Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2014 Hyatt Hotels Corporation Earnings Conference Call. My name is Laurie, and I will be your operator for today. At this time, all participants are in a listen-only. Later, we will conduct a question and answer session (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Atish Shah, Senior Vice President of Investor Relations. Please proceed.

Thank you, Laurie. Good day, everyone, and thank you for joining us for Hyatt's fourth quarter 2014 earnings call. We want to thank everyone in the investment community for participating this morning. Here with me in Chicago is Mark Hoplamazian, Hyatt's President and Chief Executive Officer. Mark is going to start by making some brief remarks, and then we will take live Q&A. 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 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, February 18, 2015, and we undertake no obligation to publicly update any of these forward-looking statements, as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks on our Web site 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 Web site for 90 days for the information included in this morning's release. And with that, I'll turn it over to Mark to get us started.

Thanks, Atish. Good morning, and welcome to Hyatt's fourth quarter 2014 earnings call. Before discussing the quarter, I would like to discuss the progress we've made over the past year in reference to a few selective topics that we discussed at our Investor Meeting in March of 2014. First, we continue to expand our system with high quality hotels. We had a very strong opening pace in the fourth quarter, as well as during the full year. In the fourth quarter of 2014, we opened 14 hotels and for the full year of 2014, we opened 43 hotels. This represents a net hotel growth of approximately 7% and a net room growth of approximately 5% over last year. As a result of hotel openings as well as revenue increases at existing hotels, total fees increased over 7% in the quarter compared to the same period in the prior year. For the full year 2014, total fees increased 13% over 2013. Our current executed contract base consists of approximately 250 hotels and 55,000 rooms. This represents approximately 45% of existing hotels and 36% of existing rooms as of the end of 2014. You will recall that during our Investor Meeting, we described how our executed contract base equated to strong embedded fee growth. This concept continues to prove out for us and we're excited about our future growth potential. Second; we continue to execute on our asset recycling strategy. We disposed $1.2 billion of assets in the fourth quarter. On the full-service hotel side, we sold the Park Hyatt Toronto. The new owner plans to completely renovate and redevelop the hotel and the site. We also sold the Hyatt Regency Vancouver and the Park Hyatt Washington DC. In all cases, we entered into new management agreements for each hotel to maintain…

Thank you, Mark. That concludes our prepared remarks. For our Q&A session, we'll move right into the questions from participants. Laurie, may we please have the first question?

Your first question comes from the line of Joseph Greff of JPMorgan. Your line is open.

Good morning, guys. I think, I heard at the end, Mark, talk about the impact of the owned hotels will have given that you're a net seller. So when I look at -- I'll refer to it by page number -- Page 6, in one of the financial supplements, you did 522 million in total owned and leased EBITDA, including the joint venture contribution. That, as a base for 2015 before any assumptions on our end for growth and any kind of assumptions on the drag from FX is 452 million, correct? Is that the way to think about the base going into 2015?

Yes that's right.

Okay, and then the adjusted SG&A. You had mentioned that the incremental go-forwards, expense related to stock comp is a few million dollars, or $2 million to $3 million a year, going forward. When you think about the rooms’ growth, I know you tend to talk about hotel openings. Would you expect the 50 hotels, the room count therein, to be consistent with the average room count in your development pipeline?

Yes, I think if you look at the progression for this past year. We had talked about the fact that hotel growth -- the number of hotels that grew -- were -- roughly 7% growth in properties and it's roughly a 5% growth in number of rooms. And the mix if you will be coming through will likely be consistent with what we saw this past year.

Okay, and then the impact from selling the vacation ownership business hits that other line on the P&L. When we look at the fourth quarter, is that sort of a run rate base to use as a base for 2014 on a full-year basis?

We closed the deal early in the fourth quarter, so yes. I think that's correct. And just to….

And the reason why I ask these questions, that is, if you look at consensus 2015 estimates, you can drive a Mack truck through them. So I think these questions are helpful in terms of bringing consensus EBITDA into a realistic state relative to a ton of these transactions that you guys have highlighted. So, those are all my questions. Thank you very much.

