Hyatt Hotels Corporation (H) Q1 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Hyatt Hotels Corporation Earnings Conference Call. My name is Shequan, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Atish Shah, Head of Investor Relations. Please proceed, sir.

Thank you very much. Good day, everyone, and thank you for joining us for Hyatt's first quarter 2012 earnings call. Here with me in Chicago today are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Harmit Singh, Hyatt's Chief Financial Officer. Before we get started, I would like to remind everyone that we have a different format to our earnings call this quarter. Mark will make a few introductory comments, and then we will read and respond to the questions which we have received by email this morning. We've not screened the questions, but have grouped them by category. We intend to take follow-up questions via live Q&A for the final 15 to 20 minutes of the call. Before I turn it over to Mark, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued earlier this morning, along with the comments on this call, are made only as of today, May 3, 2012, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find the reconciliation of non-GAAP financial measures referred to in our remarks on our website at hyatt.com under the Press Release section of our Investor Relations link and in this morning's earnings release. An archive of this call will be available on our website for 90 days, and a telephone replay of this call will be available for one week per the information included in this morning's release. And with that, I'll turn it over to Mark to get started.

Thank you, Atish, and good morning to everyone. Thank you for joining us. We received a number of questions. Thank you for the engagement and the participation. And we look forward to turning to those in just a moment. I want to cover a few topics before we cover the questions. First, first quarter results. 2012 is really off to a good start. I think when you look at North American group in transient revenue, growing in high single digits and the group booking in the first quarter -- bookings in the quarter -- for the quarter and in the quarter for the year, we're quite encouraged by the level of demand that we see. We had recently renovated hotels that are performing well. We've got great feedback from guests and meeting planners alike. Occupancy lift has been significant year-over-year, and we're looking forward to -- for the rate growth later in this year. And finally, as of the first quarter, the hotels that we acquired from LodgeWorks are doing well. RevPAR progression has been very strong. RevPAR index expansion has been very strong, and we've really seen the positive results of the Hyatt brand and the Gold Passport customer penetration into those hotels. Second, we announced yesterday the acquisition of a hotel in Mexico City. We're very excited about this. This will be Hyatt Regency in Mexico City. We're very excited about establishing our presence there, especially in this location. And we have been looking at building our brand presence there for some time. The level of travel to Mexico has been quite strong both in leisure, as well as business travel. And overall, the economic trajectory in Latin America is quite positive. We are very happy with the acquisition. The all-in costs, including an approximately $40 million renovation, will bring us an adjusted over $300,000 per key, which we believe is well below replacement cost. Most importantly, it's really consistent with our strategy of how we intend to use our balance sheet, which is to really secure opportunities in gateway cities. And eventually, this hotel, we will look to recycle it and sell it, but retain a long-term management contract. But we really believe that the repositioning of the hotel, the branding of it and some other work that we're going to do will have a positive impact. Third, I want to talk briefly about the organizational changes that we announced yesterday. We've covered quite a lot of ground over the last few years and established a great foundation for our future. We built a lot of capabilities and added a lot of resources over the last several years. As we look forward, we recognize that our business mix will shift over time as we open hotels in our pipeline. We also recognize that the velocity of the changes in consumer behavior is increasing. There's a large increase of consumers and business travelers in places like China and India. And that will change the profile of our customer base over time. And the key principle that we are really following in the realignment that we announced are, first, higher effectiveness of the organization through better alignment; and secondly, to be more adaptive. We believe that we can increase our effectiveness and our performance over time by being a more adaptive company. Some of the targets that we addressed in the realignment include better aligning operations and development in our operating regions; pushing more decision-making to the regions and to the hotels themselves; to better ensure that we can rapidly implement innovations in each region; and to unify what we're doing in appropriate ways, that is to behave as one company, ensuring consistency across the globe, but also allowing the local flavor of each region to be reflected in our operations. A quick comment on personnel changes. We have announced a number of different moves and changes. We -- by way of reminder, our 2 principal drivers of earnings growth are improvements in our existing operations in our existing hotels, and secondly, expanding our presence through additional hotels under the Hyatt brand. And a lot of what we are doing, is really leading towards the application of operations experience and a focus on ensuring that we are pushing as hard as we can to maximize our performance in our existing hotels. And at the same time, creating better alignment so that we can do more and do it faster with respect to growth of the Hyatt-branded properties. Finally, a quick note on our outlook. The industry dynamics are generally very good. In the U.S., supply is obviously still at a relatively low level. And as we look around the world, global travel continues to grow. We're seeing a lot more intra-country and intra-regional travel in places like China and India. And that is having an impact on how we've gone to market and how we think about driving preference in those markets. Our goals have not changed no matter that we are realigning the organization. Our goals remain to be the most preferred brand in each segments that we serve. And we think about doing that by being able to be focused on what our customers' needs are in each market. We continue to focus on developing our people and see higher levels of engagement over time. And our brand awareness continues to grow. And moves like establishing a presence in a gateway city like Mexico City clearly promote that. Our business model continues to work well. We've had growth. If you look at our pipeline progression over time, it's been significant in the recent past of 15% growth year-over-year. And if you look at the way in which we've actually grown and pursued expansion, we've been using all of the tools available to us, including some transactions that involve using our capital base, but also management and franchising. And it's been quite effective. So we believe that with our capital base, with our focus and with our new realignment that we are extremely well positioned as we look forward to improving conditions. And with that, I'll turn it over to Atish.

