Hyatt Hotels Corporation (NYSE:H) Q1 2024 Earnings Call Transcript

Hyatt Hotels Corporation (NYSE:H) Q1 2024 Earnings Call Transcript May 9, 2024

Hyatt Hotels Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to Hyatt’s First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President of Investor Relations and FP&A. Thank you. Please go ahead.

Adam Rohman: Thank you, and welcome to Hyatt’s first quarter 2024 earnings conference call. Joining me today are Mark Hoplamazian, Hyatt’s President and Chief Executive Officer, and Joan Bottarini, Hyatt’s Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, quarterly reports on Form 10-Q, and other SEC filings. These risks 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 today along with the comments on this call are made only as of today and will not be updated as actual events unfold.

In addition, you can find a reconciliation of non-GAAP financial measures referred to in today’s remarks on our website at hyatt.com under the Financial Reporting 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. Please note that unless otherwise stated, references to our occupancy, average daily rate, and RevPAR reflect comparable system-wide hotels on a constant-currency basis. Additionally, percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will now turn the call over to Mark.

Mark Hoplamazian: Thank you, Adam. Good morning, everyone, and thank you for joining us today. We are pleased to report that the year is off to a great start, demonstrating high-quality growth across multiple dimensions and expanding fees from all areas of our asset-light business. Let’s start with the latest trends that we’re seeing. System-wide RevPAR increased 5.5% in the first quarter and travel across all customer segments remains very healthy. As anticipated, the timing of Easter compared to 2023 positively impacted leisure travel in March and negatively impacted group and business travel. Leisure transient revenue increased 7% in the first quarter due to strong demand over spring break and the week leading into Easter.

As expected, leisure transient revenue was negatively impacted in April due to the timing of Easter. While we expect year-over-year growth rates to moderate, we are significantly above pre-pandemic levels and are not seeing signs of consumers reducing their leisure travel. For example, pace for our all-inclusive resorts in the Americas is up approximately 4% for the second quarter, led by the Cancun market. Meanwhile, group room revenue increased approximately 6% in the quarter with strong performance in January and February. We anticipate solid contribution to RevPAR from group in the second and third quarters of 2024, and the second quarter is off to a good start with April up 14% compared to last year. We expect another solid year of demand for group meetings and events with group pace for us full service managed properties currently up 7% for May through December of 2024.

Finally, business transient revenue increased approximately 6% in the quarter with strength in both January and February, and we saw similar trends in the U.S., a clear sign that business travel continues to recover. April was up 21% globally compared to 2023 and we remain optimistic about business transient’s positive contribution to RevPAR growth over the last three quarters of 2024. Turning to our loyalty program, World of Hyatt membership grew 22% over the past year, reaching a new high of approximately 46 million members at quarter-end. Loyalty room night penetration increased in the quarter, highlighting the strong engagement of our expanding membership base, which is highly valuable because our members stay longer, they spend more, and they book through Hyatt channels.

I’m also thrilled to share that more than 700 Mr & Mrs Smith boutique and luxury hotels and villas around the world are now available through Hyatt channels, including World of Hyatt. We now have more than twice the number of properties previously available through our alliance with small luxury hotels with offerings in 25 additional countries and hundreds of new markets. We expect to have approximately 1,000 Mr & Mrs Smith properties available through Hyatt channels and World of Hyatt by the end of this year. We are also establishing relationships with Mr & Mrs Smith hotel owners, and we expect this will lead to potential opportunities to expand our direct engagement with those owners. Last week, we announced the collaboration with Peloton to reward our members for prioritizing their well-being.

This collaboration joins Hyatt’s expansive roster of global well-being programming, further differentiating World of Hyatt from other hospitality loyalty programs. Finally, World of Hyatt received several accolades during the quarter, including being named the Best Loyalty Program for Hotels and Hospitality rewards by Newsweek and Best Hotel Rewards Program and Best Credit Card Benefits by NerdWallet. Additionally, 55 Hyatt properties were recognized by Forbes Travel Guide 2024, and 355 Hyatt properties were recognized by U.S. News & World Report’s hotel rankings. These continued recognitions, in addition to the loyalty program’s growth, is driving higher room light penetration and greater owner preference for our brands. Turning to development, we are realizing the benefit of greater owner preference through the continued expansion of our pipeline.

