Hyatt Hotels Corp (H) 2014 Q2 法說會逐字稿

Good day, ladies gentlemen, and welcome to the second quarter 2014 Hyatt Hotels Corporation earnings conference call. My name is Tony and I will be operative for today. At this time, all participants are in listen-only mode. Later we will conduct a question and answer session.

(Operator Instructions). As a reminder, this conference is being recorded for replay purposes. And I would now like to turn the conference over to your host for today, Mr. Atish Shah, head of investor relations. Please proceed.

Thank you, Tony. Good day, everyone, and thank you for joining us for Hyatt's second quarter 2014 earnings call. We want to thank everyone in the investment community in advance for talking to us today.

Here with me in Chicago is Mark Hoplamazian, Hyatt's President and Chief Executive Officer, and Gebhard Rainer, Hyatt's Chief Financial Officer. Mark is going to start by making some brief remarks and then we are going to read and respond to questions emailed to us this morning. Finally, we will take live Q&A towards the end of the call.

Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-K and other SEC filings which could cause our actual results to differ materially from those expressed and/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, July 31, 2014, and we take 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 per the information included in this morning's release.

And with that, I will turn it over to Mark to get started.

Thanks Atish. Good morning and welcome to Hyatt's second quarter 2014 earnings call. I would like to speak about three topics today. First, I will discuss our second-quarter results and share some thoughts on our outlook. Second, I will talk about growth and transactions that we have recently announced. And, third, I will talk about our approach to capital allocation.

Our second-quarter financial performance was strong, particularly when compared to a strong second quarter in 2013. We benefited from higher room rates and newly opened and ramping hotels. With occupancy at prior peak levels in a number of markets around the world, RevPAR growth was driven primarily by higher room rates. Adjusted EBITDA increased 9%, comparable systemwide RevPAR increased 6.1% on a constant dollar basis, and in our most significant market, the US, RevPAR increased over 6% on a comparable basis.

I will focus first on our owned and leased hotels. At owned and leased hotels, occupancy rates increased 100 basis points to over 80% and average room rates increased 2.7% in constant dollars. Our owned and leased hotels results were negatively impacted by a tough comparison to the second quarter of 2013 due to the timing of Easter, and also the strong results at five particular hotels in the same period last year.

Comparable owned and leased operating margins for the quarter declined 20 basis points. However, margins would have increased 30 basis points if we exclude the results of two hotels located outside the US, each of which faced some difficult market-specific challenges.

Looking at margins from a geographical perspective, owned and leased margins at hotels in the Americas increased 100 basis points, while owned and leased margins for hotels located outside the Americas decreased 400 basis points, largely due to the results of the two hotels that I mentioned.

Further, note that the 20 basis point margin decline that we reported includes 20 basis points of negative impact from higher rent expense and property taxes, which we had anticipated. As we have now lapped the time when the upward adjustments in rent expense and property taxes were implemented, we do not expect a negative comparison impact going forward.

For the six months ended June 30, during which there is no shift in timing of Easter versus last year, owned and leased RevPAR increased 5.1%, and comparable owned-leased of margins increased 60 basis points.

At US full-service hotels, transient revenue represented over 50% of rooms revenue in the second quarter. Transient rooms revenue increased almost 8%, with 80% of the increase due to higher room rates and 20% due to higher demand. Transient demand in the US was derived from sectors in the economy that are performing well, such as technology, consulting, and manufacturing. Strong transient markets included Chicago, San Diego, and San Antonio.

Group revenue at US full-service hotels increased 1.5% in the second quarter. Group business was impacted by the timing of Easter and, as you may recall, our first quarter 2014 results benefited from this timing. Note that group revenue in the first half of 2014 increased 5% over the first half of 2013, which eliminates the quarter-to-quarter Easter impact.

The second quarter of 2014 represented our fifth consecutive quarter of solid year-over-year growth in group production. Group production is the total amount of group revenue booked in a particular period. Total group production increased over 11% as compared to group production in the second quarter of 2013.

Now moving on to our management and franchise fees in the quarter, total fees increased 7% during the quarter. Incentive management fees declined 20%, primarily because no incentive fees were booked at the four French hotels that we began managing in the second quarter of last year.

