Hyatt Hotels Corporation (H) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Quarter 1 2013 Hyatt Hotels Corporate Earnings Conference Call. My name is Caroline, and I'll be your operator for today. [Operator Instructions] As a reminder, the call is being recorded for replay purposes. And I would like to turn the call over to Atish Shah, Head of Investor Relations. Please go ahead, sir.

Thank you, Caroline. Good day, everyone, and thank you for joining us for Hyatt's First Quarter 2013 Earnings Call. We want to thank everyone in the investment community for joining us. Here with me in Chicago is Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Gebhard Rainer, Hyatt's Chief Financial Officer. Mark is going to start by making some brief remarks, and then we are going to read and respond to questions e-mailed to us this morning. Finally, we will take live Q&A towards the end of the call. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued earlier this morning, along with the comments on this call, are made only as of today, May 1, 2013, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find the reconciliation of non-GAAP financial measures referred to in our remarks on our website at hyatt.com under the Press Release section of our Investor Relations link and in this morning's earnings release. An archive of this call will be available on our website for 90 days, and a telephone replay of this call will be available for 1 week per the information included in this morning's release. And with that, I'll turn it over to Mark to get started.

Thanks, Atish. Good morning, and welcome to Hyatt's First Quarter 2013 Earnings Call. I'd like to speak about 3 topics on today's call: first, I'd like to discuss our first quarter results; second, I'd like to provide some thoughts on our outlook for the remainder of the year; and third, I'd like to talk about our progress on our long-term goals during the quarter. During our last earnings call, we had identified items that we estimated would reduce earnings by $3 million to $6 million per quarter over the next several quarters, with more impact earlier in the year. These factors, including things like the timing of the Easter holiday, renovations at managed hotels in the U.S. and in Asia, together with other factors, materialized largely in the way that we had expected. Now let's review the business in a little bit more detail. At U.S. full-service hotels, transient demand was strong with solid rate increases in most markets. Transient revenue represented over 50% of rooms revenue in the first quarter. Transient room revenue increased 8%, with half of the increase due to demand and half due to rate. We continued to shift the mix away from lower-rated categories to higher-rated business. RevPAR for owned and leased full-service hotels in the U.S. was up 6.7%, reflecting strength in transient business. Group room revenue, on the other hand, declined due to the profile, duration and mix of the business. So let's talk about the group segment in some more detail. As a reminder, group business represents a meaningful portion of our total business at approximately 45% of our room revenue for U.S. managed, full-service hotels and a meaningful proportion of our F&B revenue. At those hotels, group room revenue decreased approximately 6% in the quarter. More than 100% of this decline was due to lower occupancy as we saw rate increase by just under 2%. The 6% decline for the quarter is a combination of flat group revenues in January, flat group revenues in February and a 20% decline in group revenues in March, which was worse than we expected. 2/3 of the decline in occupancy was associated with major properties under renovation, for example, in San Diego, Dallas and Washington, D.C. Other factors contributing to the group revenue decline included the timing of the Easter holiday and some canceled business in connection with which we were unable to fill gaps in our patterns. One other dynamic in the quarter was that in the quarter for the quarter bookings were down 12% and in the quarter for the year bookings were down 8%. This was in part due to government-related group demand being particularly weak. While government-related group business represented less than 2% of overall group in the first quarter, it was down 50% in the quarter relative to 2012 and represented over half of the decline in the quarter for the year bookings. Moving ahead to fees. Our management fee performance generally reflects the estimated impacts that we noted on the last earnings call. First, we hit almost $4 million of termination and contract modification fees in the first quarter of 2012 that did not recur in the first quarter of 2013. Second, the managed hotel renovations that I mentioned in the U.S. and the renovation of major hotels in key cities in our ASPAC region led to negative variances in management fees of approximately $2 million in the aggregate. Finally, since the first quarter of 2012, several managed hotels left our system, which negatively impacted fees by over $1 million in the first quarter of 2013. Let me turn to our owned and leased hotel performance, then I will focus on margins. Lower group demand, both in some resort markets, such as Coconut Point and Scottsdale and in some urban markets, such as in Atlanta, had a negative impact on F&B revenue and profitability. In fact, excluding the F&B impact, which was largely a banqueting issue, margins would have increased by about 100 basis points. We also have some tough comparisons in several hotels outside the U.S., including Seoul and London, which are seeing a combination of lower RevPAR and lagging non-rooms revenue growth compared with strong performance a year ago. On the expense side, we're managing the majority of our costs very well, including wages and supply costs such as food. But some other expense areas are growing at a faster -- at a rate faster than inflation. For example, on our last earnings call, we discussed our expectation for higher property taxes this year, which remains an area of pressure from various municipalities. Further, we're seeing an increase in health care coverage costs at well above inflation rates. As we look to the future, we're encouraged by several data points. First, group pace. Even though realized revenue for group business was down in the first quarter, overall group revenue production was up over 3% in the quarter. There is a significant dichotomy between short-term bookings and longer-term bookings. On the short side of the booking curve, in the quarter for the quarter bookings were down 12% and in the quarter for the year bookings were down 8%. On the longer side, bookings for 2014 and beyond were up 13%. Much of the weakness on the short end was in connection with