Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 Hyatt Hotels Corporation's Earnings Conference Call. My name is Kim, and I'll be your operator today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Brad O'Bryan, Treasurer and Senior Vice President, Investor Relations, and Corporate Finance. Please proceed. [0CPPRG-E Brad O'Bryan]: Thank you, Kim. Good morning, everyone, and thank you for joining us for Hyatt's second quarter 2018 earnings conference call. I'm here in Chicago with Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Pat Grismer, Hyatt's Chief Financial Officer. Mark will begin our call today with highlights of our second quarter operating results and an update on our growth strategy. Mark will then turn the call over to Pat, who'll provide more detail on our financial results for the quarter, as well as an update on our full year outlook. We will then take your questions. As a reminder, all references to RevPAR results included in our discussion today are calculated on a comparable and constant dollar basis. Before we get started, I'd like to 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 late yesterday, along with comments on this call, are made only as of today, August 1, 2018, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of our non-GAAP financial measures referred to in our remarks on our website at hyatt.com under the Financial Reporting section of our Investor Relations link and in last night's earnings release. An archive of this call will be available on our website for 90 days per the information included in last night's release. With that, I'll turn the call over to Mark.

Thank you, Brad. Good morning and welcome to Hyatt's second quarter 2018 earnings call. Before covering our quarterly results this morning, I'd like to briefly discuss our activities in relation to NH Hotel Group based in Spain. Our interest in NH was born out of our efforts to significantly expand Hyatt's presence in Europe, where a bulk of NH's hotels are located. We felt that the strength of our distribution channels, loyalty program, and the association with the Hyatt brand would enhance the operating results for NH's hotels. We also saw an opportunity to unlock value through the separation of NH's real estate from hotel operations. On Thursday of last week, we submitted a letter to the NH Board of Directors, requesting access to information to allow us to develop an offer for the company. On Monday of this week, we submitted another letter to the board of NH, indicating that disclosures by NH's largest shareholder that came to light after the submission of our letter last Thursday led us to conclude that our path to a successful tender offer for NH was narrowed to the point of not being practical. Abstinent change in facts or circumstances, we will not be pursuing a tender offer at this time. Consistent with prior disclosures, we're continuing to evaluate and pursue asset light investment opportunities as part of our long-term growth strategy, using some of the proceeds from our $1.5 billion real estate sell-down program. We expect that these investments will be individually in the hundreds of millions of dollars, not billions, and that the manner in which we execute these investments will preserve our investment-grade credit rating. Moving now to quarterly results, I'm pleased to report that our strong first quarter momentum carried into the second quarter, where we once again delivered…

Thank you, Mark, and good morning, everyone. I will begin by providing more detail on our second quarter results, and will then share an update on our full year expectations. Late yesterday, we reported second quarter net income attributable to Hyatt of $77 million and earnings per share of $0.66 on a diluted basis. Adjusted EBITDA for the quarter was $218 million, with system-wide RevPAR growth of 4.0%. The timing of the Easter holiday positively impacted our system-wide RevPAR growth by approximately 30 basis points, reversing the negative impact that we saw in the first quarter. Year-to-date through June, system-wide RevPAR growth was 4.2%. The impact of transactions over the past 12 months resulted in a net decrease in adjusted EBITDA for the quarter of approximately $32 million compared to 2017. Excluding this unfavorable transaction impact, the favorable holiday impact, and other non-recurring items, our adjusted EBITDA grew approximately 14% on a constant currency basis. This strong earnings growth was driven by net rooms growth of more than 7%, healthy, transient, and group business with solid in the quarter, for the quarter bookings, and outstanding performance at our owned and leased hotels, which delivered strong RevPAR growth and margin expansion in the quarter. I'll now highlight our segment results, starting with our managed and franchised business, where we delivered impressive fee growth with base incentive and franchise fees collectively increasing approximately 13% on a constant currency basis compared to the second quarter of 2017. Included in that increase, is another strong quarter of incentive fees, driven by solid profitability improvements at our managed hotels. Total fees increased approximately 9% on a constant currency basis, including a $5 million year-over-year decrease in non-recurring fees. We've now delivered 10 consecutive quarters of high single to low double-digit growth in our total fees,…

Your first question comes from Patrick Scholes from SunTrust. Your line is open.

