Hyatt Hotels Corporation (H) Q1 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Hyatt First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and Global FP&A. Thank you. Please go ahead.

Thank you, and welcome to Hyatt's First Quarter 2026 Earnings Conference Call. Joining me on today's call are Mark Hoplamazian, Hyatt's Chairman, President and Chief Executive Officer; and Joan Bottarini, Hyatt's Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K quarterly reports on Form 10-Q and other SEC filings. These risks could cause our actual results to be materially different from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today's remarks under the Financial section of our Investor Relations website and in this morning's earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation on our Investor Relations website this morning containing supplemental information. Please note that unless otherwise stated, references to occupancy, average daily rate and RevPAR reflect comparable system-wide hotels on a constant currency basis and closed hotels in Jamaica are excluded from comparable metrics in 2026. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will now turn the call over to Mark.

Thank you, Adam, and good morning, everyone. We appreciate you joining us today. Before I begin, I want to acknowledge recent events in the Middle East. We are closely monitoring the evolving situation and remain in regular contact with our hotel teams who've done a remarkable job of managing operations during trying times. And I'm extremely grateful for the professionalism and care with which my colleagues have conducted themselves throughout. The quarter also saw isolated security concerns in Mexico and Hyatt colleagues, guests and our hotels were thankfully unaffected. The safety of our guests and colleagues remains our top priority, and I'm proud of the care and resilience that our teams continue to demonstrate. At times like these, our purpose to care for people so they can be their best, continues to guide our actions. Turning to operating results. This morning, we reported first quarter system-wide RevPAR growth of 5.4% and performance exceeded our expectations, driven by continued strength in our luxury brands globally. RevPAR growth in the United States was ahead of expectations, and we saw strong growth across most international markets. Leisure demand from premium customers was exceptionally strong in the quarter, increasing approximately 7% compared to last year, with the strongest demand realized by our luxury brands. Business and group travel was also solid with business transient RevPAR up 2.4% in the first quarter and group RevPAR up nearly 4% compared to last year. Our core fee business remains durable and our diverse global portfolio has proven resilient in the face of demand fluctuations, including certain macro and geopolitical disruptions. Our differentiated brands continue to deliver results over the long term and reinforce our position as a preferred brand portfolio for guests. We continue to see this preference reflected in our World of Hyatt loyalty program. We ended the first quarter with approximately 66 million members, an increase of 18% compared to the first quarter of last year. And World of Hyatt members accounted for nearly half of total occupied rooms globally during the quarter. World of Hyatt's success goes beyond scale. We are focused on generating higher value demand. When our members stay with us, they spend nearly twice as much compared to a nonmember, highlighting the engagement from our premium customer base. The value proposition of our loyalty program continues to resonate with our members. Enhancing Hyatt's attractiveness to owners and developers. Development activity during the quarter was very strong, we ended the first quarter with a record development pipeline of approximately 151,000 rooms, up more than 9% compared to the first quarter last year. We continue to see strong interest in our newest brands with owners recognizing the value of our brands and the strength of our commercial engine. In the first quarter, we signed a number of new franchise agreements across Hyatt Studios Height Select and unscripted by Hyatt brands in the United States and have many more in discussion. In total, the pipeline for new hotels in our Essentials Brand Group increased nearly 25% compared to the first quarter of 2025. Outside the United States, our development engine is strong. with significant signings activity during the quarter. We're seeing broad interest across our brand portfolios throughout the