(Operator Instructions) Your next question comes from the line of Steven Kent of Goldman Sachs. Your line is open.

Good afternoon. This is [Andrew Sivarajan] for Steve Kent. Two quick questions. So, one is what are the lead times for the transient bookings coming in from Europe, especially with regard to the New York properties? When would you actually be able to see the impact of the stronger dollars, and if you can share some early trends, that would be helpful. The second question is the roughly 55,000 rooms in the pipeline. What share of it would be realized in 2015? And your 5% system growth in 2014 drove about 11% increase in your base and incentive management fees. So if you could give broad contours there, that would be helpful. Thank you.

Okay. So let me just address the second question first. If you look at the openings that we just discussed in 2014, and you hear the fact that we believe we will open 50 new hotels in 2015. We would expect the room mix, so to speak, of the hotels that we're opening this year to be roughly in line with what they were this past year. So, that will give you a benchmark to compare to, from '14 to '15. With respect to the first question, the answer is that most transient bookings in the industry, including those being done from Europe, tend to be relatively short-term. So, they do tend to be concentrated in certain times of the year. And there is a significant measure of -- has been significant measure of European travel to the U.S. during the summer months, a typical vacation time. And with respect to, sort of impact to-date, it's really been limited, if you look back over the first five or six weeks of this year. New York is probably the market that people will most focus on because that is the primary destination for in-bound European travel. New York started off the year quite weak. I think if you look at the market statistics, RevPAR opened up this year down 15% to 20%, across the market, which is obviously a significant decline. But, you have got several things going on. You have got a tough comparison to last year when we had the Super Bowl in New York. And you also had some very unfortunate weather threats that really impacted business in January. So, relative to those big comparative issues, the in-bound traffic issue has not been a material year-over-year change yet.

And very quickly, anything that you can comment on U.S. to Europe-bound travel?

Nothing really significant to speak to at this point.

Your next question comes from the line of Shaun Kelley of Bank of America, Merrill Lynch. Your line is open.

I have two questions. The first one would be on the inverse side of obviously the loss in all of the owned EBITDA that you guys are now sitting on a significant amount of proceeds from all those asset sales. So, I know, you've given your four criteria before of what you're sort of looking for in terms of acquisition candidates. But, could you elaborate a little bit, just in terms of, which of those four is probably the most attractive to you right now? Because I know you've made some progress in several of those categories as well. And how you think about, just in general, redeploying that over $1 billion that should be sitting on your balance sheet?

Sure. So I guess the key gateway city point, or area of focus is, has been and will remain first among equals, because those markets tend to be significant from a brand awareness and brand presence perspective. And so we will continue to be focused on that. We have talked in the past, about markets in which we are particularly focused; they would include places like Miami and Los Angeles, in particular, in the United States; and London is probably the primary key focus outside the U.S. I would add that we've launched a new brand, Hyatt Centric, and we are going to begin the life of that brand with all three types of ownerships that we engage in; that is, owned hotels, managed hotels and franchised hotels. We have, in the past, very effectively used our balance sheet to help propel the growth and establishing and growing our brand; we've done in relation to Hyatt Place; we've done it in relation to Hyatt House; and we did it in relation to Andaz. So if you look back, and you look at the fact that we have used our balance sheet to help grow those brands, and if you look at the progress, our progress relative to other competitive brands that were launched in the same time frames as those brands, you will see where we are relative to those other brands, which is, I think, evidence that we've been able to clearly define and create a lot of momentum. And so we would plan to do the same with respect to Hyatt Centric. So, that's maybe a little bit more color on where we may be looking to apply capital as we move forward.

That's helpful. And then I guess as a follow-up to that, before I go to a different topic, was just the -- is there urgency around, given the nature of these types of proceeds, is there urgency from a tax perspective around doing some sort of 10-31 exchange since that seems to be the buzz word for publicly traded hotel companies these days?

