Hyatt Hotels Corp (H) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, welcome to the First Quarter 2017 Hyatt Hotels Corporation Earnings Conference Call.

My name is Dan, and I will be your operator for today.

(Operator Instructions) 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, Mr. Brian Karaba, Treasurer and Senior Vice President, Investor Relations and Corporate Finance.

Please proceed.

Thank you, Dan.

Good morning, everyone, and thank you for joining us for Hyatt's first quarter 2017 earnings conference call.

I'm here in Chicago today with Mark Hoplamazian, Hyatt's President and Chief Executive Officer; Pat Grismer, Hyatt's Chief Financial Officer; and Amanda Bryant, Hyatt's Director of Investor Relations.

Mark will begin our call today with a review of our first quarter, including highlights of our operating results and our commitment to create shareholder value.

Mark will then turn the call over to Pat, who will provide more specific details of our financial results for the quarter, including underlying business trends and regional performance.

Pat will also provide an update on our outlook for 2017, and we will then take your questions.

Before we get started, I would 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 earlier this morning, along with the comments on this call, are made only as of today, May 4, 2017, 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 for the information included in this morning's release.

With that, I'll turn the call over to Mark.

Thanks, Brian.

Good morning, everyone, and welcome to Hyatt's first quarter 2017 earnings call.

We are pleased to report a strong start to the year with respect to both topline and bottom-line results, as we continue to execute our strategy to create long-term value for shareholders.

In addition to strong operational performance, we delivered on our capital strategy during the quarter as we entered into a $300 million accelerated share repurchase program in connection with the $290 million redemption of our preferred investment in Playa.

In addition with today's announcement of our Board's approval of an additional $500 million repurchase authorization, we are demonstrating our continued commitment to return cash to shareholders.

I will further address our capital strategy later in my remarks.

But first, I'll turn to our strong operational performance during Q1.

Our adjusted EBITDA for the quarter was $228 million, up 19% from Q1 last year after adjusting for foreign currency translation.

Our growth in the quarter was fueled by the performance of our recent hotel openings and acquisitions, as well as strong increases in management and franchise fees.

Our systemwide comparable constant dollar RevPAR increased 4.7%, driven by both occupancy and rate gains.

Our RevPAR strength was broad-based.

Our full service hotels in the Americas and Asia-Pacific both enjoyed RevPAR increases of approximately 5%.

Our Americas select service hotels increased RevPAR by about 4%.

And our Europe, Africa, Middle East Southwest Asia full service hotels increased RevPAR by approximately 3%.

Our owned and leased hotel results were lower than systemwide average, but nonetheless, delivered RevPAR growth of 2.7% during the quarter.

Notably, on our owned and leased results, if you exclude the performance of 1 owned hotel, which had a particularly tough year-over-year comparison, our owned and leased hotel portfolio grew RevPAR by about 4%.

We grew both revenue and adjusted EBITDA in each of our regions during the quarter, another testament to the broad-based strength of our Q1 results.

Looking ahead to the rest of the year, we feel cautiously optimistic.

We expect our hotels will continue outperforming relative to their peers, and we are monitoring macro and industry dynamics that may put pressure on results over the remainder of the year.

Pat will provide additional details regarding our regional performance and our conservative outlook later in the call.

Before I provide you with an overview of operating results, I'd like to spend a bit more time talking about what we see are 3 key catalysts for value creation and the progress we're making with respect to them: first, sustained strong operational performance; second, the expansion of our system; and third, capital deployment.

The first value creation catalyst is our operational performance.

For the ninth consecutive quarter, we gained market share on a systemwide basis as measured by RevPAR index.

Moreover, during the first quarter, we gained share in each region and across both our managed and franchised hotels, further illustrating our strong broad based performance in Q1.

Focusing on our largest market, the U.S, our market share gains for full service hotels in the top 10 U.S. markets were double our overall increase, with nearly 60% of our hotels in our top 10 U.S. markets gaining share during Q1.

At the heart of these share gains is the strength and resonance of our brands, essentially the experiences that we offer our guests through high-quality hotels and exceptional personalized service.

These attributes engender what we call irrational loyalty, and also underpin World of Hyatt, which we launched in March.

World of Hyatt is more than a customer loyalty program.

It's a platform for guest engagement.

With the enhancements we've made, we expect World of Hyatt will build even higher levels of guest preference and help to position us to sustain the share gains we've made in recent years.

Of course, it's easy to reference strong market share gains quarter-after-quarter, but in order to create shareholder value, those gains need to translate into bottom-line results as they did in Q1, with management and franchise fees increasing over 14% versus Q1 2016, contributing strongly to our overall EBITDA growth in the quarter.

About half of our 14% fee growth was driven by improved performance at our existing hotels.

I am particularly pleased with the fact that our incentive fee growth was 17%, as this reflects strong profitability at our managed hotels.

This operational performance is also great news for our hotel owners who are committing more capital to grow the Hyatt brand globally, which lead me to the second key catalyst of shareholder value creation, which is the expansion of our system.

I'm pleased with the progress we're making on that front.

During the first quarter, we opened 11 new hotels and 1,856 new rooms, representing net growth of 9% and 7%, respectively, compared to the end of Q1 2016.

