Earnings Call
Hyatt Hotels Corp (H)
Earnings Call Transcript - H Q1 2026
Operator, Operator
Good morning, and welcome to the Hyatt First Quarter 2026 Earnings Conference Call. Operator instructions were provided. 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.
Adam Rohman, Senior Vice President, Investor Relations and Global FP&A
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.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
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. 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. 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, Hyatt 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 signing 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 Andaz Lisbon, which strengthens our lifestyle brand presence in Europe, Andaz 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 further strengthening our position as a leader in lifestyle offerings at scale. We also continue to see strong momentum in our Essentials brands, entering seven 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 Hyatt 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 rooms 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 and sale agreement for the sale of the Andaz London Liverpool Street. 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 drives 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 can 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 perform 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.
Joan Bottarini, Chief Financial Officer
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% 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, hotel-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 the Playa 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, Operator
The conference is now open for questions. Our first question comes from Lizzie Dove with Goldman Sachs.
Elizabeth Dove, Analyst, 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. 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 and leisure and how you expect that?
Joan Bottarini, Chief Financial Officer
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. Even more in excess of our expectations was that select service RevPAR was strong, and that was driven by business transient improving. So all of those trends that we saw 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. That's going to be helped in part 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.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
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 nine months grown group share. Our RevPAR realization has steadily increased over that period of time. Part of that has to do with a new approach in terms of how we go to market, which 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 segments in our portfolio. If you look at our brand group, for example, we were up in the double digits in RevPAR growth in the first quarter. We also had the most expansive index growth, so market share growth, almost 5 points of increase in share in the first quarter. So 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. I think our relative performance is a reflection of that.
Operator, Operator
Your next question comes from the line of Stephen Grambling with Morgan Stanley.
Stephen Grambling, Analyst, 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. 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, or is this more kind of a standalone at this point?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
Thank you, Stephen. First of all, the way we think about the business is that it has been hit by a couple of isolated issues that have had an obvious impact. You heard 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 opportunities than risks. They really derive from two 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. We have an AI strategy roadmap for new capabilities that we're building that will make us more effective and more efficient and I think drive more volume. The platform itself is highly enabled to be able to serve others on a white-label basis. We see growing opportunities in that domain because there are companies with large customer bases that are looking to offer more and different types of services to their customers. 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 the 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 lift. 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 just a cog in the wheel. We're looking at it as a real business with a real opportunity in the future.
Joan Bottarini, Chief Financial Officer
And the only thing I would add to what Mark said is structurally about half of the business serves five-star locations and half of the business serves four-star locations. So when you think about the performance of our portfolio and the demand that we saw despite the security concerns in Mexico, there was redirection of a lot of that business into other locations. That is something that has benefited our portfolio, but it is temporary. With respect to ALGV, we're seeing after the disruption late February and into March that pace 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 and second quarters improve significantly, particularly into the third and fourth quarters of this year.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
So while we're on this topic, I want to provide a couple of pieces of data that I think 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%. Secondly, we were positive the highlighted markets had positive RevPAR growth across most of those markets—Jamaica excepted because Jamaica is still widely disrupted. But up 3% in Mexico and up 11% in the Dominican Republic; really where you saw the massive change was March. Mexico was down 5% but the Dominican Republic was up 16%. 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 and were able to cascade business that wasn't going to Mexico because of security concerns into the Dominican Republic. So that's a hard data point for you to understand in terms of the strategic value that ALGV provides to the business itself.
Operator, Operator
Your next question comes from the line of Michael Bellisario with Baird.
Michael Bellisario, Analyst, Baird
Mark, on the demand front and sort of your big picture outlook taking those together, how are you thinking about or maybe sensitizing the whole potential range of outcomes with all the macro uncertainties out there, like higher gasoline, higher airline ticket prices, reduced flight capacity? How are you thinking about that? Are you seeing anything yet in the booking pace that maybe gives you any pause?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
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. The biggest issue is the persistency of the current situation: overnight last night oil moved quite a lot. There's a danger in trying to make predictions off of momentary geopolitical or policy positions. If there is a persistence of higher oil prices and that keeps going up, the biggest hit in terms of demand will be among lower-income households. That's true across retail as well as hospitality. That's 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. That hasn't really affected our volumes; they've shifted as I described, but it hasn't affected our volumes. At some level, the distinction is that our client base is concentrated in higher-income households and households that have financial assets and investments. There's a caveat: we don't see any significant demand shifts at this point, but we are paying close attention because ever-escalating oil prices and inflation will have an impact if they persist.
Operator, Operator
Your next question comes from the line of Richard Clarke with Bernstein.
Richard Clarke, Analyst, Bernstein
Just want to follow up a little bit more on some of the Caribbean dynamics. At the full year results, you would have expected the Jamaica hotels to reopen by the end of this year. It looks like that's moving to early '27. What impact does that have on this year's numbers? And on Mexico, are you seeing demand there 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?