Our pipeline reached a new record of approximately 129,000 rooms, a 10% increase year-over-year, and represents approximately 40% of our existing room base. We signed contracts across our brand portfolio, including luxury and lifestyle brands such as Park Hyatt, Andaz, and Thompson Hotels, and have further strengthened our upper mid-scale pipeline, including our UrCove and Hyatt Studios brands. There are now 40 UrCove hotels open in China with approximately 75 in the pipeline. And in the year since we announced Hyatt Studios, we have around 250 hotels in various stages of negotiation. Today marks another milestone for Hyatt Studios as we celebrate the groundbreaking of a second property, Hyatt Studios Huntsville, which is expected to open in late 2025.

Our record pipeline is translating into an expanded global footprint, and in the quarter, net rooms growth increased 5.5%. Notable openings include Thompson Houston, Secrets Tides Punta Cana, Secrets Playa Blanca, Costa Mujeres, multiple UrCove properties in China and Hyatt Regency Nairobi Westlands, our first hotel in Kenya. We remain focused on enhancing our network effect by expanding our offerings in new markets and across more price points for our guests and customers. The first quarter demonstrates this with new lifestyle resorts and upper mid-scale hotels added to our portfolio. Turning to transactions, we have several updates to share on asset sales, but first I want to cover an important transaction that was completed in the quarter with an existing joint venture partner in India.

The relationship with our partner dates back 40 years when they developed the first Hyatt Hotel in India, and 20 years ago, we formed a 50-50 joint venture, Juniper Hotels, with this partner to develop hotels in India. Today, the Juniper portfolio is made up of six Hyatt hotels, including the iconic Grand Hyatt Mumbai and Andaz Delhi, each of which also has branded residences. In February, Juniper Hotels completed an initial public offering on the BSE Limited and National Stock Exchange of India, successfully raising capital representing approximately 23% of the company. The current equity value of our stake in Juniper Hotels is close to $475 million, and we are confident the current value of our joint venture exceeds any sum-of-the-parts analysis or historical assessments of value of our joint venture interests.

One other benefit of the IPO is that Juniper Hotels paid down third-party debt, relieving Hyatt of a substantial debt repayment guarantee. In addition to creating significant shareholder value, this joint venture relationship has allowed us to enhance our strong brand reputation in India, leading to over 100 open and pipeline hotels in the country. Turning to asset sales, in addition to closing the sale of Hyatt Regency Aruba on February 9th, which we announced during our fourth quarter 2023 call, we have several updates to share. We completed three separate transactions, selling Park Hyatt Zurich on April 4th, Hyatt Regency San Antonio on April 23rd, and Hyatt Regency Green Bay on May 1st for combined proceeds of $535 million at a 14.7 times multiple.

We retained long-term management agreements at both Park Hyatt Zurich and Hyatt Regency San Antonio and a long-term franchise agreement at Hyatt Regency Green Bay. In connection with the sale of Park Hyatt Zurich, we provided $45 million in seller financing. In addition to realizing great value for these assets, we will avoid approximately $40 million of capital expenditures over the next few years. Although the transactions environment has been uneven, we have once again proven our ability to transact with a variety of different buyers, and in the case of Hyatt Regency San Antonio, complete an all-cash transaction. We also signed a purchase and sale agreement for an asset that, upon closing, would yield cumulative gross proceeds that exceed the $2 billion asset sell-down commitment.

Finally, we remain in the marketing process for another asset we previously mentioned. We have realized $1.5 billion of gross proceeds from the net disposition of real estate since our $2 billion commitment announced in August of 2021, including the three asset sales completed during the second quarter at a total multiple of 13.3 times. We remain confident that we will complete the remaining portion of our disposition commitment before the end of this year. In closing, we are pleased with our operational execution in the quarter and forward-looking indicators are positive across all customer segments. The significant progress that we have made selling owned assets increases our asset-light earnings mix, which we expect will exceed 80% on a run rate basis once we complete our $2 billion disposition commitment.

We remain focused on expanding our network effect and our growth across multiple dimensions, including rooms, fees, pipeline, and loyalty membership. This is leading to strong free cash flow and increased shareholder value. Before I conclude my remarks, I want to say how proud I am that Hyatt was named one of the 100 best companies to work for by Fortune and Great Places to Work. This marks the 11th year in a row that Hyatt has received this recognition and we are honored to be one of the longest ranked hospitality companies on the list. Our purpose to care for people so they can be their best guides us every day and gives me confidence in our ability to deliver great results into the future and to continue to create value for our shareholders.