the weakness in government bookings I noted earlier. Group pace for the final 3 quarters of 2013 is up in the mid-single-digit percentage range as of the end of the first quarter. Overall, we see our booking experience as an indication that the booking window is lengthening. During April, group bookings increased by about 15% as compared to group bookings made in April 2012, thanks in part to the timing -- due to the timing of Easter. Second, trends in demand. The overall business climate in the U.S., with strength in manufacturing, technology, housing and other sectors, is supporting robust transient demand levels. Therefore, while we expect group demand to improve relative to what we saw in the first quarter, we still expect transient business to be a stronger driver of improving results this year. Third, the economic and market conditions around the world are evolving. As we look around the world at various regional and individual economies, we believe that the hotels in the Americas and ASPAC regions are likely to see stronger levels of RevPAR growth than hotels in the EAME/Southwest Asia regions over the remainder of 2013. If we look back on the last few years, we've seen disruptions in Japan, the Middle East, North Africa and certain locations in Europe, as well as varying levels of demand growth and supply additions in China, India and some other countries. You would expect this type of volatility to continue due to geopolitical and economic factors. I recently met with our teams in both China and in India. And while there are some near-term challenges that will create some volatility, I'm encouraged by their continued pace of development in both of these markets. In China, the focus by the new leadership on austerity has and will continue to hurt F&B revenue, in particular in the short term. In India, the economy is starting to stabilize while the country enters a national political process leading up to general elections in 2014. Nonetheless, the positioning of our existing portfolio, as well as the hotels expected to join our portfolio over the coming year in each of China and India, is very encouraging. As for our outlook for the remaining quarters of 2013, the areas I mentioned earlier will continue to impact us. We expect the impact to be towards the lower end of the previously mentioned $3 million to $6 million range per quarter for the next quarter or 2. The impact is expected to decline as renovations of managed hotels are completed and year-over-year comparison issues recede. The negative impact from these items is expected to be offset by higher fees as we begin to realize fees from conversions and hotels that we've recently opened. In addition, we increased the number of hotels we expect to open this year from 30 to 35, which should help grow fees over the next several years as those hotels ramp up. Next, I'd like to discuss progress we've made on long-term goals during the quarter. Our base of executed contracts for new hotels remains very strong at approximately 200 hotels or 45,000 rooms. We opened 8 hotels, including 2 conversions in India that are part of the 5-hotel deal that we announced last quarter, and we entered into long-term agreements to manage 4 iconic hotels in France. In terms of other progress, we acquired The Driskill, a historic hotel in Austin, Texas, for $85 million, which is in the range of a 10% cap rate on trailing 12-month NOI. The Austin market has diverse and growing demand drivers, and the hotel has a long and storied history with a unique position in the market. So we're very excited about this acquisition. We sold 3 select service hotels to Summit Hotel Properties for $36 million, which represented an approximate 7.5% cap rate on trailing 12-month NOI, keeping management contracts on those properties. Also, we sold a minority interest that we owned in one hotel located in Asia, thereby reducing our pro rata share of JV debt by over $20 million, which represented an imputed multiple of greater than 20x on trailing 12-month EBITDA. We continue to manage that hotel under a long-term contract. As we discussed on our last earnings call, we are exploring the sale options for 6 full-service hotels in the U.S. This effort is moving ahead, and we will update on the sale if and when closed. In all cases, we intend for these hotels to continue in our portfolio under long-term management or franchise contracts. On the balance sheet side, we continue to be active in repurchasing stock, having repurchased $27 million of our stock -- of our shares during the quarter and $16 million subsequent to the end of the quarter through April 26. We continue to believe that the ability to repurchase our shares is a good tool to have in our toolkit. As such, yesterday, our Board of Directors approved the expansion of our authorization by $200 million. Our balance sheet continues to be very strong. We recently announced the redemption of approximately $250 million of our notes due in 2015. Separately, we announced our cash tender offer were up to $250 million of our notes due in 2019. As we disclosed when we announced our tender offer for the 2019 notes, our obligation to purchase tendered notes is subject to and conditioned upon certain conditions described in the Offer to Purchase, including, among others, the company having received net proceeds from new indebtedness on terms satisfactory to the company in its sole discretion sufficient to purchase the tendered notes. Finally, in conclusion, I'd like to add that during the quarter, we held a Global General Managers meeting, as well as a Global Hotel Owners Conference. We discussed our company's strategy and growth plans with both audiences. The positive energy and feedback we received from these conferences give us further confidence that our strategy to expand preference for our brands is embraced by colleagues and owners and will propel us in the years ahead. We continue to operate the company with a long-term view and continue to be confident in the progression of earnings, outlook for our brands and our strong relationships with our colleagues, our guests, and our owners. The move that we're making in innovation, optimizing the balance sheet and asset base and focusing on delivery of superior guest experiences will help create shareholder value over the long term. And with that, I'll turn it back to Atish for the questions and answers.

Thanks, Mark. That concludes our prepared remarks. For our question-and-answer session, we received several questions in advance, which we're going to start off with. We received about 20 questions, some of those, a handful were duplicates. So we have about 15 questions that we're going to go through. After we finish with those 15 questions, we'll take your questions directly.