world, reinforcing our confidence in our ability to drive durable, capital-efficient fee growth over the long term. We achieved net rooms growth of 5% for the first quarter of 2026, in line with our expectations as we lapped a quarter of outsized openings last year. We had several notable openings in our lifestyle brands, including the Anda Lisbon, which strengthens our lifestyle brand presence in Europe, Diana's Shanghai ITC a luxurious and modern addition to our already strong brand presence in Greater China and the Livingston, our first hotel in Brooklyn, New York. These openings reflect our continued focus on expanding our portfolio in high demand markets with differentiated offerings. With many exciting additions to our lifestyle portfolio slated to open in 2026 and further strengthening our position as a leader in lifestyle offerings at scale. We also continue to see strong momentum in our Essentials brands, entering 7 new markets during the quarter. This included the expansion of our upper mid-scale portfolio with several UrCove by Hyatt openings as well as the third Height Studios property in the U.S. These brands are an important driver of our growth strategy, allowing us to expand our brand footprint in markets where we have significant white space while also offering attractive economic returns to owners. We expect our net range growth to accelerate over the course of the year as we benefit from meaningful opportunities to convert hotels into our system, along with openings from our pipeline. Now shifting to an update on transactions. We continue to make progress on the plan to sell Hyatt Grand Central New York and could be in a position to close that transaction in the fourth quarter of 2026, if various closing conditions are satisfied. We will continue to provide updates on this transaction as we reach key milestones. During the quarter, we elected to terminate the purchase of sale agreement for the sale of the Anda London Liverpool Street. And separately, we are no longer under contract for two other properties that were previously signed, our decisions not to move forward were specific to the individual transactions and reflect our continued discipline around pricing and terms. To be clear, our broader plans for additional asset sales and our confidence in the transactions market remain unchanged. We remain active in the market and are in discussions regarding certain assets to further realize value from our owned portfolio. Our approach remains consistent with our previous track record, ensuring we realize attractive values when we sell hotels and ensuring we execute transactions in a disciplined manner that retains the sold properties within our portfolio and increases shareholder value. As we look forward into 2026 and beyond, I'm confident about our future. We have significant competitive advantages that drove the strength in our core business in the first quarter. We are focused on elevating Hyatt so we can respond faster, innovate more and perform at a higher level. in an increasingly dynamic environment. At its core, elevating Hyatt and maximizing our potential comes down to three integrated areas working together, our brands, our talent and our technology. Increasing brand equity is a key component of how we drive value for our stakeholders. Our sharpened brand focus strengthens differentiation, enhances the guest experience and drive stronger performance across our portfolio. This makes it that much more attractive to owners and developers supporting our expectations for long-term growth and growing free cash flow. Brands create the most value when they are executed consistently, and that comes down to our people. We are focused on developing leaders who could execute at a high level while continuing to innovate as enabled by our culture. We've built an organization grounded in quality, responsiveness, performance and continuous improvement. Strong brands and great teams performed best when enabled by the right data and the right technology that we are leveraging to uncover deeper insights. These insights will allow us to better engage with our guests, support our colleagues and enable faster, more informed decision-making. We navigated a very dynamic quarter with several events requiring speed and responsiveness that our colleagues handled exceptionally well. I'm proud of our colleagues around the world who live our purpose every day, which I truly believe allowed us to deliver such strong quarterly results. I'll now turn the call over to Joan to provide more details on the quarter. Joan, over to you.