Well, we've been active in buying and selling on both sides of the equation for years now. I think if you look back, we have got multiple billions of dollars of transactions under our belt over the last three years. So, we've been very, very active and we've been able to manage it effectively and efficiently, from a tax perspective. And that’s been the case through 2014. We do always have this in line as we think about deploying capital. And so, we're focused on identifying new opportunities. There is some measure of the proceeds that would have some tax attributes associated with them. But in the main, we've already -- we've done a good job managing it through the disposition proceeds from last year.

Meaning that you would really -- you don't necessarily have to do something right away?

No, there were a lot of what we were able to do, and the timing of what we were able to do, allowed us to already accommodate, from a 10-31 perspective, proceeds from dispositions.

Got it. Okay. That's really helpful. And just to switch gears on you a little bit. I believe back at the Analyst Day, if we were sort of back into some of the math, and I don't know -- I can't remember exactly how you gave the target. But we sort of were able to calculate, sort of a net rooms’ target on the managed and franchised side of probably a number that should have looked like, on your current system size, close to 7% to 9% over -- I think it was a like a three-year period on an average basis. You came in for this year at around 5%. So, I guess putting it simply, do you think -- can the 5% accelerate? Is it sort of continued based on your plan for the 5% to accelerate as we move through ’15, ’16 and ’17?

Yes, I think if you look at the progression, just from '14 to '15, that is 43 hotels opened last year, 50 this year. We do see the progression of the construction of the hotels that are in the pipeline. So, I think that the -- it will depend on completion rates in different places around the world. And we think about this over the life span of these construction projects. But yes, we do already see that in '15, we're looking at a higher rate.

Just as a reminder, we did say 25% over three years so and about 45% of the rooms in our executed contract base are under construction right now.

Your next question comes from the line of Thomas Allen of Morgan Stanley. Your line is open.

Can you update us on the CFO search? Thank you.

Sure. We're actively engaged in interviews, where we've got a number of high quality candidates and we're encouraged with their interest in Hyatt. The fact that we are in sort of the closing and reporting season for companies has had an impact on scheduling some interviews. And we will of course provide further updates when and as appropriate.

And I got on a little late, but just following up on the earlier questions on capital returns and capital deployment. Can you just give us your views on just the transaction market, in general, your ability to continue to do deals? I mean you've obviously been doing it -- you did a lot of deals in the fourth quarter and continue in the first quarter. But where are you in terms of being a buyer or a seller or a net buyer and a net seller? And then just -- you said in your press release that you accelerated share repurchases in 2014, accelerated pace of share repurchases in 2014 into the first quarter of 2015. Can you just talk about your view there? Are you picking up, like should we expect share repurchases in 2015 to be higher than previous years? And how -- what's your ability to do that given the ownership structure? Thank you

Our activity on the transaction front has been and remains, both on the buy side and the sell side. The level of activity has been very high for full service and select service assets, and we see that continuing. I think part of that has to do with capital formation; that is, different types of buyers, either raising capital or having capital available to them; and secondly, favorable lending environment, both availability and cost. And on the cost side, that continues to remain, I think, a propelling force in terms of deal activities. So, we would expect 2015 to be as active as 2014 was. I think it will evolve and take different shapes over the course of the year as it morphs even over the course of 2014. But I think you are going to see continued significant activity. We were a significant net seller in 2014 and our -- where we end up on being a net buyer or net seller this year ends up being very dependent upon what the opportunity set looks like and what we're able to execute against. So it's really impossible to predict as we sit here at this moment where that will come out. What I would say is we remain committed to using capital to continue to grow, and especially in particular markets and with specific asset types. The thing about our business that I think is a powerful model for us is that we got -- we have historically and are currently utilizing our asset base to generate the proceeds for investments, not using operating cash flow to do that. So as a consequence we're able to do both; that is, stay active in the market and invest; and at the same time have cash flow to be able to return to shareholders. And as we said in our Investor Meeting last year that’s what we're committed to do both overtime. And they way we've set up our activity base we're able to do both overtime. So, with respect to share repurchases, we are -- we have obviously been very active that activity base has continued into this year. And it's been a very effective tool for us because as we look at deal opportunities and investment opportunities, share repurchase allows us to remain very flexible, in terms of how we utilize available cash for investments that make up -- arise from time to time. And we have flexed our, both down and up, our pace of share repurchases depending on particular deal opportunities that came up from time to time. And that's really what I would expect to see in this year as well. So, that's hopefully a little bit more context for where we're starting the year and what our outlook is.

