deliver another exceptionally strong year of net rooms growth. Finally, I'd like to briefly comment on earnings sensitivity. Our previously communicated earnings sensitivity levels illustrated that a 1% change in RevPAR level using 2019 RevPAR as a baseline resulted in an impact of approximately $10 million to $15 million in adjusted EBITDA. We previously communicated that we expected that our earnings sensitivity would be at the high end of this range in the near-term due to the larger decline in owned and leased RevPAR relative to our system-wide RevPAR as a result of COVID-19. As the relationship between owned and leased system-wide RevPAR has formalized, the earnings sensitivity is now expected to improve towards the midpoint of the $10 million to $15 million range of adjusted EBITDA, reflecting our ability to mitigate the adjusted EBITDA downside impact relative to our 2019 results. I will conclude my prepared remarks by saying that we are very encouraged by the rate at which our business is recovering. Adjusted EBITDA and operating cash flow were positive for the quarter and we anticipate the momentum to continue into future quarters. Our management and franchise business reflects the quickly strengthening RevPAR environment and coupled with industry-leading net earnings growth is accelerating meaningfully. Our owned and leased hotels continue to exceed expectations as the segment generated positive adjusted EBITDA for the quarter. We remain mindful that this recovery will be uneven, but have unwavering confidence we are on a path to full recovery.

Thank you, Mark. Your first question comes from the line of Stephen Grambling from Goldman Sachs. Your line is now open. Stephen?

Hi. Thanks for taking the question. I think you touched on this in the remarks a little bit, Mark. But now that you've bumped room growth to 6% plus from, I think, it was 6% two months ago, which was up 5% plus a month before that. Can you just elaborate on what's driving the incremental confidence as we think about splitting it between accelerated construction schedules versus outright interest in development and/or changes in the financing environment? And then as we think longer-term, how might the pipeline at 40% of your existing room base translate to room growth longer-term? Thanks.

Thanks, Stephen. I want to highlight a few key points. First, our conversions have been performing at or above expectations this year, which gives us a solid level of strength and confidence. Second, the terminations have been lower than what we anticipated, and as the year progresses, our confidence in this will increase. Third, we've seen that opening dates have been pushed further into the year due to supply chain disruptions, which we are closely monitoring. We're cautious about any further negative developments in the supply chain that could delay openings into next year. However, we believe our gross room opening expectation for the rest of the year will significantly exceed the 6% threshold. The main factor we're managing now is the uncertainty regarding how many projects might be deferred into January or February. Given the dynamics I mentioned earlier, our confidence is high, which is why we expect it to exceed 6%. Additionally, while we have to report at the end of the quarter, we believe that the openings currently scheduled will proceed, and any delays of a week or two after December 31 will not impact our overall momentum too much. Regarding our pipeline, we've mentioned before that there are different narratives emerging from various cities. Select service remains under pressure mainly due to financing issues in the U.S., but this has been offset by growth in select service and full-service signings internationally, particularly in the Americas. Our overall pipeline remains strong, and we anticipate meaningful progress in select service by year-end. In terms of net rooms growth for the future, our pre-COVID earnings model indicated a long-term growth rate of around 6.5% to 7%. I see no reason we won't be at least in that range or higher in the long term, even if it might be slightly lower in the next couple of years, around 6% to 6.5%. It should not fall below that due to the numerous projects moving forward and strong momentum in conversions. That's our current outlook.

Thank you for that. I’ll let others jump in. Thanks so much.

Thanks very much. Good morning, Mark and Joan. I'd like to start off with the Ventana acquisition. Regarding the Ventana Big Sur, could you provide some more detail on the strategy behind the acquisition, including some context behind the headline pricing? And perhaps, more broadly, how you see luxury resorts valued today?