So why don't we start with the first question, which was on our first quarter Americas RevPAR performance. The question is, can you quantify the impact of renovations and Easter on full-service RevPAR? So Easter versus renovations.

Sure. So Easter -- this is Mark. Easter generally had an impact of about 200 basis points of RevPAR growth for the quarter, and the renovations would have had approximate 150 basis point impact. And with respect to how we are reporting comp versus non-comp hotels, our policy is really to maintain hotels in the comp set unless more than 25% of the rooms are out of service for renovation purposes.

Okay, great. That's helpful. I think the next question related to renovations was to provide some indication of the magnitude and duration of renovations for the remainder of the year, both in North America and in Asia.

Sure. This is Gebhard. Just a reminder, these are renovations to our large managed hotels. We talked about that last quarter. And we are very, very excited that our owners have and continue to commit capital to improve these assets. The North American renovations finished in the third and the fourth quarter, and the Asia renovations that we pointed out earlier continue through 2014. Those are predominantly 4 key gateway city locations: Hong Kong, Singapore, Taipei and Shanghai. The fee disruptions in the aggregate subsude starting in the third quarter but will continue into 2014.

That's great. Next questions were on the Asia Pacific region and China, in particular. The questions were, can you provide more detail on performance, RevPAR performance in ASPAC? And also, can you provide more detail on RevPAR growth in China? In particular, what was your RevPAR growth in China and what were the factors in that market?

Sure. So Asia Pacific, the ASPAC region, was varied in results across different markets. Obviously, we've talked a lot about major hotels that are under renovation at this time. So if you just take the renovations impact in ASPAC as a separate topic across the region, the ASPAC RevPAR results would have been up about 2% relative to the reported number, which was down 2.6% or down about 0.4%, excluding currency impact. If you look at individual markets, there's significant variability across markets. Japan was quite strong, up in the high-single digits. Hong Kong was weaker. Of course, we have renovation impact in Hong Kong at the Grand Hyatt Hong Kong there. Same is true for Taipei and Singapore, which were the significant hotels under renovation currently. If you look at China, there's not one story for China. If you look at our aggregate RevPAR result for the quarter, it was down in the range of about 8%. But that sort of masks the variability across the country. North China was up -- was down over 10%. South China was down in the low-single digits, and East China was down in the mid- to high-single digits. So varied results depending on what region you're looking at. And what that really reflects at this point is an evolution of 2 things: one is where the austerity measures and the government-related travel hit the hardest up until now; and secondly, supply issues. So let me just address the first point first, which is -- with the transition in power in the government, the diplomatic travel to Beijing decreased, as well as other travel to Beijing. But we're starting to see a pickup in diplomatic bookings at -- the new government is in business now, and they are open for meetings and taking meetings. So we see a significant diplomatic flow -- diplomatic booking flow through our hotels in Beijing, increasing at this point. Second, I would just point out that the picture for supply absorption looks really different in different markets. By way of example, if you just look at Shanghai, the supply increases in Shanghai, if you look back to say, 2009, just looking forward from 2009, supply increased roughly by 10% in 2009, about 10% in 2010, about 4% in 2011 and about 2% in 2012. Now remember that the expo, the World Expo was in Shanghai in 2010. So the 2009 and 2010 supply expansion was in part in conjunction with the expo. But the absorption of that supply over time looks different and has a different profile than you would see in Beijing or in South -- in the Southern cities of China, in Shenzhen or Guangzhou. So that's by way of example of another dynamic. So as we see the short term, as I mentioned earlier, the short-term impacts from the austerity focus has absolutely had a negative impact on food and beverage revenues, which were down about 4% across the country in the first quarter. And -- but we do believe that, that will likely be more short term -- more of a short-term impact as government activity starts to ramp back up over the course of the year. So that hopefully gives some more color with respect to Asia Pacific and China, in particular.

Great. We received several questions on improved business, 4 questions. So I'm going to ask each one separately. First, can you remind us how big is group exposure in the U.S.?

Sure. The systemwide group business exposure is approximately 45% for full-service managed hotels in the U.S. The exposure for the owned portfolio in the U.S. is likely less in terms of groups.

Second question would be on trends in group business, both for 2013, and what we saw in the month of April.

What -- the outlook for 2013 looks to be improving, but short-term bookings remain a concern. As Mark alluded to in his remarks, on the short side of the booking curve, in the quarter for the quarter bookings were down 12%. In the quarter for the year bookings were down 8%. On the longer side, bookings for 2014 and beyond were up 13%. Much of the weakness on the short end was in connection with the weakness in government bookings, which, while a small portion of the overall group business, showed the largest decline of approximately 50%. Group base for the final 3 quarters of 2013 is up in the mid-single-digit percentage range as of the end of the first quarter. Overall, we see our booking experience as an indication of the booking window is lengthening. We do expect a rebound in April, especially group, of course, this includes the Easter effect. April, as stated before, recovered with group bookings up 15% compared to last year.

Next question on group was, are you seeing any impact from the sequester? What's the percentage of government, government-related business in your mix? I think that's it.

