Thanks. Good morning, everyone. We're going to get started. I'm Mike Balisario, Senior Research Analyst at Baird. Today we have Hyatt with us, not just Joan Botterini, Chief Financial Officer, but also Adam Roman, Senior Vice President, Investor Relations, FP&A.

Treasurer.

And soon to be Head of Americas for Hyatt, July 1. So this is your farewell tour. thanks for joining us we'll jump into a bunch of the investor day topics from last week but first maybe set the stage one q rev par outperformance maybe walk us through some of the drivers of that and then what are you seeing so far in the second quarter yeah so first quarter well first Mike it's great to be here we really enjoy this conference a lot and it's been been a great morning so far so thanks for having us as far as first quarter performance went yeah better than been than expected United States was was very strong

international markets were all very strong as well notwithstanding the tail end of the quarter when there was disruption in the Middle East with the conflict that's that's taking place in terms of second quarter we continue to see positive momentum we'd mentioned on our last earnings call that April was a little bit better than expectations I think may we still have preliminary results right now but certainly shaping up better than than we were expecting primarily driven by strength in the United States strengthen Asia Middle East looks like it's going to be less worse than than April but obviously still a lot of variability going on in that part of the world. But overall, I think we're really pleased to see how the quarter is shaping up and feel good about the second quarter estimates that we provided a couple weeks ago on our earnings call. And then just along the same lines, the high-end, low-end debate that everyone's focusing on, what are you seeing within your select service portfolio in terms of the inflection that's occurred and for how sustainable do you think that is yeah select service looks a little bit better year over year uh which isn't a which isn't a surprise given that we're now starting to get into some easier comps after lapping liberation day last year so um there's certainly still a bifurcation between higher end and lower end we're still seeing our luxury hotels performing better than than select service in especially in the United States but select services is starting to look a little bit better then in terms of the demand strength are you seeing a lengthening in the booking window at all and then on the group side any changes and sort of group meeting planner sentiment no much on the I don't think the booking window has changed that much I mean, it's always shorter term for business travel, leisure travel, except for, you know, sort of fly-to destinations. But it's probably more stable, certainly, than it was when we were sitting here with you a year ago. And group continues to look really solid. I think we'd said on the last earnings call, balance year was up kind of mid-single digits. So corporate customer, especially our top 100 accounts, continue to prioritize travel, both for group and business travel.

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

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

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

We haven't seen any notable direct impacts. Obviously, you know, intercontinental travel coming through the Middle East between Europe and Southeast Asia is a very prominent route, but we've seen different routes being taken place clearly because the demand in Europe and what we've seen in Southeast Asia has been very stable. Nothing notable there.

We can spend a lot of time here on the Investor Den. I should mention, if anyone in the audience does have questions, you can send this session to at rwbaird.com. Just in terms of the financial targets, sort of the drivers, I think 2% to 4% rent-parter growth, probably no surprise, but 6% to 8% net unit growth. What needs to happen to get to 6%, what needs to happen on the good side to get up to 8% over the next three years?

Well, those targets that we laid out last week, and for those of you who haven't listened to our Investor Day presentation, very, very, I think, compelling messages that we delivered around Hyatt's differentiation at scale, our competitive advantages, and our strategy to continue to deliver industry-leading growth in net rooms growth, in our fee growth. Our organic fee growth exceeds the industry over the last three years, and our fees that we generate for every room that we have in our system also on a per-room basis exceeds any other of our larger peers in the industry. So when we look at all of what our competitive advantages are delivering, our messages there were that clearly we're very well positioned to continue to deliver these industry-leading growth rates. And that leads to what you just asked, Michael, around net rooms growth. We have and had outlined in our session last week a very compelling multidimensional reasons behind our net rooms growth, one of which is the scalable brands that we launched in the last couple of years in the upper mid-scale space. We have, and we've got a great slide that's posted that shows how we have, we've been operating for 70 years, and across that time period, we have representation in the top 50 hotel demand markets in the world. So we have great representation across all of the major markets around the world, but as you go deeper, we didn't have into sub-markets, and we show the top 650 on that slide, and where we are relative to our larger peers, and there's a huge gap. So the white space that exists for our brands to continue to grow, that's primarily in the U.S. We noted 300 markets in the U.S. where we are not present. We now have the brands to be able to grow in those markets and be the first Hyatt in those markets, some of them which are highly saturated by other brands. So great opportunity for us. And that 6% to 8% is organic growth. And everything I'm talking about with this opportunity for the white space is right exactly in that brand category and will help us as we look forward into the future. Our pipeline is over 150,000 rooms on the existing base of over 350,000 rooms. That's 40% of our existing rooms is in our pipeline. That embedded growth into the future also is what gives us confidence in the 6% to 8% number. And growth in markets outside the U.S. was also prominently featured last week. We have had very strong growth in China. Our pipeline as a percentage of the existing base in China is over 100%. So we've got a lot of rooms opening in China, a lot of continued opportunity given our reputation there. And then in India, we see that the investment being made into the country, the increase in domestic travel, increase in inbound travel, and the growing middle class there is only creating more opportunity for travel in the country. So we've seen great signings just starting off this year, actually. And so multiple dimensions that I just covered. Anything I missed?

