Hyatt at Morgan Stanley Conference: Asset-Light Strategy Emphasized

On Tuesday, 03 June 2025, Hyatt Hotels Corporation (NYSE:H) participated in the Morgan Stanley 3rd Annual Travel & Leisure Conference. The company shared insights into its asset-light strategy and current market dynamics, highlighting both opportunities and challenges. While Hyatt aims for a high percentage of fee-based earnings, it faces mixed demand conditions, with robust international performance contrasted by softer U.S. markets.

Key Takeaways

• Hyatt is committed to an asset-light strategy, targeting over 80% fee-based earnings.
• Strong international demand, particularly in Asia and the Middle East, contrasts with a softer U.S. market.
• The company is leveraging AI to enhance efficiency and productivity.
• Loyalty program growth outpaces competitors, with a 20% annual increase.
• Hyatt plans $2 billion in asset sales by 2027, despite transaction market volatility.

Financial Results

• Revenue Per Available Room (RevPAR): Guidance for RevPAR growth this year is between 1% and 3%, with U.S. growth at the lower end.
• Asset Sales: Over $5 billion in asset sales have been achieved, with plans to sell an additional $2 billion by 2027.
• Margins: Labor costs remain the largest expense in luxury hotels, impacting margins.

Operational Updates

• Brand Performance: Luxury segments are experiencing double-digit growth. Hyatt is gaining market share across most brands and regions.
• Loyalty Program: Hyatt’s loyalty program boasts 40% more members per hotel than peers, with elite members spending more and paying higher rates.
• Artificial Intelligence: AI is used to respond to over 1.5 million business RFPs annually and is being integrated into revenue management and finance.

Future Outlook

• Growth Strategy: Focus on expanding leisure offerings in the Middle East and Asia and on converting independent brands.
• Development: New construction projects are emerging, particularly in the upper midscale hotel segment.
• Challenges: Volatility in fixed income markets and wage inflation are affecting transaction volumes and margins.

Q&A Highlights

• Demand Environment: Group demand is pausing, with uncertainty leading to shorter booking windows.
• Asset Dispositions: Last year, Hyatt sold $1.8 billion in assets, navigating a challenging market.
• Development Pipeline: Project initiation and completion in China are experiencing delays.

Readers interested in more detailed insights are encouraged to refer to the full conference call transcript.

Full transcript - Morgan Stanley 3rd Annual Travel & Leisure Conference:

Unidentified speaker, Analyst: Well, so excited for our next presenters. We’ve got Mark Hoplamazian, president CEO of Hyatt along with Joan Bottarini, who’s the chief financial officer to discuss Hyatt Hotels, which is always very busy. There’s lots of things that they’re doing.

Actually, yesterday on our panel, there were some very positive remarks from, actually, two panels referencing your, I would say, prodigious use of the balance sheet to create a strategic asset. So that was the exact comments, and you can I don’t wanna explicitly say who it is? Maybe we can talk about that offline. But, you know, maybe to set the stage I think you can’t leave me hand right now. Yeah.

Hold We’ll talk about it later. Okay. So, you know, you’ve you’ve done a lot of things as I as I referenced, trying to simplify the model. There’s also, on the flip side, you’ve done a couple of acquisitions. So maybe you just walk us through the current mindset in terms of thinking about the asset light journey, where we are, and how these fit in.

Mark Hoplamazian, President and CEO, Hyatt: Yeah. So, first of all, good morning, everybody. Thanks for taking the time to be here, and thank you. Yeah.

Unidentified speaker, Analyst: Thank you. Appreciate it.

Mark Hoplamazian, President and CEO, Hyatt: We have been committed to this asset light journey since 2017. So it’s been eight years, not quite eight years, seven and a half years. It’ll be eight years in November when we formally announced. And we have basically achieved and accomplished exactly what we set out to do. I think it took us to it took us to actually execute against it for people to really realize that we were not living in la la land.