Joan will now provide more details on our operating results. Joan, over to you.

Joan Bottarini: Thanks, Mark, and good morning everyone. Before I begin, I’d like to remind everyone that our first quarter results reflect our three new reportable segments, management and franchising, owned and leased, and distribution. First quarter 2023 results that we published in our earnings release this morning have been recast to reflect our new reportable segments. Selected recast historical financial information is available on our Investor Relations website. As Mark mentioned, first quarter system wide RevPAR increased 5.5%, led by growth across multiple international markets. This growth was fueled by 21% RevPAR growth in Asia-Pacific, excluding Greater China, which benefited from strong outbound travel from Greater China to markets including Japan, Thailand and South Korea.

In Greater China, RevPAR increased approximately 12%, aided by easier comparisons to the first quarter of 2023 during which COVID restrictions were lifted. RevPAR growth in the Americas excluding the United States increased approximately 12%, a result of strong leisure demand in Mexico and the Caribbean. We also saw similar results at our all-inclusive properties in the Americas with net package RevPAR growth of 10% for the quarter. And moving to Europe, RevPAR increased 10% due to exceptional performance in southern and eastern Europe. Our European all-inclusive properties produced impressive net package RevPAR growth of approximately 25%, driven by high demand for our resorts in the Canary Islands. And finally, in the United States, RevPAR was up approximately 2%, excluding the impact of Easter, reflecting normalized growth.

We reported record gross fees of $262 million, up 13% due to a combination of our RevPAR growth, greater system size, and an increase in our non-RevPAR fees. Franchise and other fees increased 21%, driven by the expansion of our franchise footprint and increases in co-brand credit card fees and UVC fees. Incentive fees increased 16%, excluding foreign exchange headwinds in Mexico due to greater contributions from international hotels. Base fees increased 8%, reflecting a combination of increased managed RevPAR and fees from newly opened managed hotels. In total, management and franchising segment adjusted EBITDA increased approximately 10%. Moving to our owned and leased segment, adjusted EBITDA for the quarter decreased by 9% when adjusted for asset dispositions.

We faced difficult comparisons versus 2023, including lapping the Super Bowl, which benefited Hyatt Regency Phoenix, as well as the timing of Easter, which negatively impacted group revenues across our U.S. owned portfolio in March 2024. Compared to the first quarter of 2023, adjusted EBITDA was also negatively impacted by higher real estate taxes, increased wages in certain markets and transaction costs associated with asset sales that closed after the first quarter. Our expectations continue to be that we will achieve flat to moderate expansion of owned and leased margins for the full year, maintaining ongoing margin expansion relative to 2019. Finally, our distribution segment’s adjusted EBITDA reflects Hyatt’s ownership of UVC through the sale of our majority interest on February 14th of 2024 as well as full-year ownership in 2023.

First quarter 2024 results include $6 million of adjusted EBITDA losses for our period of full ownership of UVC before the transaction closed. The distribution segment’s adjusted EBITDA declined $19 million compared to the first quarter of 2023, as ALG Vacations lapped a very strong first quarter last year. These results are consistent with our prior public statements as our expectations relating to year-over-year headwinds for ALG Vacations. Overall total company adjusted EBITDA for the quarter was $252 million. Compared to last year, adjusted EBITDA increased approximately 3% when excluding transactions, the impact of foreign exchange and the headwind from ALG Vacations. Our core management and franchising business delivered outstanding results led by RevPAR and net rooms growth.

The owned and leased portfolio lapped challenging comparisons in the first quarter, which we do not expect will continue through the remainder of the year. Now moving to liquidity, as of March 31st, 2024, our total liquidity remains strong at $2.3 billion, including approximately $1.5 billion in borrowing capacity on our revolving credit facility. At the end of the quarter, we reported approximately $3 billion of debt outstanding. We remain committed to our investment grade profile and our balance sheet is strong. During the first quarter, we returned over $400 million to shareholders inclusive of dividends and share repurchases. We repurchased approximately 2.5 million shares of Class A and Class B common stock for an aggregate purchase price of $388 million.

