Good morning, and welcome to the Hyatt Third Quarter 2024 Earnings Conference Call. Thank you. 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. Please go ahead.

Thank you. And welcome to Hyatt's third quarter 2024 earnings conference call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer, and Joan 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 on our website at hyatt.com under the Financial Reporting section of our Investor Relations link and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Please note that, unless otherwise stated, references to occupancy, average daily rate and RevPAR reflect comparable system-wide hotels on a constant currency basis. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. Additionally, we have updated our inventory schedule on Page 84 of the earnings release to now include hotels and rooms associated with Mr. and Mrs. Smith and other strategic alliances. And with that, I'll now turn the call over to Mark.

Thanks, Adam. Good morning, everyone. And thank you for joining us today. Before I turn to the quarter, I would like to acknowledge the damage caused by recent hurricanes in the Southeast United States. In response, Hyatt colleagues have come together through our Hyatt Care Fund to provide financial support to those in need. Our purpose to care for people so they can be their best resonates in times like these and we are thankful that our colleagues are safe. I recently spent time in Europe and Asia, where I met with many of our teams and owners, including a visit to the newly opened and stunning Park Hyatt London. The hotel is a flagship representation of the Park Hyatt brand in one of the most vibrant cities in the world. I also had the opportunity to visit with our new Standard International colleagues in Bangkok who are preparing for several exciting openings of Standard branded hotels across Asia over the coming months. The trip left me filled with excitement for Hyatt's future as we continue to grow across many markets globally, while delivering differentiated guest experiences for the high-end travelers in each segment that we serve. Now turning to the quarter, our third quarter results reflect the strength of our asset-light business model, including double-digit growth in growth fees, record number of rooms in our pipeline and a record number of World of Hyatt members. This morning, we reported system-wide RevPAR growth of 3%, and we continue to see high-end consumers prioritizing travel as RevPAR growth was strongest amongst our luxury brands. Leisure transient revenue decreased approximately 4% in the quarter driven by the United States and Greater China. Through the first nine months of 2024, revenue was flat compared to 2023 despite headwinds from renovations at certain resort properties and weaker demand in Maui. Transient pace for resorts in the Americas is up over 9% over the festive period and up slightly in the first quarter of 2025. America's all-inclusive resorts pace is up 10% over the festive period and up over 20% in the first quarter of 2025. Group rooms revenue increased approximately 6% in the quarter with strong results in both the U.S. and Europe. Group pace for U.S. full-service managed properties is up over 5% in the fourth quarter, excluding the timing shift of the Jewish holidays in October and the U.S. election next week and is otherwise flat when accounting for the holidays and election week. As we look to 2025, group pace is up approximately 6% compared to 2024 with average rate accounting for over half of that increase. Business transient customers continue to deliver the largest year-over-year growth with revenue up approximately 16%. In the United States, revenue increased at a similar growth rate and major urban markets continue to benefit from the recovery of business travel. We continue to see exceptional engagement from our World of Hyatt members, which is reflected in our third quarter results. World of Hyatt membership passed the 50 million milestone and reached a new record of approximately 51 million members at quarter-end, a 22% increase over the prior year. Loyalty room night penetration also increased as we realized the direct benefit of our growing membership base. And spending on our co-branded credit cards has increased 16% through the first nine months of 2024 compared to the same period in 2023. Finally, World of Hyatt was recognized as one of the top hotel loyalty programs by U.S. News & World Report. Our members continue to benefit from our greater system size and expanding collection of world-class brands, while our membership growth and increased room night penetration reduces customer acquisition costs, which we believe makes us even more attractive to owners and developers. We see evidence of owner and developer preference reflected in our pipeline, which expanded to 135,000 rooms, a new record. This represents an increase of approximately 10% compared to the third quarter 2023 and our pipeline represents 41% of our existing room base. The United States and Greater China continue to account for significant signing activity, especially among our upper mid-scale brands, Hyatt Studios and UrCove by Hyatt. We also saw healthy signings among our all-inclusive brands in the Americas, and I'm thrilled that we signed our first all-inclusive resorts in Asia-Pacific, the Hyatt Zilara and Hyatt Ziva, Phang Nga in Thailand. We also recently announced the formation of a joint-venture and strategic collaboration agreement with China Resources Land to expand Hyatt's brand presence across China. This includes six existing hotels that have joined the Unbound Collection by Hyatt and JdV by Hyatt Collection brands. Additionally, and separate from the JV, Hyatt and CR Land have signed agreements for two new projects, including Park Hyatt Xi'an and Andaz