Thank you, Mark, and good morning, everyone. In the first quarter, RevPAR exceeded our expectations, increasing 5.4% compared to last year, driven by strong demand across our global portfolio and continued strength of the high-end traveler. In the United States, RevPAR increased 3.3% compared to last year. Performance was led by our full-service hotels, which benefited from strong leisure demand, including at our resorts, which had a particularly strong March. Group RevPAR was up 1.2% in the face of more difficult comparisons in Washington, D.C. due to the January 2025 presidential inauguration. We also saw improvements in select service RevPAR, which increased 1.8%, led by business transient demand. Outside the United States, RevPAR growth was even stronger, increasing over 8% and reflecting robust international travel demand. Greater China grew RevPAR over 12% in the quarter, supported by improved domestic leisure demand, particularly during the Lunar New Year holiday in February. Along with improved international inbound travel, including from the United States. Asia Pacific, excluding Greater China RevPAR increased over 11%, driven by strong inbound travel and demand across key markets. Europe continued to perform well, with RevPAR growth of 7.5%, supported by strong leisure travel and solid group demand benefiting from the Olympics in Milan. RevPAR in the Middle East and Africa declined by approximately 4% compared to last year due to the conflict in the Middle East. Net package RevPAR in our all-inclusive portfolio increased 7.4% and compared to last year despite the security concerns in Mexico beginning in late February. Overall, our first quarter results reflect strong demand for premium leisure travel globally and a healthy commercial travel backdrop. Turning to our financial results. Our core fee business continued to perform well in the first quarter, supported by our top line performance, with tell level profitability, increasing scale and the quality of our portfolio. Gross fees increased approximately 9% to $333 million, driven by strong performance across our managed portfolio, fees from newly opened hotels and the newly structured management agreements from the Playa portfolio. We also grew incentive fees approximately 14%, reflecting solid hotel level profitability, particularly in international markets. In the first quarter, owned and leased segment adjusted EBITDA declined by approximately $2 million adjusted for the impact of asset sales. Distribution segment adjusted EBITDA declined versus the prior year due to temporary factors, including the closure of hotels in Jamaica because of Hurricane Melissa and lower demand in Mexico due to security concerns. The distribution segment was also impacted by lower demand for 4-star properties a dynamic we have shared that will take time to return to previous levels as travel spend improves for this consumer segment. Overall, adjusted EBITDA for the quarter reflects the strength of our core fee business. As of March 31, we had total liquidity of approximately $2.2 billion, including $1.5 billion of capacity on our revolving credit facility. In the first quarter, we repurchased $135 million of Class A common stock, returning approximately $149 million to shareholders through share repurchases and dividends. We ended the quarter with $543 million remaining under our share repurchase authorization. We remain committed to our investment-grade profile and our balance sheet is strong. Looking ahead to the rest of 2026. We are operating in a dynamic environment that varies from region to region. RevPAR in the Middle East is expected to be down significantly compared to last year, impacting fees by approximately $10 million for the balance of the year. Pace for our all-inclusive resorts in the Americas is up in the low single digits in the second quarter due to lower demand in Mexico. While we expect positive net package RevPAR growth in the Americas, we do not expect to see the same level of growth for the remainder of the year compared to the first quarter due to the disruptions from the security concerns in February. Overall, these disruptions are expected to have a modest impact to results. We are increasingly positive about the outlook for the United States. Forward-booking trends in the United States are strong for the balance of 2026 with group pace for full service hotels up in the mid-single digits for the remainder of the year. We continue to hear positive feedback from our group and corporate customers about their intent to travel this year, and we expect the strong leisure trends to continue. We are also seeing improved select service trends as we lap easier comparisons starting in the second quarter. Outside of the United States, we also expect performance in Greater China and the rest of Asia to be very strong in the balance of 2026. We believe the improved performance in the United States supports increasing our full year system-wide RevPAR growth outlook to between 2% to 4%. RevPAR in the United States could grow between 2% and 3% for the full year, reflecting the improved trends that I just reviewed. We expect moderately higher growth in international markets compared to the United States overall, but growth will be lower compared to our expectations last quarter, primarily due to the impact of the conflict in the Middle East. We expect net rooms growth of 6% to 7% for the full year with continued momentum behind our new brands, driving another year of strong organic growth. We are raising our gross fees outlook for the full year and expect fees to grow between 9% to 11% in the range of $1.305 billion to $1.335 billion. We are maintaining our full year adjusted EBITDA outlook range and we expect adjusted EBITDA to grow at a strong rate of 13% to 18% in the range of $1.155 billion to $1.205 billion. This outlook reflects stronger performance in our core fee business, offset by revised expectations for the Distribution segment, which we believe will decline by approximately $25 million for the full year compared to 2025. including $15 million in the second quarter from the impact of the security concerns in Mexico. We are maintaining our adjusted free cash flow outlook for the full year in the range of $580 million to $630 million an increase of between 20% to 30%. This reflects the conversion of adjusted EBITDA to adjusted free cash flow of at least 50% for the full year. Finally, we expect to return between $325 million and $375 million of capital to shareholders for the full year through share repurchases and dividends. For the second quarter of 2026, we expect global RevPAR growth of around 3%, which reflects solid growth in the United States, including the start of the FIFA World Cup in June and continued strength in international markets, except for the Middle East. Gross fees could grow in the mid-single-digit range in the second quarter compared to last year. We expect adjusted EBITDA for the second quarter to be up in the mid-single digits compared to what we reported in the second quarter of 2025 after removing $17 million of pro rata JV EBITDA consistent with our updated definition and $14 million of owned and leased adjusted EBITDA for the period of ownership of supply portfolio. Please refer to Schedule A 9 in this morning's earnings release for the 2025 adjusted EBITDA baseline by quarter which excludes pro rata share of JV EBITDA and asset sales that were completed last year. In closing, our first quarter results reflect the strength of our core fee-driven earnings, our results demonstrate the performance of our brands and the resilience of our premium customer base across brands and geographies in the face of a dynamic operating environment. As we look ahead, we remain confident in our ability to deliver continued growth, supported by our strong pipeline, differentiated brand portfolio and disciplined approach to capital allocation. We believe we are well positioned to navigate a dynamic environment while continuing to deliver meaningful long-term value for our shareholders. This concludes our prepared remarks, and we're now happy to answer your questions.