But we have. We sold the assets that we had set out to sell. We are in excess of 80% fee based earnings at this point and counting. We’ll be we’ll be growing the the fee based earnings percentage over time even higher because we will sell additional assets that we own legacy assets, and and we have every intention of selling the Playa assets once we acquire Playa. So our commitment to that asset light journey remains steadfast.

And we have executed with discipline and with strategic intent to make sure that we are getting full value, that we are selling assets where we have in Kuwait investment requirements. So we’re sort of off building into a sale, a PIP, or a property improvement plan where the owner will take that on. And we’re paying close attention to the owner that we’re selling to so that we know that we’ve got a good very long term agreement, either management or franchise, which we’ve done for every single asset that we sold, and, and that they will be potentially, owners that will continue to grow with us. So, I mean, as we look forward, I mean, over the next, say, five years, there’s no question that we will be in the nineties, with respect to percentage of our total revenues that are coming I’m sorry, earnings that are coming from asset light asset light, fee based earnings fee based earnings. That’s great.

And what we’ve got a couple

Unidentified speaker, Analyst: of questions that we’re asking every one of the companies here. And the first one, which is a bit of a topic to sure, but it’s just where are we in the demand environment? How do you think about where we are now versus maybe your long term thought process for where RevPAR, you know, could go globally?

Mark Hoplamazian, President and CEO, Hyatt: Do you wanna start on that?

Joan Bottarini, Chief Financial Officer, Hyatt: Sure. I’ll I’ll start. It we provided guidance this year of one to 3% in in RevPAR growth. And as we announced that in our first quarter earnings, you know, we were really looking at pretty diverse demand patterns around the world. So in The US, you know, we’re at the lower end of that range.

In the second quarter, we said we expect to be about zero to 2% in in The US. And that’s because we’re seeing a little bit of a a tad bit, I would say, of demand that is waiting to book. We we are and that becomes challenging if you’re looking at these patterns in The US for us because it’s just booking windows that are very narrow right now. So that’s The US. Outside The US, demand is strong.

It’s strong in Asia, outside of China, in Europe, in The Middle East. We’re just we’re just seeing, you know, consistently good performance there. So, you know, this is this is consistent with what we said in the first quarter, and those those booking windows still are are are pretty tight. And I think, Mark, you said yesterday, you know Yeah. This uncertainty that people are feeling breeds some caution.

So, you know, that is that is the shorter that is the shorter booking windows that that we’re experiencing now. On the group side, you know, we’re still positive this year and engaging with our corporate group customers who, you know, got an update from our sales team yesterday that, you know, there’s there’s some waiting as far as booking that business that, is coming into July hasn’t gone permanent yet. So those are the types of things that we’re experiencing right now in the environment.

Unidentified speaker, Analyst: Yeah. It’s interesting. We yesterday, we heard from some folks that there was that pause from a group standpoint. We had see that. We also had some, one of your peers and also a private equity panel.

And they but they did say that the in the closer end bookings were actually coming in a little bit stronger. So people are exactly Despite that uncertainty, they’re they’re showing up just makes it

Mark Hoplamazian, President and CEO, Hyatt: little harder as you’re describing to maybe predict. Yeah.

Unidentified speaker, Analyst: Sounds good. You know, think that the other question that, you know, we often hear about the demand environment or need to think about with brands is that there might be different performance by chain scales or even by brands. As you look at your different portfolio of brands, how do you assess which ones are resonating, which ones are performing better or worse, and what are the tools that you have to maybe change the trajectory of any individual brand within your portfolio?

Mark Hoplamazian, President and CEO, Hyatt: Yeah. We’re actually going through a really interesting evolution of how we assess success. Historically, we have done it pretty in pretty in a pretty rudimentary or straightforward way of looking at market share and margins to the extent that you can get competitive information, GOP per available room, that sort of thing. And also growth. I mean, with the ultimate list libnestestest as to whether you’ve got a brand that’s working or not is do you have a pipeline that’s growing and developers that are continuing to sign up with you?