As we mentioned on our last call, because we started managing these hotels in May of last year, we recognized incentive fees over the guarantee threshold in the seasonally stronger second quarter of 2013. This year, given that we were managing the hotels in the seasonally weaker first quarter, instead of booking incentive management fees in the second quarter of 2014, our earnings above the guarantee threshold were recorded in other income to offset the guarantee shortfall from the first quarter of 2014.

We expect that the quarter-over-quarter comparison variances in incentive fees booked for these four French hotels, relative to last year, will continue through year-end 2014. While we continue to believe that the addition of these four hotels will be great for our brand representation in Europe over the long-term, we currently expect to pay approximately EUR15 million in guarantee payments in 2014.

As to our outlook for the future, we ended the second quarter with approximately 60% of our group business for next year on the books. Group pace for 2015 is up 8% as of the end of the second quarter. In particular, the first half of 2015 looks very strong from a group booking standpoint, and we are hopeful that this sets the stage for a strong group year.

The strength is a result of more corporate group production and is also reflected in our catering pace, which is up over 10%. Corporate profits and economic growth in the US has set the stage for continued strong transient demand as well.

Moving ahead to my second topic for today, I would like to provide an update on our capital recycling activities. As you may recall, we took nine full-service hotels to market in the first quarter. We have decided not to pursue the sale of one of those hotels, so eight of these nine hotels remain on the market. We will provide an update if and when any transactions close. As a reminder, this group of eight hotels earned approximately $40 million of EBITDA after management fees in 2013.

In addition, we recently listed for sale 42 of our 44 owned Select Service hotels. As you will recall, we had indicated in our investor meeting in March that we would sell these hotels over time. Given the current market environment for these types of hotels, we think now is a good time to explore options.

We are early in the marketing process and would anticipate this process to take at least six months. This group of 42 Select Service hotels earned approximately $45 million of EBITDA after management fees on a trailing 12-month basis. As with all dispositions, we expect to maintain brand presence with each hotel.

We are also on track to close on the sale of Hyatt Residential Group to our long-standing partner, Interval Leisure Group, by year-end. We are selling this business, which generated about 2% of total company-adjusted EBITDA on a trailing 12-month basis, for $190 million. In addition, we are selling our stake in a project in Maui that is under development at cost for about $35 million.

Interval is expected to be our exclusive licensee in vacation ownership and will pay us recurring annual license fees under a master license agreement. Interval intends to invest in and grow the business over time, and we look forward to Interval creating new opportunities under the Hyatt Residence Club brand.

On the buy side, we continue to actively seek opportunities to grow our platform, consistent with the comments we made at our March investor meeting. By way of reminder, we are focused on four main areas -- key gateway city hotels, resorts, urban Select Service hotels, and convention hotels.

In terms of gateway city hotels, you may recall that we were slated to acquire a two-thirds interest in the Park Hyatt New York, based on the original total contract value of $375 million plus preopening expenses for the hotel. The hotel's construction is nearing completion and we expect to open the hotel in August. The profile of the development is strong, due to its location, the cachet and reputation of the building, and the pace of residential sales on the floors above the hotel.

We are excited about the opening of this flagship hotel, particularly as it comes just after two other notable openings, the Park Hyatt Vienna and the Andaz Tokyo Toranomon Hills. As we approach the opening of the hotel, please note that we are currently in discussions to revise our acquisition deal. Instead of buying a two-thirds interest, we may acquire 100% of the hotel. If we do so, the total purchase price would be at the original contract value plus preopening expenses and closing and related costs that would add $10 million to $15 million to the total value. Therefore, a total purchase price of $385 million to $390 million.

We are considering buying 100% of the hotel for several reasons, as follows. First, whole ownership provides us more flexibility and control to recycle the asset at the right time. Second, whole ownership allows us the ability to purchase the hotel on an all-cash basis, which makes sense given our balance sheet and liquidity position. Third, whole ownership as opposed to joint venture ownership allows for the deferral of gains on certain hotels that we expect to sell.