Sure. Ventana Big Sur is in a unique market that attracts guests from major cities like San Francisco and Los Angeles. It has very limited opportunities for new development, making it a one-of-a-kind asset in a stunning natural setting. This location appeals to those looking to reconnect with nature, which will continue to drive interest. Economically, this year has been exceptional; the hotel is achieving the highest rates and revenue per available room in our portfolio, consistently nearing $2,000 a night with very high occupancy. This performance is translating into strong earnings growth, yielding a low double-digit multiple on our acquisition based on this year’s earnings. While 2019 showed even higher potential in the high teens due to renovations, we find the current economic situation very appealing. Although 2021 may be a peak year influenced by COVID, guest feedback has been overwhelmingly positive regarding the location. The price per key has raised some eyebrows, but we have multiple reasons why it's not our primary concern. The hotel sits on a large property, offering many additional development opportunities beyond just room counts. Currently, we have 50 keys with entitlements for 59, and we believe that enhancing this space will significantly increase revenue and earnings, given the strong demand for high-end suites. We view this as an excellent growth opportunity, and it remains one of the most challenging markets for new entries globally.

That's all very, very helpful. So I appreciate all that Mark. As a brief follow-up since you're speaking about the outdoors just a moment ago, I'd like to shift gears and ask about the Miraval Berkshires. If you could speak to your initial expectations for that property and maybe some detail if you can about how the other senior level properties are performing today?

Yes. Thank you. So not surprisingly, Miraval is booming in many ways and in a number of ways it's very constrained. So just as a reference point to start with the numbers. In the second quarter, the three properties that is Tucson, Austin, and the Berkshires generated about $7 million EBITDA. And that is inclusive of significant capacity constraints where we limited occupancy to below 50% in all three resorts for April and May, and in the Berkshires, continue to operate at something like a 30% to 40% occupancy level. And it's all driven by availability of therapists and trade personnel who can actually run the programs for us. Having said that, RevPAR has – in this business, the RevPAR is interesting but not actually the biggest issue. The biggest issue is total revenue per occupied growth because the vast majority of the revenues of these properties happens on property but outside of room rate. So while room rates are in and around $300 a night, the total revenue per occupied room was over $1,700 and that's up more than 25% versus 2019. So the way we look at the investment that we've got in the real estate, which aggregates to a bit over $300 million excluding the brand value that we paid for the – as we look at just the second quarter of this year at those highly constrained occupancy levels, we're already running something approaching $30 million on a run rate basis. So we're really got over renovation in Tucson. That will be complete – or the rims part of the margin will be completed by September. The remaining will be largely completed by November. So we're going to continue to build. And as we are able to lease staff at a better level over the course of the remainder of this year, we have very high expectations for the earnings potential for the Miraval going forward.

Terrific. That all sounds very promising. Thank you very much.

Thank you. Good morning. Can you just give us an update on your capital allocation thoughts both in terms of capital returns? Any thoughts around larger-scale M&A, if you had like single assets? Thanks.

Thanks, Thomas. In terms of capital allocation obviously, we deployed some capital to acquire Ventana. In my prior response, I forgot to mention the most important driver of our interest in buying Ventana and that is that our management agreement was terminable upon sale. And so we wanted to secure our presence there for the long-term. It's become an integral part of our Alila network on the West Coast including Napa Valley and Encinitas Marea hotel. But it's also a key addition to a resort that serves a very high-end customer base including our World of Hyatt members. So I failed to mention that as a key driver of why we acquired it to begin with. So we obviously acquired that but that's actually not that material. We've benefited from this tax refund that we received of $254 million and we will turn around and use those proceeds from our tax refund to repay the $250 million of maturities in August. And we do have a very strong cash position, and it's also true that we've got – we raised $750 million in August of last year in floating rate bonds that are due over the next couple of years. So we're paying attention to those maturities as well. We feel that, we come through the pandemic and now into recovery mode at a very healthy clip with respect to earnings and cash flow – positive operating cash flow in the second quarter, which we expect to grow over time. So as we think about deployment of capital, we are starting to turn our attention to what I would say, back to the things that we were trying to do and identify before COVID hit, which is more and more opportunities to grow in Europe. And we are paying close attention to smaller brands and groupings of hotels there. While the deal volume there has been slow to date, we are tracking a number of different potential opportunities in the hopes that we'll see some things free up over the coming year. And also we talked a lot about – I talked a lot in my prepared remarks about the extension of our resort portfolio over the last several years. Again, that's been deliberate because we've intentionally wanted to grow in lifestyle and in the leisure segment. So we're going to continue to focus on that. As always, growing the company in a very deliberate strategic way is our top priority. But however, it’s also true that we move back to – we are essentially back to a strong balance sheet already and moving back to internal operating cash flow. So we will take up the question about returning capital to shareholders in 2022.