Thank you, Mark. That concludes our prepared remarks.

Now we'll begin by reading the submitted questions, and Mark and Harmit will respond as appropriate. So the first topic is SG&A. We received several questions on SG&A, and they're really asking for main topics. One was the color on SG&A in the quarter describing the nature of these items. And then the second was future SG&A costs, whether the costs in the quarter represent a higher run rate or what the numbers should be for full year, whether first quarter is a good run rate. And lastly, the question was why this not communicated earlier.

Great. Thanks, Atish. And good morning to everybody on the call. Let me start with the overall color. Our SG&A costs were higher in quarter 1 when you compare it to a year ago, but broadly in line with our internal expectations because we don't necessarily guide. It's difficult for us to indicate line by line what costs or revenues are. But I just want to make sure that everybody understands that broadly in line with our internal expectations. The first half of the year, which is 2012 relative to last year, our expectation in terms of SG&A cost increases will be higher than the second half primarily driven by 2 reasons. One, as we expand our presence globally, we recruited both development, real estate, finance and legal. We recruited folks in the second half of last year, so the impact of that on an annualized basis will impact the first half of 2012. And the second is a onetime [indiscernible] get into, which we just experienced in quarter 1. The way to look at this is cost for the quarter is split into 3 buckets. 1/3 is one-timers, which I just explained; 1/3 cost related to expanding our presence globally; and 1/3, what I call basic baseline cost. The one-timers in quarter 1, which is approximately, I would say, $7 million, $6 million to $7 million basically relate to a couple of things. As you know, we're relaunching and converting our extended-stay properties to Hyatt House, so the signage and conversion costs related to that. We had -- we reserved some bad debts for basically 2 properties, again small in terms of number of properties, so that impacted the first quarter. And then there were legal fees that relate to the termination of one hotel outside the U.S. So that's broadly explaining the third. The remaining costs I just said were equally split between expanding for the future and baseline costs. As we -- the second question related to what's the expectation as we think through the year. I'd say we're looking at potentially SG&A cost increasing in the double-digit -- low double-digit to low teens on a full year annualized basis. And that would incorporate costs that were impacting quarter 1 on a onetime basis. The only thing I would say in summary is, as Mark mentioned about an organization realignment, these costs do not include any costs related to the realignment. We're in the process of quantifying that, and we'll advise on all of you over the next coming quarters.

