Good day, ladies and gentlemen, and welcome to the second quarter 2017 Hyatt Hotels Corporation earnings conference call. My name is Mariana, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Amanda Bryant, Investor Relations' Director. Please proceed.

Thank you, Mariana. Good morning, everyone, and thank you for joining us for Hyatt's second quarter 2017 earnings conference call. I'm here in Chicago with Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Pat Grismer, Hyatt's Chief Financial Officer. Mark will begin our call today with a review of our second quarter, including highlights of our operating results and an update on our growth strategy and other business matters. Mark will then turn the call over to Pat, who'll provide more detail on our financial results for the quarter, as well as an update on our full year outlook. We will then take your questions. Now before I get started, I would like to remind everyone that certain statements made on this call are not historical facts, and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued earlier of this morning, along with the comments on this call are made only as of today, August 3, 2017, 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 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'll turn the call over to Mark.

Thank you, Amanda. Good morning everyone and welcome to Hyatt's second quarter 2017 earnings call. We are pleased to report that in the second quarter we sustained positive momentum from our first quarter, led by healthy holiday adjusted RevPAR growth and a record pace of new hotel openings. Adjusted EBITDA for the quarter was $229 million. As a result of lost adjusted EBITDA from transactions and a shift in the Easter holiday that particularly impacted our owned and leased hotels, Q2 adjusted EBITDA was up about 1% from last year on both a reported and constant currency basis. This was ahead of our internal expectations and has given us confidence to raise our full year outlook for both RevPAR and adjusted EBITDA, as Pat will outline later. Our system-wide comparable constant dollar RevPAR increased 2.9%, led by increases in occupancy. Looking at year-to-date, which eliminates the impact of the Easter holiday timing, our global RevPAR grew 3.8%, including a healthy 3% in the U.S. Based on Smith Travel Research reports, more than half of our hotels globally gained share during the quarter, as measured by RevPAR index. These share gains, combined with our RevPAR growth, reflect the strong preference our brands have among consumers. It's clear that travelers value our premium brands and distinctive service. And judging from our pace of new hotel development, which is largely supported by third-party capital, we believe that owners are demonstrating their preference for Hyatt, because they understand the value that can be created with Hyatt branded hotels, given our unique positioning in the premium segment. Excuse me. During the second quarter, we opened 22 new hotels and 3,366 rooms, a quarterly record for us, which represents 10% net hotel growth and 7% net rooms growth year-over-year. Included in these openings are three debuts,…

Thank you, Mark, and good morning, everyone. I will begin by providing more detail on our second quarter results and will then share an update on how we're thinking about the balance of 2017. Earlier today, we reported second quarter net income of $87 million and earnings per share of $0.68 on a diluted basis. Adjusted EBITDA for the quarter was $229 million on comparable system-wide RevPAR growth of 2.9% in constant dollars. Because the timing of the Easter holiday was favorable to Q1 and unfavorable to Q2, it's helpful to look at year-to-date results. Year-to-date through the second quarter, we delivered comparable system-wide RevPAR growth of 3.8%, contributing to 9% adjusted EBITDA growth, both in constant dollars. Overall, we are very pleased with these results. I will now highlight our segment results, starting with our owned and leased business, which as Mark noted, accounted for approximately 53% of our adjusted EBITDA before corporate and other expenses in Q2. Owned and leased segment adjusted EBITDA was down approximately 8% to prior year in constant currency. Excluding the impact of the change in our ownership of Playa Resorts, owned and leased segment adjusted EBITDA was down approximately 4% in constant currency. This was led by a decline in comparable RevPAR of 1.2% at owned and leased hotels. Compared to our system-wide average, Easter timing had a more pronounced effect on our owned and leased hotels because we have a higher exposure to group business in our owned portfolio. Excluding the Easter timing impact, our owned and leased hotels grew RevPAR by 0.5% in the second quarter. This was generally in line with our expectations as we entered the quarter given a challenging lap at Park Hyatt Zurich, as well as general market softness in San Francisco, where we own the Grand…

Your first question comes from the line of Michael Bellisario with Baird. Your line is open. Mike J. Bellisario - Robert W. Baird & Co., Inc. (Broker): Good morning, everyone.

