Hyatt Hotels Corporation (NYSE:H) Q4 2024 Results Conference Call February 13, 2025 10:00 AM ET

Company Participants

Adam Rohman - Investor Relations
Mark Hoplamazian - President & Chief Executive Officer
Joan Bottarini - Chief Financial Officer

Conference Call Participants

Ben Chaiken - Mizuho
David Katz - Jefferies
Connor Cunningham - Melius Research
Smedes Rose - Citi
Stephen Grambling - Morgan Stanley
Chad Beynon - Macquarie Group
Brandt Montour - Barclays
Alex Brignall - Redburn Atlantic
Michael Bellisario - Baird
Richard Clarke - Bernstein
Patrick Scholes - Truist Securities

Mark Hoplamazian

Yeah. There were several notable openings in the fourth quarter enhancing our luxury resort and lifestyle offerings. These included Park Hyatt London, River Thames, Grand Hyatt Deer Valley, Thompson, Palm Springs, and the addition of the Standard and Bahia Principe hotels.

We expect organic net rooms growth to meaningfully accelerate in 2025 reflected in the outlook that we provided this morning. We kicked off the year in a big way with the addition of the Venetian Resort, in January. And through the first 45 days of the year, we have already opened 9,000 new rooms.

Now turning to operating results. Our fourth quarter results reflect the strength of our brands as we achieved several records during the quarter. This morning, we reported system wide RevPAR growth of 5% for the quarter and 4.6% for the full year. We continue to see high end consumers prioritizing travel as RevPAR growth was strongest among our luxury brands in both the quarter and for the full year.

Leisure transient rooms revenue increased approximately 4% in the Quarter. And for the full year, revenue increased approximately 1%. Results were strong for resorts in the Americas over the festive period, and transient pace for the first quarter of 2025 is up in the high single digits.

Compared to the first quarter of 2024. Group rooms revenue was flat in the quarter and was up 5% when adjusting for the timing of the Jewish holidays in October and the US elections in November. Looking ahead, 2025 group pace for the US full service managed properties is up 7% compared to 2024.

With average rate accounting for over half of the increase. We expect group contribution to be strong in the first quarter driven by the timing of Easter falling in April 2025, compared to March of 2024, and the presidential inauguration in DC in January. The This is TransUnion.

Customers remained our strongest growth segment. Delivering revenue growth of 10% in the quarter. We continue to see our large corporate customers back on the road and we experienced an increase in both demand and average rate in the quarter.

Overall, business transient revenue was up 12% For the year. And this benefited major urban markets in the United States including New York, Washington DC and Seattle. World of Hyatt continues to deliver remarkable results.

And has fueled our commercial success. World of Hyatt membership reached a new record of approximately 54 million members at year end at 22% increase over last year. Multi room night penetration during the quarter set a record high highlighting the engagement from our world of Hyatt members.

Spend on our co branded credit cards increased 18% in 2024 compared to 2023. And our consumer card was the winner of the Kiplinger's Reader's Choice Award for the best hotel credit card. Our focused effort to deliver more unique experiences for our guests more frequently and in more locations, helps to position Hyatt as the brand of choice.

Before I turn it over to Joan, I'd like to spend a few minutes reflecting on Hyatt's evolution to a brand led organization. When we launched World of Hyatt in 2017, we we aspire to create a loyalty program that would build community and engage with high end travelers. World of Hyatt was and is the foundation of our brand portfolio. And we've deliberately expanded that portfolio to meet the needs of our existing customers and to attract new members. While growing an award winning loyalty platform we also took intentional steps to add brands that would complement our existing portfolio while accelerating the growth of our existing brands.

We used customer insights to identify where and why our members wanted to travel, and deliberately grew our portfolio of luxury resort and lifestyle hotels while at the same time expanding into the upper midscale segment. Since 2017, tripled resort rooms, and quintupled lifestyle rooms. We also launched Your Cove and Hyde Studios, our upper midscale brands.

At the same time, we embrace the power of a differentiated loyalty by providing more benefits for our members when many loyalty programs were taking benefits away. The relationship with our members is more than a transaction. Because when they say the Hyatt, they welcome us into their lives.

And we have always committed to caring for them so that they can be their best. We also extended care by providing our members with more ways to experience Hyatt. Whether on property, or through collaborations that extended the value of their membership.

While care is hard to measure, we would know we were succeeding if our membership base and engagement of our hotels increased. And on those measures, been extremely successful. Since 2017, we have grown our loyalty membership base on average by 27% per year.

