Hyatt at Baird Conference: Strategic Expansion and Growth Plans

On Wednesday, 04 June 2025, Hyatt Hotels Corporation (NYSE:H) presented at the Baird Global Consumer, Technology & Services Conference 2025. The company outlined its strategic expansion into the upper midscale and upscale segments, aiming to complement its established luxury market presence. While Hyatt remains optimistic about future growth, it faces challenges such as shorter booking windows in the U.S. market. The pending acquisition of Playa Hotels & Resorts is central to Hyatt’s plans, with an emphasis on asset sales and franchise contract transitions.

Key Takeaways

• Hyatt is expanding its presence in the upper midscale and upscale segments.
• The acquisition of Playa Hotels & Resorts is crucial for future growth.
• Shorter booking windows are noted in the U.S., but group bookings remain strong.
• Hyatt is committed to an asset-light strategy and net unit growth.
• The World of Hyatt loyalty program continues to enhance customer engagement.

Financial Results

• First Quarter Performance:

- Business travel demand persisted from Q4, with strong leisure demand in Mexico and the Caribbean.

- Luxury growth rates remained robust.

• Revenue Management:

- Upper-tier brands showed no trade-downs.

• Capital Allocation:

- $150 million in shares were repurchased in Q1, despite the Playa transaction.

- A mandatory term loan paydown is required post-acquisition.

Operational Updates

• Asset-Light Strategy:

- Hyatt’s asset-light mix exceeds 80%, targeting 6-7% organic growth.

• Playa Acquisition:

- Plans to sell Playa’s real estate by 2027 and transition contracts into long-term management agreements.

- Requires over 80% tender offer acceptance and Mexican regulatory approval.

• Net Unit Growth:

- Accelerating pipeline openings with new brands like Hyatt Studios and Unscripted by Hyatt.

• Loyalty Program:

- World of Hyatt strengthens customer acquisition and engagement.

• Technology Advancements:

- Investments in AI and system upgrades to enhance efficiency and guest engagement.

Future Outlook

• Organic Growth:

- Confident in maintaining 6-7% growth rates.

• Expansion Plans:

- Targeting underpenetrated markets worldwide.

• Capital Allocation:

- Buybacks paused until the Playa transaction clarifies, aiming to resume post-leverage balance.

• Supply and Demand:

- High demand for new builds in upper midscale and upscale segments.

Q&A Highlights

• Booking Trends:

- Shorter booking windows noted in the U.S., with solid group bookings into 2026.

• Health of the Consumer:

- High-end consumers prioritize travel, while lower-end show caution.

• Development Headwinds:

- Lower supply in upper upscale and luxury segments in the U.S.

• Brand Strategy:

- Focus on brand recognition and loyalty benefits.

For further insights, refer to the full transcript below.

Full transcript - Baird Global Consumer, Technology & Services Conference 2025:

Mike Bellisario, Senior Research Analyst, Baird: Everyone. We’re gonna get started. I’m Mike Bellisario, senior research analyst at Baird covering the global hotel brands and travel companies. Today, we have Hyatt, Joan Bottarini, chief financial officer, and Adam Roman, SVP, FP and A and IR. This is session three, so if you have questions email session3rwbaird dot com.

Joan’s going to start with a few slides and then we’ll jump into Q and A.

Joan Bottarini, Chief Financial Officer, Hyatt: Thanks so much, Michael. It’s a pleasure to be here and thank you for all of you attending for your interest in Hyatt. We really appreciate the invitation to this conference. We have experienced great investor engagement, so thank you put on a really great conference. Thank you.

And one other shout out to you, Michael, is we really appreciate the quality of the research that you have done. We have talked about it a lot that you you go deep and it’s really high quality. So thanks for that.

Mike Bellisario, Senior Research Analyst, Baird: More to come.

Joan Bottarini, Chief Financial Officer, Hyatt: Great. Great. So for those of you this is all posted on our website. I just wanted to make a couple of comments. We only have a couple of slides, but two really key points on where we are today and our strategy go forward.

So this is this is our footprint basically, where we’re located globally, been in been in business for over sixty years. When you look at our distribution, our hotels, and our rooms, we are 70% of our mix is in the upper upscale and luxury segments. This has been created from the beginning, our entrance into these types of product categories, and has been cultivated over decades of time. So now where we are and you would have seen us perhaps launch a new brand earlier this week in the upscale space, which is not in that 70% category. Earlier this year, we launched a brand in upper midscale, and two years ago, we launched a brand in upper midscale as well.