Hi. Good afternoon. Thank you. Just a quick question. Certainly, a very large level of share repurchases in 2Q. How should we think about the trajectory for the rest of the year?

Thank you, Patrick, for the question. Given the extent to which we took up the pace of share repurchases in the second quarter and our revised guidance for total shareholder capital returns of approximately $100 million for the full year, that would imply a reduced pace of share repurchases for the balance of the year. No particular indication as to the pace across Q3 and Q4, but certainly more muted pace compared to the first half of the year and certainly in relation to Q2.

Okay, that's it for me, makes sense. Thank you.

Your next question comes from Smedes Rose from Citi. Your line is open.

Hi. Thank you. I wanted to ask you, so you said that the NH potential acquisition or bid is sort of off the table now. But could you maybe just talk about your interest in other brand opportunities, kind of either in Europe or I think you've talked about maybe focusing in on Asia and kind of where does that stand in terms of, I guess, your list of priorities?

Sure. Thanks so much. I think what we said is that we are focused on acquisitions and investments that, first and foremost, help expand our presence and distribution in places where we are under-represented; and secondly meet some financial objectives that we outlined, namely investments that are accretive to earnings, but also asset-light in nature. So, the definition of the set of things that we said that we would be looking at really have to satisfy those two categories of objectives. Europe is a key, it has been. It remains a key area of focus for us. I would say with respect to Asia, we have such a significant pace of development-driven growth in Asia that our focus there is really to identify areas that would be particularly and differentially enhancing of the value of our network and the World of Hyatt. So specifically, I would think more about resort representation in Asia than I would say in urban markets where we've got a significant pace of growth as it is. So that might be another area of focus. But generally speaking, I would say we're looking at the various alternatives that we are continuing to evaluate through the lens of our focus on our high-end traveler base. How we can enhance the network effect for Hyatt and the value of the World of Hyatt platform, subject to the two sets of objectives strategically and financially that I mentioned just a minute ago.

Okay. That's helpful. And then, I just wanted to ask you, the pipeline sequentially was flat at around 73,000 rooms and typically, we've seen that pipelines grow faster than kind of the net additions. And is that something that you would expect to accelerate through the balance of the year, or is there some maybe a seasonal component there?

You know the ebb-and-flow of openings versus signings over the course of a year is both unpredictable and a variable over time. So, we actually are not so focused on whether we maintain sequential growth, let's say. We had a very significant quarter of openings this quarter and maintained our pipeline and it does represent a 10% growth year-over-year. So, as I sit here today and I think about how we are gauging our future and I look at the backlog of transactions that are being negotiated right now and Letters of Intent that have been signed, we are in a higher demand for Hyatt brand position as we sit here this time this year than we were last year, by a wide margin. So, I look at the opportunity to continue to expand our pipeline, even as we maintain what we've noted is an industry-leading level of net rooms growth is we're confident about being able to do both.

Okay, thanks.

Smedes, this is Pat. I'd just like to build on what Mark has said and I'll take you back to our earnings call in February, where we provided a deeper look at the construct of our earnings growth model. We were also at that time providing guidance for 2018 and in order to provide some context around the guidance we provided for net rooms growth for 2018, we provided some visibility to how we saw things shaping up for 2019. And you may recall that we highlighted that we expected an acceleration of our net rooms growth rate in next year and that is still the case. We indicated at the time that we expect the 2019 would deliver more than 7.5% net rooms growth. And that outlook remains solid.

Great. Thank you. And Pat, in your updated guidance for EBITDA does it also anticipate the sale of the owned asset that you mentioned in the third quarter?

It does not at present.

Okay. All right. Thank you very much, guys.

Your next question comes from the line of David Katz from Jefferies. Your line is open. Your next question comes from Thomas Allen from Morgan Stanley. Your line is open. Thomas G. Allen - Morgan Stanley & Co. LLC: Hey. How are you? Just in terms of the RevPAR growth in the quarter. Certainly, it stood out a little bit. Was it the select service and Hyatt Place, Hyatt House brands underperformed the higher end brands? Obviously, Easter had a bit of an impact, but you called that out. Are you seeing any shift where kind of higher end hotels are outperforming lower end? And what do you think could be driving that? Thank you.