Again, the deal to acquire 100% of the hotel is still under negotiation, so there is no assurance that it will be completed. We will let everyone know our ownership position when the transaction is completed.

My final topic this morning is capital allocation. I would like to take a few moments to walk through our strategy. We have been consistent on this topic since our IPO, and we have outlined our perspective from time to time, including at the investor meeting in March.

While nothing has changed, given the number of owned hotels that we currently have listed for sale and the level of questions on this topic from investors, it is worthwhile to reiterate our approach. Our main belief is that we can generate superior long-term returns by growing the business. So, our focus is and will continue to be on finding opportunities to redeploy capital in our business. We want to be a recycler of our asset base through the cycle, and think that now is still a good time to be buying certain kinds of hotels and investing in opportunities that meet our criteria.

Second, we expect that acquisitions can often be funded from proceeds generated through dispositions. This is a tax efficient way to improve the quality of our owned hotel portfolio, maintain the earnings and growth profile of the Company, achieve our goal to be the most preferred brand, and earn superior returns.

Third, even as we grow the business, as I just described, we expect to continue to return capital to shareholders. We will do so because we recognize that return of capital is one way to drive shareholder value. To date, we have returned capital to shareholders through share repurchases, which has allowed us flexibility and can create significant value based on share price relative to intrinsic value per share.

We purchased over $100 million of our stock since the start of the second quarter. This is at a higher level than we had purchased in the prior few quarters. While in part due to the increase in share price, the increased volume of share repurchases was determined in the context of our other activities, liquidity, and view on value that we can create. We intend to remain active buying back our shares into the future and have over $300 million of remaining buyback capacity under our share repurchase authorization.

Finally, we are focused on maintaining our investment grade credit rating so that we may have access to capital and flexibility through the cycle. Over time, we expect to keep our leverage ratio, meaning gross debt to adjusted EBITDA, below 3 times.

While there is inherent uncertainty until transactions actually close, we do believe that given the quality of our owned portfolio, we will generate ample disposition proceeds to fund acquisitions and investments. This gives us a high level of confidence that we can continue to return capital to shareholders.

We have been successful in balancing our asset recycling activities with a return of capital, and we have created a significant amount of shareholder value since our IPO. We believe that our model and portfolio will allow us to create healthy levels of long-term shareholder value in the years ahead.

And, with that, I will turn it back to Atish for some Q&A.

Thanks, Mark. That concludes our prepared remarks. For our question and answer session, we will start with the questions that were submitted to us by email this morning, and we will finish off with your questions.

For the first set of questions, they are on the topic of performance, particularly as it relates to group. The first question was, regarding group business, was the Easter shift the main driver of the significant underperformance relative to transient RevPAR or were there other dynamics in play?

Yes. Easter was really the main driver with regards to the full service hotels' performance. To give you an indication as to the magnitude of that, the Americas food service RevPAR was impacted by 220 basis points because of the Easter shift. And, by coincidence, our owned and leased portfolio in the US, full-service, was also impacted at 220 basis points.

Okay. Great. Second question, could we provide some more color on group versus transient trends, both in the quarter and thoughts on seasonality for the year?

This is Mark. Easter obviously impacted realized group revenue in the quarter, as Gebhard just mentioned. Interestingly, if you look at the Select Service RevPAR progression in the second quarter, which was over 8%, I think the number is 8.4%, it is sort of a proxy for transient demand in the quarter. And I think the base of transient demand has been quite strong.

In terms of seasonality, we typically see the third quarter being more transient led and the fourth quarter being more group led, both in terms of vacation schedules and corporate calendars. And we would expect the same seasonality to apply this year.

One other thing I would note is, we have been looking at the progression on a quarter over quarter basis. I mentioned in my remarks that we have got five straight quarters of very robust total group production in the quarter, some very encouraging signs heading into 2015. And as we see both corporate and association business, we are looking at some of the booking curves for each of those groups of business. They operate on very different curves. Association business is typically booked much further into the future.

But in both cases, relative to the troughs that we saw in corporate business in 2010 and association business in 2011, an expansion of the booking curve in terms of timing. So that is encouraging.