All very helpful. Thank you.

Hi. Thanks. I just wanted to go back and ask you a question on the group statistics that you mentioned in your opening remarks. I just want to make sure I understood right. Did you say that you've got 90% rooms volume that you did in 2019 on the books for 2022 and those rooms are at a 5% higher rate, is that correct?

No. What I mentioned was the bookings we observed in June for the remainder of 2021. The total amount we booked in June for dates within that year is approximately at a 90% level compared to June 2019. This gives a sense of our current booking activity. The pace going into 2022 is down relative to 2019, around the mid-teens level. This indicates that we are tracking closely with the booking pace from 2019 between the end of the first and second quarters. It's encouraging that our growth remains consistent with 2019's activity levels. Looking ahead, we currently have over $760 million booked for next year, compared to about $900 million at the same time in 2019. Essentially, we are trending about 15% lower than 2019. There are two factors we need to focus on. First, candidates and leads are significantly higher than in 2019, which should help us close the gap in the booking pace, particularly in the first quarter of 2022. The largest gap in near-term bookings is in Q1 2022, but we are seeing notable growth in group sizes, especially those with 100 to 250 participants. We are also seeing a strong return of Citywides, which make up about a quarter of our business on the books. Seventy percent of those Citywides are scheduled for the first half of next year and are firming up. The second point is that around two-thirds of our Q3 bookings are corporate, with low levels from associations. In Q4, corporate makes up about 50% as associations begin to return. Thus, the largest shortfall in the first half of next year will likely be corporate bookings, which are typically booked on a shorter timeline, while associations strengthen over the year. In summary, if I had to estimate, group business could realize around 85% of 2019 levels next year. While there is a potential downside due to possible restrictions, there is significant demand, particularly among corporate groups. The upside is that if the leads I mentioned start to convert, we could exceed that estimate. We still need to secure a lot more business, including in-year bookings for next year. Looking further ahead, 2023 is projected to be down in the high teens compared to 2019 levels, though the rate is maintained or even higher, primarily affecting volume. As we head into 2022, I expect improvements in pace as things stabilize.

Okay. I really appreciate that detail. I just wanted to ask you, do you mentioned that the acquisition of Big Sur was driven by the contract being terminable upon sale. Are there other properties, where you feel like you might have to put your balance sheet to work in order to lock-in and your management there? And do you see these as potentially long-term dispositions, or are you happy to own that asset longer-term?

There were two different questions. Regarding the first question, our core management franchise has very few contracts with termination on sale provisions. We acquired more contracts with such provisions in the Tuas portfolio, which was part of the Tribute portfolio, but even in that case, the number is quite low. I can't recall any contracts that aren't stable or where we're not performing well, so there's really nothing else to mention at this time. As for the second question, I believe Ventana is a unique and highly attractive property, which would generate significant interest from other potential buyers. We did not acquire it for the long term, as I view all our assets as part of a potential disposition strategy at some point. We did not buy it to hold onto it.

Assuming the two hotels you mentioned do sell as expected and you complete the current net disposition program, will you expect to move forward with another program, or as you sit here today would you prefer to take a less programmatic approach?

No, I think we deliberately set some goals back in 2017 because we believed that providing clarity to the investment community was essential. It is also true that Wall Street has chosen to value our owned estate at low multiple levels. Joan presented a very clear case for why that perspective is outdated. When you consider the operating leverage we have achieved through exceptional management and a disciplined revenue management approach, we have gained significant revenue share—500 basis points—in our owned and leased portfolio over the last quarter. These results are remarkable. We are committed to demonstrating the value in our portfolio through programs that we believe will exceed our expectations for both execution time and valuations. We will continue to pursue this.