Good morning. Mike J. Bellisario - Robert W. Baird & Co., Inc. (Broker): I had a question for you on the World of Hyatt program, maybe what benefits have you seen so far and have you seen any uptick in Hyatt loyalty member stays in terms of percentage contribution, whether demand or room nights?

Great. Thanks, Michael. Overall, we're really pleased with how World of Hyatt is evolving and how customers are responding to it. Enrollments year-to-date are up significantly over the last year and program awareness has been trending more positively than we expected since the launch of the program. So we've seen very positive member responses, both in terms of acquisition of new members, but also retention of members and their spend. And we have also concurrently had an increase in our My Hyatt rate or member discount rate over the course of this year and we've progressively been growing that segment of the business. Over 70% of the bookings through the member discount is either new or previously inactive World of Hyatt members. And since the launch of the program, about half of those new and previously inactive members have booked more than once, so we're seeing repeat business come from them. And a majority of our hotels are continuing to – that are using member discount – are continuing to have improved RevPAR index, so we believe that it's been constructive both in terms of engaging new customers, reengaging previously inactive customers within the World of Hyatt, but also yielding positive results for the hotels that have deployed. So I would say overall, we're really happy with how things are progressing. The areas that I would say – we established the World of Hyatt as really a platform for engagement, understanding and experiences, and in the understanding category I would say that we have elevated the amount of engagement that we've undertaken to ensure that we're hearing what's going on amongst our guests, and I would say, across the tiers, it's been very positive, and it's also the case that we can do better in fulfillment of benefits at each tier across the hotel portfolio. So it's an area of focus for us going forward, I think that it's something that we can continue to actually focus on and build on, and we're very excited about that. Mike J. Bellisario - Robert W. Baird & Co., Inc. (Broker): Great. That's super helpful. And then just one other quick one. Do you guys plan to integrate the Oasis Collections investments you just made with World of Hyatt, or is that going to stay separate?

I would say stay tuned to that. We are evaluating the best way for us to actually create visibility to and engagement with our World of Hyatt guests for those kinds of offerings. But we do intend over time to create a channel through which they can, the World of Hyatt members can have alternative offerings in the style and manner of what Oasis does in their existing portfolio. Mike J. Bellisario - Robert W. Baird & Co., Inc. (Broker): Got it. Thank you.

Sure.

Your next question comes from the line of Bill Crow with Raymond James. Your line is open. Bill A. Crow - Raymond James & Associates, Inc.: Hey. Good morning. Mark, before I get to my question, could I just get a clarification or maybe a reminder, because I'm sure we've talked about it before, but why the performance guarantee's excluded from adjusted EBITDA and how that will trend over the next couple years?

Well, I think, the answer to the first part of that question relates to accounting policy, with respect to the nature of the guarantee. And as to the second, we're evaluating how this is evolving. Don't forget that this is a particularly significant year of renovations and that's really what is driving the bulk of the guarantee payments this year. We have had very significant rooms out of service at our largest hotel in that portfolio, which is the Hyatt Regency at 12, and now also the Hôtel du Louvre, which is part of the Unbound Collection, as well as the Grand Hyatt, the Martinez in Cannes. So, we have three hotels that are going through various stages of renovations, but the peak of that really is this year.

And, Bill, just to add to that, the guarantee does expire in 2020. To Mark's point, we expect this year to be the peak year of guarantee expense. We do expect a meaningful reduction in 2018 as the renovations are completed. Bill A. Crow - Raymond James & Associates, Inc.: Great. Let me turn to my question here. It sounds by your comments, Mark, that you're more definitely going down a more asset light path and certainly the asset sales would seem to indicate that as well. I think you said you're 53% owned and leased in the U.S. Can you kind of talk about how quickly that might evolve down to 20%, 25%? How aggressive should we think about you being on asset sales as we think about 2018?