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

Just big picture, as you look at reinvesting your proceeds. Are you more inclined to focus on buying and owning real-estate or do you feel -- are you more interested in management contracts at this juncture? And then, also, can you give us what the appropriate tax rate is to use for 2015?

On the acquisition front, the answer is we have and would do both property acquisition as well as looking at acquisitions of either management agreements or brands, the collections at hotels.

So you don't favor either, at this point. It would just be very deal-specific?

I am sorry, say that again.

You don't favor either at this point in the cycle. It would just be deal-specific to you, owning versus managing?

That's correct.

Okay, and then on the tax rate?

On the tax rate, so mid to high 30% range is a good blended rate to use, for us, for 2015. The '14 tax rate was 34%, so a slightly higher tax rate and it's just frankly based on mix of earnings and geography of earnings. So, mid to high 30s is the right rate to use.

Your next question is from David Loeb of Baird. Your line is open

Mark, just to come back to your comments on the Hyatt Centric, a lot of the markets that you mentioned in the launch Web site, appeared to be locations where they are existing Hyatt branded, just plain Hyatt Hotels. What level of investment do you think you will need on a corporate level to make -- in order to induce those managed and franchise owners to convert to the Hyatt Centric brand?

So, it's true that a number, as we said, a number of the hotels that we expect to be Hyatt Centric hotels will be conversions from existing properties that we already have branded and the number of those will be from the Hyatt sub-brand. The level of investment is going to be different per hotel. Well, a lot of it has to do with signage and some capital requirements within the hotels. We will definitely be supporting signage and we will certainly be putting money behind the launch of the brand this year. But the capital that's required for other repositioning cost within the hotel, where there is F&B spaces, a lot of it will be public space, evolution will be -- we will look to organize that with third-party owners and have them make those investments. And that's really would be process that we're going through right now. But it's going to vary a lot by hotel. So, most of the capital that we will end up putting behind the launch will end up looking, like signage and some other promotional costs, along the way.

So it sounds like pretty minimal from Hyatt corporate perspective. But is that enough to induce owners to actually make this change as opposed to staying in the Hyatt sub brand?

Yes, we’ve got great traction in the number of discussions that we have underway currently. And I would also say that we have a number of hotels in the executed contract base globally that we’re seeing as great opportunities to actually make Hyatt Centric's. So our premise for this was that we would see opportunities to convert existing hotels and clarify our presence in that boutique space that we would -- that this would absolutely be a global brand, when we looked at the market opportunity. So when we were at the Investor Meeting last year, we talk a little bit the new brands that we have launched and what we saw as the potential over time. And by way of reminder, our outlook for Andaz was over 75 properties in different places around the world. And we believe that Hyatt Centric has got broader appeal than that. So we have big plans for this and it's on a global basis. I am excited about the key cities that we will start-off in. And the fact that we are opening, really our first few representations of the brand, are going to be newly opened hotels in the second quarter. And as I said, we're continuing to focus on new deals that are under discussion at this point, again globally.

Your next question comes from the line of Rich Hightower of Evercore ISI. Your line is open.

Two questions, so the first one is on the owned and lease margins. And I think the total owned and lease margin decline was 50 basis points. And I know you gave some details on some asset-specific and market-specific issues that maybe impacted that number. But was there anything related to the mix of assets sold, especially on the select service side during the year, during the quarter that impacted those figures?

The figures that we're citing are comparable. And so, the answer to that question is really no. We did have this significant impact from Seoul -- I know we've been talking about Seoul for a few quarters now. But Seoul alone was probably something in the range of a $3 million impact in the fourth quarter. And so, that one hotel really had outsized impact on our margins and our overall results for owned portfolio. The outlook for that property is now positive. I guess, we feel like we’ve turned the corner we’ve gotten to a point where the relative declines will slow and eventually stop this year. But we're mindful that this continues to come up and we're highly focused on it. So, we've got a positive outlook for the year where we think that RevPAR will be positive and earnings will be positive, even if it's going to take us some time to really make that material turnaround.