Joan Bottarini, Chief Financial Officer
Richard, with respect to Jamaica, we have removed Jamaica from our metrics for this year. So the impact to this year is captured in our EBITDA and fee outlook. We provided a walk during our investor presentation in the fourth quarter on that specifically. 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 saw in late February and into March, so we feel good about what we're seeing in the last couple of weeks. Week-on-week, we're actually seeing pace get better. Airline capacity has not increased, but airlines are managing with load factors, so there's still quite a bit of demand going into these markets as we look out into future quarters. For the second half of the year, we feel good 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 redirection of travel into other markets where we have hotels.
Operator, Operator
Your next question comes from the line of Shaun Kelley with Bank of America.
Shaun Kelley, Analyst, Bank of America
I wanted to ask about some of your global expectations. Could you give a little more color on how you're thinking about Middle East and Africa trending through the balance of the year? And maybe some of the offsets globally—like is Asia seeing any redirected business that is now staying more in that market and not crossing over to Europe, or how do you see some of those global puts and takes?
Joan Bottarini, Chief Financial Officer
I'll start with what our outlook includes, Shawn. Middle East is built into our outlook as having a more pronounced impact in the second quarter, which is embedded in our EBITDA outlook. 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. By the end of the year, we may be getting closer to flat versus last year, but it's very uncertain as this evolves. One region that has been exceptionally strong is China; 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. In China, the Lunar New Year holiday gave a boost in the quarter, but we're also seeing group slightly up and business transient about flat. So across all demand segments, China looks like a region we can continue to rely on for growth for the remainder of the year.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
The only additional comment I'd make is on Europe, which was up 7.5% in the first quarter, stronger than we anticipated. There's more and more talk about fragility in Europe, especially around energy prices, and that's an area to watch. There will likely be a difference in performance between economy/budget/mid-scale versus full-service and luxury. We actually have a positive outlook in Europe for the remainder of the year. Europe has been resilient for our portfolio over the last several years, and I wouldn't count it out.
Operator, Operator
Your next question comes from the line of Smedes Rose with Citi.
Bennett Rose, Analyst, Citi
I appreciate all the color around Mexico and the Middle East. Switching gears, I was curious about your comments at the beginning of the call about terminating the sale of the Andaz in London and not moving forward with a couple of other asset sales. Could you provide more color around what broke those deals? Also how are you thinking about the transaction environment overall? Is it getting more favorable relative to your last call and maybe this time a year ago? Would you like to complete additional asset sales through the balance of the year?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
Sure. With respect to Liverpool Street, the hotel sits on top of rail lines that are part of Network Rail and is adjacent to Liverpool Street station. The redevelopment we had been part of with a developer had a number of conditions, including approvals from Network Rail that were not issued. We don't believe the opportunity is dead; we believe the deal we had signed doesn't yet have the authorities it needs to move forward. That doesn't mean there won't be a redevelopment, it will likely take a different shape. We remain in close contact with all parties involved and I'm optimistic. It's a great location and a great hotel market. In the meantime, the hotel is performing very well, so we're effectively getting paid to wait. We will not undertake the redevelopment ourselves; we would only participate by selling the property into a redevelopment plan. The other hotels were relatively small deals—portfolio cleanup items, unleased properties operating on ground leases. We ended up deciding not to proceed with two of those properties for market-specific reasons. We believe the markets will perform well and we'll get paid to wait; we'll look to put another deal together in the future. Finally, yes, we are working on other opportunities to complete additional asset sales. Our plans and confidence in the transaction market remain unchanged. I do think the market for property sales is more constructive this year than it was last year.
Operator, Operator
Your next question comes from the line of Duane Pfennigwerth with Evercore.
Duane Pfennigwerth, Analyst, Evercore
So just low-single-digit EBITDA growth in the first quarter and mid-single-digits in the second quarter. Can you walk through the building blocks of why we would get so much acceleration in the back half?
Joan Bottarini, Chief Financial Officer
Sure. As we look at the core business, we've been talking about how strong we've been performing and how we anticipate continuing to perform, including our net rooms growth expectations. When you look at total year RevPAR and total year net rooms growth, that's going to lead to very strong fee growth for the year. In the second half, the distribution segment will recover with better performance, particularly in the fourth quarter because we are experiencing easier comps in that quarter. Also, structurally, we renegotiated the Playa contracts and in the second half of the year we don't have the headwinds from franchise fees that we had in the first quarter, which helps fee growth into the second half. Additionally, the G&A we posted in the first quarter was a little higher than our expectations, mostly due to timing, so as we look at the last three quarters of the year, we'll have lower G&A expense as well. So there are structural items, improvements in distribution, continued strength in the core fee business and G&A timing that lead to better acceleration in the back half.
Operator, Operator
Your next question comes from the line of Dan Politzer with JPMorgan.
Daniel Politzer, Analyst, JPMorgan
You spoke a bit about general drivers of demand, but earlier in the year there was a lot of focus on events like the World Cup, the America's 250th, etc. Has there been any change in the outlook for those events as they impact your business, especially the peak summer season?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
No change in outlook; it's positive. The pace we're seeing into the cities hosting World Cup is very strong. New York is a significant driver because that's where the finals will be, and the July pace for New York is extremely strong. We have real group business pacing well ahead in those cities too, so it's not just transient demand. Our visibility to transient pickup between now and the World Cup is limited, but our visibility on the group side is quite good. Group pace increases for those markets are in the mid-teens, so we continue to feel positive.