So three brands over the course of the last two years, which when you think about the opportunity for for Hyatt because of our extensive mix in the categories of upper upscale and luxury, we are now building out our portfolio in upscale and upper mid scale, which are adjacent to those segments, and we’re very excited about the opportunity. We are under penetrated in virtually 250 markets and and in every in every market around the world because we have we have a smaller footprint, but we have a mighty footprint in the in all of the countries that we operate. Just about the growth over the last this is over the last eight years. The reason why 2017 is relevant is that’s when we undertook our transformation to an asset lighter platform. And so the growth as we’ve unlocked the value in our balance sheet and have reinvested in asset light platforms has been extraordinary over that time period.

And so now today, we are this number here, 79% is as of 2024. This year, we are are well over 80% asset light mix, and so that creates great opportunities for us to generate more and more cash flow, and and we also are very, very confident about our ability to continue to grow at the six to 7% organic growth rates into the future. So with that, I will conclude my introductory remarks.

Mike Bellisario, Senior Research Analyst, Baird: On the fundamental backdrop, can you maybe just give us a lay of the land, sort of what changed January, February so strong, March to April, and then where’s everything at today as we sit here in early June?

Adam Roman, SVP, FP and A and IR, Hyatt: Obviously, the first part of the first quarter was a continuation of what we saw in the fourth quarter. For us, it was a continued strong demand from the business traveler. Leisure was very strong in the first quarter, especially given the mix that we have in Mexico and The Caribbean where our all inclusive resorts are located primarily. There’s been some macro noise that’s taken place in March and April, that created some concerns about visibility, especially in the short term, which has really led to a much shorter booking window. Pace into the future for business transient and leisure transient was down the last time we spoke during our earnings call.

What we’ve since seen is that while pace was down into the future, we’ve just seen a shorter term booking window and more bookings being realized at the last minute. So visibility still remains fairly short term in the business transient and leisure transient space, and this is primarily a domestic comment, U. S. Comment. Group continues to look solid.

Bookings into 2026 and beyond for our customers for Group have been very healthy. Then when you take a step outside of The United States into key international markets, we continue to see very good strength across our non US geographies. Europe’s going to have a pretty tough comp this year just given the mega events that took place last summer. Greater China has a little bit of an easier comp in Q2 and Q3, which we think will help us see some growth. So overall, I think we feel good about the outlook that we put out during our earnings call.

Nothing’s changed that is making us rethink how we view the rest of this year, either positively or negatively. Given the short term nature of the environment right now, certainly possible for an acceleration. If things stay the same, we believe the downside risk is relatively low.

Mike Bellisario, Senior Research Analyst, Baird: Health of the consumer, we get that question a lot. High end performance, low end performance, what is driving each of those and the divergence that we’ve seen recently?

Joan Bottarini, Chief Financial Officer, Hyatt: Yeah. We’ve certainly experienced a divergence amongst the 70% mix that I was referring to and the lower brand scales. So, it’s, you know, about the decisions that are being made, the uncertainty in the environment is creating, you know, cautionary behaviors from guests and so that’s leading to the short term behavior that Adam’s referring to. But, you know, we think that could continue to persist, that bifurcation and, you know, the the higher end is still actually prioritizing travel and experiences and it’s showing up in our numbers. We had really strong luxury growth rates in the first quarter and then in the upper upscale space, you know, it was slightly lower than that, but so that’s where we’re seeing that bifurcation really show up.

And as as Adam said, outside The US, you know, our footprint is largely in that upper tier brand categories. So that’s where a lot of that strength is coming through on a global basis outside The US.

Mike Bellisario, Senior Research Analyst, Baird: In terms of revenue man management strategies, are you seeing more people prepay, any trade down within categories, any other sort of nuanced revenue management consumer booking behavior changes you’ve noticed?

Joan Bottarini, Chief Financial Officer, Hyatt: We have not seen any trade downs because the health of those upper tier brands has been has been very strong. So that continues to persist in the numbers. And and again, you know, our our concentration at the at the upscale levels is such that, you know, we’re not in the economy space. We’re not in upper mid scale yet in The US, but we’re building. So, you know, there there continues to be demand.