The company’s Board of Directors has authorized a $1 billion increase to our share repurchase authorization, and we now have approximately $1.8 billion available. Now I’d like to review our 2024 outlook. After adjusting for the impact of transactions, we are reaffirming our outlook for the full year that we provided during our fourth quarter earnings call. We expect full-year system-wide RevPAR growth between 3% and 5% compared to 2023. We expect group and business transient customer segments to contribute meaningfully to overall RevPAR growth and leisure transient to grow compared to 2023 at a moderate growth rate. We anticipate U.S. RevPAR growth around the lower end of our global outlook, while RevPAR growth in our key international markets exceeds the high end of our range.

We expect net rooms growth between 5.5% and 6%, driven by both organic growth and conversions. Gross fees are expected to be in the range of $1.1 billion to $1.13 billion and adjusted G&A is expected to be in the range of $425 million to $435 million. For adjusted EBITDA, our updated outlook of $1.15 billion to $1.19 billion reflects a $30 million reduction at the midpoint due to transactions, including the three asset sales in the second quarter that Mark mentioned as well as the adjusted EBITDA losses from UVC prior to closing the transaction. Free cash flow is expected to be in the range from $575 million to $625 million, including the $30 million reduction to adjusted EBITDA and $25 million of cash tax payments relating to the three asset sales.

Finally, we are raising our outlook for capital returns to shareholders to a range of $800 million to $850 million, including share repurchases and dividends. We’ll update our outlook as additional asset sale transactions close. The full details of our outlook can be found on page three of our earnings release. Additionally, we published a revised earnings growth model this morning, which can be found on our Investor Relations website on Slide 11 of the investor presentation. I’ll conclude my prepared remarks by saying we are very pleased with our first quarter results. Our teams have delivered outstanding results, which we believe demonstrates our unique positioning and differentiated model. We’re excited about the remainder of this year and continuing to execute our strategic vision.

Thank you. And with that, I’ll turn it back to our operator for Q&A.

See also 25 Countries with the Lowest Home Ownership Rates and 16 Biggest Publicly Traded AI Companies in the World.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Daniel Politzer from Wells Fargo. Please go ahead, your line is open.

Daniel Politzer: Hi. Good morning, everyone, and thanks for taking my question. First, I just wanted to touch high-level how you think about asset sales from here. It seems like you guys are pacing towards that $2 billion target. As you kind of maybe get there or even exceed it, how do you think about going forward? What’s your appetite for incremental asset sales? Should we expect another target or do you feel like you’re – it’s going to be kind of ad hoc from here? Thanks.

Mark Hoplamazian: Thanks, Daniel, and good morning. Yes, I – we will be at a run rate of in excess of 80% fee-based earnings, and – assuming that we close everything that we’ve got remaining, and – but from our perspective, we are fully asset-light. We were 76% last year for the full year and we do not intend to publish another targeted sell-down program. It is true that we have a number of really phenomenal assets left in the portfolio, and we will continue to look at opportunities to sell those. And the opportunities will likely come in conjunction with other growth opportunities that – we have some irreplaceable assets in the form of three Park Hyatt’s, not excluding JVs. We have a JV in a Park Hyatt in Europe. We own the Park Hyatt Paris, New York, and Chicago, and the Miraval portfolio, all of which represent what I would consider to be highly durable from a valuation perspective assets in extremely high-barrier markets.

And so we are very optimistic about what we’re going to be able to do going forward. So I think you can expect to see us continue to sell down. We – like every other company in our industry, we will not get to zero. There’s nobody in our industry that has zero and we don’t – that’s not a target for us. And so the other fact is that we will find other, I think, very value-accretive opportunities to buy hotels from time to time. Irvine is an example. Indian Wells, we proved that out. And so not to mention, if you go back in history, the Hyatt Regency Mexico City and others. So I think we’ve proven that we can buy, add value to and then sell at a profit plus retain long-term management agreements. And if the market’s important enough to us and the opportunity is good enough, we’ll do that, but that will be opportunistic and not programmatic and modest.

Daniel Politzer: Thanks. That’s really helpful. And just for my follow-up, you reiterated your 3% to 5% RevPAR guidance, but I guess as we think about it now versus a few months ago when you initially introduced it, what are some of the puts and takes? And if you can maybe opine a bit on what you’re seeing in China and if that’s changed a little bit versus a few months ago. Thanks.