And my second question, you mentioned in the prepared remarks that Hyatt is not going to move forward with, I think, four additional asset sales. Can you just go into kind of generally what maybe torpedoed those deals and reiterate your sale criteria?

Sure. So, we did -- I mentioned that we're not going to proceed at this time with those four deals, definitely move them eventually. But at the moment, that's the case. The criteria that we've talked about in the past, I’ll just remind everyone; our price, obviously, the form of the contract that we establish a management agreement or a franchisee agreement; capital commitments into the hotels; and the other things that we can do with owners -- the potential buyers of the properties. Those are the four key criteria. So, every hotel has got its own story associated with it but those are the four key criteria that we look at.

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

Hi. Thanks for taking my questions. With respect to the pipeline progression, mainly beyond the 50 hotels that you mentioned in 2015, I'm assuming a good part of the tail of this are the franchised properties in India and China. And I was wondering if you could comment on the general construction trends there? I know, Atish, you said 45% of total rooms are executed at this point, but if you could talk specifically about those two markets. And then, secondly, with respect to that if you could touch on general occupancy demand levels within these areas as well given lower GDP estimates? Thanks.

I will just give you the stat for India and China, it's about a third that are under construction. And Mark, maybe you can talk a little bit about the dynamics in those markets.

Sure. Two very different tails here, India has been under a lot of pressure over the last 2.5 years. Results quarter-over-quarter have been under pressure more severely in the '13 and '14 timeframe. What we saw, starting to slowdown, was that negative progression, part of it’s also had to do with the fact the Rupee went through a significant devaluation in that period of time from somewhere between 45 to 50 Rupees to the dollar to 65 Rupees to the dollar now trending closer to the low 60s. That had impact on in-bound and out-bound travel; it also had an impact on economic activity in the country. And so, the dynamics are such that with the new government coming into place in India and the impact of the reduction in oil prices, which has actually led to a current account -- I think it is actually a current account surplus now in India, which is a bit shocking and wonderful, welcome news. We're starting to see stabilization and that's really critical. During this period of time, the lending environment did not get materially better; rates remain very high, so most developers are looking at borrowing interest rates in the teens; and advance rates are still relatively modest at strength like 50% of construction cost. So, it has absolutely had an impact on new supply growth in India, so lot of projects slowed down or stopped. The development activity base also was negatively impacted. So, I would say that India -- we've already suffered through a bad period of time and it feels like its stabilizing. And the indicators at this point are all sort of pointing in a positive direction. There is still some evidence of progress that needs to be seen in the economy with the new government. But I think the indicators are positive. In China, we have not seen as significant as a decline in either deal activity or construction activity. No matter that we went through a very difficult period in 2013, which was really the result of the austerity program that Xi Jinping's government put into place. So, what happened what was a lot of the corporate business and banquet and social business that we accommodate at our hotels for state-owned enterprises for other businesses, significantly declined during the course of 2013; and 2014 was really lapping a pretty challenging time. So, it feels to me and to -- if you look across the industry other than certain pockets, things are stabilized and growing. We had positive results in most of the regions around China and for China as a whole. And development continues to be high. So, hopefully, that give you more color, I think. So therefore, the pace of openings in India is slower than we expected, the pace of openings in China is roughly as expected. And in terms of the future, I guess we will see how things play out in India.

Okay. That's great color. And then on New York City, given your reliance there and you mentioned several anecdotes and results in your prepared remarks. Could you kind of talk about if you think this is a negative perfect storm that could hurt the market for multi-years given how strong the green back is and the additional supply, or if this is something that the supply could be satiated as long as international travel is at historic levels? Thanks.