Your line is now open. David, your line is now open. Moving now to the next questioner. The next question comes from the line of Chad Beynon from Macquarie. Your line is now open.

Hi, good morning. Thanks for taking my question. Mark you briefly just touched on this and Joan in your sensitivity work I think it kind of is flowing through this. But I wanted to revisit the owned business particularly the long-term margins. You mentioned that you've been able to push through some of the labor inflation to the consumer with higher prices. And I believe previously you've talked about getting back to those prior revenues, margins could be 100 to 300 basis points higher. I was wondering how you're thinking about long-term margins for this business and if that still stands true? Thanks.

Thank you for the question. We still expect long-term margins to be between 100 and 300 basis points above pre-COVID levels on a stabilized basis. Let me elaborate on your inquiry regarding the owned versus leased portfolio, which aligns with what Mark mentioned earlier. The recovery has accelerated, leading to impressive results in our owned and leased portfolio, a trend that has continued into July. We have previously discussed our commitment to profitability initiatives, which are yielding strong outcomes at our hotels, including our SMB initiatives designed to ensure our offerings are both profitable and aligned with current consumer demand. Additionally, our digital initiatives are enhancing productivity. Notably, our managers have been showcasing innovative revenue management and marketing strategies that capture market share and adapt to current demand patterns. Our owned and leased RevPAR index for leased hotels increased by 9% in the quarter. A prime example is the Hyatt Regency Orlando, a 1,600-room convention hotel, which typically fills 70% to 80% of its rooms with group bookings in a stable year like 2019. In the second quarter, RevPAR for this hotel dropped by about 50%, with June down 30% and July down 7%. However, by implementing effective market strategies, the hotel has successfully tapped into leisure demand, with approximately 50% of room nights sold in June and July coming from leisure guests. In summary, we are adeptly adjusting our hotel management strategies to align with demand and executing effectively, which is evident in both our revenue and profitability initiatives.

Thank you very much. I appreciate that.

We'll take our last question please.

Thanks. Good morning everyone.

Hi.

Just want to go back to the development pipeline. Maybe how did the quality compare to a few years ago? Just trying to think about the mix of higher-earning managed hotels. Is the contract lengths longer? And then, how you think about the stabilized earnings of each room in the pipeline versus simply just the room count which is what we see reported every quarter. Any thoughts there would be helpful.

Thank you, Michael. I would say that the quality of the pipeline itself is higher than where it was a couple of years ago. What I mean by that is, we have had over this period of time last year a effectively replacing the pace that we had enjoyed on select service signings with more full-service and lifestyle hotels globally. The contract terms internationally are quite stable at this point and require less capital through, by way of either key money or other financial support. Some of the capital intensity is lower for these signings. We've more than replaced the lull in select service signings over the last year with these higher-rated and full-service properties. So if you think about the embedded fee-generative power potential effectively has gone up over this past year. I'm happy to say that we continue to find opportunities with existing owners, but it's also true that we've expanded our relationships with a number of new ownership groups. You might remember that we announced last quarter that we have expanded our franchise team, franchising and relations team to really lean on accelerating the franchise growth. That's come to light in the most significant way in Europe so far. We do expect that to translate into a higher pace of franchise growth here in the US and in Europe. So in summary, we have a substitution in our pipeline. It's with very robustly underwritten deals that we have valued one by each. These are deals that are fully signed and, in our opinion, financed or able to be financed. And they were very stable contract times. We're not seeing any degradation in our contract terms over time. And finally, I do expect that our franchise fee base will grow at a faster pace going forward and represent a bigger proportion of our total fee base as time unfolds here in the next three to five years. So for all those reasons, I think we're actually sort of have a higher from a fee-generative perspective a higher quality and more stable more predictable level of fees into the future.

Thank you everyone for taking the time to join us today. Take care and we look forward to speaking with you soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.