It's hard to tell whether directly related to sequester, but likely due to government uncertainty on budget issues, there was, as I stated before, a decrease of government business, a decline of approximately 50% in the first quarter.

Last question on group, which geographic regions in the U.S. saw the most impact in terms of group?

We were impacted both in urban and resort markets, with concentrations in city and locations where we have hotels with major renovations. Maybe 2 particular locations to point out from a resort perspective is Scottsdale and Coconut Point, both had a large declining group business, down in each location approximately 20%. Part of that, of course, was Easter. It's hard to say how much the Easter effect was compared to the renovation impact on those locations where we have renovations going on at the moment.

Okay, great. Shifting gears a bit, next category of questions was on balance sheet and share repurchase. So first question is the rationale for stock buyback given limited flow, and what was the catalyst for the re-upped repurchase program?

So thanks. As we reported, we've been executing against the share repurchase authorization, and we reported additional share repurchases this year. And so we believe that having a share repurchase authorization is a useful tool to have available, and that's really the rationale for the expansion of the authorization that we received approval for yesterday. We are mindful of the float. The float has actually expanded over the last 15 months. So if you see the total impact, we actually have seen an expansion. We have not changed our strategy. That is to say, our intention is to use our cash and our capital base to drive shareholder value, whether through investing or return of capital. The return of capital, in conjunction with pursuing growth opportunities, makes the most sense for us at this point. We still have significant liquidity. We have cash and equivalents of approximately $100 million undrawn borrowing capacity. And as we have stated that we -- in the past, we will maintain flexibility going forward so that we can be opportunistic when good opportunities present themselves. We are trying to manage our credit base and our credit profile to maintain investment grade ratings through the cycle, and that remains an intention of ours.

Okay. Next question. You've added in the disclosure that you expect to spend $100 million to $120 million on investment spending this year. Did you just start disclosing this because you have specific projects in mind?

We actually disclosed this last quarter in my prepared remarks. I talked about activity, investment activity, and we thought we would simply add what I stated last quarter to our disclosures in the release to be able to track it over time. The $100 million to $120 million estimate on investment spending this year really relates to JV projects, which would include, for example, the Andaz Wailea Resort, which continues to make great progress. We expect a third quarter opening. And we have other construction projects that are underway in the U.S. and in Latin America through existing or new JVs, or in the case of our Hyatt Place construction projects in Omaha, it's on balance sheet development. So I would say that our activity and focus on new opportunities through both JVs and whole ownership continues to be a significant area of activity and focus for us. And that's why we wanted to simply track this over time.

Great. Next question is on fees. What percentage of your hotels are earning incentive management fees? And how does that compare to the prior peak?

Sure. The international portfolio has typically a higher percentage pay incentive fee because of lower hurdles. North America is more based -- fee-based and has higher hurdles on the incentive fee side. So if you look at the comparison versus peak, the Americas are at 37% versus approximately 50% in peak. And in Southeast Asia and Asia Pacific, it is 80% now versus approximately 85% at peak. This is first quarter data.

Okay, great. Shifting gears to asset sales. With private equity capital getting more aggressive given dramatic improvement in the CMBS market, will Hyatt be a more aggressive seller of assets over the next 12 months?

We talked last quarter and it remains true now that deal activity, generally speaking, has increased. So the transaction flow, the investment opportunities that we're seeing and that we're pursuing continues to increase. Our focus remains on gateway cities, mostly in the Americas and in Europe, in terms of application of capital. And I would say we have been and continue to be focused on expanding our resort presence. Obviously, the Andaz Wailea project is directly in line with that. We mentioned on the last call and reminded everyone in this call that we've got -- we're pursuing sale options for 6 full-service hotels at this point. So we expect to continue to pursue those options. And consistent with what we've done in the past, we'll have something more to say when we actually have a closing. But I would say that overall, we're encouraged by the transaction activity and the interest. And I think, generally speaking, the capital markets environment is supporting our activity on both the buy side and the sell side. Our intention is to continue to be active through the cycle on both the buy side and the sell side.

Our next question was on The Driskill acquisition. Please discuss the rationale behind the Austin purchase. Pricing seems aggressive. Discuss returns underwritten and/or EBITDA multiple and the investment pieces.

Great. We're really excited about this hotel. The -- it really is a unique property, has a unique position in Austin. Austin is one of these remarkable markets that has multiple healthy, long-term, viable demand drivers. State government, the university and a pretty diverse economy with a strong tech base, lots of creative industries are really burgeoning and expanding in Austin. So it really is a vibrant market. There's been a lot of discussion and a lot of announcements made about expansion of supply in Austin, and I think there's good reasons for it. We just opened a Hyatt Place in downtown Austin, so we've got some select service experience in the market at this point. And of course, we've got the Hyatt Regency Austin, which has held a strong position in the market for a long period of time. The Driskill really represents a unique opportunity in that market but also a category -- it's part of a category of hotels around the U.S. and also in Europe where you've got an independent -- historically independent hotel that's got a distinct position in a given market. We believe that through affiliation with Hyatt, we can help to improve results overtime without really compromising or destroying the unique attributes that made the hotel successful to begin with. This was an opportunity to buy the hotel at what we thought was an attractive valuation at about 10% cap rate on trailing income. Of course, there will be absorption of new supply over time, depending on the timing of that. So we're going in with our eyes wide open. I think that we -- and we continue to look at and work on how we will integrate The Driskill and other opportunities in the same category of hotels into the Hyatt portfolio over time. We haven't come to a final conclusion on some of the brand attributes there yet. Similar to what we discussed when we bought Mexico City, I would say that our investment in this hotel would be viewed as part of our capital recycling program, that is to say it was a great opportunity to expand presence in a key market for us and a great location, unique position in the market, but would also be available for sale in the future to create -- to generate capital for reinvestment in the future. So we didn't buy it with the idea that we would own it forever. And as I mentioned, when we bought Mexico City, we've got -- as we underwrite deals, we're looking at the prospects for resale at some point in the future after we've accomplished some of the goals that we intend to focus on. So that pretty much covers The Driskill I think and the other opportunities that we would look at.