Dongguan, which deepens our relationship with CR Land who own seven existing luxury Hyatt branded properties in China. During the third quarter, we achieved net rooms growth of 4.3%. There were several notable luxury openings in the quarter, including the Park Hyatt Marrakech, our first Park Hyatt in Northern Africa, and the Alila Shanghai, a flagship for future development of this luxury branded urban markets. We also opened the Grand Hyatt Kunming, the 18th Grand Hyatt in Greater China. Our openings provide more opportunities for our guests and members to engage with us, while our growing pipeline allows us to expand into new markets into the future. Turning to transactions, on August 16th, we hit a significant milestone with the sale of Hyatt Regency Orlando and the adjacent land for gross proceeds of $1.07 billion. This marked the completion of our third asset disposition commitment, which we announced in 2021. Over the three-year period, we realized gross proceeds of $2.6 billion, net of acquisitions at a multiple of 13.3 times. While we've successfully completed our third disposition commitment, we expect to continue to reduce our hotel ownership. Hyatt Grand Central New York and Andaz Liverpool Street both remain under contract for redevelopment. Upon closing, we will receive significant proceeds from these sales and upon the completion of the redevelopments, we will have magnificent new hotels in each highly desirable location. Additionally, we are actively engaged in other discussions and expect to sell more hotels in 2025 and beyond. First, we completed the acquisition of Standard International, which includes the standard, StandardX and Bunkhouse brands, further enhancing our position in the lifestyle segment. At closing, 22 hotels with approximately 2,000 rooms joined Hyatt, and the acquisition will add 10 executed agreements to the pipeline in the fourth quarter totaling approximately 1,300 rooms. In addition, there are more than 20 additional projects, including branded residences with a signed agreement or letter of intent. I'm also pleased to share that we've already engaged in conversations resulting from inbound calls for new projects since we announced the acquisition. On October 28, we announced the signing of an agreement to enter into a long-term strategic joint venture with Grupo Pinero to manage Bahia Principe hotels and resorts. 23 open and operating resorts totaling over 12,000 rooms will be added to Hyatt's inclusive collection upon closing, expanding Hyatt's all-inclusive room portfolio by approximately 30%. This is a unique opportunity to expand our all-inclusive offerings in the 4.5-star category, which fills the white space in our brand portfolio. Presently, over 85% of Hyatt's all-inclusive resorts in the Americas are 5-star properties, and this transaction enhances our network effect by expanding our all-inclusive offerings to members and guests at multiple price points. The transaction is anticipated to close in the coming months, and we will provide more details once the transaction closes. Seven years ago, we committed to permanently reducing our earnings from owned hotels while investing in asset-light growth. The results of our transformation into an asset-light business have been highly accretive to shareholder value. We've realized $5.6 billion of gross proceeds net of acquisitions from asset sales at a multiple of 15 times, which exceeds the overall multiple at which Hyatt has historically traded. We've reduced our owned and leased adjusted EBITDA by approximately $390 million and annual capital expenditures by over $100 million, while adding approximately $50 million of durable management franchise fees from the sold hotels. At the same time, we have acquired asset-light platforms, including Two Roads Hospitality, Apple Leisure Group, Dream Hotels Group and Standard International for a total of $3.6 billion at a blended multiple of approximately 9.5 times. We have exceeded our underwriting expectations for both Two Roads and ALG, and we expect to do the same for Dream and Standard when those acquisitions mature. Not only have we replaced EBITDA from asset sales, but we have and will continue to do so in a much more capital-efficient manner that drives greater free cash flow. Additionally, during this time, we have returned $4.4 billion to shareholders, including $4.2 billion of share buybacks at a weighted price of $87.74 per share. Our capital allocation strategy has fueled our growth, while creating significant value for shareholders. While we celebrate the successful execution of our earnings transformation, we recognize continued evolution and innovation is essential to benefit all our stakeholders into the future. In the coming months, we will debut a new lifestyle group led by Amar Lalvani, former Executive Chairman of Standard International. Amar brings his expertise in designing world-class lifestyle brands and delivering exceptional experiences, and I'm excited to welcome him and all the Standard International colleagues to Hyatt. We will also be forming a dedicated luxury group with distinct leadership across key functions and services focused on caring for guests and customers at the pinnacle of luxury. We will continue to leverage the significant capabilities that we've been building while welcoming new colleagues with unique talents. We believe this alignment will allow us to care more deeply for guests, customers and especially hotel owners across each of our brands, further deepening preference for Hyatt while creating even more value for shareholders. I would like to close by expressing my gratitude for all Hyatt colleagues who live our purpose every day by caring for each other and for all of our stakeholders. Joan will now provide more details on our operating results. Joan, over to you.