Okay, we have 2 questions related to SG&A, in particular the callout on Hyatt House. They are as follows: Are there any additional brand initiatives forthcoming for some of your more mature concepts? And two, how much do you expect to spend on brand development this year?

In terms of -- we established an innovation team last year, and we're looking on a regular basis about innovating and meeting customer needs as they change over time. And that's included in the numbers that I've talked to you or mentioned to you in terms of the outlook for 2012.

Shifting gears a bit. Concentrating on Mexico, what's the strategic rationale for the deal? What did the new property do in EBITDA last year? What's the forecast for this year?

The strategic rationale, this is Mark, for the Mexico City deal was really to establish key presence in a large gateway city. Mexico City is a top global market. We don't have a current presence in Mexico City. This particular property is extremely well located. It's in the Polanco area, and it overlooks the Chapultepec Park. And it's actually in a hotel zone with a lot of other first-class hotels. It is a large hotel, which will allow us to establish a significant presence. It's currently situated with 756 rooms, but post renovation, we'll have 734 rooms. And the forecast outlook for the year, we expect to close the transaction in May. And we would expect EBITDA level earnings in the range of $8 million to $10 million for the remainder of the year. If you look at the overall market and travel patterns, travel to Mexico has actually been quite strong, especially from the U.S. both leisure and business travel. And when you look at the prospects for this hotel, there's several things going on. The first is it will be rebranded. And I think that the Hyatt branding will make a significant difference to the volume that we can bring through travel -- travel base that we can bring to the hotel. Secondly, the renovation, which we currently estimate to be about a $40 million investment will include the expansion of the meeting space of the hotel as well. The hotel currently has roughly a 15% group mix. And we expect that to expand over time, both because of our revenue management and our group base of business, but also because we're doing some reprogramming within the hotel. Overall, we looked at this transaction and concluded that it was really attractive on a standalone basis, if you just look at the economics of the deal itself. But clearly from a strategic perspective, we do have further plans, too, and we are focused on growing our presence in Mexico, both business and leisure locations. And having a significant good presence, prominent presence in Mexico City is key to that initiative. Now the last thing I would say is that this is consistent with our approach to using our balance sheet. And we do expect that over time we will look to recycle this asset, that is dispose of it but retain a long-term management contract at -- upon any sale.

Next question was, can you talk about where the Mexico City property was in the prior cycle and where you think it can get to post conversion, say, in 3 to 5 years?

Yes, I don't -- I can’t really go back into historical detail to give you a sense for where it is. It's clearly below peak. But the comparability of that to the operation of the hotel under our management is really difficult to establish, especially in view of the fact that we do expect to change the mix of business in the hotel. We clearly expect that there will be a lift from the branding, as well as the renovation, which we expect to execute over the next 2.5 to 3 years.

Should we assume Hyatt will continue to look for real estate in this region? Similarly, is the company interested in buying real estate in Europe?

So as to real estate acquisition in the region, the answer is that many transactions in different parts of Latin America would do require capital in different ways. And we have looked at other opportunities, and we will continue to. Again consistent with our approach, which is establishing presence in key gateway cities, looking to expand our resort presence and also supporting our group business. These are the 3 areas that we've talked about historically as being important to us. We also believe that there's a significant opportunity for select service development in Latin America in general, and we've been applying a lot of resources to that. In fact, we have our first Hyatt Places that are opening up outside of the U.S. including one hotel this year in Latin America. In terms of Europe, yes, we certainly are paying attention to and looking for opportunities there. It's certainly hasn't generated any -- the tumult in the market has not generated any opportunities for us yet. But we continue to look for opportunities, especially because our presence in Europe remains relatively modest. And there are a lot of attractive markets into which we would like to further expand.

We've received one related question about updates that we could share regarding our development site in Rio.