We’re evolving that though because there are more tools available to us, more data available, and more analytics available to us to actually decipher brand health. And we’re looking at multiple dimensions of brand health with external data feeds and internal data feeds. We’re just feeding into a model that’s gonna allow us to have a more robust a sense of whether there’s brand heat and whether there’s brand activity that we can lean into and really flex both in terms of pricing and programming or whether there are things that we need to go back to rectify. So I’m excited about that because I think there’s a lot of advancements that have been made for consumer products companies, for apparel companies, for footwear companies. They can really well assess kind of what’s going on with their brand.

And I think we have the there’s no reason why that can’t be done in the hotel business, and we’ve already started to to go down that path. I will say that the the continuation we are still very focused on RevPAR index and where we stand. In Asia, we’re also very focused on F and B revenues, which represent a big chunk of the total. So we are tracking these as real indicators about are we keeping up? Are we gaining share?

And the good news is we’re gaining share in the vast majority of our brands, in the vast majority of the regions. So it but there’s no question that the upper end of the chain scale has been outperforming, has been growing the fastest, is the most healthy at this point, double digit growth in the first quarter in luxury. There’s just a lot of momentum at that higher price point. And as you go down chain scale, it successfully goes down lower and lower and lower.

Unidentified speaker, Analyst: Okay. Yeah. So that’s that’s been another question we get from investors, which is just I think that some of them look at the pricing of some of the hotels Yep. Whether it’s leisure or just broader luxury. Yes.

Like, how is this sustainable? You know, these price points seem so high, but sounds like it just keeps going. I mean, are you seeing any pockets of change amidst this greater uncertainty? And when what gives you the confidence to be maybe moving even further into the leisure category? Well, we already have more than 50% of our revenues coming from

Mark Hoplamazian, President and CEO, Hyatt: room revenue coming from leader. So we, I think, have a really good balance, and and and I think that’s it is a good balance for both World of Hyatt members as part of the program, for the network effect, but also leisure has been higher end leisure has been very durable over time and the the first segment to recover after every downturn that we’ve had since, I don’t know, for at least thirty years. So we feel good about where we stand, and there are opportunities for us to continue to grow in leisure, but we’re also organically growing in more traditional markets that are not leisure oriented markets. There may be purpose of visit at those hotels that are leisure, but they’re not actually reserved markets.

Unidentified speaker, Analyst: Right.

Mark Hoplamazian, President and CEO, Hyatt: So and with respect to, like, the the price realization and whether there’s a limit or not, don’t forget that supply growth, especially in a city like this I mean, why are luxury hotels trading where they are? Nothing’s being built. Right. So it’s not complicated. It’s a bind to band.

And for those of you who’ve been to the Park Hyatt, you are if you’re in New York, you understand why a couple thousand dollars a night is a massive bargain. I mean, it’s a freaking great hotel. So I don’t understand. Like, of course, it’s gonna be worth standing.

Unidentified speaker, Analyst: Yeah. So sticking with with leisure, you’re still in the process of waiting for, you know, approval fully from the Playa deal. There’s also some other things we can talk about, but you referenced that you’re at 50% or more of leisure demand right now. Is that it? Or are we gonna keep moving down this path, or is is Playa kind of getting you to the point where you feel like you’re strategically complete in leisure?

Mark Hoplamazian, President and CEO, Hyatt: No. I think, there are probably other opportunities, but, probably was a unusual opportunity and an unusual profile because our commitment to being asset light means that we’re selling those assets. Right. And they they do represent a big chunk of the value of the company. So the by any principle deals completely asset light, and I think that there will probably be other opportunities to do asset light deals.

So we don’t have any interest in growing asset heavier in any way, shape, or form. So I would say, I think that the kinds of things I don’t think we’re we have a deficit in our in our resort portfolio right now. But geographically, I believe that The Middle East will represent some interesting growth in leisure. Asia, I think, is underpenetrated in resorts for our system. We have we have such an extraordinary group of World of Hyatt members that are the road warriors of Asia who, you know, Grand Hyatt for them is the is their core brand.