Yes, so we do not view this as a perfect storm in negative sense. There is no question that starting the year down close to 20%, as a market in RevPAR, is not an auspicious beginning. But the weather was a killer, and the Super Bowl comparison is very difficult. The outlook for RevPAR for the year remains positive. It may be low, sort of in the low single-digit range, let's say, but it's positive. And so, New York is an unusual market it has the ability to absorb new supply pretty much unlike any other market, maybe in the world but certainly in U.S. And I do think that we will need to pay a close attention the U.S dollar rate. But so far, we really don't have significant evidence that it's having a now impact, it's something that we’ll definitely keep a close eye on over the course of the year. We opened -- it's not the same also by segment within our industry, so we opened Park Hyatt New York in August of last year. We ran over a $1,000 rate for the period during which we were open last year. And so, we've been able to position the hotel with the right customer base and establish an appropriate position from a rate perspective within the market. Now what we're doing is building occupancy over time. And we also turning to right now to really focus on banqueting and social business, which is an important component piece of the overall hotel. So, we're ramping up well. Although even though conditions in New York have been tough, we're confident that given the customer base that we're serving in how we're positioning the hotels, so that will be good story overtime. So, it's not going to be the same story for every segment within the city.

Laurie, we’ll take our last question.

Your last question is from Vince Ciepiel of Cleveland Research. Your line is open.

I wanted to dig a little bit more into the $70 million year-over-year headwind. Does that account -- number one, does that account for the Park Hyatt and Lost Pine, which should be a tailwind getting into next year? And then, number two, what type of margin headwind or tailwind is associated with the disposition of that 70 million? And then, finally, as you walk through those dispositions, could you help us understand any ensuing impact on the management and franchise fee stream?

Sure. So first of all the number is a net figure that nets out dispositions and acquisitions. So, everything that’s embedded in our activity base in '14 is within that number. With respect to margin progression, all of the data that we've been discussing is related to comparable margins. If you look at the operating margins for select-service properties, they to tend to run 5 points to 10 points higher than full service-hotels depending on the market. So, if you looked at -- if you were looking at the total blended rate of -- margin rate for the owned portfolio, historically, we will see a decline based on the disposition of the select-service hotels. The exact amount will really depend on what happens with the owned portfolio overtime. Not all -- some of the newer acquisitions that we've made are actually in the full-services space, are actually at a relatively higher GOP margin level. So, I think on a blended basis, for sure, it will end up being lower as a static matter. But what we really are going to focus on is comparable progression. That's the really the key topic for us. In terms of management and franchise fee progression, you've seen already an impact if you look at the fee progression this past year, our franchise fees are up 35% year-over-year. That has to do with really three things. One is we've converted some hotels that we owned and operated ourselves into franchises, so that's one dimension of it. Second dimension is just increases in revenues from existing franchised hotels. And the third is opening some new franchised hotels owned by third parties, so all three of those things contribute to that growth rate. And that's a progression that you will likely see into this coming year. Progression meaning that you’ll see the conversion of the select service hotels that we sold in the fourth quarter to franchise properties that had a positive impact on the mix of franchise and management fees over the course of the year. So most of what we focus on is the progression is based on revenue increases at existing hotels and new openings. And the conversion so to speak between managed and franchised is some is more of a transition as opposed to a net increase or decrease at a given point in time. So again, our focus is going to continue to be on opening new hotels out of the contract base and driving revenue and earnings for the existing hotels. So, those are the two primary drivers of our earnings base as a Company.

The only thing I would add to that is the 70 million by quarter. It's about 25 million in the first quarter, 25 million in the second quarter and 20 million in the third quarter. And the fourth quarter we're lapping, so that's how the 70 breaks out by quarter.

And then on group real quickly here, impressive number on the pace, I know that ’14 was a bit lumpy. How do you see group panning out from a quarterly perspective? Is there that lumpiness embedded in ’15 as well as you comp on that?

Well I am not quite sure, I don’t know what you mean by lumpiness, I think the fact is that the group business is not equal -- it's not a steady pace over the course of the year. The third quarter tends to be relatively weaker because of the summer months that are not key months for corporate groups, which is a big chunk of our group business. So, there is a natural cadence to it. But if you meant some other kind of lumpiness, I am not sure I know what you mean.

Thanks guys.

So, thank you very much for joining this morning. I would like to thank everyone. And we look forward to speaking with you in the near future.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.