Yes, so we completed the acquisition of a site in Rio. And we continue to refine the design plans and the construction estimates for the project. So at this point, it's predevelopment costs that we are incurring to move the project along, which we will continue to do. We're looking forward in time to the Olympics in 2016 and ensuring that we put ourselves on a path to have the hotel open and ready for that, prior to that. And we will, over time, engage with potential partners and look to establish a partnership, a JV of some kind, in taking that project forward.

Shifting gears a bit, we received a few questions on group business, pricing, bookings for the remainder of the year and pace.

Yes, so let me start by saying our group business in the quarter was strong. Our revenue was up 9% primarily driven by demand. Pace for the year is up 4%, again, primarily driven by demand, 2/3 demand, 1/3 rate. Our bookings in the quarter for the quarter were fairly strong. They were up 20%, and they were equally distributed between rate increases and demand increases. In the quarter -- for the quarter -- in the quarter for the year bookings were up 13%, and that was really driven by risk. Rates were up about 6%. So overall, the strength we saw in the group business in the quarter primarily came from corporates. And in terms of sectors, they were largely driven by -- consulting technology and IT were the sectors that were the prime drivers of the group business growth that we saw in the quarter. In terms of windows, still fairly short. Many meetings have been booked within 90 days. So overall I think that probably addresses most of the questions, Atish.

Yes, one additional question. Which corporate segments have seen the most and least relative strength to date in 2012? And what are your early thoughts for 2013 corporate rates?

In terms of the sectors, as I mentioned, it's really consulting, technology and IT being strong. In terms of least strong, less strong, it's really the pharma and the financial sector. In terms of the question about '13 rates. It's too early to tell at this point in time. And over time, we'll get a better sense of that. Having said that, I would say as I think about the bookings for '13 and '14, continue to grow. For '13, I think we probably have about 45% of the business on our books; and '14, we probably have 30% of the business in our books. And rates are picking up. I mean, rates are up 2% when you compare this for the bookings this time last year. So I think overall, trends are looking decent.

Okay. Can you give us a sense of how the development of Andaz is tracking versus your expectations? What does your future pipeline look like for the brand particularly across North America?

So Andaz' evolution has been really encouraging and exciting to watch. We are seeing an increasing base of customers, who are identifying with the brand and seeking it out. That's reflected in the performance that we've seen in the individual hotels. We have 8 Andaz hotels open and operating currently. And we've converted 2 full-service hotels to Andaz hotels in the first quarter. We have about half a dozen in the pipeline at this point, mostly outside of the U.S. and in some really attractive and important cities, both for the Andaz customer base, but also for Hyatt overall. We're less than 5 years into the rollout of the brand post-launch. I think the traction has been very good. And I think that the -- there's been a positive impact to the rest of the portfolio as Gold Passport members are discovering Andaz. And so it remains a significant brand in the dialogue with developers that we're already doing business with in China and India and in other markets.

What type of performance does the company expect out of the LodgeWorks portfolio? And how much does management expect it to contribute to margins? And how has the initial integration process been tracking?

I'll address some of that. The results that we're seeing are tracking slightly ahead of what we actually expected. We had looked forward into 2012 when we were -- last year, after we completed the acquisition, look forward to 2012 and estimated that the LodgeWorks portfolio would contribute about $40 million of net EBITDA. And as I said, we're tracking slowly ahead of that at this stage. The RevPAR progression has been very solid. And a part of that has to do with the expansion of the Hyatt customer base into those properties, as well as managed corporate travel. We've been able to secure more volume account business for the hotels relative to their prior branding. The integration has been superb. The LodgeWorks team, to a person, has really been a joy to welcome into the Hyatt family in both on the operation side, but also on the development side. We've really identified and are pursuing a number of opportunities for new developments, which really came with the team from LodgeWorks. And they take many different forms. We are certainly pursuing them with the idea that -- to the extent that we end up developing them ourselves, that we do it with partners. We look for potential buyers for those properties over time. We don't expect to engage in an extensive development program on our own balance sheet, but we will apply capital to get projects moving and to seek out good partnerships. And I'm very encouraged by the flow that I've seen to date.