And next question was, how much did Easter impact your second quarter group room revenue growth of about 2%? It looks like the comparison was more difficult in second quarter versus first quarter. How do things look in terms of pace in the second half for group?

So I think the best way to look at this is by looking at the first half group revenue performance, which normalizes for the timing of Easter. So for the first half, group revenue was up 5%. When you look at group pace, it has accelerated and we are showing 8% pace for 2015 and low single digits for the balance of 2014. So overall, there is a continuation of healthy growth in group.

Our next question is on owned and leased RevPAR. Comp owned and leased RevPAR of 4% in constant dollars seems a little light compared to what we have seen out of peers and Smith Travel Research data. Could we elaborate? And how much did the two hotels outside the Americas impact owned and leased RevPAR?

Yes. I think, first of all, it was a tough comparison. When you look at the owned and leased in 2013, it was up by 7.1%. So it is a tough comparison.

In addition, we had five owned and leased hotels that performed exceptionally well in 2013. If you take the two hotels outside the Americas, the impact that they had from a RevPAR perspective was 80 basis points. In the aggregate, if you look at it in the aggregate of these two hotels, RevPAR decline was north of 10% from -- coming from these two hotels.

Next question on owned and leased margins, a little bit of explanation on owned and leased margins is sought. Implies -- the question is, implies labor inflation was greater than 4%. Was that a bunch of different things or was that the two hotels outside the Americas? And which were the two hotels? What happened at them and what results would have been without them?

So again, just by way of reminder, we had a very good second quarter last year 2013. Margins were up 230 basis points in 2013, so it is a tough comparison. The margin issue was really primarily market-specific for those two hotels outside the Americas.

The two hotels were sold, Bishkek in Kyrgyzstan, Central Asia, which, combined, impacted our total owned and leased margins by 50 basis points in the quarter. The market-specific issues, very quickly, in summary, were in Seoul, new supply as well as a major competitor coming back after being closed for renovation. And in Bishkek it is really all demand issues driven specifically by the fact that the US military airbase has been closed down, which was a major contributor to the customer supply of the hotel.

Okay. Great. The next topic was about that of bioresorts. How much EBITDA, if any, did Playa contribute in the quarter? And, secondly, can you give us an update on future plans for Playa?

Sure. The contribution from Playa for the quarter was approximately $4 million of JV EBITDA. For the year, we had said that we thought we would earn somewhere between $13 million and $15 million from our JV interest, and we are likely going to be at the lower end of this range.

And in terms of future plans, we are very focused on getting all of the slated hotels open and ramped up under the two owned inclusive brands that we have got. Progress in Jamaica has been very strong and we are very much looking forward to opening that property at the end of this year.

Okay. Great. The next topic was on asset recycling and sales or transactions. First question, how is the marketing process for your full-service and Select Service hotels progressing? Are you hoping to sell the Select Service hotels as a portfolio? And what is the average age and RevPAR for the Select Service hotels?

So first of all, on the RevPAR question, it is actually disclosed in the schedules to the earnings release. So you can see the breakout of our full-service owned hotels and our Select Service owned hotels.

In terms of overall process, on the full-service front, the deals typically take 6 to 9 months from listing through completion. And so, just to gauge timing, by way of reminder, we took these to market initially in the first quarter of this year. So therefore, we would expect to see the same timing apply for these properties.

In terms of the just recently listed Select hotels, it is really too early in the process to comment on how things are going. As I mentioned in my remarks, I think it is probably likely a six-month process. We are thinking about and have organized the sale process for the Select properties in three different sub-portfolios, so to speak, one relatively larger one of 32 hotels and then two other smaller ones of six and four hotels, respectively.

And so, we are thinking about these as portfolio sales and have broken down the overall portfolio accordingly. The average age of the properties is -- across all of the properties is something in the range of 15 years. Remember that this would have been -- the hotels would have reflected high branding for the last six years, which is the time at which we converted to Hyatt Place, and at that time, Hyatt Summerfield Suites, now Hyatt House.

