Hyatt Hotels Corporation (H) Earnings

Management highlights

- Strategic positioning and brand performance - Hyatt has completed its transformation into an asset-light company focused on premium/luxury brands, a growing commercial platform, and disciplined capital allocation, with the goal of delivering durable fee growth, increasing free cash flow, and attractive long-term returns. - Gained nearly 3 points of RevPAR index market share in the luxury and lifestyle portfolios in H1 2026, reflecting growing consumer and owner preference for Hyatt brands. - Luxury and leisure demand led performance across all regions, with 11% RevPAR growth for luxury properties in Greater China in Q2, and double-digit RevPAR growth for Asia Pacific excluding Greater China. - Signed a master franchise agreement with Dosen Group to launch the Hyatt Select upper midscale brand in mainland China, leveraging Dosen's local market expertise to scale in this high-potential market. - Notable Q2 openings include Miraval the Red Sea (first Miraval outside the U.S.) and Burai Hua Hin (first Unbound Collection by Hyatt property in Thailand), expanding Hyatt's luxury wellness footprint. - Loyalty program growth - World of Hyatt ended Q2 2026 with ~69 million total members, a 17% year-over-year increase, driven by ongoing program enhancements, including a new collaboration with Air Canada that expands reward opportunities for members of both programs. - The loyalty program creates network effects: new hotels expand member benefits, while growing membership strengthens the commercial platform for owners, driving higher direct demand and durable fee growth. - Development pipeline - Ended Q2 with a record 154,000 rooms in the development pipeline, a 10% year-over-year increase, with strong interest across luxury, lifestyle, inclusive collection, and growing momentum in the essentials/select brand segment. - Q2 2026 net room growth was 4.4% (excluding Playa Hotels acquisition rooms removed in H2 2025). Over half of 2026 full-year openings are scheduled for Q4, with some expected to slip into early 2027 due to pre-opening delays for full-service/luxury projects. - Balance sheet and capital allocation - As of Q2 end, total liquidity was ~$2.1 billion, including $1.5 billion of available capacity on the revolving credit facility, with a solid investment-grade balance sheet. - Year-to-date through Q2, $175 million was returned to shareholders via dividends and share repurchases, with $1.5 billion remaining under the current share repurchase authorization. - Transaction activity - The planned sale of Hyatt Grand Central New York is no longer expected to close in 2026; Hyatt remains active in discussions for sales of other owned assets to unlock portfolio value, while keeping properties in the Hyatt system under long-term management/franchise agreements to support continued fee growth.

Guidance

- Full-year 2026 system-wide RevPAR growth guidance was upgraded to 3.5% to 4.5%, from the prior lower range. U.S. full-year RevPAR growth is expected to be 3% to 4%, with international RevPAR growth (excluding Middle East conflict impacts) expected to be slightly higher than the U.S. - Full-year net room growth is expected to be approximately 6%, in line with prior long-term targets. Some Q4 2026 openings are expected to slip to Q1 2027 due to pre-opening delays for complex full-service and luxury projects, but confidence in long-term 6-8% annual net room growth remains high. - Full-year gross fee growth guidance is maintained at 9% to 11%, with gross fees expected to total $1.305 billion to $1.335 billion, despite temporary headwinds from Jamaica hotel closures, softer Mexican demand, and Middle East conflict impacts. - Full-year adjusted EBITDA guidance is maintained at 13% to 18% year-over-year growth, for a total of $1.155 billion to $1.205 billion, including an expected $25 million full-year decline in the distribution segment. - Full-year adjusted free cash flow guidance is maintained at $580 million to $630 million, representing 20% to 30% year-over-year growth, with at least 50% conversion of adjusted EBITDA to free cash flow. - Full-year 2026 total capital return to shareholders via share repurchases and dividends is expected to be $325 million to $375 million, in line with prior guidance. - Q3 2026 global RevPAR growth is expected to come in at the low end of the full-year guidance range, with net package RevPAR moderately below 2025 levels. Q3 growth fees are expected to grow in the high single digits year-over-year, after adjusting for 2025 owned asset sales and pro rata JV EBITDA adjustments. - Long-term guidance for 6-8% annual net room growth and 9-11% annual compound fee growth, outlined at the prior investor day, remains fully intact.