It’s just a it’s just a matter of short term and slightly lower than than those upper category brand categories. Switching gears a

Mike Bellisario, Senior Research Analyst, Baird: little bit on on Playa, maybe high level, just remind us the strategic rationale and sort of what what’s the end goal and the end game here when this ultimately gets closed and we’re talking twenty four months from now?

Joan Bottarini, Chief Financial Officer, Hyatt: Yep. That’s right. So, in our our strategy, in our growth strategy and in every acquisition that we’ve undertaken, we’ve said this has to be a complimentary guest space, this has to have an asset light model or a path to asset light and so Playa is no exception in that regard. There is a lot of real estate, it’s a public company, you can all do the work to see that it’s a large asset base that is owned. And the strategic rationale for us is, first, we have we have to have confidence that we’ll be able to sell the real estate.

And so when we entered into the contract to buy Playa, we did the research and we engaged with a broker to say, help us understand this is a market where there’s not a lot of publicly available trade information. You will not be able to find it easily. So we engaged with a broker who does have a lot of experience in that market and we started to engage with potential investors. And the amount of interest and affirmation of our underwriting that we received gave us confidence that we will be able to undertake this disposition strategy that we’ve committed to in a period of time. We’ve given ourselves until 2027, but, you know, Michael, over the past eight years, we’ve done it in advance of our committed period and at levels we’ve we’ve basically over delivered in every single one of our commitments.

So so so where does that leave us? The ability to sell the real estate critical, that leaves us with an operating company and a management company for the 15 resorts that Playa today owns, half of those are are Hyatt brands. They’re franchised today, the incremental value creation for shareholders is the is the transition of those franchise contracts into long term management contracts with a significant incremental fee base. We will also and then we will be introducing the the brands that are non Hyatt branded that we will control because we’ll own them into the Hyatt portfolio. So that’s incremental fees and incremental rooms And then furthermore, there’s opportunity for us to, you know, scale our platform accordingly with respect to our resource base and meaning synergies and then also introducing the distribution platforms that we acquired from ALG into the Playa assets.

They had not previously been leveraging the unlimited vacation club and ALG vacations, and both of those distribution platforms will add incremental value for our ultimate real estate owners after we sell the assets. And all that put together, incremental fees, tapping into the to the the distribution platform, and synergies across the the the resource portfolio leads to a great deal of shareholder value, which we will tell you about as soon as we have the information about our closing and the progression of our real estate discussions.

Mike Bellisario, Senior Research Analyst, Baird: And the closing conditions are what?

Joan Bottarini, Chief Financial Officer, Hyatt: So we have to there’s a tender offer out there with a requirement to reach over 80% on the tender, which in our last expiration we did, and there is also a regulatory hurdle through Mexican antitrust.

Mike Bellisario, Senior Research Analyst, Baird: The real estate is separate. That is not a condition to closing a transaction.

Joan Bottarini, Chief Financial Officer, Hyatt: That is not a condition to closing and we cannot enter into an agreement officially to sell the real estate until we actually own it.

Mike Bellisario, Senior Research Analyst, Baird: Right. Yes. Right. Understood. And then just more broadly on the asset sale front, I know you’ve mentioned I think there were a half a dozen other hotels.

What’s the landscape like in buyer interest like today, especially versus a pre Liberation Day and then all the volatility we experienced in April too?

Joan Bottarini, Chief Financial Officer, Hyatt: You know, there’s been a lot of talk, especially this week at the conference around the transaction environment. And that’s that’s a very broad it’s it’s a it’s a big industry with asset classes and product types across, you know, if you’re just referring to hospitality assets. So you really have to consider the fact that the quality of the asset, how well it’s performing in this market today, and how well capitalized owners are with respect to their ability to finance. So all of those factors lead to this environment not creating any challenge, unusual challenge relative because these are incredibly high quality assets in great locations with very strong cash flow. So this this is what makes them them highly attractive.

The the real estate investor pool that we’ve been talking to is, you know, high net worth families that already own in all inclusive markets in Mexico and The Caribbean and institutional investors alike. So it’s it’s a broad it’s a broad interest pool, and it’s a highly attractive investment even today considering the environment. That’s what gives us the confidence in our ability to meet and exceed our our commitment.