Thanks, Mark. And good morning, everyone. During the third quarter, system-wide RevPAR increased 3%, led by increased business in group travel. In the United States, RevPAR increased over 1%. Group was strong in the quarter, reflecting continued momentum for corporate meetings and social events. Associations drove the growth in group rooms revenue and business transient was led by large corporate accounts benefiting hotel sales in major areas. On the leisure front, we continue to lap challenging comparisons in Maui due to the wildfires last year, the quarter was also negatively impacted by hurricane activity and an increase in international outbound travel. RevPAR in the Americas, excluding the United States, increased approximately 4% and all-inclusive properties in the Americas reported net package RevPAR 5% below last year, driven by the impact of hurricanes. Despite some of the headwinds and challenging comparisons for leisure travel, the forward booking activity that Mark mentioned earlier supports our continued confidence that the strong demand levels we have experienced are sustainable. In Greater China, RevPAR decreased approximately 7% as we lapped unusually high levels of domestic travel last year, especially from higher-income travelers. While domestic travel was down 9%, we did experience a moderate increase among international inbound travelers. The stimulus measures enacted by the government in late September are targeted at boosting domestic spending and, while still early, we're seeing improved RevPAR results from our hotels in the month of October compared with the third quarter. Asia-Pacific, excluding Greater China, once again produced great results with RevPAR up approximately 10% due to strong inbound travel with notable demand coming from Greater China and the United States. RevPAR increased by double-digits compared to last year in South Korea, Japan and India. In Europe, RevPAR increased 15%, driven by the Summer Olympics in Paris and Euro 2024 in Germany. These events were large drivers of international inbound travel and we saw significant growth of international travel throughout the rest of the quarter as well. Our European all-inclusive properties produced impressive net package RevPAR growth of approximately 13%, driven by high demand for our resorts in the Balearic and Canary Islands. We reported gross fees in the quarter of $268 million, up 11% due to a combination of our greater system size, RevPAR growth and an increase in our non-RevPAR fees. Franchise and other fees increased 23% due to the growth in our co-branded credit card, the contribution from UVC and fees from newly opened franchise properties. Growth in base fees reflect increased managed RevPAR, most notably in Europe and fees from newly opened managed hotels. Incentive fees were flat with impacts from weather events, renovations and results from hotels in Greater China, offset by strong contribution from hotels in Europe and Asia-Pacific, excluding Greater China. Turning to our segment results. Management and franchising segment adjusted EBITDA increased approximately 9%, driven by the increase in our gross fees. Owned and leased segment-adjusted EBITDA increased by 13% when adjusted for the net impact of transactions. Group rooms revenue for the portfolio increased 30%, strong demand in the United States and the Olympics in Paris. Margins for comparable hotels increased 210 basis points and we continue to expect to achieve flat to moderate expansion of owned and leased margins for the full year compared to 2023. Finally, our distribution segment's adjusted EBITDA declined by approximately $5 million when excluding the UVC transaction, consistent with the expectations we communicated during our second quarter earnings call. Looking ahead, we anticipate fourth-quarter adjusted EBITDA, excluding UVC, to grow by approximately $5 million compared to last year. In total, adjusted EBITDA was $275 million in the third quarter, an increase of 9% compared to last year. In the third quarter, we repurchased $407 million of Class A common stock and $250 million of Class B common stock, returning excess proceeds from asset sales to shareholders. We have approximately $1 billion remaining under our share repurchase authorization. And during the quarter, we repaid the 2024 notes for approximately $750 million, inclusive of accrued interest, reducing our total debt outstanding to approximately $3.1 billion. As of September 30, 2024, our total liquidity of approximately $2.6 billion included $1.1 billion of cash, cash equivalents and short-term investments and approximately $1.5 billion in borrowing capacity on our revolving credit facility. We remain committed to our investment-grade profile and our balance sheet is strong. Now I'll cover our outlook for 2024. The full details can be found on Page 3 of our earnings release. We have tightened our ranges as a result of lower-than-expected results in the third quarter. October-to-date results and PACE data for November and December reflects encouraging RevPAR trends in the United States and Greater China for the fourth quarter. This is due to solid group pace, excluding the timing of the Jewish holidays and U.S. election, sustained business transient activity and improved leisure pace over the festive period. In Greater China, preliminary RevPAR for the month of October is flat to last year, a meaningful improvement to the third quarter. And I want to be clear that a continuation of these trends is assumed in our current outlook ranges for fees and adjusted EBITDA. Global full-year system-wide RevPAR growth is expected to be in the range of 3% to 4% compared to 2023. We anticipate United States RevPAR growth for the full year of approximately 1% to 1.5%, and we anticipate fourth-quarter RevPAR growth will be similar to the third quarter, even with the timing of the Jewish holidays and U.S. elections. RevPAR growth in Greater China is expected to improve in the fourth quarter relative to the third quarter as the stimulus measures take effect, leading to full-year RevPAR growth that is flat to 2023. And finally, we expect RevPAR growth in other international markets to exceed the high-end of our range, led by Europe and Asia-Pacific, excluding Greater China. We expect net rooms growth in the range of 7.75% to 8.25%. If the joint venture with Grupo Pinero closes in early 2025, we would expect to be in the range of 4% to 4.5%. Gross fees are expected to be in the range of $1.085 billion to $1.11 billion, a 13% increase at the midpoint of our range compared to last year. As I just mentioned, our updated outlook accounts for lower-than-expected incentive fee contribution in the third quarter and also accounts for Standard International closing later than our prior expectations. Adjusted G&A is expected to be in the range of $425 million to $435 million, consistent with our prior outlook. Adjusted EBITDA is expected to be in the range of $1.1 billion to $1.12 billion, a 5% increase at the midpoint of our range compared to last year. Free cash flow is expected to range from $380 million to $410 million, which includes the payment of approximately $150 million of cash taxes related to asset sales. Finally, we expect capital returns to shareholders of approximately $1.25 billion, including share repurchases and dividends. In closing, our third quarter results highlight the strength of our asset-light business model and the successful completion of our asset disposition program. As Mark mentioned, we will continue to strategically sell owned assets next year and beyond. And importantly, we are focused on operational excellence to continue to grow our core business and enhance our network effect through strategic net rooms growth to benefit all stakeholders well into the future.