Look, I think overall, we're thrilled with the performance of the select brands. We gained share in the quarter, Thomas. And as we look back, we've gained share as Pat mentioned in 12 consecutive quarters. So, we feel like the strength and the performance of the brands is well in place. Generally speaking, the supply and demand in select – in the upscale segment right now is relatively closely balanced. And so, as we think about how we're competing at this point, it's in part due to really differentially performing and gaining share. It's particularly why we're so excited about the new changes and the evolution of the high place brand that I talked about in the script. Because we feel like those will continue to put us in a position where we can differentiate what we're doing and really focused on the guest experience. But overall, we believe that we're in a period where the kind of performance and the level of growth that we've seen and the first half should be sustainable at this point. So, our outlook is not that we're seeing some kind of structural shift that will tend to be a trend of any kind in terms of a decline quarter-over-quarter. Thomas G. Allen - Morgan Stanley & Co. LLC: That's helpful. Thank you. And then just kind of touch on that last point, for the guidance overall, you obviously don't give quarterly guidance. Is the implication you've raised your second half of the year expectations given the strong momentum or are you kind of baking in the same second half expectations, which could, some would argue, be conservative? Thank you.

Yeah. Thomas, thank you for the question. We have modestly increased our second half expectations, but we've also given the fact as you know to the lower favorability from ForEx, which you know has mitigated the impact we would've otherwise expected given the underlying momentum in our business. Thomas G. Allen - Morgan Stanley & Co. LLC: Helpful. Thank you.

Your next question comes from Bill Crow from Raymond James. Your line is open. Bill A. Crow - Raymond James & Associates, Inc.: Hey. Good morning. Thank you. I wanted to start with a follow-up to Thomas's question there on the limited service or select services versus full service. I think the way you answered it was more pertinent to your own market share and performance. But I'm just wondering if there's a shift in the demand segments that are driving RevPAR growth or maybe supply shifts that are making the upper upscale and full service outperforms select service, looking beyond your portfolio?

Thanks, Bill. As I think about sort of – you know thinking about the segments and segment performance, a couple of things that I think are notable. I talked last quarter about the strength of leisure or transient demand and that continued in this quarter. Hawaii was a real standout performer for us. So, our high-end customer base is still active on the leisure front that helps too and tends to help enhance full service resort performance. The second dynamic that is really notable is that the corporate demand on the group side this quarter was really spectacular. It was a very, very strong quarter for corporate demand, both in terms of realized business, but also in terms of booking pace, we had a very strong quarter with respect to in the quarter for the quarter, and in the quarter for the year bookings a lot of which, most of which are corporate in nature. So, if you look we had sort of on a year-to-date basis taking the Easter quarter – the Easter impact out, corporate demand – corporate group revenue is up almost 7% year-to-date. And so as we look at that and we look at sustained levels of demand in volume accounts and business transition, a lot of that activity, so significant quarter in group, continued sustained demand on the leisure side, which is really for the benefit of resorts more than it is for the select service portfolio, that is part of the dynamic that we saw and it partly helps to explain kind of the evolution or profile of the results. Bill A. Crow - Raymond James & Associates, Inc.: Yeah. That's great. Thank you. I wanted to also ask about the NH deal and a two-parter here, how aggressively did you go after the stake in NH that HNA sold earlier this year, I think it was? And then the second part of that is how much work did you do to understand the value and the opportunity to unlock the value from selling the assets, I'm not as familiar with how that might be done in Europe and the tax efficiency, et cetera, in the U.S. but just tell me kind of the work that you did, that you got comfortable?

Okay. Thanks, Bill. On the first issue, I'm not going to comment on any specifics that we might have pursued or how we went about what we do, or what we did. On the second point, the fact is that we spent a lot of time considering different ways in which we could approach the opportunity. The backdrop of that was to really focus on the separation of the real estate from the hotel operations. It's a complicated process and, ultimately, led us to realize that we couldn't advance our work without getting information from the company which is really what drove the letter that we sent to the board last week. Given the nature of the regulatory environment in Europe that became public, and so there was a lot of focus and attention on it. And as I mentioned in my comments, we didn't know about some disclosures that were made after we submitted that letter which led us to the conclusion that we did. So I would say that we did a lot of work, in fact I think we sort of did all the work that we could do with publicly available information and came to the conclusion that we could not advance what we wanted to do further without additional information. Bill A. Crow - Raymond James & Associates, Inc.: Okay. That's great. Thank you.