We have now experienced net rooms growth of between 6% and 7% for 8 consecutive quarters, which speaks to the momentum that our brands are enjoying.

With approximately 60 new hotel additions to the Hyatt system expected, we anticipate 2017 will be another year of record openings.

Included in the openings in 2017 is the Grand Hyatt Baha Mar Resort in Nassau where, once all the rooms are available for occupancy later this year, we will be managing a beautiful resort property comprising 1,800 rooms as well as a convention center adjacent to the resort.

Even with our healthy pace of new openings from the first quarter of 2016 to the first quarter of 2017, our pipeline has increased approximately 17% to 305 hotels and 66,000 rooms.

Across the globe, and across our brands, our signings have continued to outpace our openings and we expect this dynamic to continue throughout 2017.

Our pipeline represents nearly 38% of our existing rooms, making us a leader in the industry in relation to the size of our executed contract base as compared with our existing base of hotels.

60% of the hotels in our pipeline are located outside of the Americas region and 95% of our pipeline is third-party-owned, including about 30% that are franchised.

Finally, more than 50% of our executed contracts are Hyatt Place and Hyatt House hotels, reflecting our strong momentum in the fast-growing select service category.

Any way you slice it, we believe our brands are preferred by owners as evidenced by the capital they are putting behind the growth of our system, allowing us to drive predictable, less capital intensive fee growth and create shareholder value.

To put this into some context, I just returned from a trip in Southeast Asia, where I visited with existing hotel owners and new potential partners as well as a number of Hyatt colleagues.

I visited a number of new Hyatt hotel projects underway, including 2 Park Hyatt properties, 1 in Bangkok, and 1 in Jakarta, and a new Andaz Hotel in Singapore, all of which are expected to open over the next 12 months.

I also met with developers with whom we are in discussions on new hotels and new branded residential developments in a number of markets.

Our strength in Asia was built on the back of a very strong network of Grand Hyatt branded hotels in virtually every major gateway city between Tokyo and Mumbai.

And this strength is now allowing us to expand our other brands in these markets.

For example, we are well on our way to creating a Park Hyatt network in excellent locations across major cities throughout Asia, and this is driving great customer engagement.

As a result, our Park Hyatt hotels are consistently #1 or #2 in their competitive sets because of the differentiated experience we are offering.

This performance drives strong developer interest at a time when travel is increasing on an accelerating basis, partly driven by increases in outbound Chinese travel.

Our third catalyst for creating shareholder value is our approach to capital deployment.

One of the ways we strive to create shareholder value is through disciplined asset recycling, whereby we liquidate existing assets to make new growth investments to generate new incremental earnings streams and position us to return capital to shareholders over time.

A great example of this is our investment in Playa.

Our investment 4 years ago allowed us to strategically and successfully enter the all-inclusive resorts space, a format that is increasingly popular in key resort destinations in Mexico and the Caribbean, and one in which many traditional hotel companies have not participated.

As a result of the investment we made in Playa, we now have 2 new brands in the segment, with 6 long-term franchise agreements for Hyatt branded, all-inclusive hotels, all of which are producing superior results and a platform for future growth in the segment.

Now with the redemption of our preferred shares in March, we've initiated a $300 million accelerated share repurchase program to return capital to our shareholders.

We continue to uphold an 11.6% stake in Playa that was valued at $126 million as of March 31, 2017, as well as founders and earnout warrants.

So as with Playa, the essence of our capital strategy is to recycle our asset base to stimulate growth.

Although preserving and growing the value of our assets is always a central focus, we deploy our capital in order to achieve brand representation in new markets, add new brands to our portfolio to establish new platforms for growth for years to come and extend our business beyond traditional hotel stays, all of which unlock new growth opportunities for Hyatt.

These investments include acquisitions, as well as unconsolidated ventures and internally developed projects.

At the same time, we balance these investments with dispositions, whether the sale of hotel assets, the liquidation of joint venture holdings or the establishment of new joint ventures, whereby third parties invest in our current projects which reduces our capital commitment to those projects.

Given the often times opportunistic nature of these events, the investments and dispositions don't always happen in the same year, let alone the same quarter.

For example, 2016 into early 2017 was a period of investment, including our acquisition of Miraval.

Whereas we expect the balance of 2017 will be a period of asset dispositions, achieving our goal of balanced asset and capital recycling overtime.

Speaking of Miraval and asset dispositions, let me update you on the status of the latest addition to our brand portfolio, as well as the 6 hotels we have been actively marketing for sale.

I'm pleased to report that Miraval Group delivered a solid, profitable quarter in line with our expectations.

Importantly, we are making good progress with our redevelopment and expansion of all 3 resorts: Tucson, Austin and Lenox.

We are also beginning to design Miraval-based programming, which we will integrate into our offerings to Hyatt guests, and we are refining our strategy for adding third-party funded Miraval destination resorts and Miraval Life In Balance spas globally.

These efforts underscore the purpose of our investment, to develop a platform that extends the Hyatt brand into a rapidly growing space, namely wellness, which resonates well with the high-end travelers we serve.

We're still in the early days of realizing the potential of the Miraval brand.

And even though earnings from our Miraval Resort in Tucson are very solid, we don't expect the Miraval operations to contribute meaningfully to Hyatt's overall earnings until 2019 given the redevelopment of the new resorts in Austin and Lenox, and the expansion of the resort in Tucson.