The first question comes from Joe Greff with JPMorgan. Please go ahead.

Good morning, everyone. I appreciate you taking my questions. I have a two-part question regarding the updated guidance. It seems that net rooms growth organically has decreased compared to a quarter ago. Could you help clarify the reasons behind that change? Additionally, regarding the recent pending acquisition and joint venture, could you discuss it in the context of trailing 12-month EBITDA? I know you provided the year fee contribution, but it would be helpful to know the current run rate and your expectations for next year as we consider not just the rooms but also the contributions from the first three years. Thank you.

Thank you, Joe. Regarding our outlook for net rooms growth, I want to highlight a few key points. First, we anticipate that our gross openings this year will exceed 6%, although this is lower than initially expected due to over 2,000 rooms being postponed until 2025. This includes hotels currently under construction that may face delays, as well as some conversion deals we've been pursuing that represent a considerable number of rooms. Secondly, the attrition rate for rooms has been higher than we projected, nearing 1.5% this year, which is notably above our usual rate of between 0.5% and 1%. About 40% of this increase is linked to brand standards and market-specific challenges that impacted our ability to renew agreements for certain hotels. Some markets have become more difficult, or central business districts have shifted, leading us to seek new representations. Additionally, there were some cases where we could not reach agreements with hotel owners to meet brand standards, which reflects our commitment to maintaining quality in our portfolio. Despite these challenges, our overall momentum remains strong. Looking ahead to the first quarter of 2025, we are on track to achieve a year-over-year net rooms growth of over 6%. While there may be some slippage from the first quarter, we see no fundamental or structural issues affecting our outlook for organic growth in the same range moving forward. I’d like to briefly mention three other factors. First, our growth is bolstered by a robust pipeline, an increase in construction starts, and generally favorable conditions for hotel development. Second, we have seen a significant number of conversions benefiting us, particularly in recent years, and we plan to pursue more conversions and portfolio deals in the future. However, this activity is not included in the organic growth outlook I mentioned earlier. Third, our net rooms growth strictly involves managed or franchise rooms, excluding affiliations or any units related to residential or loyalty partnerships. We have included additional information regarding hotels and rooms associated with our partnerships with Mr. and Mrs. Smith, as well as Under Canvas, which has been very successful but does not contribute to our net room calculations. In summary, I remain confident and optimistic about our outlook. I believe we have strong momentum, and I focus on that rather than individual timing discrepancies in openings. Concerning the Bahia Principe deal, we will provide further details as we approach closing. We have a forecast for the next three years, and in cases where we engage with a platform, we typically account for renovations and integration into Hyatt systems, which will also apply in this instance. More information will be shared once the transaction is finalized.