Sure.

Your next question comes from Stephen Grambling from Goldman Sachs. Your line is open. Stephen Grambling - Goldman Sachs & Co. LLC: Hey. Thanks. I guess, first you mentioned the investment in the organization to ramp the international pipeline growth and also some of the inherent demand for new properties. I guess is there any way to size the demand or unit growth that you may to be turning away or delaying due to this infrastructure and how quickly could we see that growth ramp?

Hello, Stephen. This is Pat. Thank you for the question. We're certainly not turning away any development opportunities. What I was making reference to in terms of the growth in adjusted EBITDA for ASPAC and the extent to which that earnings growth was not consistent with the top-line growth that we're seeing out of the region is that we're making investments in human resources and human capital to provide the platform and the infrastructure necessary to support the ramp-up, the very dramatic ramp-up we're expecting in new hotel openings over the next several years. So, certainly not turning away from opportunities, in fact I would say running toward opportunities, building on an already strong pipeline and building partnerships as we did with (43:36) earlier this year to ensure that we are fully capitalizing on the enormous growth potential of that market. Stephen Grambling - Goldman Sachs & Co. LLC: Great. And then perhaps I missed at the opening, but how does the recent strength in the hotel transaction market alter your thinking, if at all, on the timing and magnitude of asset sales?

Well, first and foremost we are active in the market, have been, are now and will continue to be. So, we've – you heard Pat described a couple of things that are going on. One is the announcement of our acquisition of the Hyatt Regency in Phoenix. The second is our plan to dispose of one of our hotels. We're actively engaged in other acquisition opportunities, as we speak. And in relation to the sell-down commitment that we made, we have a 100% confidence that we will make our commitment to fulfill the $1.5 billion sell-down target. And what we expect is that, as the year unfolds further, we will turn to a more specific plan for the next step in that. And that will likely take us into 2019 for the next chapter of that sell-down process. Stephen Grambling - Goldman Sachs & Co. LLC: Sounds good. Look forward to hearing it.

Thanks.

Your next question comes from Joe Greff from JPMorgan. Your line is open.

Good morning, guys. Most of my questions have been asked and answered. But I'm just curious, with respect to NH Hotels, and I know you sent the more recent letter Monday, have you heard from them? Have they responded to you?

Nothing to comment on at this point.

Okay. Thanks, guys.

Thank you.

Your next question comes from Vince Ciepiel from Cleveland Research. Your line is open.

Thanks for taking my question. I had a question about rate growth. It looks like it's accelerated quite nicely, both system-wide and in your owned hotel portfolio. Could you just remind us the connection between rate growth and margin growth? And based on where you are in the cycle and from a cost perspective, what the trajectory of margins could be like within your owned portfolio?

Certainly. Thank you, Vince. As it relates to rate growth and the trends that we're seeing, we're obviously very pleased with overall RevPAR growth and the extent to which that has been supported by healthy rate growth. One of the key contributors to that, in addition to the premium positioning of our products, is that we are continuing to improve our revenue management efforts. And we're certainly seeing that in our overall margin performance, which was the second part of your question. I'm very pleased with the margin progression that we saw in the second quarter for our owned and leased properties. In breaking down the 160 basis point improvement versus the second quarter of last year, we noted 40 basis points came from Easter, so that left 120 basis point improvement net of that holiday shift. A lot of that is coming from sales leverage, as well as from significant profitability improvement initiatives, which include revenue management. So very strong momentum in our owned and leased portfolio, and we're following a similar playbook for our managed properties that we don't own. We're very pleased with the overall momentum. It's hard to say how that's going to progress balance of year or into next year, but this is something we've been focusing on quite a bit over the last couple of years. And we're extremely pleased with the kind of results we're seeing with this level of margin expansion.

Great. Thanks. And then maybe just a bigger picture question, the midpoint your guidance kind of implies a little bit more modest RevPAR growth in the second half relative to the first half. And I'm just curious. Is that conservatism for international, which has been growing quite nicely, or do you think that both domestic and international could decelerate a bit in the second half?