That would just add $7.5 million of EBITDA this year...

Yes. It's for the remaining piece of the year that we have own the -- that we expect to -- or that we will own the hotel for, right?

Next question was on the Affordable Care Act. Can you provide any color on how you believe the Affordable Care Act will impact your business?

Yes. That's a quite important topic, and it really is too early to provide specific details on the full impact. But let me add some steps or some additional commentary as to where we are in the process of evaluating that. We have a relatively strong participation rate as it is currently. And we are working through the impact, through the issues of what the impact will be across the chain and the impact on the HHC. We have already absorbed some of the costs for things like 100% preventive care and coverage of dependents through age 26. We know that the impact of implementation costs lie ahead, and we can't really know how many associates who currently opt out from our plans will choose to participate beginning in 2014. However, we expect health care costs to continue to exceed inflation in the next few years and add some significant cost element to the portfolio. But to be specific in quantifying the impact, it is too early at this stage.

I would say -- one other thing I would add to this is the implementation costs, that is the government implementation costs, are also bombing at this point. As I understand it, the health -- the HHS budget is actually upside down at the moment by billions of dollars, a couple of billion dollars is the estimate that I read a few weeks ago. And so I believe that as the implementation unfolds, we will see an evolution and increase in the actual implementation -- or structural implementation costs. In terms of the actual experience that we have, as Gebhard mentioned, I think the participation rate is really a big question in terms of how many new participants we actually have in our programs and our plans and also how the plan structures evolve and shift over time. So stay tuned. There's a lot of work being done on this, and we will provide more information as we have it.

Okay, thank you. The last question that was submitted in advance relates to a new schedule that we included in the release, Page 6, in the schedules at the back of the release. We are breaking out our stats -- RevPAR stats by brand. That's the first time we've provided this, and we're going to continue to provide it in the future quarters. The question is the Andaz brand as it relates to Smith Travel data and performance, is the performance a function of the geographic mix? And how did the brand perform in North America?

So yes, this is a good question. We talk a lot about this whether to include Andaz in the schedule or not given the fact that there are so few hotels there, 8 opened comparable hotels, currently 9 in total. And we just decided that having the data available is better than waiting until we had some additional comp hotels opened and operating. So there will be volatility in the results by virtue of the fact that in the portfolio of 8 or 9 or 10 hotels, individual performance in the single hotel can have a significant impact, which is really the story of this past quarter because London experienced a tough quarter, especially relative to a very strong quarter a year ago and was down almost 10%, while the U.S. was up about 4%. So in terms of the mix, while we have, in the past, not gone into property-specific RevPAR reporting because I think it's a distraction, frankly, and we probably won't continue to do this on an individual property level. I did want to at least denote that we did debate whether we would include it nor not. I think the risk is that you end up digressing into a discussion about individual properties, which is not very helpful. But we did, at least, want to include it as it is a part of our brand portfolio. So I would also note that on the last call, there was a question that Gebhard answered regarding disclosure and sort of what he saw as a CFO coming into the company. And at that time, he said that one of the things that he was focused on was additional reporting that may be useful, and this is a piece of information that we had been asked about. So we hope it is useful.

Okay. That captures all the submitted questions. We'd now like to take some live Q&A and take your questions. Caroline, may we please have the first question?

[Operator Instructions] The first question comes from the line of Joe Greff. Joseph Greff - JP Morgan Chase & Co, Research Division: Looking at your full-service hotel, it probably was a bit below than I think the consensus here. If you exclude renovation activity, can you talk about RevPAR index trends and market share?

It really varied tremendously by market. So if you just look at markets like New York and L.A. and San Francisco, we saw expansion there. If you look at San Diego or D.C., we saw a contraction there. So a lot of it did have to do with renovation impacts. So what I would say is that the -- a couple of the resort markets where we had some group weakness were in difficult markets to begin with, and then the group impact had maybe a disproportionate impact on our quarter. So I guess my answer is it really varies tremendously by market, but the alignment with our renovation impact is pretty high. Joseph Greff - JP Morgan Chase & Co, Research Division: Great. So that leads me to my next question about future ongoing renovation plans. So beyond what's going on right now, what's the next batch of renovation activity look like? I guess, we're trying to get a sense of whether or not we should be mindful of modeling disruption beyond this year.