Based on customer response, the performance of the Miraval brand and the new offerings we are now designing, I'm more excited than ever about the opportunity we have to further differentiate and grow Hyatt by leveraging a powerful wellness brand.

Turning now to the hotels we are actively marketing, negotiations are progressing well.

And based on what we know now, we expect to close on 4 of the assets before the end of Q3.

Subject to certain regulatory approvals, we anticipate that the sale of the remaining 2 assets would close during the fourth quarter.

In the aggregate, we expect sale proceeds for these properties to be broadly in line with our original estimate of approximately $500 million pretax.

We will continue to update you on these disposition efforts throughout the year.

With these asset sales expected to be completed in the near to medium term and the potential for more on the horizon and given the extent to which we believe our shares are currently undervalued, we announced that our Board of Directors authorized the repurchase of another $500 million of our common stock.

This is consistent with what we said in the first quarter regarding our asset recycling strategy, which is that, following a year in which we were a net buyer of assets, we expect to be a net seller over the next year and, in the process, return a substantial amount of cash to our shareholders.

We're doing what we said we were going to do.

In summary, we're very pleased with our start to 2017, even as we continue to monitor dynamics that have the potential to create some headwinds over the course of the remainder of the year, as Pat will describe.

Our brands are performing well, and we are growing our owner and customer base.

Our pipeline remains robust and our financial results are strong.

And we are executing against our asset recycling strategy, which allows us to invest for sustained growth in the future, while also returning meaningful capital to our shareholders.

So with that, I'll turn the call over to Pat.

Thank you, Mark, and good morning, everyone.

I will begin by providing more detail on our first quarter results and will then share an update on how we're thinking about the balance of 2017.

Earlier today, we reported first quarter net income of $70 million and earnings per share of $0.54 on a diluted basis.

Adjusted EBITDA for the quarter was $228 million, up about 18% to prior year on a reported basis and up about 19% on a constant-currency basis.

Comparable systemwide RevPAR increased 4.7% in constant dollars in the quarter, driven by a 1.8% increase in ADR and a 200-basis point increase in occupancy.

As expected, Q1 benefited from the timing of Easter, which provided a higher than expected 90-basis point lift to comparable systemwide RevPAR for the quarter.

I'll now highlight the key drivers of our performance, starting with our owned and leased segment, which accounted for approximately 56% of our adjusted EBITDA before corporate and other expenses in Q1.

This segment delivered nearly 12% revenue growth and 10% EBITDA growth, both on a constant dollar basis.

RevPAR at comparable owned and leased hotels grew a respectable 2.7% in constant dollars for the quarter and, as Mark noted, grew 4%, excluding the results of 1 hotel that had a particularly difficult quarter compared with the first quarter of 2016.

Occupancy increased 80 basis points and average daily rate increased 1.6%.

RevPAR at our owned and leased hotels in the U.S. grew 3.5%, while RevPAR at our non-U.

S. owned and leased hotels was flat.

Among markets where we own and lease hotels, Orlando and San Antonio enjoyed a strong first quarter, whereas Austin and New York were softer.

Internationally, Hyatt Regency Mexico City continued to perform very well, but Park Hyatt Zurich saw a significant drop in RevPAR due to tough year-over-year comparisons.

Comparable owned and leased hotels margins increased 50 basis points to 25.8% in Q1, fueled by a combination of productivity improvements and property tax credits.

Excluding Park Hyatt Zurich, our owned and leased hotels margins were up 110 basis points.

I am very pleased with the efforts of our hotel teams to realize operating efficiencies, while maintaining high levels of service.

Transactions significantly aided our owned and leased business in the quarter, netting $11 million of positive EBITDA impact in the quarter, excluding our pro rata share of unconsolidated hospitality ventures' adjusted EBITDA.

This included the results of Grand Hyatt Rio, the Confidante Miami Beach and Royal Palms resort and spa, as well as 100% of the hotel EBITDA at Andaz Maui, where we bought out our partner's interest in Q4 of last year.

This was partially offset by the dispositions of Andaz 5th Avenue and Hyatt Regency Birmingham U.K. in 2016.

Our pro rata share of unconsolidated hospitality ventures adjusted EBITDA declined by about $2 million versus prior year, primarily due to changes in our ownership of Andaz Maui and Playa.

Please note that as a result of the reduction in our ownership stake in Playa, we've discontinued recognizing our pro rata share of Playa's EBITDA starting March 11.

Also, with the change in our ownership at Playa, we no longer report approximately $200 million of unconsolidated hospitality venture indebtedness in our financial disclosures.

By way of reminder, we invested a total of $325 million in Playa in 2012, including both common and preferred stock.

To date, we have received approximately $330 million in cash by way of a return of the principal amount of our preferred stock holding, plus a return on net investment.

We received this return upon the receipt of $94 million in cash in the first quarter.

Separately, due to the original book value of investment, we recognized a $40 million noncash loss in the quarter.

Before leaving our owned and leased discussion, let me add that you will find Miraval's results divided between both owned and leased revenues and expenses and SG&A on our income statement.

However, Miraval's total operating results are reflected in corporate and other in the segment financial summary, in the schedules accompanying our earnings release.