[Operator Instructions]. Our first question comes from Lizzie Dove with Goldman Sachs.

So we've seen, obviously, this really meaningful positive shift in the U.S. demand dynamic. There's been some talk of the C-shaped economy, but it also seems like your higher-end customer is still doing very, very well. And so, maybe you could just unpack a little more about what you're seeing real time, what's embedded in that 2% to 3% you raised it to in the U.S. in terms of business in leisure and how you expect that?

Sure, Lizzie. Yes, we had a result in the first quarter that exceeded our expectations and leisure transient in the quarter in the U.S. alone was up 4%, and group RevPAR being up 1.2 with the comparison we had to the inauguration last year was a strong result and even probably more, I guess, in excess of our expectations was select service RevPAR was strong, and that was driven by business transient improving. So all of those trends that we saw that were in excess of our expectations. We're looking at the second quarter and the rest of the year. and factoring that into our outlook. I mentioned that we expect the U.S. in the second quarter to be between 2% to 3% growth. And that's going to be helped in part to by the group business that we're seeing from FIFA in June, and that will carry over into July a bit too. So for the full year, we believe we have a strong and reasonable expectation given what we're seeing, I mentioned group up in the mid-single digits for the remainder of the year in the U.S. and business transient and leisure transient, the booking windows are still modest, but we feel really confident about our outlook now for the U.S.

I'll just add a couple of comments, Lizzie, thanks for the question. First, on the group front, we have sequentially over the last approximately 9 months grown group share. And our RevPAR realization has steadily increased over that period of time. Part of that has to do with a new approach into -- in terms of how we go to market. And that reflects the quality and the positioning of the groups that we are actually attracting differentially. Secondly, whether you look at STR chain scales or you look at the luxury brand group that we've defined for ourselves, they were the strongest RevPAR growth sectors -- segments in our portfolio. If you look at our brand group, for example, we were up in the double digits, RevPAR growth in the first quarter. And we also had the most expansive index growth, so market share growth, almost 5 points of increase in share in the first quarter. So we really -- if there's any sign of weakness in terms of the high-end customer, we have not seen it. Of course, I think we are playing the game differently and also really focused on the clients that we serve and how we go to market. And I think our relative performance is a reflection of that.

Your next question comes from the line of Stephen Grambling with Morgan Stanley.

I wanted to turn to the distribution segment a little bit. I recognize that you had some kind of one-off things that are impacting it. But how should investors think about the drivers of this segment longer term? And separately, do you still see synergies from this business within the overall portfolio, if you will? Or is this more kind of a standalone at this point?

Thank you, Stephen. First of all, the way we think about the business is, it has been -- it's been hit by a couple of isolated issues that have had an obvious impact. And you heard what we -- what our outlook is for the year. There's some FX in that as well, but a lot of it is the change in volumes that relate to Jamaica being largely shut down in relation to the core bookings that we had last year into Jamaica before Hurricane Melissa. And then secondly, the Mexico security concerns. I would say that we view both of those as isolated. The second thing is we see actually more -- if I had to say, do we see more opportunities than risks. The answer is absolutely yes. and they really derived from 2 things. One is, in the same way that we have revamped how we go to market in certain areas within our core business. We have done the same in relation to ALG vacations. And we have an AI strategy road map for new capabilities that we're building that will make us more effective and more efficient and I think drive more volume. And the platform itself is highly enabled to be able to serve others on a white label basis. And we see growing opportunities in that domain because there are a lot of larger -- there are companies with large customer bases that are looking to offer more and different types of services to their customer base. And package travel is one key area. So we see really significant opportunity. Having said all of that, the principal reason we own this business is because of its interface and integration with IC, the height inclusive collection because it's still a significant revenue generator for that business, and it strategically serves a purpose of being able to have greater visibility into things like Lyft. We buy, I don't know, I would hazard a guess, it's in excess of $1 billion, probably more like $1.5 billion of airline seats every year as part of the packages. So we have extremely close relationships with all the carriers as well as charter operators. That visibility gives us a lot to go on in terms of how we forecast and what the outlook looks like for each market. So I would say there is a strategic rationale. It does fit with the inclusive collection. If that were not true, I'm not sure that we would own this business, but it is true, so we own it. It happens that we are not looking at this as sort of just a cog in the wheel. We're looking at it as a real business with a real opportunity in the future.

And the only thing I would add to what Mark said -- sorry, the only thing I would add to what Mark just said is, structurally, about half of the business serves 5 star locations and half of the business serves 4 star locations. So when you think about the performance of our portfolio and the demand that we saw despite the securities concerns in Mexico, that there was redirection of a lot of that business into other locations. So that is something that has benefited our portfolio, but on the temporary side with respect to Forestar we're seeing actually after the disruption late February and into March, that pick up, stabilize and grow. So when we look at the second half of the year, that's where we're seeing the impact from the first year -- excuse me, from the first quarter and the second quarter to get much better and particularly into the third and fourth quarters of this year.