It's more conservatism than anything else. We have half the year to go. We have improved visibility versus the last quarter, which is why we took up our guidance in addition to the fact that we had a strong second quarter, but we feel that it's prudent to guide conservatively and we have a high level of confidence around our ability to deliver against our numbers. One thing that we are facing in the second half of the year is that we are facing some tougher comps in Asia, as was the case in the second quarter. And there are some renovation impacts and other things that would contribute potentially to a slightly softer half compared to the first half of the year. One thing actually on the subject of balance of year, one thing I would like to highlight, while we don't provide quarterly guidance as it relates to either RevPAR or adjusted EBITDA, we are expecting, on balance, the third quarter to be a bit softer and the fourth quarter to be a bit stronger. Part of that is due to how the transaction effects lay out across the quarters balance of year. We're expecting about a $20 million transaction impact in the third quarter and about $15 million in the fourth quarter. There's also some holiday timing that is adversely impacting the third quarter relative to fourth quarter. And then finally, as a reminder, we took some fairly significant severance and other charges in the fourth quarter of last year. We'll be lapping that this year. So that also contributes to what we expect will be a stronger fourth quarter, a slightly softer third quarter, as it relates to how we're thinking about balance of year.

Thanks for that color.

Your next question comes from Michael Bellisario from Baird. Your line is open. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Good morning, everyone.

Hi, Michael. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Just want to go back to your kind of net unit growth and the focus on the select service side. You mentioned doubling that footprint. I think that's 80 hotels a year. You guys have been running out of kind of 60 hotel run rate for the entire company. How should we think about that step-up in development and are you guys going to have to invest any of your own money to hit that five-year target?

Thank you for that, Michael. Our activity base on the development side for select service hotels has been extremely weighted towards working with third-party developers. We have historically entered into development partnerships. We've built some hotels ourselves, although not so many that we have built to hold. We've identified sites to develop and then either took on a partner or ended up selling the hotels upon completion. The reason we've done that is because we really wanted to control site selection in key markets. And the whole initiative, starting about four or five years ago, that I talked about at that time was the next chapter of growth for us for select service was key urban markets, and that's really why we weighed into that. But our deployment of capital against construction or on balance sheet development for select service will be a very small going forward. We will continue to identify key locations in markets and work with developers to work through those opportunities, but you will not see us deploying a lot of capital against construction. In terms of the pace of growth, what I said is I think we can double what we're doing from here over the next five years. I think that will – we expect that that will ramp over that period of time. And part of that has to do with changes that we're implementing that I talked about but also adding resources – development resources globally. We see continued positive momentum in demand for our Hyatt Place and Hyatt House brands globally. So we believe that we will see a further acceleration of that, over time, as we get more presence and develop more awareness of the brands, but also can demonstrate more of the network effect that I – as I had mentioned that we already see in the United States. Once we get to a greater scale in some other countries.

Michael, this is Pat. Just to build on what Mark has said, earlier I referenced that we had provided a preliminary outlook for net rooms growth for 2019 more than 7.5%. This year's guidance, as you know, is 6.5% to 7%. So that's a very significant increase in the pace of new unit openings and a very significant contributor to that is the pace of our select service development. So we are, in fact, expecting an acceleration of that growth. Michael J. Bellisario - Robert W. Baird & Co., Inc.: That's helpful, and then just one housekeeping item if you could maybe provide any more info on the impairment you guys took during the quarter?

Yeah. Thank you, Michael. That impairment relates to Oasis which is the alternative accommodation investment that we made last year. Oasis has underperformed our expectations as it relates to the scalability of that business and the synergies to be realized through the alliance with Hyatt. The business has consistently experienced shortfalls in operating cash flow, and so, as a consequence, we felt that it was prudent to impair our investment to-date. We treated it as a special item, as you know, it's outside of adjusted EBITDA. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Okay. Thank you.

Your next question comes from the line of David Katz from Jefferies. Your line is open. You may be on mute, please un-mute. There are no further questions in the queue. I now turn the call back over to Mr. Brad O'Bryan. [0CPPRG-E Brad O'Bryan]: Thank you, Kim, and thanks to everybody for joining us for the call today. We look forward to talking to you soon.

This concludes today's conference call. You may now disconnect.