In summary, our owned and leased hotels segment started the year strong, generating adjusted EBITDA growth of 10% as we started to see earnings accretion from investments we made in 2016.

Turning now to our managed and franchised business.

As Mark mentioned, total fee revenues in Q1 increased approximately 14% on an as reported and constant-currency basis compared to the same quarter in 2016.

These strong results reflect the continued growth of our system, the outperformance of our brands and our ongoing focus on productivity.

For example, labor productivity at our Americas full service hotels, as measured by hours per occupied room, improved over 100 basis points in the quarter, which drove a 90 basis point increase in gross operating profit margin and fueled 17% growth in our incentive fees for the quarter.

As our new hotel openings are substantially all managed and franchised, we expect our fee business to continue to grow at a faster pace than our owned and leased business, contributing to higher EBITDA margin and improved asset returns over time, given low levels of capital intensity.

Of note, Q1 represents the fifth consecutive quarter in which we have seen sequential improvement in the growth rate of our fee business.

More specifically, the progression of our fee business growth rate over the past 5 quarters has been 2%, 3%, 7%, 8% and now, 14% in Q1, which, when adjusted for a $4 million termination fee, would have been 10%, still a sequential improvement over the prior quarter.

Now to add more context to our quarter, I will discuss each of our 3 regions, starting with the Americas, which accounted for nearly 80% of our management and franchising adjusted EBITDA in Q1.

The Americas delivered a great first quarter, with management franchise and other fee revenue up 14% and adjusted EBITDA up 18% versus last year.

Comparable full-service RevPAR increased 5.1% in constant dollars.

This included 5.3% RevPAR growth at comparable U.S. full service hotels, which was well above the industry averages for the luxury and upper upscale segments of 2.1% and 3.0%, respectively, as reported by Smith Travel Research.

Nearly 3 quarters of the RevPAR increase was driven by rate with strong flow through.

Approximately 1/3 of our RevPAR growth in the Americas was attributable to the timing of the Easter holiday and the Presidential inauguration.

When adjusting for the impact of these 2 items, Americas full service RevPAR growth would have been a very solid 2.9% for the quarter.

Due also to the fact that Easter shifted into Q2 versus 2017, we saw strength in group performance and relative softness in transient performance compared with Q1 of 2016.

In fact, group revenue at U.S. full service hotels was up 10% in the quarter, whereas transient revenue was down a bit more than 1%.

Group benefited from increases in both the room nights and rates, whereas transient revenue was up in rate but down in room nights, reflecting displacement by some of our higher rated group business.

I will discuss group trends later in my remarks when I address our outlook for 2017.

Notwithstanding our strong results in the U.S., we did observe a decline in international inbound travel, which intensified in the back half of the quarter.

We attribute this decline primarily to a stronger U.S. dollar.

Room nights from inbound travelers were down double digits on a percentage basis versus prior year in several markets, including Mexico, Canada, Japan and the United Kingdom.

However, as U.S.-bound international travelers account for only about 4% of our worldwide rooms revenue, the impact to our global business was less than 1%.

Our select service hotels continued to perform well in the Americas, with comparable RevPAR up 3.9% in Q1, which approximately 2/3 was driven by rate.

Our U.S. select service hotels were up 3.6% in RevPAR, easily outpacing the 1.0% growth of the upscale segment as measured by Smith Travel Research.

I'll now move on to our managed and franchised business in Asia-Pacific, which accounted for about 13% of our management and franchising adjusted EBITDA in Q1.

Revenue from management, franchise and other fees increased approximately 17%, and adjusted EBITDA increased approximately 29%, both when adjusted for currency.

Our system growth in the region is a main driver of these results.

In fact, given the shape of our development pipeline, we expect to increase the number of our hotels in Asia-Pacific by nearly 20% over the course of 2017 alone, which should drive continued double-digit growth in revenue and EBITDA for the region.

Comparable full service RevPAR in Q1 increased 5.2%, driven by occupancy increases in China, Hong Kong and Southeast Asia.

China hotel RevPAR increased nearly 9%, which is particularly noteworthy given a 240-basis point headwind we're facing due to the implementation of a value-added tax in Q2 of last year.

Finally, I'll turn my attention to the Europe, Africa, Middle East and Southwest Asia region, accounted for approximately 7% of our management and franchising adjusted EBITDA during the first quarter.

After a challenging 2016, areas within the region are beginning to show signs of growth.

Revenue from management, franchise and other fees increased approximately 3%, and adjusted EBITDA increased approximately 5%, both when adjusted for currency.

Comparable full service RevPAR increased 3.1%, driven by occupancy increases, which more than offset rate declines.

A bright spot in the region continues to be India, where comparable RevPAR increased a solid 6% over last year.

During 2017, we expect to expand our presence in the region by about 12% versus 2016, as measured by the number of open hotels.

This robust system growth should help to sustain our upward trajectory in the region.

As to this region, including France, I'll now update you on the status of our guarantee related to certain managed hotels in France.

During Q1, we expensed $26 million under the guarantee and, consistent with prior guidance, we continue to expect that we will expense approximately $80 million over the course of 2017 due to challenging market dynamics and ongoing renovations at 3 of the 4 hotels covered by this guarantee.

Consistent with prior years, we expect this guarantee expense to be highest in Q1 and Q4 of this year, and we expect 2017 to be the peak year of this guarantee expense, which will expire in 2020.