Okay great. Next question is, how do you expect to use the proceeds from the asset sales? Would you consider pursuing another portfolio deal similar to Lodge Works and placing the hotels under one of your growing brands?

Look, I think our goals remain exactly as we stated in the past, which is we are focused on four categories -- the gateway city hotels, resorts, urban Select Service, and convention hotels. We have been really active, really across each of those different areas and we remain focused on those four categories.

And whether we would consider another portfolio deal, the answer is yes, recognizing however that they are few and far between. So I think that we are always looking for very good real estate and good brand representation opportunities, especially in markets in which we are either underrepresented or don't have representation. So we are active in the market looking at new opportunities.

Okay great. Thanks, Mark. We had one question on capital allocation. How does the Board evaluate the trade-off between share repurchases and additional acquisitions? Do you expect to repurchase additional shares as you sell assets, if you can't find acquisitions?

Yes. So, as I mentioned, we take all these factors into account on a constant basis. And it is a dynamic process, obviously, because the profile of liquidity and opportunity will change quarter over quarter, depending on what is going on in the marketplace and how things are progressing, either on the disposition front or the acquisition front. So it needs to remain a dynamic process and we continue to look at current opportunities and future commitments that we already have in the context of our overall capital allocation decisions.

And as I mentioned, as we see the evolution of our asset recycling program, we believe that we will continue to generate healthy disposition proceeds, which should fund our new investments over time. And that is actually the backdrop on which we feel confident that we will remain active on the return of capital to shareholders.

Great. Shifting gears a bit and into development, have you seen a change in the development landscape in the last few months? That is, are more or less incentives required to get deals across the finish line?

The short answer is no significant changes in the last few months. Activity remains very high. Our overall base of executed contracts has not expanded at net, but we have opened -- I think it is 18 hotels year to date. So we are on a pretty healthy opening pace. And this is after having opened over 50 hotels last year. So we have got a lot of activity in terms of hotels cycling out of our executed contract base through openings and maintaining the overall contract base.

The other thing I would note is that the contract base is seasonal. That is that there are more signings and contracts coming to fruition towards the end of the year.

Things have evolved quite differently in different markets. So I would say that the overall level of activity in India has abated somewhat, pending the elections that just got completed. I think that it is fair to say that there is maybe a move from concerns about various macroeconomic trends and maybe policy issues to optimism about the future. And so that should have a positive impact on the market dynamics as well as development opportunities there.

And, in China, it has remained relatively consistent over the past several quarters. I think the evolution that we expect to see going forward is more activity for our Select Service brands. We just opened our first Select Service hotel in China and we have a lot of activity and a lot of interest in our Select Service brands there. So I think that will evolve in that way.

And, of course, the Select Service opportunities in the US continue to be the primary deal drivers. And we are looking at selected other full-service opportunities, but most of the activity is in Select.

We had a question on an income statement item. The swing in equity earnings from unconsolidated hospitality ventures was a point of differentiation versus my forecast. Could you talk about expectations for this line item going forward?

Sure. First of all, the primary driver this quarter was approximately $20 million from the sale of our share in the Hyatt Place in Austin, Texas. Looking forward, it is very difficult to forecast going forward, as we reflect both equity and cost method of accounting there. So, earnings versus cash dispositions. And there is a certain amount of relativity volatility that will continue to be there. But we will continue to provide more details as we go through each.

Okay. Next question was on Hyatt Residential Group. How much revenue and EBITDA is generated by the timeshare division this year and into the future? Any updates on the timing of sale and expected level of proceeds?

Sure. So timeshare activity, timeshare business generated in the range of 2% of total Company adjusted EBITDA in 2013. It has been relatively consistent at that level -- that proportion of total adjusted EBITDA. But, of course, earnings, as you think about the profile of earnings, would be positively impacted by the Maui project which is under development right now.

In terms of the arrangement going forward under the master license agreement, we would likely see earnings license fees in the range of a couple of million dollars per annum. In terms of timing, as I mentioned, we expect to close before the end of this year and the expected proceeds, I mentioned earlier, at $190 million-plus at cost; $35 million for our interest in the Maui JV that is under development.