Yeah, and the other thing I'd probably just highlight, and Javier talked a little bit about this when he was discussing all-inclusive, is that while we are the leader of all-inclusive five-star luxury hotels, the opportunity to grow is still very significant for us. We've got strong market share in a traditional market like Mexico and the Caribbean, But when you get into Europe, it's a very fragmented space for all-inclusive opportunities, really, as you sort of think about North Africa, as well as really the whole entire Mediterranean basin, as well as opportunities in the Middle East and Asia, where we've got two Hyatt Ziva and a Hyatt Zillara opening in a couple of years. So even in a brand category where we are the leader, like all-inclusive, we still see significant opportunity to grow those brands over time. So I think we're very excited about the growth opportunity for us because, in addition to what Joan said, there's just very few markets that we look at and go, we're good. We don't need any more hotels. We can continue to serve our members and our customers in a way that will benefit them for a very long time.

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

Well, one of the unique attributes of the brand that we launched in 2023, Hyatt Studios, is we did it actually with developers right alongside of us. And we recognized and heard from them that, Hyatt, you need product in this space, in the upper mid-scale space. And so we worked on it with them and made sure that it met return profiles, met the market profile. So the return on assets, so the cost to construct the product, and the market rates that would yield the returns that investors were expecting, developers were expecting. And so that's where it all began. And we launched it with great momentum. It's been three years. We have five hotels now open and operating, and several more in the pipeline, and many more under discussion. So it's just a unique commentary that I would make about doing that alongside of developers because we were actually building exactly what they were looking for, but very much designed with our customer base in mind, which obviously was attractive to the developer base because they are a higher-end customer base embedded within our world of Hyatt platform. And so going into a new category was going to be important that we had the quality to be able to deliver the top line and cash flow for owners. Right now, there has been some incremental costs that surrounding interest rates. I think that that has actually stabilized a bit. We're looking at ways that we can help our developers and make relationships where they're trying to pull their equity stack together and secure financing and, again, back to the relationship approach, getting those hotels built in the coming years. So we're very excited about it and see a great opportunity.

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

It's exactly the reason that I was just describing around us not being present in 300 markets, clearly that we've identified as top markets. So if you are a developer owner of a particular brand and you're looking at an opportunity to enter the Hyatt system, we now have a brand for you and you can convert your asset to a Hyatt brand and enter into a system, be the first Hyatt hotel in that market and tap into the world of Hyatt high-end customer base and have a premium RevPAR in the market. And so that is what we're seeing. And it's coming from multiple categories surrounding the Hyatt Select, which is well-positioned in the upper-mid-scale space. So some that are converting from another upper-mid-scale product, some from a step below, making incremental investments, and some coming from an upscale space that want to make a lesser investment to enter into the upper-mid-scale category. So there's multiple dimensions of how that brand is going to grow. Again, very exciting for us. We're seeing a lot of momentum in the pipeline and under discussion, and these will open up quickly. They'll take three to six months to get signed and open.

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

In studios and select, for the most part, at least the open properties are in the U.S., what are the international growth plans for those brands?

There are, we've already put in a licensing agreement in China for both of the brands with a existing developer that we've worked with, existing owner.

So we've already got underway agreements, multi-unit agreements with two different developers in China, both of which we have announced. we've announced both of those yeah so and then there's opportunities outside of china as well but we're really getting the momentum here in the u.s and then we'll expand yeah i think these brands will work really well in a lot of different markets including market a market a country like india um you know even something like the unscripted by hyatt brand our our select service soft brand that's primarily a conversion brand the first hotels or several of the first hotels that came into the system were actually through a portfolio in Vietnam. So we believe that's a brand that will scale across the world as well.