To wrap up this discussion of our managed and franchised business, I'd like to highlight how the growth of our fee business has enhanced our overall business profile.

In the first quarter of 2017, our adjusted EBITDA margin was 31.8%, reflecting a 120-basis point improvement over the first quarter of 2016 on a constant-currency basis.

Five years ago, for the entire 2012 fiscal year, this margin was 26.1%.

So as we continue to realize the shift of our business mix to be more managed and franchised-based as opposed to more owned and leased hotel-based, and as we continue to sustain improved profitability in our owned and leased hotels, we expect this profitability metric to sustain upward momentum over the long term.

Now that I have reviewed our operating performance, I'd like to turn to our balance sheet, which continues to be a source of strength and a competitive advantage for us.

At quarter end, we had $1.7 billion of debt on our balance sheet, had access to approximately $1.2 billion under our revolving credit facility and had cash and other liquid assets of approximately $500 million.

As such, we continue to maintain our investment grade credit rating and are well-positioned to execute our strategy of investing for growth.

I'm also very pleased with where we stand on the capital return front.

Prior to entering into our $300 million accelerated share repurchase program, we had repurchased $48 million of our stock during Q1.

Between this activity and the $500 million share repurchase authorization announced today, as well as our commitment to disciplined asset recycling, we're demonstrating our commitment to return meaningful capital to our shareholders, while also driving growth and improving overall asset returns.

I will conclude by sharing our full year outlook for 2017.

As Mark and I have mentioned throughout the call, we are very pleased with our results in the first quarter and encouraged by our continued outperformance compared to industry averages.

However, in providing guidance, we believe it is prudent to be conservative, considering where we are at in the year, the trends we are observing and the macro environment that continues to be uncertain and somewhat volatile at times.

Along those lines, some of the most insightful data we can focus on are trends in our group and transient business.

First, we expect the Easter timing RevPAR benefit of 90 basis points will reverse in the second quarter.

Additionally, we've observed some softness in the pace of group sales for both the second and third quarters, but still expect group revenue to be up in the low single digits over the course of the entire year.

Group production for all periods decreased a bit more than 3% during the first quarter, with in the year, for the year production decreasing nearly 4%.

However, in the quarter, for the quarter production increased for the first time in 5 quarters.

Please also note that we are lapping some strong group production from Q1 2016, where total production was up about 6% versus the same quarter in 2015.

And as mentioned earlier, we are keeping a close eye on U.S. inbound international travel, given the declines we observed in Q1.

Based on our analysis of these dynamics and the overall profile of our business, we are conservatively leaving our full year RevPAR growth guidance of 0% to 2% unchanged at this time.

Consistent with this, we are reaffirming our full year adjusted EBITDA guidance of $769 million to $804 million.

Recall that our EBITDA guidance range reflects the impact of the Playa transaction and is quoted inclusive of estimated foreign exchange impacts.

Given the strength of our Q1 results compared to what we knew at the time of our fourth quarter call in February, we currently expect to be toward the high-end of our RevPAR and adjusted EBITDA guidance ranges.

We will revisit this guidance again when we announce Q2 results in early August, at which point, we will have much more visibility to full year results, including the impact of any completed asset sales.

One aspect of guidance that we are revising at this time is capital expenditures, which we originally guided to be approximately $430 million.

We've recently entered into joint venture agreements on some of our corporate development projects, reducing our own capital commitment to those projects.

Additionally, delays in corporate development projects have shifted some spending from 2017 to 2018.

Due to these changes, we are revising our 2017 CapEx guidance downward to $375 million, and we are in the process of pursuing additional opportunities to reduce our direct investments in corporate development projects through sales and joint ventures over the next couple of years.

Before wrapping up, even though we do not provide guidance with respect to our share buyback activity for the year, I did want to take a moment to address our buyback cadence over the remainder of the year.

Under the terms of our accelerated share repurchase arrangement, we are not able to make any additional share repurchases from Class A shareholders until final settlement of the agreement, which is expected to occur in the third quarter.

We do expect to repurchase additional Class A shares this year once we are able to do so.

To conclude, Q1 was a successful quarter for us and a great start to the year.

Our strong operational results, coupled with our continued execution of our capital strategy, has allowed us to create value for our shareholders on multiple fronts.

And despite some potential headwinds over the remainder of 2017, we believe we are poised to build upon the success of the first quarter, as we continue to implement our growth strategy and create value for shareholders.

And with that, I'll turn it back to Dan for Q&A.

(Operator Instructions) Our first question today comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

Thanks for all the detail on some of the capital recycling initiatives.

I just wanted to spend a little bit more time there and get a little bit of clarity, probably on kind of that last set of remarks in Pat's section.

Specifically, could you just give us a little thought on this rejiggering of expenses related to some of the corporate development?

To be clear, like, what were you contemplating (technical difficulty) corporate development?

Is that just on balance sheet construction of new hotels?

Or is there some other corporate initiative that you're looking at?

And then I guess the follow up to that will just be, how much of this is -- how much of the CapEx shift is sort of just timing and moving into '17 -- or moving into '18 versus how much is really being moved to third parties?

Yes, corporate development is in fact development of new hotel properties where Hyatt has an ownership interest, whether full or partial interest.