Well, I think the best way to think about it is, as I described it, I think this is a general direction that's going to continue to unfold in the direction that we've already undertaken here, because the growth rate of our fee business just continues to expand and compound, which I think is really the key driver of this. And I would say that our discipline around ensuring that we are not expanding our owned portfolio or owned estate is at an extremely high level. And so we will be making sure that as we go through and identify things that we feel are important for us as a means of growing a particular brand or growing in a particular location that, that is self-funded as an absolute matter. So, I think, what you can – what we can say is that we will not be growing on the owned side, and that our pace of growth on the management and franchise side will continue to be very healthy, not just because we continue to do well in our core operating performance, you can see how our RevPAR performance has been compared to the rest of the industry over the last several quarters, but also because we are growing and adding new units at a significant pace.

The other thing, Bill, I would add is that, this year's decline in that percentage is more significant than we might see in a given year because of the net seller position this year including the impact of the change in our ownership of Playa. But to Mark's point, over the long run, given our commitment to disciplined and holistic asset recycling, we expect the primary driver of the reduction in that percentage to be the outsized growth of our managed and franchised business. Bill A. Crow - Raymond James & Associates, Inc.: Okay. Thanks for your time, guys.

Thank you.

Thank you.

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

Hi. Good morning, guys. Mark, not to kind of belabor the point that you just – that you just made, and I think, you repeated again, but I do think it's really important here, because if we were to go back I think over the last call it five years to seven years as a public company, for a lot of that time, it feels like Hyatt emphasized the importance of real estate in sort of kind of getting a message across to owners that you're committed to kind of working on the business together. So I'm – to the extent you now mentioned in the prepared remarks and in the last question, I mean, is this – this sounds like a really permanent change in – although a little bit of a change in the view towards sort of how you plan on allocating capital going forward. Are we reading too much into that, or is that really what is actually going on here?

Well, I guess I would say, to be directly responsive to your question, I think you're reading a little too much into it. Let me say that first, it's not a change in strategy, which is really the reason I said, what I just said. It's really an elevation of discipline, that's the first point I would make. Secondly, I would just point out one thing, and I think this is a key issue, key point. So Pat mentioned in his prepared remarks that we've now been expanding share for Hyatt Place and Hyatt House for 20 consecutive quarters – sorry, months, I meant to say, sorry. And the growth of those brands has been really significant. I would just like to say that that's not happenstance, it's not by coincidence and by luck that that have actually occurred. We actually were aggressive through use of capital to significantly expand those brands, and we did that in a very deliberate way to get the critical mass and to start to penetrate urban market. So, if you go back and take a look at where we've invested capital behind, what brands we've invested behind. We've invested – our activity base has been very high in Hyatt Place, Hyatt House urban projects. We've recently undertaken a couple of Hyatt-centric projects to get that brand primed and get some key markets served and we put money into both resorts and into convention hotels, but let me stick with Hyatt Place and Hyatt House for a second. My point is that the use of capital in getting into new markets and expanding the brand does actually matter. It matters to the long-term performance of those brands, it matters to the momentum behind those brands, it matters to developer and owner confidence in how we…

I appreciate the detailed and lengthy response. And then, I guess the second piece of it is, so, you hit on a few of the key buckets, all right, resorts, the select service side. Where do you think that leave you with as it relates to let's just kind of call it the big full service type things as contented – those types of assets can soak up. They can take up a lot of capital. Are you comfortable with where the portfolio is right now? You got into some of the big group markets, like you mentioned, Orlando of course, or is that – so is that part of this as well in terms of you kind of have what you need to, to kind of get in the markets that you want to be, or do you still think you might need the capital on the balance sheet side for what you want to do in full service?