Joan Bottarini: Sure, Daniel. I’ll take that question. On the 3% to 5%, we’re seeing very strong, as we reported in the first quarter, international result, and that is – as we look at pacing into the second quarter and what our operators are telling us around the world is that continues to be strong. So we feel good about the international results and those would, I would say, are on the high end or exceeding the high end of our guidance as we think about the full year. The U.S. has been in the low single digits. We reported that we saw in the U.S. 2% growth outside of Easter. There was a headwind in the first quarter for the U.S., the Easter holiday, but as we noted in our prepared remarks, our group business is very strong with pacing into the last three quarters of the year up 7% and business transient is also very strong with some very important markets for us like New York up significantly and seeing good short-term transient pacing on the business side.

So I would say, all in all, the composition of the RevPAR range is, U.S. on the lower end, international markets on the higher to maybe exceeding the higher end. And then with respect to China, China has been – as I mentioned, international markets very strong, China and Asia-Pacific, excluding China, no exception; really good results coming out in the quarter. And specifically what we’re seeing is actually good news on the international inbound into China. So the mix of that business into China from international has increased. I think our numbers are about 7 to 8 percentage points on the mix. So a material increase in international inbound. Still below pre-COVID levels, but we’re seeing that business pick up. And then outbound is a phenomenal story into markets like Japan, South Korea, Thailand that we noted in the prepared remarks.

We’re seeing significant outbound travel from China into those markets, and frankly, all around the world. So really good results coming out of that region.

Daniel Politzer: Thanks so much.

Joan Bottarini: You’re welcome.

Operator: Our next question comes from Shaun Kelley from Bank of America. Please go ahead. Your line is open.

Shaun Kelley: Hi, good morning, everyone. Mark or Joan, I just want to dig in on ALG a little bit. So the first part was just kind of exactly helping us understand kind of what is occurring here. So big picture, you had great – it sounded like you had very strong demand on the package tour side both in Europe and in the Caribbean and Latin America. And I’m trying to kind of square that with the distribution headwinds called out in the release and mentioned about sort of the difficult comps. Is there just a timing gap on the way, the distribution piece kind of records revenue? Is there something different in that that we’re seeing? So just help us kind of balance the two – those two comments or those two areas, both – one of strength and one of weakness.

Mark Hoplamazian: Yes. We had already indicated previously that there was going to be, I think we said an approximate $20 million headwind with respect to the ALG Vacations business, and that that would be – that would really show up in the first quarter and that’s true. That’s what happened. So a lot of that had to do with the comparison to last year, which was extraordinary. Just by way of a reminder, there were – there was an unusual level of air demand, which was not being fully satisfied by scheduled carriers. We were able to backfill that in relation to our efforts. We also drove tremendous traffic to our own all-inclusive resorts both in the Americas – well, throughout the Americas, throughout the Caribbean and the West Coast of Mexico and Jamaica and so forth.

So – and this year, the world has changed with respect to the air side. So packaged levels have come down a bit, but – and which we understood and knew that we were facing different dynamics there. It is still true that the demand for our resorts remains extremely strong. So our pace of plus 11 for the first quarter with very strong pace. If you look at Cancun, for example, in the second quarter, pace into Cancun is plus 6. So the – what was it referred to as, the Cancun fatigue last year is we predicted it was temporary. And sure enough, it is. So demand for our hotels remains very, very strong. And I would just point out that there can be a difference between ALGV’s business results and our own resorts by virtue of the fact that our resorts represent maybe 25% of ALG Vacations’ total volume, and ALG Vacations represents about 20% of the total revenue that we book into our resorts.

So there is a lot of other hotels and a lot of other markets that are being served by ALG Vacations.

Joan Bottarini: Shaun, one thing I would just add to that is recognizing what Mark just said, is that there is mix of packages and mix of business as far as what markets ALG Vacations is serving. And what we plan to do is to provide additional color going forward. Just like we did for the first quarter, the headwind that we anticipated, and going forward, we’ll continue to provide color on that just because of that correlation that isn’t entirely connected with our net package RevPAR results.

Mark Hoplamazian: Yes. And so one such difference in the first quarter and most likely will show up again in the second quarter and the third quarter, given our pace outlook is Jamaica, Jamaica will be lower, even though we have packages that we sell into Jamaica, and Cancun, as I mentioned, is going strong. So those differences also affect ALG Vacations total volumes.