So while we're on this topic, I do want to provide a couple of pieces of data that I think will provide context first. In terms of gross fees, Mexico represents about 10% of our total gross fees. The Dominican Republic represents about 6% and Jamaica represents about 1%. And so as we talk about these markets, I think it's important for everyone to understand the relative size. Secondly, we were positive the heightened [indiscernible] had positive RevPAR growth across each of those markets -- sorry, not Jamaica. Jamaica is still wildly disrupted, so let's leave that out. But up 3% in Mexico, up 11% in the Dominican Republic, really where you saw the massive change was March. So Mexico was down 5%, but the Dominican Republic was up 16%. And that is a direct reflection of the channel shift that we actually played a big role in because we have the largest tour operator in North America. To actually cascade business that wasn't going to Mexico because of security concerns into the Dominican Republic. So that's just a hard data point for you to actually understand in terms of the strategic value that ALGV provides to the business itself.

Your next question comes from the line of Michael Bellisario with Baird.

Mark, on the demand front and sort of your big picture outlook kind of taking those together. Just how are you thinking about or maybe sensitizing just the whole potential range of outcomes with all the macro uncertainties out there, just higher gasoline, higher airline ticket prices, reduced flight capacity. Just how are you thinking about that? Are you seeing anything yet in the booking pace that maybe gives you any pause?

Not at the moment. I think we're very sensitive to what's happening with airfares because airlines will have to adjust their affairs to accommodate fuel price increases. And of course, the biggest issue is the persistency of the current situation overnight last night, oil moved quite a lot. And -- but again, I think there's a danger in trying to make predictions off of momentary strategy -- or sorry, policy positions that the participants and the board might be taking. So we are looking at a situation in which if there is a persistence of higher oil prices and that keeps going up. I think the biggest hit in terms of demand will be at -- in -- amongst lower income households. That's true across retail as well as hospitality. It's -- that's really where a disproportionate amount of the pain will be felt. I think airfares have already gone up. And depending on what market you're looking at, they've gone up between 5% and 10%, maybe a little higher than that in certain markets. And that hasn't really affected our volumes. They've shifted as I just described, but it hasn't affected our volumes. And I think, once again, this goes back to the actual client base that we have. We're not serving primarily the market of lower household -- lower household incomes relatively speaking. It's really very concentrated in higher-income households. And also households that have financial assets, investments in the stock market and so forth. So there's a [indiscernible]. And so -- we don't see any significant demand shifts at this point. But we are paying close attention to this because at some level, ever-escalating oil prices and inflation will have an impact.

Your next question comes from the line of Richard Clarke with Bernstein.

Just want to follow up a little bit more on some of the Caribbean dynamics. So I think at the full year results, you would have expected the Jamaica hotels to reopen by the end of this year. I think it looks like that's going to move to early '27. So what impact does that have on this year's numbers? And just on Mexico, are you seeing demand there now normalizing? Is that what you're saying for the second half that Mexico will be back to normal levels of demand beyond the second quarter?

Richard, I think you were referring to Jamaica. And we have removed Jamaica for this year. So impact to this year is nothing greater than what we've presented in our EBITDA and fee outlook. And we provided a walk during our investor presentation -- in our investor presentation in the fourth quarter on that specifically. So that's the story with Jamaica and we'll keep you posted as far as reopening and our expectations in 2027. With respect to Mexico, we are seeing a moderating of the impact that we -- that I mentioned that we saw in late February and into March. So we feel good about what we're seeing in the last couple of weeks. So week-on-week, we're actually seeing pace getting better. And as Mark mentioned, airline capacity has not gotten larger, but airlines are actually managing this with load capacity. So there's still quite a bit of demand that's going into these markets as we look out into future quarters. So the second half of the year, we feel good about that we'll be able to pick up -- and our outlook overall is positive for the Caribbean and for our net package RevPAR in the Americas. Part of that is due to the improvement in Mexico and part of that is due to some of this redirection of travel into other markets where we have hotels.

Your next question comes from the line of Shaun Kelley with Bank of America.

I just wanted to ask about some of your global expectations. Could you just give us a little bit more color on how you're thinking about Middle East and Africa trending through the balance of the year? And then just maybe some of the offsets globally as -- I don't know if Asia is seeing any redirected business is now staying more in that market and not kind of crossing over to Europe or just how you see some of those kind of global puts and takes.