So, we're continuing to look at some key destinations or key gateway cities. We continue to look at opportunities on the group side, on the convention hotel side in particular and on resorts. However, in every single one of these cases, we are a 100% dedicated to self-funding all of it. So, we are not looking to expand the portfolio by virtue of those investments. If we find something that we find is meaningful and will have a big impact on our customer proposition and the portfolio, we will be aggressive about pursuing it, but we will self-fund.

And Shaun, just to add to that, that includes how we're thinking about investments in new lines of business or new platforms as was the case with Miraval. To a large extent, it was in fact the change of our ownership in Playa that funded that investment. And so, as we think about making other investments going forward to extend the reach of the Hyatt brand, we look our owned and leased portfolio as a source of funds. It's currency in effect to underwrite the growth of our business.

Got it. So, when you see self-funding, you really mean no change in net. You will sell something in order to put the proceeds back into something else, but no change in sort of your net let's call it asset intensity position from here? Is that right?

That is exactly right. And again, to clarify, our net seller position in 2017 is designed to offset what was a net buyer or net investment position in 2015 and 2016.

Great. Thank you very much.

Your next question comes from Joe Greff with JPMorgan. Your line is open.

Good morning, guys.

Good morning, Joe.

Just with respect to the performance guarantees, the $80 million, how much of that was extended thus far this year, is it just pro rata?

In the second quarter, it was $15 million. I don't recall off hand, year-to-date. I can get back to you on that.

Okay, great. And just with respect – thank you. And with respect to the EBITDA guidance delta now versus three months ago, I know you don't break it up by segment, but relative to how you were speaking about things internally, I'm presuming that was more in the management and franchise segment versus owned, leased and joint venture? And then, just with respect to the increase in the annual guidance, that's more related to I'm presuming 1Q and 2Q upside correct?

Yeah. Actually, let me get back to you first on the Constellation question. So in the first quarter, our guarantee expense was $26 million, and in the second quarter, it was $15 million, and we're expecting approximately $80 million for the year. So, with respect to the update to our outlook for the year from an adjusted EBITDA perspective, there're really three primary contributors. The first and I would say the most important is improved operating performance. So, based on the strength of our Q1 and Q2 results relative to our original expectations, we adjusted up. We also saw some relief on the Forex front. So less Forex pressure than we were expecting at the beginning of the year. And then the final piece is directly related to the two asset sales, which closed in the second quarter, the Grand Cypress and Louisville, combined having a $10 million adverse impact to full year adjusted EBITDA. So, those are the three drivers.

Okay. Thank you.

Your next question comes from Thomas Allen with Morgan Stanley. Your line is open. Thomas G. Allen - Morgan Stanley & Co. LLC: Just following-up on those questions around the guidance, if you looked at the new full year RevPAR guidance range of 1% to 3%, in the first half you did 3.8% RevPAR growth, the low end of that would imply a significant deceleration or even a decline in RevPAR in the second half. So should we be all kind of leaning to the high end of the range, and kind of – how should – what considerations should we be thinking about? Thank you.

Not necessarily, and we guide or we provide guidance that we have a high degree of confidence we can achieve and we're at the midpoint of the year so still six months to go and we've signaled that Q3 we expect will be our weakest quarter of the year. So, I think, once we close out Q3 and we report results we'll have much better visibility to full year results. We'll probably be in a position to tighten that range, but I would not indicate at this stage as to whether we're going to be at the middle or high end. We are confident that we're going to deliver in the range of 1% to 3% for the year. We're very pleased with our results year-to-date and we're optimistic for the balance of the year. Thomas G. Allen - Morgan Stanley & Co. LLC: Okay.