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

Yes. The fees we are discussing are strictly management fees from managed hotels; there are no franchises among the 12,000 rooms we are adding. Besides these management fees, there are other fees and revenues that Hyatt will earn through its owned platforms in the distribution area, which will be additional to that total. We will share more details as we approach the closing.

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

Hi, good morning, everyone. Thanks for taking my question. You've mentioned several times that credit card fees are additive this quarter, which has been a common trend among your peers. Could you discuss the scale or expected timing of the renewal and how we should view that non-RevPAR fee component of your growth moving forward?

Well, we haven't detailed what's included in non-RevPAR fees. However, I can share that the average spending per card, reflecting the strength of our customer base, is higher than many others, likely at the top end for affiliated or co-branded credit cards. Additionally, spending volumes have been increasing, partly due to our expanding World of Hyatt membership base that includes cardholders. These members tend to have relatively higher net worth and household income, which means their spending is less tied to the state of the economy, and we expect to see continued growth. Over the last couple of years, we have been compounding our World of Hyatt membership growth by over 20%, and we are confident that this growth will continue. While we can't guarantee a 20% growth rate indefinitely, it is currently outpacing the total number of rooms we are adding. This could be partly due to our progress with new experiences and different price ranges we are offering. We're enthusiastic about that. Regarding the credit card contract, we've mentioned before that it is set to last through 2025, and we're actively working on structuring the next phase of our credit card arrangement. We’re not waiting until the deadline to finalize these deals; we’re working on it now.

Got it. Thanks so much.

Thank you.

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

Hi, thanks. Thanks for taking my questions. Within distribution and destination, I think you said EBITDA in 4Q up 5%. Has the trajectory in this business changed at all? Was hurricane an impact? Just a little of any color on what you're seeing from a demand perspective? And then one quick follow-up. Thanks.

In the third quarter, we experienced some impacts from the hurricanes, particularly in the Caribbean and Southeastern United States. This resulted in slower bookings, which were somewhat below what we had indicated during our second quarter earnings call. However, as we mentioned in our prepared remarks for the fourth quarter, we are optimistic about our leisure booking trends. Coming out of September into October, our leisure booking pace has really picked up. Specifically, the markets that our distribution business is managing are seeing significant growth. We project an increase of about $5 million compared to last year for the fourth quarter. As for the first quarter, we are observing a strong booking pace for our resorts, and our distribution business also supports those resorts and other nearby markets. We anticipate that this positive booking momentum will continue in the near future.

Got it. And then that's very helpful. I appreciate it. And then on room growth, the color on the 1.5% attrition was very helpful. Would you expect that attrition to leak into '25 as well? Or is this more so concentrated to a few examples and thus more of a 2024 dynamic? Just how you're thinking about it as we stand today? Thanks.

Thank you. Yes, I think there was a relatively higher number of hotels that were coming to end of life and PIP requirements that were not met. So maybe we had a bit of a blip here heading into the fourth quarter. I will say that if you look at the structure of our brand portfolio, we do not, at this point, have a brand into which we would encourage owners who want to downgrade their hotels to something that's at a lower level just to maintain those rooms in our portfolio. That's different than our competitors. And so, some of this is just maintaining brand integrity across our brands as they stand today.

Thanks.

Our next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.

Hi. Good morning, everyone. And thanks for taking my question. Mark, maybe just to fill in from that last question about a couple of points. So first of all, for next year, if I caught you correctly, I think you said you feel comfortable at 6%, but that would be kind of closer to a gross basis. So even if attrition normalized a little bit, still a little bit below, I think your kind of longer-term algo you laid out last year at the Investor Day. So maybe if you could just walk us through pros, cons on that piece? And then, specifically, on that last thing you said about the ability to kind of trade-down on sort of the brand standard side, is that an opportunity for Hyatt? Maybe you could just talk about that as you think about that and conversions because I think you're absolutely right, that is activity that we see, but other brand families have opportunities there. Is that something that Hyatt could explore? Thanks.