They need we need to find a way to provide more and more leisure opportunities for them in Asia. So that’s a that’s a place where I would say we would lean more heavily to and Europe also, we we have met a lot of room to grow out in Europe. But I would say Asia, just in terms of network effect and The Middle East, those are the two areas that I think you can you can imagine that that would actually be particularly beneficial from a network effect perspective. Makes sense. Yeah.

Unidentified speaker, Analyst: And as part of your continual move towards asset light, part of that’s tapping the transaction market and making sure that you you do sell some of the asset heavy. Yep. Seems like there’s mixed messaging there when we talk to different investor, bases. Maybe because of higher interest rates, maybe because of other factors. But what are you seeing in the transaction market, and why are your assets maybe different than just the run of the mill?

Mark Hoplamazian, President and CEO, Hyatt: Well, I mean, I think if you talk to the brokers, it’s easiest place to get data. Volumes are down this year. Yeah. Transaction volumes for good reason. I mean, I think there’s been a lot of volatility in the fixed income market.

Right. And banks have been more cautious. So I think underwriting tends to be a little bit more challenging when you’ve got uncertainty and volatility. But I think what overcomes that is quality of assets and positioning of those assets in the markets that they’re in. So we we have a number of things that we’re working on right now in the existing portfolio and, of course, the asset based in Paya.

We’re working on that as well. And we actually feel confident we’re gonna be able to complete a number of transactions this year. We did make a a commitment when we announced the Playa deal that we would sell down $2,000,000,000 worth of assets by the end of twenty seven. And so we didn’t say that would be all coming from the client portfolio or for all from the legacy portfolio. It’s gonna be combination.

So my view is we feel extremely good about executing that. No question about it. But I I still think we can get deals done in this environment. It’s not it it is harder than it was last year and the year before, but I think that that’s also temporary. I mean, we’ve been doing this for eight straight years, and we’ve sold assets through thick and thin.

Unidentified speaker, Analyst: Are the are the luxury or I should say luxury or your legacy? Some of them are luxury assets.

Mark Hoplamazian, President and CEO, Hyatt: Yeah. Many of them.

Unidentified speaker, Analyst: Many of them are luxury assets. Yeah. Are are those do they have a different buyer pool than the apply assets? Yes. To be totally separate, but they’re are they both influenced by the same rate dynamics, or are these more so unlevered buyers?

Mark Hoplamazian, President and CEO, Hyatt: The rate issues are the same if you’re gonna lever a transaction no matter what it is. Yep. However, it’s more geography and the conditions. So, you know, resorts in The Caribbean, they have these things called hurricanes that come through from time to time. So that’s a that’s an issue that has to be taken into account.

There’s Those are typhoons in the Atlantic. Exactly. Okay. Exactly. Right.

So you have to think about, like, the what what what’s the actual environment? Therefore, what’s the likely what what was what what is the prevailing sort of multiple structure or valuation structure that’s there versus, say, the park height and sitting in the middle of plus one dump. Like, that’s those are two vastly different things. Right. So go ahead.

Joan Bottarini, Chief Financial Officer, Hyatt: Sorry. I thought you were No. No. In the last, year, in 2024, there was a lot of feedback of how are you gonna finish this commitment that you had made previously before the 2,000,000,000 that Mark just described. Well, because because the debt markets had you know, the rates have gone up so much end of twenty twenty three and into the early parts of 2024, it’s about finding the strategic buyer who is going to be the long term relationship partner with us in the contract.

We sold 1,800,000,000.0 of assets last year in an environment that was arguably more challenged. The CMBS market opened up. So, you know, the Hyatt Regency Orlando was a very strong deal, very shareholder accretive. So, you know, when you think about the quality, what Mark just described, I just wanted to, you know, put a fine point on that that it is a very important factor, the long term nature of the relationship, and the fact that if these assets are higher quality, you’re not looking at a short term interest rate challenge. You’re looking for the long term because you can you can get past that if you’re a strategic buyer.