I would just add briefly – sorry, Thomas, that on the Q3 and Q4 profile one of the issues in Q3 to remember, rather is that two things. One is, I'm specifically talking about group business now. So group pace for Q3 was challenged from the beginning of this year, so it's not a surprise to us, part of that is that we're lapping a very strong Q3 group performance last year and a shift in the Jewish holidays. So I think the combination of those two things is influencing how we're thinking about Q3 and Q4 in that profile. Thomas G. Allen - Morgan Stanley & Co. LLC: That's helpful. Thank you. And just two follow-up questions. One, could RevPAR be negative in the third quarter, or is that a reasonable expectation? And then two, I think a follow-up on the EBITDA guidance question, did you raise your expectations for second half EBITDA after the strong first half results or was the rate purely a reflection of the kind of beats in the first half? Thank you.

Yeah. First, with respect to Q3, I would say that it is unlikely that our system-wide RevPAR, comparable RevPAR, will be negative. However, we are expecting owned and leased to be weaker than system-wide, but not necessarily negative. And then as to the adjusted EBITDA, I would say that our guidance raise was largely informed by year-to-date performance versus necessarily raising back half expectations. Thomas G. Allen - Morgan Stanley & Co. LLC: All very helpful color. Thank you.

Thank you.

Thanks.

Your next question comes from Carlo Santarelli with Deutsche Bank. Your line is open.

Hey, guys, thank you. Pat or Mark, I want to just clarify one of the comments that you made about kind of the cadence of EBITDA in the 3Q and the 4Q. I believe you said that the 3Q would be the weakest of the year from a RevPAR and EBITDA perspective. Were you making that reference as it pertains to EBITDA from a growth perspective in terms of weakest of the year or from an absolute dollar perspective?

Absolute.

Okay. Great. That's helpful. And then going back, Mark, to some of your prepared remarks, you talked about the Oasis Collection, and then you mentioned afterwards that you were evaluating some other complementary investments. Just in terms of scope and size of those potential future investments, is there anything you could say that might be able to help us think about them a little bit?

I think it's difficult to characterize, because as things evolve over time we'll evaluate what we believe the impact to be on really expanding the relationship that we have with our guests. And so it might be that we identify relatively larger investments over time. But at this point we've made a beginning, taken a step down the path of creating a very clear position in the wellness and mindfulness space. And we're really happy with how that's going so far. It's likely that we will continue to invest behind that, not just in the Miraval brand itself, but probably in other respects as well. And we are right now in a design phase with respect to programming that we can pull into Hyatt's branded hotels, but unique content that's allowed through our ownership of Miraval. So some of what we're doing is actually building off of resources that we've already obtained, so not all of it's going to be through acquisition. So, by way of reminder, we said we're going to build some, we're going to buy some, and we're going to partner in some cases. So, I would say it's possible that we will make more sizable investments over time, but I think in the nearer term it's more about building out some additional capabilities in a couple of core areas.

Great. That's helpful. Thank you.

Your next question comes from Stephen Grambling with Goldman Sachs. Your line is open. Stephen Grambling - Goldman Sachs & Co. LLC: Hey, thanks for taking the questions. Following up on the asset intensity and national shift to more fee-based business, does this shift make you re-evaluate what the right leverage ratio is for the business and what level of cash should be deployed back to shareholders?

Not at this stage, Stephen. I would say, because we see this as more of an evolution versus a sharp change in direction, if you will, we're comfortable with where we're at from a leverage perspective. Obviously what's important to us is having the flexibility to invest across the cycle, so maintaining an investment-grade credit rating is important in that regard. So we don't see that changing in the near future. Stephen Grambling - Goldman Sachs & Co. LLC: I guess more theoretically or fundamentally, do you believe that the fee-based business offers greater visibility, less volatility and potentially greater leverage?

Yes. I think that – conceptually, that is correct. But I wouldn't say that we're there just yet. Stephen Grambling - Goldman Sachs & Co. LLC: Understood.

But we – as Mark said in his prepared remarks, over time, we do expect the profile of our earnings to become more compelling, and that means better predictability, less volatility. And you're right, that would tend to support higher levels of leverage.