And so we've been very much focused, in the context of our asset recycling, of finding -- focused on finding opportunities to bring in joint venture partners or to identify investors who can come in and take our place on some of those projects.

So we're delighted that we've made some good progress in signing up some investors to invest alongside us in those corporate development opportunities.

And that is leading most of that reduction in our CapEx outlook for the year.

There is however, as you mentioned and as I remarked in my script earlier, that some of the timing is shifting into 2018.

But this forms part of our overall long-term asset recycling effort.

So we do incorporate corporate development into what we're doing by way of acquisitions and dispositions.

And, I mean -- just as a follow up.

Like, the -- it feels like this may be a little bit of a strategy change.

I mean, historically, it's always felt like Hyatt has been sort of less willing to kind of fully make the push into capital light.

I don't want to read too much into the tone and the commentary here.

Is this more just cyclical?

This the right thing to do right now, in terms of capital deployment?

Or is there a little bit more of an acknowledgment that, given your cost of capital, this might actually be a longer-term shift that we could look forward to?

Well, Shaun, it's Mark.

What I would say is we've always been committed, whether you're looking at acquisitions that we've made or corporate development.

And historically, we've always been committed to organizing and structuring those investments so that we can actually sell those assets.

And as I reflect back on the last few years we -- I'll give you a few examples, we have engaged in new development activity where we bought a site, or optioned a site, and got entitlements and then sold the whole project to a third-party developer in total.

And therefore, didn't really deploy any capital.

We've done that a couple of times with existing partners.

We have both sourced new projects and also had new projects brought to us, wherein we ended up in a joint venture with a third-party developer.

And in some cases, we've actually gone and secured a site and built a hotel.

One example is we built a Hyatt Place in Omaha, which we then sold once we'd opened it.

So I guess what I would tell you is we recognize that, from an activity-based perspective, maintaining any material construction activity on balance sheet is not particularly desirable because these projects are inherently local development activities.

In some cases, it's been extremely useful to be in the market, to be able to secure great locations for particular brand representation that we're trying to drive.

But in all cases, we're looking to increase the velocity of turning that capital over.

So I think it's consistent with how we've been behaving.

I think what you're seeing is an increased level of activity in engaging with third-party developers to make sure that we are keeping pace on offloading those kinds of commitments.

And Shaun, this is Pat, once again.

I would also reinforce, just to clarify, that when we talk about asset recycling, it is all-encompassing.

So it's not simply traditional hotel acquisitions and dispositions.

But it does take into account investments we're making by way of corporate development; equally, opportunities we're seeking to bring in investors alongside us in those projects; equally, liquidation of joint venture interest, as was with the case of Playa; and equally, investments we're making as with Miraval.

So we step back and look at our total asset position, and our goal is to recycle our asset base, encompassing all of those different aspects of capital deployment and capital raising.

And your next question comes from the line of Thomas Allen with Morgan Stanley.

So your U.S. full service RevPAR growth outperforms select service for the first time in 1.5 year.

Obviously, there was the Easter shift this quarter.

But excluding that, are we seeing a change in trend there?

Well, I guess you could look at STR results to answer that question.

I think that there has been strength that you saw in this past quarter in the full service segments, relative to growth in the select segment.

I think part of that is calendar.

But I think the best way to answer the question is just look at the market overall.

Thomas, this is Pat.

I will also highlight that you have to consider what we're lapping from last year.

So in Q1 of 2016, Hyatt full service U.S., up -- the RevPAR up 1.7%; select service, up 6.5%.

So in select service, we're also lapping a much higher comp.

Okay, that's helpful.

And then just digging a little deeper into the group versus transient trend in the quarter, where the group was up 10% and the transient was down 1%.

Was that all mix, like you driving mix shift?

Or was transient -- did transient come in line with your expectations, is really the question.

Yes.

So thanks.

I think it will be useful to just take a moment to step back from the quarter and think about group and transient in combination with one another, because one of the key issues is what's going on with the corporate customers, whether that's group or transient and what's happening on the leisure side.

So let me just start with group, and then I'll talk a little bit about transient.

Overall, obviously, a very strong quarter.

And the total realized revenue was really solid, pretty much across the board.

When we look at segments, we had particular strength in banking and finance and consulting.

And even to a certain extent, in retail, for the first time in a long time.

On the weaker side were tech and pharma customers, especially pharma.

So just in terms of a little color on what's going on with respect to underlying industry demand.

The other dynamic that I think is really important to note is the differences between corporate demand and association demand on the group side.

Association was solid across the board, both occupancy and rate.

Rate for both corporate and association customers were up -- was up over 5% in the quarter, which is very encouraging.

But in terms of room night demand, it was stronger on the association side.

If you think about -- if you look at the overall position that we find ourselves in right now, a bit over 85% of our targeted group business for the year in 2017 was on the books at the end of the first quarter.

And so -- and our expectation for group revenue increased over the course of the year remains in the low single-digit range.

But a lot of that we're focused on, therefore, is the last 15%.

And as we think about how to start to gauge the potential for that last 15%, there are a couple of sort of data points that I would reference.

The first is, in the quarter, for the quarter revenue was up for the first time in 5 quarters in the first quarter, which is notable.