Mike Bellisario, Senior Research Analyst, Baird: Right. $2,000,000,000 Playa and legacy Hyatt combined.

Joan Bottarini, Chief Financial Officer, Hyatt: That’s right.

Mike Bellisario, Senior Research Analyst, Baird: Switching gears a little bit, just net unit growth, just sort of the 6% to 7% organic range you’ve talked about. Guess what needs to happen to get back to that on a more consistent basis?

Adam Roman, SVP, FP and A and IR, Hyatt: If we think about this year and maybe the next couple of years, a couple of things. We’re seeing greater acceleration of openings out of the pipeline, which is very positive and beneficial for us. What is coming, and it’s already starting to arrive, are the new brands. We opened our first Hyatt Studios property in Mobile, Alabama in February after launching the brand about two years ago. We’ve got a significant number of hotels in the pipeline already, and we’ll continue to see more and more openings plus a lot of conversations that are taking place with developers, real conversations.

These are real deals that we expect will happen. You’ve got Hyatt Select, which we announced in February, which is primarily a conversion brand in the upper mid scale space, so more on the transient side, which is complementary to Hyatt Studios. Those are two brands in chain scales, upper mid scale, where we have no presence in The United States before this year. There’s significant white space for us where a developer, an owner may be looking at the pool of different brands that exist in the market today, and they don’t have a Hyatt property, or there’s maybe one or two Hyatt properties versus a lot more saturation of other brands. So they’re looking at our customer base, they’re looking at the quality of the World of Hyatt member, their ability to spend, and their ability to travel, and that makes a very compelling argument to do deals with us.

And then last Friday, we announced the unscripted by Hyatt brand, which sits in the upscale space. Very light touch conversion brand, so this is not a you’ve got to gut the hotel, renovate it before it can come into the system. These are independent, unique hotels where they’re leveraging our commercial engine so they can sign, get executed and convert into the system pretty quickly. So we’re going be able to leverage these types of brands on top of a high quality portfolio of pipeline of hotels, especially in the luxury and upper upscale chain scales, especially in international markets that are going to allow us to grow organically for a long period of time. If you think about what we’ve done over the last seven to ten years, we’ve spent a lot of time investing in building out the brand portfolio that we have today and a lot of strength in the high end aspirational brands that we’ve either developed on our own or acquired over time.

And there’s significant white space for us to grow in the upscale and upper mid scale segments, are much less capital intensive. We have a lot of white space and opportunity to grow, so we have a lot of confidence that domestically we’re going to see great growth in the select service space, which will complement the strong portfolio of full service hotels in the pipeline that we have today.

Mike Bellisario, Senior Research Analyst, Baird: Development headwinds, is that still a predominantly U. S. Problem headwind? Then what are the developers asking for or needing from you today?

Joan Bottarini, Chief Financial Officer, Hyatt: You know, supply right now is is lower, particularly in the upper upscale luxury segments in The US. This is this is by market around the globe. And so there isn’t a lot of new build in those categories, in those brand categories. In in the upper mid scale and upscale space, it’s there’s a lot of demand and there are a lot of developers out there who own land, want to build, and that’s because supply growth is still lower than the demand projections into the future. So there’s and many of those developers are very well capitalized.

They’re using their own balance sheets to actually open and and we know for the studios, hotels, they’re they are using their own balance sheets. So, you know, the the the capital formation challenge in The US is not it’s not something we’re not actually talking to our developers about, but, you know, it it is not impeding our expectations around our our organic room growth from six to 7% for the next couple of years because, you know, we are being creative in certain in certain situations to help on the capital formation front. And and we have, you know, very high quality brands where, you know, those owners and developers are actually being very creative and and they’re also very experienced. So I think when you when you put all of that together, we are gonna weather this current current environment and it’s not impacting across the board the same way.

Adam Roman, SVP, FP and A and IR, Hyatt: And one follow-up on that too is we’ve heard from developers this week that there is more and more of an appetite for the larger money center banks to start to lend into the space again, which as you know was very prolific really until the Especially during the low interest rate environment. As that starts to open up, that will certainly help from a capital formation standpoint.

Mike Bellisario, Senior Research Analyst, Baird: We heard that too. NYU recap, there’s a thanks are back.