Yes, thank you, Shaun. You're correct about the 6% growth, which I want to clarify as it refers to pure organic growth, excluding any conversion activities. We do have ongoing conversions that significantly contribute to our overall performance. Our long-term outlook remains around 5% to 6%, possibly 6% to 7%. If we take 6% as a midpoint, accounting for attrition, it still aligns with our outlook. Conversions continue to play a crucial role during this slowdown in new construction, particularly in the U.S. However, we're witnessing a rebound in construction starts and activity in China, where the increases over the last two quarters are noteworthy. In fact, rooms in China make up about 37% to 38% of our total pipeline, with 31% of rooms currently under construction, which is up from last quarter. These positive developments support our organic growth. The number of portfolio deals and pure conversions remains high, and we are actively pursuing these, especially in markets where our penetration is relatively low. Was there a second part to your question?

Yes. With respect to the brand standards, we have

There is potential opportunity for that.

There is opportunity. It's something we've been looking at ever since the beginning of time actually. And we constantly listen to our owners and take their feedback and consider that into how we think about brand standards. It's also true that serving the high end of each segment that we serve requires investment into the properties that we have. So our owners recognize that. They're well-capitalized and that's why our attrition has historically been so low is because owners have invested in the properties and they've been performing. So I think this is a bit of anomaly that Mark described this year and we don't expect those levels to continue going forward.

I want to provide a broader perspective on the attrition we've observed and how it relates to new brands entering the mid-scale, upper mid-scale, or upscale markets. Many of those brands have been around for much longer than Hyatt Place and Hyatt House. When we introduced Hyatt Place, it was built on the foundation of over 100 AmeriSuites hotels. Looking at our overall portfolio's history, we're just starting to see hotels that have been open for over 20 years. It may seem surprising given the significant growth of Hyatt Place and Hyatt House, but we launched Hyatt Place 17 years ago and AmeriSuites predated that. We're starting to see the effects of this age. Our competitors are now on their fourth, fifth, or even sixth iterations of their current brand prototypes, having numerous generations dating back to the 1980s. As these hotels age, they may become obsolete or misaligned with today's market, which is a natural progression in our industry, influenced also by shifts in central business districts across many U.S. cities and towns. We remain vigilant and are deeply committed to maintaining brand quality and consistency. Our owners, particularly in the Hyatt Place and Hyatt House segments, are urging us to ensure that all stakeholders invest properly because it's tied to our brand equity. We're very much in agreement with our owner advisory group on this matter. However, this is a new challenge we haven't faced as prominently in the past, and I hope this gives you better clarity.

Yes, thank you very much.

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

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

Sure. Platform acquisitions often appear to have a very high valuation multiple when they first occur. For example, when we acquired Two Roads or ALG, particularly during the middle of COVID, the trailing multiple was exceedingly high. However, we do not evaluate based solely on past performance; instead, we focus on the future potential of each portfolio. Each portfolio features unique characteristics, including different lengths and quality of the underlying contracts tied to management and franchise agreements. All these factors are considered in our decisions regarding potential transactions. Generally, the initial multiples we see tend to be significantly higher—often double or more than what one would anticipate based on a consistent run rate. This is primarily because it takes time to integrate loyalty programs and other distribution channels, in addition to updating relevant renovation programs. Therefore, initial multiples tend to look inflated, and it's crucial to carefully evaluate the expected growth in fee revenue and EBITDA from these platforms to adjust the multiples to a more reasonable low-double-digit range. We believe that if we can secure a path towards a low double-digit earnings multiple on an asset-light platform, it presents ongoing value. Currently, our last four acquisitions are performing below 10, placing us in the high-single-digit range, which is quite favorable. That's our goal, and we intend to maintain this focus. We also have considerable opportunities to expand into markets where we currently have little representation compared to larger competitors. This means that adding existing properties is feasible and well-received by our loyalty members.

Helpful. Thank you.

Sure.

Our next question comes from the line of Smedes Rose with Citi. Please go ahead.

Hi, thank you. I wanted to ask you, considering your joint venture with Grupo Pinero, what percentage of overall demand do you see leisure making up in the Hyatt system now?