And today, our members per hotel is significantly higher than our larger competitors. And the next step of our journey begins with our new brand groupings. Luxury, lifestyle, Inclusive.

Classics, and essentials. Our brand led organization allows us to further elevate the focus on our guests, and customers that we serve in these brand groups. We're using new tools that deliver bespoke insights that will drive greater customer preference for each brand group and more loyalty to Hyatt.

Even as we improve these abilities, we have the most white space and opportunities to grow compared to our major competitors. We expect to continue to grow at a healthy pace with well defined brands and organic growth from our record pipeline, to serve many more stay occasions for our guests. Our growth in luxury and lifestyle will continue to be very intentional ensuring we protect the ethos of each brand and to not just grow for the sake of growth. We will continue to be a leader in the all inclusive space, with an increasing level of powerful resources driving performance.

For Hive, this means much more than just a pending quote, all inclusive unquote. The end of an existing brand. It means providing a differentiated frictionless travel experience through vertically integrated channels like ALG vacations and UBC, while delivering the best food and beverage and entertainment offerings in the category.

Our classics, which includes storied brands like Brand Hyatt and Hyatt Regency, and our Essentials brand group, which includes our select service brands. Will drive scale for Hyatt. We will focus on expanding our brand footprint, as we still have many more markets to serve.

Especially among our essentials brands, This includes our upper midscale brands which have great momentum with over 55 open York Cove hotels and our First Hyatt Studios hotel opening in the first quarter of this year. We have over 120 upper midscale hotels in the pipeline will fuel future growth. This is a view to our future.

Differentiated offerings across distinctive brands and a highly focused approach to leveraging our loyalty program and the insights that matter the most as we serve high end travelers across more and more of their stay occasions. We are committed to seeing our guests and customers as individuals and extending our purpose of care We will not use a lowest common denominator approach in any aspect of our business. This leads to greater loyalty and share wallet among our members and customers.

At a higher average rate n at a lower cost of acquisition, driving better returns for our owners. Our owners realize the benefit of the Hyatt network and wanna build more properties with us. That increases our brand footprint.

This provides more opportunities in more places for our members and guests driving further loyalty to Hyatt and better performance for our owners. When you put this together, we have the ability to generate significant fees per room. Which increases our earnings, Margins.

And cash flow over time and serves as a powerful growth engine into the future. I'd like to close by expressing my gratitude to all Hyde colleagues including the 15,000 new colleagues from Standard and Bahia Principe who live our purpose every day by caring for each of our stakeholders. Joan will now provide more details on our operating results.

John. Over to you.

Joan Bottarini

Thanks, Mark, and good morning, everyone. During the fourth quarter, system wide RevPAR increased 5% led by increased business and leisure transient travel. In the United States, RevPAR increased over 3% our strongest quarter of growth in 2024 driven by business and leisure transient travel. RevPAR in the Americas, excluding the United States, increased approximately 9% with business travel up over 15% in the quarter.

Our all inclusive properties in the Americas reported net package RevPAR up 2% to last year had a strong festive season. In Greater China, RevPAR was flat to last year, significant improvement. From our third quarter results.

Domestic business transient travel benefited hotels in Mainland China during fourth quarter, and we experienced similar trends in January of 2025. Asia Pacific excluding Greater China had another quarter of strong results. With RevPAR up approximately 12%.

RevPAR in South Korea, Japan and India increased by double digits compared to last year driven by increased international inbound travel into these markets. Europe finished an exceptionally strong year with RevPAR up 7% in the quarter. Leisure and business transient were the primary drivers as international inbound continues to positively impact operating results in Europe.

We reported gross fees in the quarter of $294 million up 17%. We set a record for the highest gross fees in a quarter driven by franchise and other fees, which increased 27% due to the contribution from UBC and RevPAR growth in the United States. Base fees grew by 11% fueled by managed RevPAR growth, and fees from newly opened managed hotels.

Incentive fees were up 11% from strong contributions from all inclusive properties in the Americas, and hotels and other international markets.

Mark Hoplamazian

Owned and leased segment adjusted EBITDA increased by 5%.

Joan Bottarini

Sent when adjusted for the net impact of transactions. Margins for comparable hotels increased 70 basis points in the quarter And on a full year basis, improved by 20 basis points compared to 2023. Our hotel teams have demonstrated strong cost discipline and a focus on productivity improvements which has led to expanded margins despite increases in non controllable costs.