I think the modeling disruption beyond the end of this year, we know now and we mentioned that the renovations in the key markets in Asia would continue into next year. I think it will be relevant for us and important for us to keep providing an update on those renovations because as you know, a lot of these hotels are quite large and with a lot of meeting space and they're in city centers. So if you look at Singapore, which is adding a significant amount of meeting space, for example, so it's more of a restructuring of the actual property itself; or Taipei, which is a 800- or 900-room hotel with a ton of meeting space also going through a complete revamp; or Hong Kong the same -- Grand Hyatt Hong Kong, same issue there. These are huge projects. So what we will do is continue to try to provide some visibility to that as we go into 2014. Right now, in terms of large major managed properties, we think we covered the activity that we can see. In terms of our owned portfolio, we are largely through major renovations. So there are a couple of properties on which we continue to focus on alternatives to what we have currently, places like Miami and Toronto, which, if they come to pass and we start planning for something significant in terms of redevelopment, we will update you on that. But in terms of major renovations in our owned portfolio, we don't have any plans for anything like that in the foreseeable future. Joseph Greff - JP Morgan Chase & Co, Research Division: All right. And then my final question, I know you don't provide operating targets or guidance, but when you look at your current internal operating targets versus 3 months ago, have they changed, and I guess where have they changed? That's all for me.

I guess the fact, as I mentioned in my comments, that the first quarter on the group side was quite a rollercoaster ride, that is to say that's a very tough quarter in terms of realized revenue, but encouraging signs with respect to bookings. There remains some uncertainties and so forth. But I have to say that while the first quarter was, especially on the group side, was worse than we expected it to be, our overall sentiment is that we're encouraged by what we're seeing on the booking front. And frankly, the transient demand side just has continued to be a source of real support, at least across the Americas. So there's nothing that we see at this point that will -- that we expect will derail that. There are some -- the evolution of the sequester impacts and so forth, but I would say the per se -- the specific impacts of sequester are hard to put your hands around. So I would say, overall, it is -- we're encouraged by what we're seeing as we move into the second quarter, no matter that the first quarter was weaker than we expected, especially in the group realization.

Next question we have comes from the line of Joshua Attie.

Mark, it seems to me that the strategy of kind of providing color on items that might impact your results and hoping that, that trickles into the consensus estimates in a way that you want just isn't working. And this quarter is a perfect example. It sounds like your results were in line with your internal expectations, but there was a clear disconnect versus what the market expected. And I guess, regardless of whose fault that might be, would you consider providing formal earnings guidance in the press release going forward, I guess, to correct the problem of missing consensus by such a wide margin?

Well, we talked about this. We have talked about this in the past, and I think our general sentiment is that for things that we can predict or otherwise have a perspective on, we have expanded our disclosure along the way and more prospectively. I think the underlying issue that we -- that led us to not providing guidance to begin with was the fact that if you look at the sum of the issues that we are talking about, multi-quarter or even multiyear renovation programs, repositioning of properties, evolution of our business in different markets, these things all have lifespans and term structures that are beyond quarterly progress or quarterly timeframes. And so our concern is simply that we are not managing to quarterly results in the context of tilting the organization one direction or another during a given quarter, primarily because the vast majority of the things that we have going actually unfold over a number of quarters, even a number of years. So what we end up with is -- I understand that from a quarter in and quarter out perspective, there may be volatility along the way. I think the issue for us is that I think we want to try to reflect as best we can the dynamics that we see, not just over the coming quarter, but beyond that. And secondly, not hyper-focus everyone's attention on the coming quarter when really the coming span of quarters or the coming couple of years is a more relevant timeframe. So I think that's really a reiteration of the philosophical issue that had led us to our current status. But needless to say, it's also true that we've expanded reporting and expanded a disclosure in a lot of different ways, and recognizing that when we've got visibility to the evolution of specific items or things that we believe are outside, maybe either nonoperating or non-comp issues, that we can and we have, actually tried to denote those separately. So I guess we'll continue to denote -- we'll continue to evaluate this as we go. But your question is noted, so thanks. I appreciate it. Joseph Greff - JP Morgan Chase & Co, Research Division: Yes. I appreciate and I understand the long-term focus of the management team and the board. But you've been public for 3 years now. And the stock trades at such a wide valuation discount to the peers, to the point where it's multiple is the lowest of all public hotel companies. And despite having a great high-growth business and I guess my question is, knowing your long-term focus, if you don't think that providing guidance is the answer, what do you think the reasons are for the discount on the equity? And what steps do you think you can take to kind of -- to fix that over time?

Well, I guess, some of the other feedback that we received along the way has been to spend a little bit more time talking about how our future looks like -- look to unfold, especially given the degree to which we've got projects in the pipeline, that is to say the proportion of our pipeline to our existing base. So I guess one way to think about how we can actually better inform what the future looks like would be to start to put it into context over a longer period of time, which we do plan to do later this year. So we'll be back and discuss how we are going to pursue that. But I think that was one area -- that has been one area that we talked to a number of investors about.