The last question that we received via email was on the performance of some of our recent acquisitions. The question is, how did the Hyatt Regency Orlando and the Grand Hyatt San Antonio perform in the quarter?

Both acquisitions are actually tracking very well. Orlando is on track to earn $55 million as we put out as a goal at the beginning of the year -- $55 million of EBITDA this year. And San Antonio is slightly above our initial expectations. So both are doing well.

That wraps up the questions that we received in advance. Operator, if we can have any live questions at this time, that would be great.

Joe Greff.

Mark, just on your comments about combining 100% of the Park Hyatt New York City, has your underwriting or return expectation for that asset, has that changed? I know you talked about a flexibility of recycle and tax consequence as motivations for upping it to 100%, but if you could talk about that a little bit, that would be helpful.

Sure. First of all, as you know, the market in New York has been pretty healthy, especially for the top end of the market, which is where we will be playing. So that is encouraging. I think the outlook with respect to return expectations is consistent with what we said when we first struck the deal, which is we thought that we would have a return in the high single digits, and that is likely -- that remains our current expectation as we look forward.

Of course, we will go through a ramp up and we obviously got a lot of plans with respect to how we are going to market. We've got some very encouraging partnerships that we have struck with some cultural institutions in New York, and have also done a lot of groundwork with significant and key corporate and entertainment clients as well. So actually, it is really exciting.

I think the Park brand, the cachet and the performance, continues to track very well. The Park Hyatt Vienna opened very strong with lots of great coverage and also guest response. And I just returned from Tokyo. We celebrated the 20th anniversary of the Park Hyatt Tokyo, which is still going strong 20 years later. So I think the brand overall -- the brand performance is very encouraging.

And New York is extremely highly anticipated by a lot of key high-end and luxury accounts that we serve in places like Paris and Beijing and Tokyo in our Park Hyatt hotels. So that is our current outlook.

Thank you. And then, with regard to the two hotels outside of the Americas that were drags on results in the 2Q -- Seoul and the other one in Central Asia -- I won't try to pronounce that name. But Seoul, I believe you called out last quarter at least. When do comparisons in Seoul start to get easy or anniversary the challenges there? And then, with respect to Central Asia, how much EBITDA did that contribute in 2013?

This is Gebhard. The comparison will get easier in the fourth quarter, so as of the fourth quarter we should get back to more normal comparative base. There are ongoing market challenges when you look at it from a more macroeconomic perspective, as to where Korea or Seoul is, and what the influx of business there is or the inflow of business there is.

There are issues with Chinese travelers into Korea. There are issues with Japanese travelers into Korea. And, obviously, there are supply and demand issues there as well. So the comparison will get easier. I think the market conditions is something that probably will not ease off that quickly, but we are very focused on that property. Obviously, it is an important part of our own portfolio.

With regards to Bishkek, that is the one that is difficult to pronounce in Central Asia, it is an interesting one. It is less than $5 million from an EBITDA contribution in 2013. But it is an interesting one, because it is so dependent on a single market, basically. And that market for us has been the US Embassy, the US business.

And through the closure of the airbase there, that business really has fallen off the edge. It is a very limited market and these are the challenges there. So again, from a recovery perspective, we don't look at this from a short-term. This is going to take a little while to rebuild and is highly dependent on the sociopolitical aspect of that whole Central Asian area.

Okay, my final question, the 2015 group pace commentary obviously was very positive. The low single-digit pace number you talked about for the balance of 2014 does appear to be below your peers. Is there any reason for that? Are you more associations and less group in the back half of the year? And is that the reason for the maybe a below peer pace number?

I think the way we look at it is it has been progressing and growing. So actually, it is an improvement. I would say that, given the dynamics at the end of the quarter for the quarter business, and the relatively shorter-term corporate -- shorter-term booking for corporate business, which has been very healthy, we are not concerned about the balance of the year in terms of overall revenue.

In order to really try to do a comparison to others, you would have to go and look at market mix and relative mix of association and corporate. So I can't -- it is really impossible for me to do that comparison without knowing a lot of details on the competitors that you are referring to.

Shaun Kelley.