In the quarter, for the year bookings were down in the first quarter.

And in order to start to make sense of that, 2 things I would reference.

The first is you have to look at trying to adjust for some of the holiday shift.

So if you look at March and April, on a combined basis, we saw increases, both on the group and on the transient side if you combine the 2 months.

So taking the timing, the holiday timing out of it, we saw a positive increase year-over-year, both group and transient.

That was helpful.

In the context of broadening this out a little bit, if you look forward, both 2018 and [2020], in terms of pace, are up in the mid-single digits and 2019 is down in the low single digits.

So the profile is encouraging into 2018 and further out.

The bookings further out reflect, I think, a lengthening of the booking curve, and that's primarily an association dynamic.

So now turning to the transient side.

We saw an uptick in corporate transient, business transient travel in the fourth quarter of last year.

And that demand level has been sustained into the first quarter of this year.

So a lot of what we saw happening in the first quarter was actually a shift into group business.

And especially in resorts, for example, where we had significant increases in group bookings into our resorts like mid-teens increases, even as we saw transient revenue decline mid-single digits in the first quarter.

A lot of that -- the net result, by the way, is resorts were up.

So a lot of that wasn't, in our opinion -- in our assessment, a decline in demand.

It was really a displacement issue.

So I guess what I would say is, overall, we believe that the corporate picture is pretty solid from everything that we can gather and it's also true that in the quarter, for the quarter, and in the quarter, for the year dynamics make it a bit tough to really make a call on this at this point.

What I would say is it's too early for us to know whether this change in dynamic in the first quarter is sustained -- will be sustained.

It's possible, for example, that corporates -- corporations are holding on to their spend, and that there's a compression, tightening of the window between the time they make their decision to have a meeting and the date of the meeting.

I think that more of that will unfold as we see what comes through in the second quarter.

So overall, I think the demand picture is pretty stable, and the exact profile remains a question as we head into the second and third quarters.

Your next question comes from the line of Joe Greff with JPMorgan.

Just following up on this topic of group.

Would you expect your revenues to be up year-over-year in the second half?

I think the profile is that the second and third quarters will probably be more challenging.

I think that -- I think the second quarter, of course, has got a calendar shift in it.

The third quarter is probably the place where we have the biggest opportunity with respect to remaining bookings for the year.

So those 2 quarters, I think, are going to be under some pressure as a result of calendar in the second quarter and open to book in the third.

Okay.

So if you look at 3Q and 4Q together this year versus last year on the group side, would you expect that to be up, or no?

I think some of that depends on the pickup in the third quarter.

So if you strictly went on forward bookings at this point, probably not.

But I think there's -- that is the opportunity we see ahead.

And so based on the report from a number of different fronts, there's a lot of activity underway and a bit early for us to make a definitive call.

Great.

And then when you guys look at your 1Q results, I'm presuming you beat maybe your initial expectations relative to where you were earlier in the year.

You certainly exceeded sell side consensus expectations.

When you look back, where did you surprise, if you did surprise yourself, with the final outcome in the 1Q?

Then I have a couple of small follow-ups.

Well, I guess, maybe I'll answer it in terms of what we think is going on in terms of overall results over time, that I think also did apply in the first quarter.

And that is we've really been running the business through a very intense focus, focusing on the high-end customer base, the high-value customers, focusing on the guest experience and the practice of empathy in bringing care into the guest experience.

Operational excellence is another area of focus.

We own hotels, so we are hyper focused on margin performance and driving results there.

And finally, I think that when you look at the growth, we are not growing in sort of a scattered, broad way in every imaginable market.

We are actually growing in a very deliberate way in key markets, where we can bring brands that are really working.

So one of the dynamics that we've seen, for example, is that the ramp up time for newly opened hotels, especially the select hotels that are opening in urban markets in the United States, is accelerated.

So that dynamic is a proof point for the performance of the brand.

So I think, overall, our relative performance was really a great outcome that we were particularly pleased with, and it was probably just stronger because the dynamics that we've seen over a number of quarters continued to maintain that position for us in the first quarter.

And Joe, what I would add to Mark's comments is that, as I mentioned earlier in my prepared remarks, the lift that we gained from the Easter timing and how that drove group business in Q1 was stronger than we were anticipating.

And we do expect that will reverse in Q2.

So to be very clear, by maintaining our guidance, we are not implying a guide down, balance of the year.

Also as I mentioned earlier, relative to where we were at and what we knew at the time of our call in February, we are expecting to be toward the higher end of that range.

But out of conservatism, given where we're at, at the year, we don't feel that it's prudent to take up the range at this time.

Totally get that.

And you're probably not the only management team in that boat.

And my 2 final questions, Mark or Pat, I think you talked about the potential for these fixed other asset sales happening towards the end of the year.

Can you remind us what the trailing 12-month EBITDA was for those 6 hotels and the actual number of fees associated with those 6 hotels?

And then another helpful thing, Pat, is if you could give us the diluted share count, the absolute diluted share count at the end of the quarter.

Thank you.

On the first one, we actually didn't talk about trailing results or the composition of the room count and so forth.

What we have done in the past and what we will do is once we have closed transactions, we'll provide an impact, an EBITDA impact from the dispositions.

Of course, a lot of that has to do with when in the year we actually end up closing transactions.