Adam Roman, SVP, FP and A and IR, Hyatt: That’s the gun. We want them back. Yeah.

Mike Bellisario, Senior Research Analyst, Baird: Are you seeing first time Hyatt franchisees come in with these new brands, first time hotel developers too? Is there a new cohort of builders and franchisees coming in now?

Joan Bottarini, Chief Financial Officer, Hyatt: It really is across the board. So, the answer is yes. But we’re also seeing that multiunit developer who are saying, I’m going to build five of these, I’m going to build 10 of these, and they are experienced at this. They’ve done it with other brands. So we are now in that equation, in that contest, if you will, as far as what is the most beneficial flag to put on my asset, the new quality product that we’ve developed is super attractive and particularly, I mean, one of the biggest driving factors is what Adam described is the under penetration of of the Hyatt brands because that allows you to tap in to that membership base where you’re not actually diluting across maybe multiple brands in that market from another large brand that’s more proliferated in that market compared to Hyatt.

Mike Bellisario, Senior Research Analyst, Baird: You’ve introduced new brands, so have your peers. Just what is the competitive landscape like to win deals? Are you I know you mentioned not a lot of investment but some creative structures, more key money, where are you spending the key money? Also, how do you compete with the other brands too that are sort of doing the same thing as you?

Joan Bottarini, Chief Financial Officer, Hyatt: Yeah. When I was referring to earlier about the lower supply at the higher end chain scales, upper upscale and luxury, those kind of very large for those of you who follow the industry, very large key money checks that have gone out, you know, those are kind of I would describe as, like, rare error. That those are, like, very rare assets. The numbers are very large. We are very disciplined about our key money deployment and we you can guarantee that all of those deals have had multiple brands look at them.

And so in cases where we’ve looked at those numbers, we’ve said, this doesn’t work. I’m not sure how this math works for us. And, you know, given our footprint in this space of luxury, lifestyle, resort, hotels, we’re also making sure that it’s quality growth. So makes it’s accretive to shareholders and also, you know, when we think about our footprint and where our members want to travel, putting that into the equation. So it is competitive.

You’ve seen you’ve seen big money go out the door. We have not spent those types of levels. We have we’ve been about a hundred and 50,000,000 for the past couple of years and that’s about what we expect going forward. Now really strategic assets in a market where we don’t we don’t have presence, the math has to work.

Mike Bellisario, Senior Research Analyst, Baird: Along those same lines, capital allocation, top priorities today, and then just how you think about the resumption of buybacks once there’s some clarity on the Playa transaction.

Joan Bottarini, Chief Financial Officer, Hyatt: So at the beginning of this year, I think it was maybe noted by you and maybe others that we did not give guidance. We’re in the middle of all of the things we’re doing with Playa, yet we bought back a hundred and 50,000,000 of shares in the first quarter because we recognize the value and the good deployment of our capital in that way. So we will we will continue to take decisions like that when we think it’s prudent relative to balancing what we are doing on the investment side, which means that’s that’s why we’ve put this pause on providing an outlook on this on on capital returns with respect to buybacks. Once we get past Playa, I think we’ll have you know, once we get past a lot of understanding around how the real estate sales are going to take place. We have to with the with the with the money that we’re raising to acquire Playa, we have to mandatorily pay down our term loan first.

We’ll get back to our leverage ratios And if the Playa assets take on an accelerated sales process, then we will have that underway sooner rather than later. If they don’t, we have until 2027 to get that term loan paid down. But in the absence of that, we’re still gonna have we’re still generating significant levels of free cash flow to be able to take advantage of what I described at the outset, which is returns when it makes sense.

Mike Bellisario, Senior Research Analyst, Baird: And then just longer term free cash flow conversion improving the inputs to get there are what?

Joan Bottarini, Chief Financial Officer, Hyatt: Well, definitely it is our growth rates and the net rooms growth over the next over the coming years. There’s a little bit of an impact this year because of some incremental key money that we had put forth this year. Next year, we’ll we’ll also see our CapEx estimates go down. So there’s a couple of different catalysts that we expect will help bring our our target is to get higher than 50 conversion. So we believe that that path is definitely achievable given our net rooms growth expectations as well as CapEx needs coming down in the business overall.