It's also more compelling, because it's the result of continued growth in our platform in the portfolio and continued good operating performance. So it's compelling because of what's actually going on in the business itself. Stephen Grambling - Goldman Sachs & Co. LLC: Fair enough. And then as a follow-up, maybe how should we be thinking about a normalized CapEx run rate longer term? I know there's a lot of one-time things to be considering in any given year. But what would you view as kind of an appropriate normalized rate?

It's really tough to say at this stage, Stephen for the reasons you mentioned. Our CapEx profile is impacted to some extent by the timing of certain corporate development projects. And depending on the timing of our efforts to bring in investment partners, and how that may change the profile of CapEx over the next few years. So really difficult at this stage to provide an outlook. But we certainly will provide an outlook for 2018 in the early part of the year. Stephen Grambling - Goldman Sachs & Co. LLC: Fair enough. I'll jump back in the queue. Thanks so much.

Thank you.

Your next question comes from Patrick Scholes with SunTrust. Your line is open.

Good afternoon. I'm curious on where you stand with enacting some of the cancellation restrictions that two of your peers have recently enacted. It seems that there might be a bit of a prisoner's dilemma for company like yourselves. Where does Hyatt fit into all of that?

Thanks, Patrick. Appreciate the question. First and foremost, I just want to make it clear that, we as a company have an operating philosophy, where decision-making is delegated in large measure to our hotel teams. And but we do that, because, we think it allows us to be more nimble, more responsive real-time and appropriately localized to the local market requirements and so forth. So in that vein, just wanted to say that, ultimately our hotels at the hotel level that our teams manage cancellation policies, of course with input from corporate and with input from our revenue management teams at the corporate office, but they have a final call. Now what I would say is, in that same vein, about 40% of our total full service hotels in the Americas have already moved their cancellation policies to be at 48 hours or more. There is a significant portion of those hotels, over 60 of them, that have cancellation policies in excess of 48 hours. So I guess what I would tell you is that, I know, there has been a lot written about these company-wide corporate policy decisions that have been undertaken. What I will tell you is that, I'm pleased that this is another area – yet another area where I think our – the strength of our local teams and the philosophy with which we operate, the company allows us to be in the market and participating in what makes sense real-time. With respect to whether we look to – look to establishing a change in corporate policy, it's something that we will evaluate over time, but please note that we've been already active in the marketplace.

Okay. Thank you.

Mariana, we'll take our last question.

Thank you. Your final question comes from Smedes Rose with Citi. Your line is open.

Hi. Thanks. I wanted to follow-up just on your earlier remarks about moving to more fee driven business. And then curious, do you feel like over time you'll need to develop or acquire more brands that are maybe sort of on a larger scale than what you might achieve as kind of a Miraval or Oasis, or do you feel like you are really touching the customer segments that you want to serve fully right now?

Yeah. Thanks, Smedes. I guess what I would say is, the way you asked the question, you said, do I feel like we will need to. I think the answer is no. I think the – our – I guess, we're demonstrating that our model is working, our focus on the high-end customer is working and how we go to market is working. So, my feeling is that, I don't see it as a necessity, however we have in the past been active in looking at brands. We've acquired some brands historically, and we would be very open to that. I think, it would be – it could be, depending on what it is and where it is and it could be an attractive alternative for us. And to the point that you made, it would also tend to accelerate the path that we're on, which is towards a more fee-based business. So, that's another motivator for us to stay tuned to what's going on, on the M&A front and make sure that we're aware of possibilities that could fit for us. The lens through which we will look at that is our focus on the higher end traveler and our current brand portfolio, but – so, hopefully that will give you some color.

It does. Thank you.

Thank you very much. And we look forward to hearing from you and take your questions. Any follow-ups, give us a call, and we will speak with you again next quarter. Thank you.

This concludes today's conference call. You may now disconnect.