In terms of some specifics, LodgeWorks earnings, as well as margins, I'd say in the quarter about $10 million of incremental EBITDA, thanks to LodgeWorks, which we're very happy with. In terms of margins, because LodgeWorks is not truly comparable with the acquisition in late last year, our competitive margins will not include the LodgeWorks margins. But if you look at the difference between total margins and the comparable margins, total margins is up I think about 270 basis points, and comparable margin is up 120. The difference is primarily driven by LodgeWorks and the Woodfin acquisition.

Following on that question, how should we be thinking about the quarterly impact of LodgeWorks and/or renovations during the remainder of 2012?

Yes, let me talk about renovations for a minute so we can give some color on the renovations. Overall, we're very pleased with the progress as our properties and the rooms have been renovated come back into inventory. Our big hotels in San Francisco and New York, in particular, are doing very well. And we're very pleased with how that's progressed. And look at our comparable margins, margins were up 120 basis points. I'd say about 190 basis points increase quarter-over-quarter was driven by the big 5 properties that we renovated. We had some renovations going on to a smaller extent in a couple of properties, Long Beach, Lake Tahoe, for example, and our select portfolio. That hurt margins by approximately 60 basis points. So overall on a net basis, renovations drove 130 basis points increase in margins quarter-over-quarter. We had 2 properties that were a little weaker, largely international properties for specific reasons that hurt margins by about 80 basis points. So on a net basis, our base business was up 70 basis points. And if you do the math, that's how it actually works. So overall, we continue to be pleased with the progress on margins. As we look at cost, we continue to drive productivity. Our operators are doing a phenomenal job from that perspective. Costs per occupied room is actually down despite an increase in demand as measured by room nights. So overall, we're very happy with how margins have progressed through the quarter.

Okay. Are corporation's more willing to book farther out, either transient or group? On your last call you noted caution from corporate customers.

We haven't seen any material change. We saw a lot of activity within 90 days. Our large hotels, hotels that have over 650 rooms, which represents about half of group business for full-service hotels in North America, are seeing, I would say, low double-digit increases, which is largely driven by association-oriented group business. And the smaller hotels, which are represented by 10% of our total group business, are seeing slightly higher. So I think over time, we'll provide more color as things pickup. But just as a reference point, I indicated to you the increase in the business for '13 and for '14. So that's steadily improving and is largely driven by rate.

Any market specific commentary in New York City demand trends or trends from financial industry?

I think New York has been good. I think the market seen mid-to-high-single digit increases for us. We've got a New York product, whether it's the Andaz which are new or the recently renovated Grand Hyatt Hotel. So we are seeing increases higher than that on an overall market basis. Trends from financial -- the financial sector had been reasonable, both in the transient and group demand side in quarter 1.

Shifting gears, you recently announced a number of transitions across the organization. Why did the company go with an insider for the CFO position as opposed to an external candidate?

So I'll just -- excuse me, address the overall alignment, realignment of the organization. I mentioned in my introductory remarks the principles, and those principles are really reflected in both the shape of the organization, as well as some of the personnel moves. We have, in virtually every area of the company, have been looking at ways in which we can bring operating experience to -- the operations experience to how we try to find opportunities for improvements. And that also included bringing a deeper operations experience to the finance function. The incoming CFO, Gebhard Rainer, had held finance functions in his past at Hyatt. He has actually worked through, was in Chicago in that role as we -- as the company worked through the preparation to become public ready, so Sarbanes-Oxley initiatives and the control environment. So he has exposure to those issues, but he also has a more extensive operations background. We believe that, that will fit well with the realigned organization. And we also remain focused on ensuring that all that we're doing, both in terms of alignment with the organization, as well as how we are applying our resources as we move forward, are designed to continue to drive our 2 primary areas of earnings growth, which are improving operations -- improving existing operations, as well as expansion through additional Hyatt branded hotels.