The next question comes from the line of Bill Crow. William A. Crow - Raymond James & Associates, Inc., Research Division: Let me just follow up first on Josh's comment. I mean it's -- I think it's 3 out of the last 4 quarters you guys have missed. The quarters are coming whether you want them or not, reducing the volatility, reducing the misses would certainly help the stock price. I understand your long-term perspective, but investors in these days are more short-term focused. Let me just ask, as you talk about the renovation disruptions, it seems like we endured a great deal of that in the past year, past couple of years. Do you think this year's disruptions, as you quantify them, are greater than they were last year?

No. Look, I mean the disruptions that we saw in '11 and '12 were much more significant by virtue of the fact that they were renovations of owned hotels. The disruptions that we see -- which have a bigger impact, obviously, in our earnings base. The disruptions that we're seeing now are not immaterial, which is why we're -- we pointed them out last quarter and talked about them again this quarter. The reason that's true is because they happen to be focused and concentrated in some very large hotels. If you look at our -- the Grand Hyatt San Diego or the Grand Hyatt Washington, D.C., or Hyatt Regency Washington, D.C., or Hyatt Regency Dallas or Singapore, Taipei, Hong Kong, Shanghai, each one of these -- they're all very large hotels with huge revenue bases with a lot of group business, therefore, a lot of F&B business as well. And so we -- some of those -- the vast majority of what I just ran through, let me think, all of what I just ran through are managed properties. They just happen to be very large, huge revenue properties, therefore, the impact on management fees is pretty high. So what we've done is really said, okay, look, yes, the earnings impact from the renovations in '11 and '12 were quite high. That was largely because of the fact that they were owned hotels. But these other -- this wave of renovations that we've got in these major hotels will also have a material impact, which is why we're calling it out. William A. Crow - Raymond James & Associates, Inc., Research Division: Is it not fair then, Mark, to expect that the owned portfolio should this year benefit from all the disruption in prior years? You should be far exceeding the travel industry-wide data because of that bounce back, is that not a fair expectation?

Yes. I think some of the markets that I just mentioned in response to Joe's question, I think, reflect that. And I think index improvements in New York and San Francisco reflect that. Atlanta had a tough quarter because of group, so -- which was one of the other major renovated hotels. San Antonio was a bit rocky in the quarter as well, also group related. So I would say that we are seeing the results, that is to say those major renovations flowing through in terms of index progress.

And we did see some of that result last year, that the disruption was more focused in '11. That was about $25 million of disruption on the owned hotel from '11. So we saw that come back in '12.

Yes, I can't remember the exact stat, but the owned RevPAR progression last year was very healthy and reflected above STR [ph] certainly and I would say also reflected above respective comps set performance in those hotels. William A. Crow - Raymond James & Associates, Inc., Research Division: Okay. And then finally from me, the 6-pack of assets that are being marketed, is that a series of one-off deals? Are you trying to sell them as a package? Can you quantify the -- and maybe you have before, I just forget, how big a transaction would this be, number of rooms, either the ADR or EBITDA from the portfolio?

Yes. So what we said earlier is that the EBITDA associated with the 6 hotels is about $25 million in '12. And beyond that, I actually don't really want to get into a discussion about our strategy with respect to what we're doing because we're actually in the market at the moment. So it's not appropriate for me to start to get into how we're going to parse this out.

The next question comes from the line of Shaun Kelley.

Just wondering if you could combine for us what you saw in March and April on the bookings patterns because obviously you saw some extreme declines in March and then a bounce back in April. So anyway at least for the, I guess, the kind of for the year bookings, if you could combine those 2 metrics and give us something that encapsulates the full Easter shift? Were bookings just up or down over that combined period?

It's quite difficult to sort of do an aggregated level partly because we finished the month yesterday, so we don't have it through the end of the month. But we -- the net result, I think, going into the remainder of the year was to see pace for the remainder of the year up 6% or thereabouts. And so I would say that the -- it's really hard to do this on an apples-to-apples basis, though. You have -- I guess you'd have to really look at production by segment to be able to answer this well.

Yes. Total production was up for the year, 3.4% in the first quarter.

In the first quarter, right. But -- so I think that the issue is looking at in the month for the month, which we don't track, which we don't have handy April results in order to be able to back that out and then look at the pace impact. So instead of fumbling around, my answer is we don't have the data to give you an aggregated over the 2-month answer.

Yes, Shaun, we can put something together and we'll post it up.

Yes, yes. That would be helpful. I guess separately then, you guys did call out government business and virtually everyone else that's reported so far in the hotel sector has kind of brushed off the government piece. So did you guys see any meaningful cancellation activity outside of maybe 1 or 2 specific things in this quarter that -- like anything bigger that gives you cause or a pause for the remainder of 2013? And then just remind us how much government is overall in the mix. Because you said -- I think you said 2%, but I don't know if that's true for overall, if that was just true for the period you talked about.

Yes, so for the quarter -- over the course of the last year, for example, government business on the group side was less than 5% of the total. In the first quarter, it was less than 2%. But recognize that it was also down 50% year-over-year. So these are small numbers, small proportions of the total. But when you have such significant moves, even a small proportion of the business can generate an impact on the overall result, which is what we experienced in the first quarter. So generally speaking, I would say that we don't expect a huge expansion or further contraction of government business relative to the relatively small proportion it represents to begin with. And so it's really hard to see how this will evolve over the remainder of the year. The quarter impact was -- the reason we called it out is because when you look at the aggregation by segment, where the impact came from, it was the single biggest contributor to our group results in the first quarter, even though it's a small proportion.