So our practice has been and will be that we update in the quarter call in which we have a closed transaction.

And Joe, as to the...

Yes.

And can you guys give the multiple for the sale of the 6 in the aggregate to be in excess of your current trading multiple?

So that's another way of asking it without giving too much details, Mark.

We're really not going to go into any detail until we have closed transactions.

And Joe, as to your questions regarding share counts, as of the end of Q1, basic share count was $129.7 million.

Diluted share count, $131.0 million.

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

This wasn't my question, but just to clarify, I think Joe had asked for the end of period count.

I want to say you guys maybe gave the average.

I think we'll may be get back to you on that, Carlo.

Okay, no problem.

Just, I wanted to clarify something as it pertains to the guidance as it stands today.

You guys are not contemplating any of these sales in the guidance, I think I heard you say correctly before, right?

I'm sorry.

Can you repeat that, Carlo?

Yes, I said I mentioned that you guys earlier had mentioned the EBITDA or your guidance today does not contemplate any of the second half sales that you noted, correct?

Yes, correct.

Okay.

Given the Easter shift and, obviously, the 90-basis point impact that the referred to, I would imagine if you look back historically, or you obviously would know that your second quarter has traditionally been stronger than your first quarter from a fee generation, just on a dollar basis.

Do you expect that the seasonality this year, because of the Easter shift, would change materially, whereas your 1Q would actually be stronger from an overall fee perspective?

Probably difficult to call that at this point.

The calendar shift, obviously, is material so it will have a depressive effect on the second quarter.

I think it's hard to know in sequence whether -- what the profile is going to look like.

So I guess stay tuned and we'll cover that in the next quarter.

Your next question comes from the line of Stephen Grambling with Goldman Sachs.

You described an environment of compression in group booking and in corporate spend.

As you look back historically, does this remind you of any other periods?

And in your conversations with corporate partners, is there any consistent reason offered as to why there still is this reservation that could be alleviated as the year progresses?

Yes, it's a little hard to call, Stephen.

I think one of the observation -- first of all, to answer your first question, no, it's not -- there's no other period that immediately comes to mind.

I think the thing that we see on the transient business travel side is we actually have seen very, well since the fourth quarter, consistent strength in national volume accounts.

So these are large corporations that we have travel arrangements with -- and through corporate travel -- through managed corporate travel in the companies.

That's been the core of the strength.

To the extent there's been any weakness, it's been in local business travel.

And so as I think about the relationship between what we're seeing on the corporate group side, which is -- had its ups and downs and some conflicting data depending on what period you want to look at, and I see what's happening on the transient side, it leads me to think that at least in the case of the larger corporates that we serve, that there is this reservation of spend.

The demand is ultimately there.

So we're seeing it come through but maybe a more cautious approach to making forward commitments, even as little as a quarter out or 2 quarters out.

So that's what I'm surmising we're seeing here.

I think we'll have to track this, which we are.

We're on top of this topic.

As you could imagine, it's a really important topic for us.

So we're on top of it in a very [big] way.

That's really what we're paying attention to as we see the second quarter unfold, as well as bookings into the third quarter.

So those are the things we're tracking.

Thanks.

And Pat, you mentioned the restrictions on the repurchase.

And in the release, I think I saw that you can repurchase Class A or B shares.

Can you purchase the B shares directly before the ASR is up?

Or do those have to be converted, and therefore you're limited?

No, we can purchase those directly.

Okay.

One last one, just circling back to Shaun's question on capital deployment.

On new projects, are developers simply looking for less contract acquisition costs as your scale builds?

And is that something that we could expect going forward?

I'm pretty sure I don't understand the question you just asked.

When you say contract acquisition build, what does that mean?

Contract acquisition cost.

So if you're actually deploying incremental capital to build some of these new properties, you mentioned the joint ventures and basically scaling down your CapEx requirements.

Is that something that's happening because your brand is strengthened or you're gaining incremental scale?

Okay, got it.

So thanks for that.

Look, I think what's happening is we've demonstrated really solid returns on a number of the JVs that we have entered into and we've sourced some very attractive sites.

And so there's one market in particular where we, just by way of example, where we secured a site for a Hyatt House development in a very attractive location and a very attractive market.

And a partner, with whom we've already done 2 developments and with whom we're in discussions on more developments, came to us and said that they wanted -- they would like to actually take over the actual development and construction, which we were thrilled to do.

And so we entered a new JV and ultimately, upon completion of the hotel, we'd likely sell the hotel.

And so I think that what's happening is that we're seeing -- developers with whom we've worked in the past see that we have high-quality sites and projects underway.

And that's very desirable for them.

It allows us to recover capital that we might have deployed to acquire a site or something and end up with a long-term management or franchise agreement without key money or any other inducements.

So it's actually a pretty efficient way for us to be growing and securing long-term management agreements.

This is Pat, just one final comment, and this will have to be the last question because we have exceeded the time allotted for the call.

But going back to the question Joe Greff had raised around actual share count at the end of the period.

Per our proxy filed as of April 6, there were 125.5 million shares outstanding.

That is not a diluted number.

That is a basic share count.

Thank you, everyone, for joining us today and look forward to talking to you soon.

Goodbye.

Thank you to everyone for attending.

This will conclude today's conference call, and you may now disconnect.