So I'll start with what our outlook includes Sean. And then maybe Mark will want to add as well as far as the macro. But Middle East, right now, what's built into our outlook is a more pronounced impact in the second quarter, which is embedded in our EBITDA outlook that we -- that I shared -- so we expect demand in the second quarter to be more impacted and then to improve in the second half of the year sequentially quarter-over-quarter. So kind of by the end of the year, getting closer to maybe flat, but we'll see because it's very uncertain as far as how this will evolve over the coming quarters. But that's what's embedded within our outlook. And the one region that has been exceptionally strong is China. And I mentioned the growth in the quarter of 12%. And the region overall, excluding Greater China, is up 11%. We're seeing strong results into April on a preliminary basis. So that has also been a region that has exceeded our expectations. In China, this is -- we had the Lunar New Year holiday in the quarter, which always gives a boost, but we're also seeing group slightly up and BT about flat. So across all demand segments, China looks like a region that we can continue to rely on growth for the remainder of the year.

The only region I would add a little commentary to about Europe. Which was up 7.5% in the first quarter stronger than we anticipated. There are ongoing. There's more and more talk about fragility, economic fragility in Europe, especially around energy prices and the escalation of energy prices. Again, this is an example where I think there's going to be a difference between how economy budget mid-scale performs in Europe versus full service and luxury. And so we actually have a positive outlook in Europe for the remainder of the year. It seems like in 20 -- I remember thinking in 2022, the '23 would be Europe's big breakout year. It turned out to be true. I thought '24 could be good. It turned out to be great. '25, I thought couldn't beat '24, it beat it. -- so Europe has actually been, at least for our portfolio, have been very resilient. And I've learned over the last 3 years that counting your about is a mistake. So I would say we have a pretty positive outlook on Europe.

Your next question comes from the line of Smedes Rose with Citi.

I appreciate all the color around Mexico and the Middle East. Maybe just kind of switching gears a little bit. I was just curious as to your comments at the beginning of the call about terminating your sale of the Andaz in London and not moving forward with a couple of other asset sales. Could you maybe just -- I don't know if you can provide any more color around what sort of broke those deals that would certainly be of interest. But then also, how are you just thinking about the transaction environment overall? Is it getting more favorable relative to your last call and maybe this time a year ago? And any kind of I don't know, would you like to be able to complete additional asset sales, I guess, as we move through the balance of the year?

Sure. Thank you for the question, Smedes. I think with respect to Liverpool, for those of you who don't know, the hotel sits on top of rail lines that are part of network rail. That's the U.K.'s national rail system and adjacent to the liver posted station. And the redevelopment that we had a part in with respect to a developer coming together with the MTA from Hong Kong to redevelop the entirety of that site had a number of conditions associated with it, including approvals from network rail that didn't -- were not issued. We don't believe the opportunity is dead. We believe that the deal that we had signed up doesn't have the authorities that it needs to move forward. I don't believe that, that means that there won't be a redevelopment, I believe it will take a different shape. And you can imagine, we remain in very close contact with all the parties involved. And I'm actually optimistic. It's a great location and a great hotel market. adjacent to some of the biggest businesses in the city of London. And when I say adjacent, I mean literally across the street from. So we have great corporate drivers and the hotel has got a great reputation as a social event destination. So I'm very optimistic we can find our way to a different type of deal, but it will take some more time for Network Rail to make some additional decisions about how the sequencing of that project unfolds and so forth. In the meantime, the hotel is performing very well. So we don't -- we're getting paid to wait, so to speak. So that's really the whole story there. And I would describe it as a setback, not a not something that we are turning off because we won't be able to sell it. Secondly, we won't -- we will not do the redevelopment by the way. We will only participate by way of selling the property into a redevelopment plan. That's -- so we're not going to undertake a mass redevelopment in the City of London. The other hotels actually were relatively small deals. We mentioned a few calls ago that we have a few hotels that are -- we would put in the category of portfolio cleanup. They happen to be unleased property. So it's a ground lease that the hotels operate on. So they're not material we ended up with market-specific reasons why we elected not to proceed with two of those properties with two properties that we had previously had signed. And we believe that the markets will perform well this year will get paid to wait. And we will we will look to put another deal together in the future. Finally, yes, we are working on other opportunities to have additional asset sales. So when I mentioned our plans with respect to asset sales and our outlook on the transaction market remains unchanged. What that means is our intention to continue to sell properties. And I do think that the market for property sales is much more constructive this year than it was last year.

Your next question comes from the line of Duane Pfennigwerth with Evercore.

So just low singles EBITDA growth in the first quarter. It sounds like mid-singles in the second quarter. Can you just big picture walk us through the building blocks of why we would get so much acceleration in the back half?