Mike Bellisario, Senior Research Analyst, Baird: On the loyalty front, what are you hearing from customers? And I guess what are you doing to add value and and, I guess, win customers over from from other brands and then frankly get a larger share of their travel wallet more broadly?

Joan Bottarini, Chief Financial Officer, Hyatt: Well, we we hear great things, great feedback from our members. Our World of Hyatt program is award winning because of the the actual offerings that we have in our portfolio. It’s created a network that is highly attractive. We’ve also invested in the benefits of the program, which is definitely has definitely taken notice on the blogs, you know, the travel blogs are, you know, Hyatt’s program is number one, has the best benefits. Well, that is that benefits our members, but that also benefits our owners because they’re seeing those members who are spending more on property and being the first one to actually try and experience our new offerings or our new properties.

You know, the the partnerships that we have undertaken, I’ll use under Canvas as an example, there’s a glamping experience portfolio that the owners of that portfolio said, what is going to be the most beneficial membership base that I can tap into because I wanna I wanna tap into a distribution network? Well, that’s why they chose World of Hyatt, and that’s why our members are coming to under Canvas at higher levels than both of us had anticipated because it’s a it’s a new experience for them. It’s what they’re asking for. It’s how we’re thinking about how we’re growing so that we can be in places that our members wanna be. And I’m just gonna, like, emphasize this point one more time.

Our members who are not staying with us in The US, the reason why they weren’t staying with us in in certain markets is because we didn’t have a hotel in that market. And so we we got this data we got this data from a credit card company. And so the reason why we weren’t in those markets is because we didn’t have a product that would that would have the return, that would have the the cost basis and return for owners to build in that market. Hyatt didn’t have a brand. Now we do.

Now we actually have two brands. So that’s that’s why we’re actually doing that to engage and get more share of wallet in those places, those two fifty markets in The US that we don’t have presence today.

Adam Roman, SVP, FP and A and IR, Hyatt: Yeah. And I think going back to a question you asked earlier about how we win from the development front, it’s because we’re leading with our brands and not the balance sheet. Like we have confidence in the brand portfolio that we’ve built out, and that delivers for developers. We can be strategic about when we need to use the balance sheet for certain opportunities.

Mike Bellisario, Senior Research Analyst, Baird: You mentioned partnerships, I think, of The Venetian. Should we expect more partnership, maybe nontraditional hotel deals coming in the years because your portfolio is larger, your loyalty program is larger and there’s a, I guess, more positive flywheel effect that you can leverage?

Joan Bottarini, Chief Financial Officer, Hyatt: Definitely what is attractive for counterparties in those partnerships is the membership base. And they’re saying we want it’s mutually beneficial because we want to provide those experiences for our members and then they want to our counterparties wanna tap into the membership base. The Venetian is not a partnership. Organic growth, cap no capital, and also fee generative based on the business that we deliver to the Venetian. And, you know, we we need more rooms in Vegas.

Our corporate clients who are our our biggest and best corporate clients, they’re doing rotations on their major events. If you don’t have more options in Vegas, you’re missing out on that rotation that they’re doing between Orlando, San Diego, Chicago. And now we can. Now we can serve them better.

Mike Bellisario, Senior Research Analyst, Baird: Got it. Last question just on What what are you doing? What is the brand doing to help owners, help franchisees? I guess, what’s next in the queue as we all think about technology advancement more broadly?

Joan Bottarini, Chief Financial Officer, Hyatt: We’re doing a lot. So there’s there might not be enough time, Michael, but Just a couple a couple of of things we’re super excited about and I think are gonna be transformational for our owners and our guests is we have are completely swapping out our three three of our major systems which is revenue management, property management, and reservations system. System. We’re doing it all at the same time with some extraordinary talent that we’ve acquired along the way who has done this at different at other companies, and it’s going it’s we’re actually almost complete, and it’s going exceedingly well. And doing all of those at once because they are so intertwined is going to help us be much more efficient and really enable a much better engagement with our guests who are booking with us.

So the other piece which is and now I’m out of time, is our investment in AI. And so if anybody wants to come to an after section, I will can talk about our

Mike Bellisario, Senior Research Analyst, Baird: end business in Great. Thank you. Thank you everyone. The next presentation here is SPS Commerce.

Thanks everyone. Thank you all. Thank you.

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