I believe we are currently seeing leisure represent between 50% and 55%, and this will lead to a slight increase. The addition of rooms and all-inclusive options will result in a 30% increase. However, when looking at the overall picture, this translates to about a 4% rise in our leisure rooms. These hotels generally operate with a lower net package revenue rate since they are primarily 4.5-star hotels, so the overall impact on our total mix will be less than 4%.

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

Yes. Reflecting on our history, we've made several acquisitions of specific hotels or collections of hotels where we identified a clear opportunity for resale due to their prime locations. The most notable examples that come to mind include the Hyatt Regency Orlando, which we acquired for over $700 million. It's the only convention hotel in Orlando directly connected to both sides of the Orange County Convention Center, right at the center of that complex. It was previously a Peabody, known for its exceptional quality and team culture that aligned perfectly with ours. Being a family-owned operation, the team there was fantastic, and the asset was high quality. We saw a unique opportunity to take control, negotiated an all-cash deal, and completed due diligence very quickly since we were already familiar with the hotel and its market. We owned it for several years, achieved a substantial return, and later sold it for over $1 billion. The second example is the Hyatt Regency Mexico City, where we've been completely absent from the market, which is a top-five market worldwide, for more than 25 years. This hotel is situated right by Chapultepec Park in the heart of Polanco—an ideal location. It was a Nikoo hotel, and they preferred to work with a buyer who didn’t require financing contingencies. We conducted due diligence and purchased the hotel for about $190 million in an all-cash transaction. We sold it pre-COVID for approximately $400 million, which included unlocking additional value from adjoining vacant lots. These two examples illustrate our approach. If a unique opportunity arises that provides an outstanding location in an underrepresented market with a clear path to resale, we will pursue it. While we're not aggressively searching for these opportunities, they do occasionally present themselves, and we have ample potential for growth across various markets globally.

Great. Thank you so much.

Sure.

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

Good morning, everyone. Congratulations on your quarter. I'm looking at the page in your presentation where you've included a variety of brands and channels over the past couple of years. I would like to understand if these are completely asset-free, or when you refer to being asset-light, does it imply a range of interpretations? Are these additions purely incremental to revenues and profits, or do they involve any form of key money or other investment expectations? I'm trying to gauge how your earnings business will evolve as it grows.

Yes, we do allocate key money, which is included in our CapEx figures. We make investments occasionally and sometimes in the capital stack of hotels. However, you won't see significant guarantees from us. While we do have a few, they are minor. We avoid synthetic real estate exposure through leases, as we have a strong aversion to them. We also refrain from synthetic real estate exposure through guarantees; while we do have some, they are infrequent and small due to our reluctance to engage in operating guarantees. We do not claim to be asset-light while signing operating guarantees or synthetic leases to mask real estate exposure. Regarding our investments, whether they are key money, assistance in funding a hotel through preferred or rare equity interests, or occasional guarantees on debt repayment, these are all disclosed and reflected in our numbers.

Got it. Okay. Thank you very much.

Sure.

Our next question comes from the line of Patrick Scholes with Truist Securities. Please go ahead.

Thank you. Good morning, everyone. Regarding the earlier questions about some older hotels being phased out, I understand that you might be interested in having an upscale conversion brand, similar to Hilton's DoubleTree. Is this something you are considering introducing? Thank you.

I learned a long time ago to avoid making absolutes. It's not something we have pursued so far. Moving forward, we are evaluating our overall real estate, particularly the properties within our portfolio. Given our market presence and the strength of our distribution channels, there is a possibility we could develop something for existing owners. However, we want to ensure that any initiatives we undertake do not harm our brand reputation or the experience for our upscale guests in each segment. We also want to avoid creating a confusing portfolio where the offerings are inconsistent. Those are our guiding principles. So, I would say stay tuned. We will keep monitoring this and discussing it, but currently, we haven't taken any actions in that regard. Converting former Hyatt Regencies into Hyatt Places requires a significant investment to meet brand standards. While we have converted some, it's typically more common for us to transition hotels from other brands that align more closely in terms of programming, size, and room layouts into Hyatt Places. This is certainly not easy, but it is achievable. We are aware that our competitors have substantial collections they convert, particularly in the mid-scale or lower mid-scale sectors, but we do not plan to venture into that market.