Sure. The -- as we look at the core business, we've been talking about how strong we have been performing and how we anticipate continuing to perform, including our net rooms growth expectations. So when you look at the total year RevPAR, total year net rooms growth, that's going to lead to very strong fee growth for the year. And in the second half, I mentioned that the distribution segment will recover. There will be better performance, particularly in the fourth quarter because we are experiencing easier comps in that quarter. So there's a couple of factors related to all of those items built into the second half of the year. There's also structurally -- if you'll recall, we renegotiated the Playa contracts. And in the second half of the year, we don't have the headwinds from the franchise fees that we had in the first quarter. So that helps us in the pickup on the fee growth into the second half of the year. So there's a couple of structural items. There's improvement in the distribution business that we're confident in and in the core fee business will remain strong going into the second half of the year. Also, I would mention, Duane, the G&A that we posted in the first quarter was a little bit higher than our expectations, mostly due to timing. So as we look at the last 3 quarters of the year, we'll have lower G&A expense as well.

Your next question comes from the line of Dan Politzer with JPMorgan.

I think you spoke a little bit about general drivers of demand, but something that I think we came into the year hearing a lot of that was World Cup, Americas 250th things of that nature. So I mean has there been any change in kind of the outlook there as it impacts your business, especially in the kind of the peak summer season?

No, I think there's been no change in the outlook, it's positive. The pace that we're seeing into the cities that are hosting World Cup, are very strong. And we -- New York is, I think, a significant driver of that because that's where the finals will be. So the July pace for New York is really extremely strong. And interestingly, we've got real group business, significant group business that's also pacing well ahead in those cities. So it's not just transient, which is inherently shorter term. And so our visibility to how much transient we actually pick up between now and the time that we get to World Cup is low, but our visibility on the group side is quite good. And the pace increases for those markets is in the mid-teens in terms of group pace. So I would say we thought it was going to be strong in those particular cities, and we continue to feel that way.

Your next question comes from the line of David Katz with Jefferies.

I wanted to just go back to technology and AI, in particular, it's obviously a growing topic across the industry. Mark, I'd love your perspectives on sort of where you're at, where you'd like to get to and how you see it evolving for Hyatt in any industry.

Sure. We have really made significant progress over the last 2 years, more than that, about 2 years and 4 months now of really putting together our entire environment and then building out a number of genic platforms. I would say one should never measure success based on how many agents you have deployed in your company. And I don't believe that any particular platform or tool is a durable competitive advantage. So however, what I do think is if you combine advanced advancements and facility with building platforms that have actually generated real impact to date, which we have. And we become more and more practiced at the human elements that are required in order for that to really generate value. I think that's really where competitive advantage can be uncovered. So there are two dimensions to that. The first is the level of expertise and, frankly, reps repetitions of creating great tools and great platforms. And being able to pivot and continuously modify and optimize those platforms even as the models themselves learn, they're self-learning embedded in that, as you know. The second dimension is the expansion of the adoption of regular use of AI tools. We have enterprise-wide licenses on a few platforms, and we are looking to extend and expand. And I have to say every -- literally every week that goes by in my team meeting, I hear new and different applications that hotel teams have come up with that I'm blown away by. And I think it's true that the adoption rate and level of expertise varies across the company. But we've heard about some really remarkable advancements. And I think it's the combination of that enablement at the center with a special focus on expanding and scaling adoption with the entrepreneurship at the local level, the combination of those 2 things is really where magic can happen. And so we continue to see revenue focused activity is our #1 focus. It happens that in every case, every revenue-facing initiative that we've undertaken has also resulted in productivity gains. And the question is, what do you do with that productivity gain. And in many cases, we redeploy those resources to actually optimize further and hone and get more specific around insights that we've derived on our customer base to be able to go to market differentially. And I think that's why our performance has just -- in our core business has strengthened over this period of time, and I think it's 1 key driver of that is the application of AI. So that's our philosophy. That's how we're approaching this. We see the big opportunity is to actually really elevate the level of humanity and the interactions that we have with our guests and our own colleagues by taking a lot of administrative work out of the system entirely. And that's really a powerful motivator for us given that we're very much a purpose-driven business.

Your next question comes from the line of Chad Beynon with Macquarie.

Great to see the increased pipeline of executed MNF contracts that you announced in the print -- just with respect to the Middle East conflict, should we expect any type of construction start delays or overall activity delays? Or do you think this pipeline should be executed kind of as planned?

Yes. Given the nature of what we've got in the region, which is more concentrated in Saudi than anywhere else, we don't see any impact in 2025 -- sorry, '26. I forgot what year we're in.