Unidentified speaker, Analyst: Has has that evaluation conversations changed, or how do you think about it? I don’t want you to be negotiating with yourself, but, you know, it’s what’s what’s the general thought process for the right multiple to be?

Joan Bottarini, Chief Financial Officer, Hyatt: Throughout this entire disposition program, we have been selling into strength. The over 5,000,000,000 that we’ve sold, we’ve realized over 15 times. Right? And that does not even include the management contracts that we have secured, the long term management contracts in every single case. So there’s extra value to Hyatt beyond the 15 times.

So we that is that is our approach, and that is how we will continue. We will, you know, not be price takers. This is why we have done this in a very methodical way over those eight years.

Mark Hoplamazian, President and CEO, Hyatt: And if I had to rank order the issues, it’s not pricing as much as it is filling up capital stack. Right. So we tend to find that potential buyers are saying, hey. Based on our model and based on what we can borrow senior and what that’s gonna cost us, we have some gaps in the capital stack as opposed to. Actually, we’re just gonna renegotiate price.

Right. So it tends to be more focused on filling out capital stack than it does to a price negotiation.

Unidentified speaker, Analyst: By the way, I think that that 15 and a half times, mostly, you get a quote down on a free cash flow basis because they’re also very capital intensive assets

Mark Hoplamazian, President and CEO, Hyatt: versus moving asset light. Yeah. So it’s even better.

Unidentified speaker, Analyst: Yeah. Yeah. Yeah. Thank you for that. Adam, how how come you Adam, how come you didn’t think about that?

We tell them. Clearly, I’m not. Yes. Try not to get people in trouble here. I I thought I think

Mark Hoplamazian, President and CEO, Hyatt: you just

Unidentified speaker, Analyst: did. So the the the other implication of that is really the pipeline. So what are you seeing in terms of the development pipeline then in this environment where maybe rates are volatile and,

Mark Hoplamazian, President and CEO, Hyatt: you know, the broader macro is a little bit volatile? It really varies by change scale, but I you know, we have a number of hype studios under construction right now. The first one is open and operating and doing well in Mobile. A lot of developers were there for the grand opening, and they were resolved that they were gonna get home and get a shovel on the ground. So I think for for that category, for upper mid scale, it’s actually we’re seeing new starts in construction starting to really spool up.

I think in certain markets, China being prominent among them, I think new the inception or completion of projects has been slower and remains slower at this point. So and in Europe, a lot of the things that we do are already in situ hotels that are converting. So we don’t have a ton of new construction in Europe at this point. Everything in The Middle East is new construction. So I would say varies, you know, across the board in many different domains.

In The United States, we’ve we’ve had openings of of lifestyle hotels. So we just opened a a magnificent bunkhouse hotel in Houston. We’ve opened just recently. I I just said that we didn’t have any new builds in Europe. That’s not true.

We have three that come to mind, Belgium, Standard, and Lisbon. We have both an Andaz and a Standard opening in the coming year. So we have quite a few new builds actually in certain markets in in Europe. So I would say, overall, new starts have been very slow if you look back over the last two years, but I feel better about where we stand at this point. We had a a event last night and a lot of developers were there, and I was encouraged to hear how many of them were citing a number of different banks who’ve come to them and said, we’re ready to get back in the market now.

So I feel like we might be at a bit of a turning point here in terms of capital function.

Unidentified speaker, Analyst: Have the the developers changed as you’ve moved to more leisure or

Mark Hoplamazian, President and CEO, Hyatt: into international markets, the developer type or your owner type? The developer type is really different by region anyway. Yeah. So it hasn’t really changed within a given region.

Unidentified speaker, Analyst: And then on on the conversions, that seems like it’s been a topic that all of your peers have been saying has become a bigger opportunity. You know, what what sets you apart within the conversion market, and what what drives competitive advantages there versus maybe new development?