Okay, one more question. Why is the CFO resigning?

I'll take that. Let me start by saying that overall I'm a big supporter of Hyatt's strategy, both in the past and as Hyatt looks forward. In fact, as Mark mentioned in the announcement, I was part of the team that helped create that over the last couple of years. And I intend to stay on as a guest and a stockholder over time. For the reasons, I think, Mark mentioned -- as he discussed his outlook for his senior team. Mark felt it beneficial to have someone with deeper hotel operational experience. And I've had operational experience in different industries, and in hotel is something that one was picking up over time. So I think on that basis concluded that it's probably best to pursue other opportunities after a transition period. I might say that I've enjoyed the time at Hyatt, learned a great deal. And I think that we, as a team here, have -- especially in the finance function, have accomplished a lot, whether it's getting the company ready to go public, working through the IPO, which is fairly successful, and delivering on the commitments we made to all of you and our investors who invested during the IPO process. I'm proud of the team that I leave behind. I think it's fairly talented. And I'm committed to the transition, and that's why I think it's important to work through and make sure we transfer the baton to Gebhard over the next couple of months.

Would you characterize what you're currently seeing in the hotel markets, specifically are there any signs that lead you to believe that the number of hotel transactions will accelerate later this year?

I think right now what we're seeing and hearing actually maybe is more dialogue about potential transactions as opposed to evidence that there are more transactions. There are some, though, some that even were announced this past week, excluding our own, including the conversion of a hotel here in Chicago to a Hyatt. And so -- through an acquisition, that is. And we've also seen a little bit of M&A activity in the first quarter or over the first quarter. But I wouldn't say that there's a fundamental shift at this point in terms of actual transaction volume increasing. We'll see how this evolves over the course of the year. The debt markets are not backing up for sure, but neither are they really expanding significantly or at a fast pace. We have seen some improvement in securing financing for some specific projects. But those projects have tended to be in great locations in key cities with great sponsorship. And I think that the -- with those factors, financing seems to be more accessible now than it has been in the past. But again, I don't consider that a sea shift. So that's a quick perspective on what I see in the markets at this point.

And we, in the last quarter, closed some big financing. And whether it was Times Square in New York, the construction loan took a long time to get it done. But working with our partners and our banks we got that, and then one select project working -- that we partner with Noble. So I think, to your point, Mark, I think, good sponsors, a good brand and then working with our partners I think is leading to some success.

No question.

Our niche competitor, Gaylord, is exploring alternative to unlocking shareholder value. Is it fair to characterize Hyatt's interest as low or none in perhaps some portion of that entity to enhance distribution?

Well, look, first I guess -- I don't think it's really appropriate for me to comment on a specific competitor. But I do think it's an opportunity to just remind people and talk about what it is that we're focused on and how we think about this. We're always looking for what fits and what doesn't. We've been focused on 3 particular areas in as a full-service matter -- full-service hotel matter. The first is expansion in key cities. Really, you can see the results of our focus on New York, for example, through openings, as well as additional pipeline hotels that are coming through. Second, expansion of our resort presence. Harmit just mentioned the financing that we secured for the JV in Wailea. That's an example of our focus on expanding our reserve presence in key resort markets. And third has been and continues to be expansion of our group-oriented hotels. We really dedicated a lot of focus and time and attention to the Hyatt Regency New Orleans project. We invested in preferred equity in that transaction in order to create the capital base needed to finish the redevelopment of the hotel. And it reopened last year and is off to a great start, so we're very encouraged by that. Those remain the key areas. Of course, in the select service area, we're very much focused on urban development, but also overall expansion. So I would say that those remain the key areas of focus for us

Okay, shifting gears. With 70% of the current management franchise pipeline located outside North America, where are the bulk of these properties located? How will the management contracts generally be structured?