Operator, Operator
Your next question comes from the line of David Katz with Jefferies.
David Katz, Analyst, Jefferies
I wanted to go back to technology and AI in particular. Mark, I'd love your perspective on where you're at, where you'd like to get to and how you see AI evolving for Hyatt and the industry.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
We have made significant progress over the last two-plus years of putting together our entire environment and building out a number of generative platforms. One should never measure success based on how many agents you have deployed. I don't believe any particular platform or tool is a durable competitive advantage by itself. What I do think creates advantage is combining advanced capabilities with building platforms that generate real impact and becoming practiced at the human elements required to generate value. There are two dimensions: the level of expertise and repetitions in creating great tools and platforms and the expansion of adoption across the enterprise. We have enterprise-wide licenses on a few platforms and are looking to extend and expand. Every week in my team meeting I hear new and different applications hotel teams have developed that are remarkable. Adoption and expertise vary across the company, but we've seen revenue-focused activity that is our number-one focus. Every revenue-facing initiative we've undertaken has also resulted in productivity gains. The question is what we do with those productivity gains. In many cases we redeploy resources to optimize further and get more specific around insights on our customer base to go to market differentially. I think this is a key driver of the strengthening performance in our core business. The big opportunity is to elevate humanity in interactions with guests and colleagues by removing administrative work from the system. Given that we're a purpose-driven business, that is a powerful motivator for us.
Operator, Operator
Your next question comes from the line of Chad Beynon with Macquarie.
Chad Beynon, Analyst, Macquarie
Great to see the increased pipeline of executed management and franchise contracts you announced. With respect to the Middle East conflict, should we expect any construction start delays or overall activity delays, or do you think this pipeline should be executed as planned?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
Given the nature of our exposure in the region, which is more concentrated in Saudi than anywhere else, we don't see any impact in 2026 to our pipeline execution. We expect the pipeline activity to proceed as planned.
Operator, Operator
Your next question comes from the line of Trey Bowers with Wells Fargo.
Unknown Analyst (Nick Wikel on for Trey Bowers), Analyst, Wells Fargo (substituting)
I want to dig in on NUG and figure out which brands you're seeing the most uptake in, the mix between conversions and new builds for the year, and the potential impact from the Middle East. Any color would be great.
Mark Hoplamazian, Chairman, President and Chief Executive Officer
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 select-service brands, up 25% in terms of pipeline size year-over-year, which is notable. We've had a sequential improvement in hotels under construction—up 10% quarter-over-quarter. About one-third of our hotels are under construction now. Our outlook currently includes that about two-thirds of our gross room openings this year come from our pipeline and about one-third are openings that are in-year. Of the in-year openings, we already have 60% identified with opening dates. We feel really good about where we stand. Activity in the U.S. in the Essentials brands is very strong right now. We've hit a vein with Studios, Select and Unscripted. Of those brands, Select has really taken off. If I count correctly, over 30% of the conversions we see planned for the year are Select hotels. The U.S. Essentials portfolio is the strongest category and will help fill many markets where we have no representation. We opened seven new markets in the first quarter and expect to open a large number of new markets this year.
Operator, Operator
And the final question comes from Meredith Jensen with HSBC.
Meredith Prichard Jensen, Analyst, HSBC
Could you speak a bit more about the loyalty program? You gave the membership and strong growth, but could you dig into spend, redemption behavior, how that's evolving across regions and customer cohorts and any insights from your credit card partnerships?
Mark Hoplamazian, Chairman, President and Chief Executive Officer
Sure. In terms of the nature of spend, roughly 60% to 65% of room nights are paid with the remainder being redemption. It's a healthy ratio of paying guests versus redemptions. We welcome and celebrate those redeeming points because that is the loyalty flywheel. The demographic profile of our membership base continues to grow stronger and we see that in total spend of members versus nonmembers. Roughly speaking, members spend about twice what nonmembers spend. That relates to engagement and total spend per stay increasing over time. As we work closely with partners and sponsorship initiatives, we're seeing high engagement and better fidelity of customer data which is attractive to other high-end platforms. A high proportion of travel spend is represented by the top travelers and we primarily play in the top spending cohorts. We believe we can add value for members primarily through experiences, with a continued focus on well-being. Our emphasis is on experiences and emotional connectivity versus purely transactional interactions. We're small enough and differentiated enough to make this model work powerfully, and that's why you're seeing persistent significant growth in membership which will continue to evolve to our benefit. I want to thank everyone for their time this morning. We're incredibly excited about where we stand 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. If any of you who are coming are not currently World of Hyatt members, please sign up and join. After you've joined, book through the World of Hyatt app or hyatt.com because many benefits flow to members. For those of you who are already World of Hyatt members, thank you and don't forget to book through World of Hyatt or hyatt.com. Thank you for your support and have a great rest of the day.
Operator, Operator
Thank you. This concludes today's conference call. Thank you for participating, and have a wonderful day. You may all disconnect.