Your next question comes from the line of Trey Bowers with Wells Fargo.

This is [ Nick Wikel ] on for Trey. I just want to dig in a bit more on NUG, and try to figure out like which brands you're seeing the most uptake in, maybe the mix between like conversions and newbuilds for the year and you just hit on the impact or potential impact from the Middle East. So any color would be great.

Yes. Super encouraging. When we look at the pipeline increase year-over-year the activity level has gone up a lot. A lot of that has been in our Essentials brands, our slot service brands, up 25% in terms of pipeline size year-over-year, which is notable to say the least. We've had a sequential improvement in hotels under construction. It's up 10% quarter-over-quarter. About 1/3 of our hotels are under construction now. I would say as we our outlook currently includes about 2/3 of our room openings this year gross room openings this year coming from our pipeline and 1/3 or maybe it's 65, 35 or something like that being in the year for the year. And of that, in the year for the year openings figure, we already have 60% that we've identified and have opening dates for. So we feel really good about where we stand at the moment. And yes, the activity in the U.S. in the Essentials brands is really, really strong right now. I think we've hit a vein with Studios Select and unscripted. Of those brands select has really taken off. And we have quite a few, if I count them correctly, probably over 30% of the conversions that we see already planned for the year are select -- Hyatt select hotels. So -- and I think it will grow from there. So I'm encouraged across the board, but I have to say in the U.S., the Essentials portfolio is really the strongest category. Which will really help us fill in a lot of markets in which we have no representation whatsoever. We opened 7 new markets in the first quarter, and I think we're going to end up opening a huge number of new markets this year.

And the final question will come from Meredith Jensen with HSBC.

I was hoping you might speak a little bit more about the loyalty program. I know you gave the membership and the strong growth. But I was hoping if you might dig into a little bit more about spend, redemption behavior, how that's evolving kind of over regions and customer cohorts and perhaps adding any insights you might be getting from your credit card partnerships, that kind of thing, that would be great.

SP1772067257 Sure. First of all, in terms of the nature of the spend, I think it's like 60% or 65% of the room nights are paid for. with the remainder being redemption. So it's a very healthy ratio of our guests actually there as paying guests and not simply as redemption. Of course, we not only welcome but celebrate those who are redeeming their points because that is the flywheel with respect to loyalty. The demographic profile of our membership base continues to grow stronger, and we see that in the total spend of our members versus our nonmembers. I referenced some data in my talking point, so you can refer back to those. But roughly speaking, it's -- they spent twice the amount that nonmembers spend. And that relates to both engagement and also total spend per stay increasing over time. The other thing that we have really been intrigued with is as we work closely with partners of ours and sponsorship initiatives that we've undertaken, we're seeing not only high engagement, but also more interrogation, more data fidelity and robustness of the data on our customer base that is really attractive to other high-end platforms. And there's an adage where you want to go to where the money is. And so I don't remember the exact percentages, but a very high proportion something like 75% of the spend -- travel spend is represented by the top 40% of travelers. And that we play primarily in the top 20% of the travelers. So they are the highest spending guests. And I just think that we have new and different ways in which we're going to be able to add value for them. and it's primarily through experiences. And our focus on -- within that continues to remain very tightly focused around well-being. So I think that's how we think about it. It's some comments I made about experiences and emotional connectivity versus transactional caught a lot of attention. And really, I didn't mean that the transactional aspects were not important they are. But that's not how we think about what's most meaningful and most valuable for our members. It's really about the emotional connectivity we can establish the care that we can extend not only in through well-being and other experiences, but also in just how we approach our members. So that's our approach. We are small enough and differentiate enough to really make this model work very powerfully. And I think that's why you're seeing such persistent significant growth in the membership base, which will continue to evolve to our benefit. So thank you for that. I want to thank everybody for all of your time this morning. We're incredibly excited about where we stand and the principles that -- and the strategies that have left us in a very strong position I do want to remind everyone that we have an Investor Day in Chicago on May '28, and I have a request. If any of you who are coming are not currently world of hype members, first I'm shocked, Secondly, please sign up and join. And then after you've joined book through the World of Hyatt app or hyatt.com because many benefits will flow in your direction if you do. And then for those of you, most of you, if not all of you, who are already world of Hyatt members, thank you. And don't forget to book through your World of Hyatt or hyatt.com. So thank you for that support, and I wish you all a great rest of the day.

Thank you. This concludes today's conference call. Thank you for participating, and have a wonderful day. You may all disconnect.