Right. I guess maybe to ask it in a totally different way then, should we expect, even though government is a small component, I mean, is it anything like the down 50 for the remainder of the year in terms of what you've received, in terms of either cancellations or changes in behavior pattern? Or is anything like that extreme, even though appreciating that it's a small percentage of the total?

Yes, I would say that -- so we talked a little bit about the fact that in the quarter for the year bookings were down 8% and about half of that decline had to do with government booking for the remainder of the year. So that was embedded in what I described earlier. That is the best data that we have available to us at this point.

Yes, I mean in all likelihood, it should be less than that given that we were yielding out some government business mid last year and we started to see government slowdown on the group side during the course of last year. So you're going to be lapping that comparison this year. So...

No, later this year.

Later this year. So hopefully for the full year, it's not as precipitous a decline as it was in the first quarter.

The question comes from the line of Harry Curtis.

Mark, a question on your overall strategy, which seems to be all over the place. You're showing a bit of growth, you're showing a bit of asset sales, a bit of return of capital. And my question is, is there a consensus among your board on Hyatt's strategy, where it wants to be over the next 5 to 10 years with respect to growth targets, target return on invested capital, target EBITDA, for example?

Yes, I guess that's an interesting question. The answer is, yes, there's clarity of purpose. And the clarity of purpose really is centered around preference. And we are orientating everything that we do, both our capital deployment, our capital recycling strategy, which we described in some detail. So it may be useful for us to reiterate that on a subsequent call. But the -- some of the things that you cited as appearing to be all over the place are actually part of -- a consistent part of our capital recycling intention, which is to free up capital from our existing asset base and redeploy it. In the aggregate, we've -- as we reported in the past, we've been a net buyer of properties over the last 3 years. We've invested more than $1 billion in new assets, and we've realized about $500 million in proceeds from disposed-of assets. We don't expect that those are going to be perfectly match funded at any given point in time. We expect to be an active buyer and seller at every point in the cycle. Our strategy, with respect to growth, is really to engage in what we refer to as harmonious growth in markets in which we are not deploying capital, that is India and China. What we mean by that is staying focused on the key markets where we know that we have customers that are traveling to those markets, where we can represent our brands, individually and distinctively, in those markets so that we have brand enhancement over time as opposed to growing at the expense of our brands or at the cost of our brand integrity. And we think we've executed that extremely well in both India and China. And when you look at the cities, we've disclosed all this, so the development programs for India and China are laid out by brand and by year of opening in disclosures that we've made historically. You'll see that how we're actually filling out markets by brand and by segment. In those markets, one of the key issues for us is to ensure that when we open hotels, they open well, that they ramp responsibly, that the owners are enjoying good returns. And one key of that is to be able to grow our talent base to be able to continue to staff those properties. And so a lot of our focus and attention is on professional development and leadership development in the company to be able to maintain the culture that we've got that we think is critical to delivering the distinctive experiences that our brands are represented by and known for. So I would say that the growth strategy in both the markets in which we don't have capital deployed, as well as the capital recycling strategy, is not just well understood and endorsed by the board, but as I mentioned in my prepared remarks, we had a Global General Managers Meeting and a Global Owners Meeting. And I would tell you that it's also embraced and clear to our colleagues, as well as our owners, what it is that we're trying to build, how we're going about doing it and how they will be served in the course of that. So I'm actually extremely enthused by it, but also very clear that there is clarity around it for those key constituents. So I guess this is part of a much longer discussion, but that's a brief summary for at least from activities that I can cite from the last few years and especially from this last quarter.

And then just a quick follow-up, more specifically, are you pleased with the international versus domestic mix of hotels that you have now? How would you expect to see that evolve over the next several years?

There's no question that we will see, in terms of the portfolio, more international properties opening over the next 5 years than properties in the U.S...

Specifically, I'm sorry, I was looking for the owned hotels and the recycling and change of capital there.

I think the vast majority of our owned portfolio is in the U.S. We have a small portfolio outside the U.S. We have -- the hotels that we own outside the U.S. in the main are very prominent, high-rated properties in 2 locations, in important markets, Seoul, Paris, Zürich, London. These are hotels that have significant presence in those respective markets, and we will look at potential recycling opportunities for those assets but likely in conjunction with opportunities to otherwise expand our presence in those markets. That is to say by combining it with deals that acquire or otherwise expand into other properties. A straight disposition, I think, is not the best utility of those properties in terms of the disposition plan. And then on the U.S. side, we are obviously actively engaged in the market, both on the buy side and the sell side, and we will continue to be.

Thank you. We've gone probably past an hour. So I'd like to wrap up the call and thank everyone for joining us this afternoon. We look forward to talking to you soon. Thank you very much. Bye.

Thank you, Atish. Thank you for your participation in today's conference. That concludes your presentation. You may now disconnect. Have a good day.