Mark Hoplamazian, President and CEO, Hyatt: Yeah. I mean, I think first and foremost, it’s just penetration and saturation. So we’ve cited this before, but if you look at every market in which there is at least one Hyatt hotel, and then you look at all the Hyatts in those markets, the average number of hotels that we have in in all of those markets is four, and our primary competitors are 14. So we don’t have anything that looks like significant penetration or saturation in any way, shape, or form. Almost all of the hype studios are opening in markets like Mobile.

We we have no product in Mobile whatsoever. Yeah. And the next subsequent three markets where we will the next subsequent three openings for Hyde Studios will be in brand new markets. For Hyde Select, which is a a conversion brand from hard brand to into Hyde Select, those are markets in which we also have no or little representation. And the owner’s decision point is, do I want the first Hyatt that’s benefiting from a very, very healthy growth rate loyalty program, compounding at 20% a year?

With the highest I think one of the highest member per hotel. So it seems

Unidentified speaker, Analyst: like there’s ample capacity there. Correct. Yeah.

Mark Hoplamazian, President and CEO, Hyatt: So do I want that, or do I want to build the fifteenth, sixteenth, seventeenth, eighteenth Hilton or Marriott? Right? So I think there’s a very clear value prop for those those owners. And we designed Tite Studios to be really clearly a great return profile for developers, and we hit our mark with respect to the price per key cost per key for the first one. And that’s super encouraging because the worst thing that can happen is you set sort of a rough target and then you come in 20% above that, and all of a sudden developers are like, woah.

Wait a second. I’m in Missouri. You gotta prove to me that this can get built for the number you set because otherwise it doesn’t work. We’re not having to do a reset because we are out of the blocks with a really solid execution.

Joan Bottarini, Chief Financial Officer, Hyatt: I would just add too on on our competitive advantage with respect to conversions. I would say Mark touched on it with the customer base. It’s really, compelling when you think about independent brands or even hard brands that might not be realizing the returns in their market. We just had a very in the last probably six months now, but it was a really important market that we weren’t in Santa Barbara. But not Santa Barbara.

Santa Monica.

Mark Hoplamazian, President and CEO, Hyatt: Santa Monica.

Joan Bottarini, Chief Financial Officer, Hyatt: And that was converted from a hard brand to a Hyatt because of our customer base and what we could bring, getting back to we were not in that market. And then a market that we have a lot of presence in in Shanghai, we had another hard brand conversion to an Alila in Shanghai recently. These types of conversions are because the owner is saying, I’m not performing, and the Hyatt customer base is where I would like to tap into. And that is that’s what’s driving some of our conversions and the differentiated position that we have because they’re very very competitive in every market, these types of conversions.

Unidentified speaker, Analyst: Right. So you you referenced the growth and loyalty program. I referenced the this I think it was in your latest quarter. It may have been on the the end of the year that I think you have 40% more loyalty members per hotel than than the peers, which suggests that there should be capacity there. But Yeah.

Remind us who is that most loyal customer? How does that compare to some of the peers? And, you know, maybe just to level set.

Mark Hoplamazian, President and CEO, Hyatt: Well, the our elite members are spending significantly more. First, then they’re paying higher rates, and they’re spending more per night than nonmembers. And secondly, I think the the total share of wallet is has grown, and we are looking to continue to grow it further and further. When we launched Hype Studios, it was primarily through the driven by the recognition that we were losing share of wallet with guests already loyal to Hyatt that were traveling in those markets that where they couldn’t find a Hyatt because there wasn’t one. So I think that the network effect that we will continue to to get behind is gonna be high.

I think our demographic is higher. We’re told by our credit card partner that we have the highest spend per member per per cardholder. So that and that’s just not that’s not a a thing that’s lived by itself. It’s it’s derived from the fact that we have a high demographic that we have as a core customer base. Right.

So and it’s that’s also not sort of there’s there’s real grounded logic in that, which is we play in the higher end of the chain scales. Yep. And within each chain scale, we’re trying to be at the high end. So it it it it it’s logical therefore that that our customer base and therefore the the value of the customer just based on what John was just saying is very high.