Shaun Kelley: Very helpful. And then maybe just to kind of stick with the theme, can you just give us an update on sort of for the year, your general expectations for this distribution segment or what’s embedded in your broader outlook for it? And then you’ve, in general talked about, I think, mid-teens or mid to high teens margins as being, I think, normalized in that business, if we look back to pre-COVID times, and I know there was a lot of noise and changes during COVID, but we go back to that as a baseline. I think you’re a little bit beneath that. So in this quarter, should we expect that to mean revert or isn’t Q1 a little bit like the best quarter of the year, just given seasonality? Just help us understand how to think about margins and sort of the underlying top line assumption from here.

Joan Bottarini: Sure. So Shaun, in the earnings growth model that you’ll see on our Investor Relations website, we do have some indicators here for the distribution margins between 16% to 19%. All of those data that we’re sharing is on a full-year basis. So you can expect us to be within that range for the distribution margin. And I mentioned we’ll give some color on what we expect for the full year. For the last three quarters of the year, we anticipate a flat to last year for the ALG Vacations business and about $5 million or so down in the second quarter and about $5 million or so down – or excuse me, $5 million up in the fourth quarter. So flattish for the last three quarters of the year, and that’s all excluding the $20 million that we reported for the first quarter. Now what you’ll have to do is we have UVC reported in the distribution segment in 2023. So we’ve given you all of that information to strip out ALG Vacations for that segment.

Shaun Kelley: Thank you so much.

Joan Bottarini: You’re welcome.

Operator: Our next question comes from Stephen Grambling from Morgan Stanley. Please go ahead. Your line is open.

Stephen Grambling: Hi. Thank you. So you flagged the lower operating leverage in – I think it was on Slide 11 of the deck, and also on Slide 14, you noted that even before considering the free cash flow generation, I think you’ll be at sub 2 turns of net leverage versus all the asset-light peers closer to 3 and maybe targeting higher. So how are you thinking about the right capital structure as the model shifts? And then what are the factors that you’re watching to potentially take advantage of either greater debt capacity or something like that, if that’s something that’s on the path?

Joan Bottarini: Yes, we are – our capital allocation strategy hasn’t changed. As we look at generating free cash flow and asset sale proceeds, one of our priorities is reinvesting back in the business, maintaining our investment grade profile and returning excess cash to shareholders. So that’s how we’ve looked at it and balancing it. We have our – we’re squarely an investment grade profile now and our ratios look good. So as we think about opportunities for us to grow, we’ll be balancing how we manage those ratios into the future. We’ve been targeting 3 times on a gross debt basis and we’re definitely trending below that at the moment.

Stephen Grambling: Right. And I guess maybe a follow-up would just be, are there generally more or less opportunities that you see out there to reinvest in growth in the business sitting here today than maybe last quarter or even last year?

Mark Hoplamazian: Yes, I would – the short answer is more. We are more actively engaged in more transactions now than we were over the course of last year. These kinds of transactions take different forms and shapes. Some of them are portfolio deals, some of them are brand acquisitions, some of them are management company with brand management. So they take different forms. And again, just to reiterate how we think about it, it’s primarily customer base is the first screen; second is geography, and third is the way in which any potential acquisition fits to expand network effect for World of Hyatt and also for destinations served. So we are seeing more activity. Much of it is, I would say, off-market. In fact, pretty much everything that we’re looking at and engaged in right now is not part of an auction process.

Stephen Grambling: One quick clarification there. I realize this is a second follow-up, but the – on the customer base being the first thing that you think through, is that just suggesting that you’ll stick with servicing a higher end customer, or are you talking about maybe broadening out the customers that you’re looking for?

Mark Hoplamazian: Yes. I think the core of our business obviously is serving high-end customers, but what I would say is – so just to double-click on the – what I mean by customer base, it’s either growing an existing customer base that we already know and serve. So we have really good predictor value in terms of what their travel patterns might look like and their spending patterns, or it’s looking at a demographic profile that’s similar, but expands our existing customer base either by age cohort or by geography. So in the case of Dream Hotels, for example, the age – the demographic profile is actually quite similar to our core, but the average age of their guest base was 20 years younger than the average age of our guest base.

So we feel that that’s a great extension and an expansion of our customer base; still financially capable, but similar to our core customers, but at a younger age. If you look at Lindner Hotels, Lindner is very similar in terms of the demographic profile, but a significant proportion of their total business are Germans traveling within Germany. So those are two different deals done for different really strategic reasons, but it’s all designed to build network effect and grow our customer base and grow World of Hyatt, which, as I mentioned in my prepared remarks, is on a very significant growth rate, up 22% over the last year. That’s a key benefit of doing this in a very deliberate way.