And finally, our distribution segment adjusted EBITDA declined by approximately $4 million when excluding the UBC transaction. Lower than anticipated booking volumes, and hurricane Milton contributed to the decline. In total, adjusted EBITDA was $255 million in the fourth quarter, an increase of approximately 20% excluding the net impact of asset sales compared to last year.

For the full year 2024, we repurchased approximately $1.2% billion in shares as we returned excess proceeds from asset sales to shareholders. We have approximately $1 billion remaining under our share repurchase authorization. As of December 31, 2024, our balance sheet remains strong with total liquidity of approximately $2.9% billion including approximately $1.5% billion in capacity on our revolving credit facility and approximately $1.4% billion of cash, cash equivalents and short term investments.

During the quarter, we issued $600 million of senior notes and we intend to use a portion of those proceeds to repay our notes due in April 2025 on or before their maturity. Now I'd like to cover our outlook for 2025. The full details can be found on page three of our earnings release.

As a reminder, our outlook does not include projections for acquisition or disposition activity beyond what what has been completed as of today. For the full year 2025, we expect full year system wide RevPAR growth to be in the range of 2% to 4% compared to 2024. We expect RevPAR in the United States to grow near the midpoint of our system wide outlook range driven by strong group and business transient demand.

But expect to see a continuation of elevated levels of outbound international For Greater China, visibility remains very short term, but as we have previously noted, trends have begun to improve. At this point, we expect to see international outbound travel trends in 2025 looked like 2024, However, expect domestic travel to improve throughout the year driven by business transient. We anticipate our properties in Asia Pacific excluding Greater China, will have the strongest growth in RevPAR of any of our geographic regions as they benefit from significant international inbound travel, and favorable foreign exchange rates especially compared with the US dollar.

While Europe is lapping very strong results in 2024, particularly in the second and third quarters from several large events, including the Olympics in Paris, we expect to see year over year RevPAR growth at the lower end of our range. We expect net rooms growth the range of 6% to 7% driven by an acceleration in our organic growth. Our outlook does not incorporate small portfolio deals which would be accretive to our current outlook.

Gross fees are expected to be in the range of $1.2% billion to $1.23% billion an 11% increase at the midpoint of our range compared to last year. Our outlook includes the addition of the standard international and via principal pay transactions for the full year accounting for approximately one third of our fee growth.

Mark Hoplamazian

Our outlook also incorporates.

Joan Bottarini

fees from the Venetian Resort Las Vegas, which joined the Hyatt system in January. We earn fees based on the business that we deliver through our channels and expect fees to steadily increase over the coming years. Adjusted G and A is expected to be in the range of $4 to $460 million inclusive of G and A from the Standard International and via principal paid transactions. Adjusted EBITDA is expected to be in the range of $1.1% to $1.15% billion an 11% increase at the midpoint of our range compared to last year, when adjusting for the impact of asset sales.

Our outlook incorporates the reduction of $80 million of owned and leased segment adjusted EBITDA from real estate that we sold 2024. Please refer to slide fourteen of the investor presentation posted on our Investor Relations website this morning for the quarterly impact of real estate dispositions on 2024 results. For the distribution segment, expect growth of approximately $5 to $10 million compared to 2024 with most of the growth expected in the fourth quarter.

Adjusted free cash flow is expected to range from $450 million to $500 million which excludes $150 million of deferred cash taxes expected to be paid in 2025 related to asset sales that took place in 2024. Our capital allocation strategy remains consistent. We are committed to our investment grade rating, identifying opportunities to invest in growth, that create value for our shareholders paying a quarterly dividend, and returning excess cash in the form of share repurchases.

We're not providing an outlook for capital returns to shareholders at this time due to the pending transaction with Playa, However, we do expect to return capital to shareholders in 2025, beyond quarterly dividends. We will provide an update over the coming months as the transaction with Playa progresses. Before closing, I'd like to highlight recent RevPAR trends.

January started the year off strong driven by growth in leisure transient. We see these trends continuing so far into February and with the shift of the timing of the holidays that Mark mentioned earlier, expect for the first quarter to be at or above the high end of our full year guidance range. As a reminder, our first quarter adjusted EBITDA results are expected to be negatively impacted by approximately $40 million due to the real estate dispositions completed in 2024.

In closing, our fourth quarter and full year results highlight the strength of our asset light business model. Over the past year, we have successfully executed our operational commercial and growth strategies while simplifying and streamlining our business model. And as we look ahead, we remain focused on operational excellence, to continue to grow our core business while our network is expected to be enhanced by strong organic growth in 2025.

Benefiting all stakeholders well into the future. And this concludes our prepared remarks, and we're now happy Two.