So the bulk are located in India and China. Over 50% of our total pipeline is in those 2 countries or about 70% of the International pipeline is located in those 2 countries. The specifics on the contracts -- the contract structure really varies by geography and type of hotel. But generally speaking, and I would say it applies to the vast majority of the hotels in our pipeline in India and China, they are transactions in which we are signing management agreements, long-term management agreements with a base and incentive fee structure and without capital being applied to it. So that overall profile is that for the China and India properties.

Can we get an update on the construction status of the Park Hyatt New York? What does the timing look like for the project opening?

Yes, Park Hyatt New York construction is going very well. The overall project is a very tall building on 57th Street, we're in the first 22 or 23 stories of the building. And the progression -- the progress has been very, very good. Remember that we have a fixed price contract, and we'll acquire a majority interest in the hotel upon its completion. At this point, it looks like they're on track to complete late next year or early 2014, and we will establish an opening date a little later. We cannot establish a specific opening date at this point. Really, it's -- we're very encouraged and very optimistic because it's the first new luxury hotel built in New York City in over a decade. So we're really excited about bringing the Park Hyatt brand to the market.

Can you give us a rundown on the state of union relations in the U.S.? And do you foresee a scenario of increased union pressures strikes or wage pressures in 2012 through 2014?

Well, excuse me, by way of reminder, the contracts that we have in some of the major cities, Chicago, San Francisco, Los Angeles and Waikiki, for example, expired in 2009, late 2009, and in one case early '10. We've been in negotiations and dialogue with the local unions in those cities since then. We have not been able to bring those negotiations to closure. There was a recent round of negotiations in both New York and in Washington. And those have progressed relatively more quickly. And those -- the terms of the arrangements there are being finalized at this point. So it's quite difficult to forecast this. By way of reminder, we have about 25% or 30% of our workforce in North America is unionized, so we remain highly focused on this. We are applying ourselves very vigorously to try to bring closure to the contracts in the cities that I mentioned.

Okay, and the final question that we received via e-mail had to do with Europe. What percent of our customer base in Europe comes from non-Europeans?

I'd say about 40%. It varies by city. In key cities, like Paris and Zurich, it's a little bit higher. But 40% is a good range.

Okay, now, operator, we'd like to shift to the live Q&A, if you could give us the first question?

[Operator Instructions] Your first question comes from the line of Carlo Santarelli representing Deutsche Bank.

All my questions have been answered.

Your next question comes from the line of Kevin Milota representing JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: This is Joe Greff for, I guess, for Kevin. Just with regards to your SG&A outlook, I joined the call late, I know you mentioned it to be up low double-digit, low teens. On a year-over-year basis, what is the base for last year that you're referring that to?

In terms of dollars, Joe, or in terms of percentage increase? Joseph Greff - JP Morgan Chase & Co, Research Division: Well, give me both.

I think last year total SG&A was approximately $285 million. That's across the company. And the double -- so let me try and help explain the double digit versus teens a little better. The double-digit if we exclude the onetime costs, and the low mid-teens would be if you include that because we had some onetime costs this year. Joseph Greff - JP Morgan Chase & Co, Research Division: Got you. And how does it -- the balance of the year spread fairly evenly to get to that low teens on an unadjusted basis?

What I mentioned, Joe, was that the first half of the year would run at a higher clip when you compare to last year than the second half largely because of 2 reasons. One, was that we hired folks towards the second half of last year, so there's an annualization impact. And the second is we have these onetimers that we just spoke about in the first quarter.

Your next question comes from the line of Joe Greff representing JPMorgan. [Operator Instructions]

Okay, well, if there are no further questions, we want to thank you very much for your time. We appreciate your interest in Hyatt, and we look forward to speaking with you soon. Thank you.

Thank you for your participation at today's conference. This concludes the presentation. You may now disconnect and have a great day.