Unidentified speaker, Analyst: Since you mentioned the co brand credit card, but maybe I’ll expand it out to just non room related fees, how do you think about benchmarking yourself versus your peers? And then where you can, you know, maybe get opportunity to either improve economics to your owners or capture more fees?

Mark Hoplamazian, President and CEO, Hyatt: A big question.

Joan Bottarini, Chief Financial Officer, Hyatt: We I mean, with respect to the co brand card, I think it’s it’s well known that we’re in the middle of thinking about what the next level of that negotiation is because we have an extension until or we have we have a contract that expires at the end of next year. These things are long term contracts, so we’re starting already thinking about what that will look like. Our position right now is a good one because we have a loyalty program that’s been growing at 20% per annum in the last five years, and our distribution has grown 50 in the last eight years since we started the disposition strategy. So we’re in a really good position to actually make sure that we’re balancing all of the economics between shareholders, these these stakeholders, shareholders, owners, the program itself, and importantly, our members. So we’re going to take, careful look at that and, take advantage of our position.

Unidentified speaker, Analyst: And so is it I guess, I’m not sure how much you can share on this visit, more about the number of cardholders or the spend per card that you think about in terms of what drives those economics? And then secondarily, is it more about the leisure customer or the business customer?

Mark Hoplamazian, President and CEO, Hyatt: I think, our customers are both. Right. Right? Yep. In the main yes.

There are some that are retired, and so they’re primarily leisure customers. But the the vast majority of the core customer base has historically for high have been the business traveler. We are now more than 50% of our room revenue coming from from leisure. We have a much more balanced kind of customer base. So I would say that with respect to the drivers of the issues of of value that is derived from these relationships, it’s it’s total spend and the growth the growth rate that we’ve already realized and the growth in the future growth of members.

So I would say we’ve got momentum, and we have we have seen repeat business coming from the new members that are signing up. Because you’re not you’re not virtual members. They’re actually real people who are really spending money. It’s not like, oh, well, I’ll sign up because it doesn’t cost me anything, and then you never see them again. So we’re actually seeing repeat repeat states.

So I think all of those things will factor in. They all have and the dimensions on which we have possible variability relates to the value per point, the exchangeability, the the you know, there’s so many different pieces of these deals. So there’s a lot of

Unidentified speaker, Analyst: The customer, the owner. Exactly. Yep. Maybe turning to margins a little bit, and and a big piece of that, I think, that that always has questions from from investors is on

Mark Hoplamazian, President and CEO, Hyatt: the own side. Not a Mhmm. Not the biggest piece

Unidentified speaker, Analyst: of the pie, but I think it’s one that’s a little bit more uncertain oftentimes in investors’ minds to the margins. Maybe remind us of what you saw in the first quarter. I think you did reference some caution initiatives at same time that you took price. So how do we think about the margin trajectory from here on the on the lease side?

Joan Bottarini, Chief Financial Officer, Hyatt: You know, as you mentioned earlier that the proportion of the portfolio is higher luxury skewed Yep. After the the last disposition program commitment that we accomplished. So we are looking at a very healthy rate growth in that portfolio because of the nature of of those assets. And in in that portfolio, I those of you who know the industry know that labor is the biggest biggest cost that we have. We operate in some markets that have growing wage inflation.

And what is really important, our managers are, very focused on productivity where they can. And that means, you know, making sure that you must balance in those luxury assets. You must balance the productivity with customer service. So that is the primary goal, but you can do that through making sure you’re leveraging data, making sure people are in the right place at the right time. So that’s the focus of the managers, and it’s actually yielding solid performance in our margins and that we expect that to continue.

Unidentified speaker, Analyst: Great. I have a bunch more questions, but if people wanna jump in, I’ll give you opportunity. People have been a little bit shy today As as they all decide. So so one of the one of the questions that we had for everybody as well is just around AI, which is also another topic Azure. But how are you thinking about how to deploy AI?

Is that more of a a top line driver? Is it a margin driver? Are there other things to think about?