I just wanted to ask about the asset sales. Obviously, you're putting another portfolio on the block as it relates to the limited service hotels. And I guess my question is, first of all, could you give us a little bit of color on the buyer universe you are thinking you are seeing? What types of buyers? Any kind of thoughts around valuation from the Select Service portfolio side?

And then, secondly, are there any tax implications to keeping those proceeds and/or distributing them versus having something lined up, like another purchase, to kind of roll those into? Is it more tax efficient to redeploy those proceeds into another piece of real estate? Or are you guys kind of agnostic between that and possibly returning it to shareholders?

Thanks. So a couple of points. First, in terms of the buyer universe, we have already done a number of deals selling selected groups of Select Service properties to public REITs. So that is one buyer universe.

A second buyer universe is non-listed REITs which have been quite active in these types of assets this past year. And we also see private equity interest at pretty high levels for these types of assets as well. So I would say there are diverse types of buyers out there, with significant capital base behind them. And, of course, overall borrowing profile given interest rates at pretty attractive rates. So, it is too early for us to say on our deal, but there certainly have been other deals done this year that have been done at very strong values.

In terms of the tax profile, as I mentioned, one of the considerations that we have got as we think about the Park Hyatt New York transaction is the fact that, as a whole ownership property, it does offer us the opportunity to defer gains from the sale of other real estate assets. We have certainly taken advantage of those kinds of deferrals through 1031 exchanges. And we have done that actually extremely well, I think, over the last 18 months.

We have transacted a large number of sales and acquisitions. And we have done, I think, a very good job of achieving good deferral. In this case, this year, we have acquired the Grand Cypress property, which was under capital lease previously. And we closed on that this past quarter.

And, as a whole ownership property, that qualifies as a repository for deferral of gains. And so, too, would the Park Hyatt New York if we choose to do that as a whole ownership property. So I am not -- we are not sort of out trying to tee up deals solely for the purpose of doing some kind of deferral, but we have been able to manage it in the normal cadence of our acquisition and disposition activity.

Harry Curtis.

In your experience, what inning are we in for group demand, which seems to be just beginning to lift? And how long, going back to the last couple of cycles, which is the group demand lifting, might you expect the ramp to last?

I would say that things look to me to be on the ascension at this point. So, if you just look at the data that we cited for next year, and the progression that we have cited really quarter by quarter over the last five or six quarters, all of that is really positive and is building on itself. Because, given the nature of this business, it does accumulate.

Of course, as you have healthier and healthier forward booking patterns into future periods, the compression ends up increasing as well. So if you look back, we have really not seen material rate recovery from -- in real terms from prior peak, and so there is a long way to go in that dimension.

But, if you also look -- if you think about the downturn really taking hold and of 2008 into 2009, and you did not see -- you saw some mitigation of the impact of the overall cycle decline by virtue of some group business that was previously on the books, that persisted for a couple of years following the initial significant downturn that we saw in 2008 and 2009. So I would say that there is probably a couple-of-year window.

And, of course, that varies by market depending on whether you are relatively heavier in association or corporate, that you can think about in the context of overall cycle. So I would say we are encouraged. And certainly the pace that we see in the total booking volumes that we see are very encouraging.

Thank you. And, as a follow-up, talking about the mix of group customers, how much discounted rate do you still have to burn off that was put on the books a number of years ago? Or has that already essentially burned off?

It is really hard to say with precision. There is certainly some overhang in the few markets where there were more association business that was booked in -- during the (technical difficulty) period of time. But the nature of the corporate business is that so much of it was compressed into -- in the quarter for the quarter, and in the quarter for the year bookings, that there is not that much in terms of forward corporate business that is specific to that.

That may start to change a little bit because, as I said, we are seeing the lengthening of the booking curve. But it is still relatively shorter for corporate than it is for association.

The only thing I would add is that half-year group business is either booking in the year that it is consumed or that the year prior. So the amount that is actually on the books from several years prior is small.

(Operator Instructions).

Okay. Great. Well, if there are no other questions, I would like to thank everyone for joining us this morning and we look forward to speaking with you soon. Thank you very much and goodbye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect and have a great day.