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

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

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

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

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

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

We have, in all of these opportunities that we've executed on in the last seven years, they've all been off market. So unique opportunities all in luxury lifestyle resort opportunities. and this is I think an endorsement of both the attractiveness of our world of Hyatt membership base and these developers owners who have come to us and said we really want to tap in, we want our assets to be part of the Hyatt system. So as we think about opportunities into the future, it's a very similar filter that we put through if you will, a complimentary customer base, something that will amplify and increase the network between our existing members and what these new opportunities might contribute. And now that we have a lot of soft brands, there's probably opportunities for some of other brands to join our soft brands in a portfolio way, or if it's a brand that we would acquire, it would have to have the opportunity to grow and join our pipeline and be something that we could continue to grow. So we have certain attributes that we've been successful with bringing together and amplifying our network, and that's how we would continue to look at, and of course it would be asset light or a path to asset light quickly. So that's that's sort of the way we think about it I'll just comment that there's we're under penetrated in markets around the world Europe tends to be for us a particular opportunity under penetration wise and so I would say that's an area and it's very fragmented there's a lot of portfolios that are non-branded so potential opportunity for us so we you know but we're open and like I said a lot of these have come off-market urgency wise it's just I think it's a very unique opportunity when unbranded portfolios or owner operators come to a brand operator and say I want to join your system sometimes this this comes with you know estate planning or multi-generational type progression with families who own and operate these portfolios. So we'll see how it evolves over time. But I think there's lots of opportunities just finding the right one.

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

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

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

We have been long time committed and invested in our data and in the way that we use data to deliver insights to help decision support throughout the company, whether that's acquiring something or helping operations perform better on property. So we've long been very, very focused in this way. What that does is that enables a company like us to take advantage of these capabilities in a differentiated way. We had launched intent-based search about 18 months ago within Hyatt.com, and what we found is we learned a lot. We experimented, we piloted, we learned a lot. We actually improved conversion on our site by 25% before and after. So that's just a proof point of how we've gone about it, how we've built sort of the infrastructure to help us position ourselves to take advantage. And this is coming all the way from our CEO. He is consistently demonstrating in every internal and external forum his commitment to and our investment in improving these capabilities, both for our guests as they engage with us and book online. You mentioned the distribution channels and the intent-based search as part of that, but also operationally. And we focus on revenue generating opportunities. We believe those are the most important for us to focus on and will continue to drive revenue for our owners, driving, obviously, cash flow and coming back around to the flywheel of growing the company. So investments of that nature actually helps our teams to focus on the things that matter. And it's not all about efficiency for efficiency's sake. It's about better revenue opportunities so that our teams can actually spend the time to help us grow and do things to improve our owners' bottom lines.

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

Yeah, we talked about it last week. We're about 70% direct channel, so pretty similar to our larger peers. As far as the second piece of that question goes, I think it's too early to tell. I think what we're really focused on is making sure that the brand, whether it's Hyatt or the brands within our brand groups and obviously the loyalty program, are top of mind for consumers so that whatever tool you're using to plan travel, you're thinking about Hyatt first. So if you use ChatGPT to plan a trip through Europe, you're saying, I want to go to these countries and I want to stay at Hyatt's. that's where the power of our our brand and and ultimately the the increased distribution that we have what will come from and then making sure that you're able to interact with the various tools that that are out there now we talked about or we have talked about being one of the first to have a Hyatt app within the chat GPT domain it's very early days you know I think there's a lot written about the direction that travel is going with llms and the reality is it's still you know there's not a lot of um activity that we're seeing relative to other booking channels but ultimately we believe it will be very helpful for us from a direct channel standpoint having a relationship with our members having a relationship with our customers so that we're able to serve them when they're on property and then when they want to come back and stay with us so something we're very focused on and continuing to learn and make sure that we're present wherever our customers are going in terms of world Hyatt world of Hyatt how do you think about sort of next steps of sort of further improving and maybe even monetizing the program even more than you already do well we don't use that term we do on our side we you know we look at world of Hyatt as an

experience show platform this is a loyalty platform it is not a transaction between us and our members it's an experience that we're providing and benefits that we are providing for all of our members we invest in our program we have the best benefits of any loyalty program in the industry and we have a transparent award chart we have the ability to gift your points to your loved ones all very unique attributes for our program and what that does is it creates an incredibly loyal and engaged membership that is spending more at our properties they are 90% of the time when they make a reservation they're paying for that reservation as opposed to redeeming it so they are wanting to do more and more with us and what we give back is those benefits and the experiences that are delivered by our operating teams in the field to actually deliver the experience that they expect and from a from a overall perspective we are very committed to building the network and growing in the areas where we're underrepresented so that we can be in the places to meet our members more and more of their purpose of visit and their share of travel experiences so opportunities is to continue to invest in that because it has created the highest growing loyalty platform in the industry and it's delivering value for owners and that is the flywheel that we're focused on that's a good point to end on we're out of time next in this room we have core pay excuse me, Corpe.

Session one is a market discussion with Strategas. Bentley Systems is session three. Session four is Knowles Corporation. Weight Watchers is session five. And Eynosia is session six. Thank you everyone.