Mark Hoplamazian, President and CEO, Hyatt: I was about to crack a joke about all inclusive being AI, but I won’t. AI. Sorry. I think a lot of the things that we’ve turned to have been both revenue focused, but also efficiency gains at the same time. So one of the biggest initiatives that we’ve undertaken is a we bought we built a large large language model for our own use with respect to how we respond to business RFPs for group business.

And it’s very meaningful because we we respond to, you know, over a million and a half RFPs a year. So when you can sort those, value them, prioritize them, even make decisions about which ones can be automatically, you know, where where the response is automated with no touch, with little touch, with a lot of touch. You can also focus people’s time and attention on the highest value pieces of business. But with the repository of all the data that we have historically on different groups, and when you parse through the actual RFPs themselves and identify that the date range may not work for that given hotel, but for an adjacent hotel, you can there is a date range that can work for that group. Right.

All of a sudden, you got an automatic way as opposed to a pick up the phone and check-in with four different hotels where they can you can get the responses done very, quickly. So there’s a big efficiency gain in that, freeing up time for salespeople to actually focus on the highest value. It also allows revenue managers of hotels to high grade their total business that they’ve got. So my analogy is this. Disney implemented the magic band, and their their decision when they when I talked through this with a

Unidentified speaker, Analyst: bunch of Disney executives, they said, look.

Mark Hoplamazian, President and CEO, Hyatt: A new ride on average cost us a billion dollars to build. That is a way to build to expand capacity. But our parks are not at capacity. They’re not even close to capacity. So if we spend a billion dollars and create the magic band, which I think they spent more than that, but and we can gather information on those customers and geolocate them and increase their park capacity in total by 20% just by having people, guided to places so that you don’t end up standing in line for two hours.

Right. That’s that’s the gift that keeps on giving. 20% every day that goes by. So that’s actually something similar to what we are creating here. But we also have AI models that we’re now building for our development efforts.

We have a lot of machine learning that we’re building into what we’re doing with respect to revenue management and also with respect to finance functions. There are applications in legal. So we’ve got we’ve got a large number of of AI or machine learning projects underway right now. We started this effort to really have an enterprise view about what we’re doing with AI starting at the beginning of twenty four. It’s so it’s quite matured already.

This is moving very quickly, obviously. So I’m really excited about it from a top line perspective and an efficiency perspective. And, yes, ultimately, it will drive costs down. Great.

Unidentified speaker, Analyst: I’m gonna sneak one more in. This is really just going back to the the demand environment. I think you touched on this in the last call, but how do you think about your, call it, pullback playbook, what you would do or what you’d be looking out for to assess whether there was, you know, a sharper contraction or ways that you manage the business around that?

Joan Bottarini, Chief Financial Officer, Hyatt: Yeah. I would reference back to what we did over the last five years, which is each of our managers are hyper hyperfocused on how they go to market and looking at the demand that’s coming. And so in a in a very constrained demand environment, they reinvented their hotel, demand base. And so constantly, you know, leveraging that muscle as we go into the future is what we expect of those leaders, and they’ve played it’s it’s played out. So, that’s how we feel confident that we’ll be able to, you know, get our fair share and above our premium in each market that we operate.

Mark Hoplamazian, President and CEO, Hyatt: And I would just say because we can’t tell what the nature of a potential dislocation is, the most important thing is to have the muscles to be able to adapt. So adaptability is the number one issue. And I think we’ve proven that very, very well. We gained share or significant share during COVID, and that was because people were ready to pivot and ready to be agile. And that’s that’s how we’re gonna run the company going forward.

Unidentified speaker, Analyst: And you probably have more flexibility asset being more asset light just in terms of

Mark Hoplamazian, President and CEO, Hyatt: your free cash flow. Yes. Great.

Unidentified speaker, Analyst: Yep. Well, we’re about a minute over. Okay. Please join me in thanking Joan and Mark for all the insights that we’ve you. Up will be the airlines panel.

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