Thank you. I have a follow-up question for you, Joan. I apologize if you already mentioned this, but it seems there was some earnings impact from hurricanes in the Caribbean for you. Can you provide us with the EBITDA hit? This information would be helpful as we plan for 2025 and consider what challenges or advantages we might encounter. Thank you.

In the third quarter, I mentioned that we experienced a 4% decrease in net package RevPAR in the Americas, mainly due to hurricane activity, which resulted in approximately $46 million of EBITDA for the quarter.

Okay. Thank you. Sorry missed that.

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go-ahead.

Hi, good morning. I wanted to ask you about your view of the optimal number of brands in your portfolio longer term. Do you envision keeping everything that you currently have now or is there a streamlining opportunity within the existing portfolio and maybe the groups you referenced, the new groups you referenced, the lifestyle and the luxury groups relate to those decisions? And then I guess just lastly, if you do see an opportunity to streamline, what are the criteria you think about to determine which of your brands wins? Thank you.

Sure. Our aim has been to incorporate brands that possess strong brand equity and are clearly distinguished, providing a unique experience compared to the brands we already have. So far, we haven't encountered any overlap in acquiring brands that are essentially similar to our existing ones. That said, some smaller brands are still on the rise, offering us ample growth opportunities within our current portfolio. We also have collection brands, like JdV by Hyatt, Destination by Hyatt, and the Unbound Collection, in which we've included third-party brands. For instance, there's a distinguished boutique hotel brand in Scandinavia called Story Hotels, affiliated with JdV by Hyatt. Additionally, a renowned set of high-end resorts in Europe known as 7Pines is part of the Destination brand. This approach of integrating other brands into our collections is not unusual for us and will continue. There are opportunities to collaborate with mostly family-owned or individual brands that wish to enhance their brand equity while being part of a larger network. This could represent the main areas of potential consolidation. However, currently in our business, when third-party owners receive proposals to convert their brands into one of ours, it usually does not go over well. As for the evolution of our brand organization, the creation of a lifestyle group and a luxury group allows us to focus more sharply on the specific customer segments we serve. This structure will enable us to personalize the experiences for our guests more effectively and provide clearer distinctions between each brand. The goal is to ensure that when you engage with Hyatt, you won't be faced with an overwhelming list of brands but rather organized groups that cater logically to distinct customer bases. This is the direction we are taking with our organizational evolution.

That's really interesting. Thank you.

Our last question comes from the line of Brandt Montour with Barclays. Please go ahead.

Good morning, everyone. I appreciate you fitting me in. Mark, I would like to clarify your comments regarding gross net unit growth. You mentioned that the 6% growth does not include any conversion activity, but we understand that conversions are a significant aspect of your growth. So, I interpreted that as the 6% growth excluding major portfolio deal conversion activities.

If I had said that, I misspoke. I meant big portfolio deals, not conversions. Conversions, like run of the mill conversions, one by each, they are included in that number. So I apologize if I said that.

No, I'm really happy we cleared it up. Since others had a second question, I would like to add another one. The first quarter pace you provided for transient business looked very strong. I'm curious about the revenue figure you mentioned. Could you break down the pricing included in that? Also, how much occupancy is currently booked for that period, and what visibility does that suggest?

I don’t have a clear idea of the total occupancy that’s currently booked, but it’s quite substantial. This isn’t just based on the 5% of the business related to leisure, particularly in the all-inclusive segment, which I understand well regarding how forward bookings are managed. As for the ADR, they are stable, and it seems that occupancy is the key takeaway from what my team member has shared. That’s the information I have on that.

Great. Thanks, everybody.

Sure. I want to emphasize that we have two important businesses we are working on. In one case, there is a technical challenge, and in the other, we will be acquiring a 50% joint venture. I can assure you that our partners and the colleagues we are welcoming into the Hyatt family share our cultural values, which is a significant advantage we gained with ALG. The alignment in culture was seamless, and I communicated to our new colleagues that when culture aligns, everything falls into place effortlessly. Conversely, when there is a cultural mismatch, it creates obstacles that can lead to problems. I am genuinely optimistic about the new standard colleagues joining us and the Bahia Principe Group, which has a remarkable reputation. Founded 50 years ago by Don Pablo Pinero, their family has upheld a wonderful legacy. I believe that our shared values and commitment to care will drive us to great success in the future. Thank you for your time, and I encourage you to experience our commitment by visiting our properties. Lastly, Happy Halloween.

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