Segment performance

1. Core Growth Fees: Grew 8% year-over-year to $324 million, driven by strong performance across the managed portfolio, fees from newly opened hotels, new management agreements from the Playa portfolio, and growing license fees. No specific revenue contribution percentage was provided for this segment. 2. Owned and Leased: Adjusted EBITDA increased 16% year-over-year (adjusted for asset sale impacts), reflecting strong performance from the high-end positioning of Hyatt's remaining owned and leased hotels. No specific revenue contribution percentage was provided for this segment. 3. Distribution: Adjusted EBITDA declined year-over-year, in line with management expectations, due to temporary factors including hotel closures in Jamaica after Hurricane Melissa, softer demand in Mexico following a Q1 2026 security incident, and lower demand for four-star properties. A full-year 2026 $25 million year-over-year decline in distribution segment EBITDA is expected. Travel volumes into the Dominican Republic for this segment were up 7%, reflecting continued strong demand for that destination. No specific revenue contribution percentage was provided for this segment. Overall company: System-wide comparable RevPAR grew 5.9% year-over-year. U.S. RevPAR grew 6.7% year-over-year, international RevPAR grew nearly 5% (7.5% excluding the Middle East). Overall adjusted EBITDA grew approximately 9% year-over-year after adjusting for asset sales.

Risks & headwinds

- Ongoing conflict in the Middle East caused a 36% year-over-year Q2 RevPAR decline in the region, and is expected to reduce full-year 2026 fees by approximately $10 million, with hotel revenues expected to remain significantly below 2025 levels for the full year. - A February 2026 security incident in Cancun, Mexico, and reduced flight capacity have led to softer-than-expected demand at Hyatt's all-inclusive resorts in Mexico, resulting in an approximately $15 million negative impact to full-year 2026 fees compared to prior guidance. While sequential improvement is ongoing, recovery has been slower than expected. - Over 50% of 2026 annual hotel openings are concentrated in Q4, and over 60% of these are complex luxury, lifestyle, or full-service projects that face higher risk of pre-opening delays (permits, construction, certifications) that could push openings into 2027. - PIP (property improvement plan) requirements for new conversion brands (Hyatt Select, Unscripted) have been heavier than initially modeled, leading to extended completion timelines and opening delays. - Inbound travel to Europe from the Middle East has softened, offsetting healthy domestic leisure demand in the region and limiting Q2 RevPAR growth to 4.5%.

Analyst Q&A

• Q: Is the 2026 net room growth adjustment driven by expected openings slipping to 2027, and is this a proactive conservative measure? /

  A: Yes, some openings have slipped due to heavier-than-expected PIP requirements for new conversion brands and the high concentration of complex full-service/luxury openings in Q4, which inherently carry more timing uncertainty. Management proactively adjusted the 2026 outlook to reflect this potential slippage, but emphasized that long-term net room growth of 6-8% and fee growth of 9-11% remain on track. A two-year stacked net room growth of 16% from 2024 H1 to 2026 H1 confirms the underlying growth trajectory, and a new $500 million third-party financing facility for owner construction is accelerating deal progress. The key driver of shareholder value is fee growth, not quarterly net room volatility.

• Q: What is Hyatt seeing in current M&A and asset sale transaction markets, particularly for high-end properties? /

  A: Management confirmed a pronounced flight to quality in the current transaction market, with high-end properties in high barrier-to-entry markets garnering the most investor interest and activity, while the broader market remains relatively flat. This aligns with Hyatt's strategy of selling non-core owned assets in attractive markets to unlock value while keeping properties in the Hyatt system under long-term agreements, supporting ongoing fee growth.

• Q: How is Hyatt addressing industry concerns about rising owner fee burdens, given Hyatt's large managed portfolio concentration? /

  A: Hyatt retains a strong owner-focused DNA from its history of asset ownership, and has conducted extensive comparative analysis showing its commercial and technology system costs are highly competitive (often advantaged) against larger peers. The company has absorbed the full cost of migrating to new cloud-based property and revenue management systems, reducing per-room PMS costs for owners by 40% and eliminating IT implementation fees for all new openings. New AI-powered tools for revenue optimization and vendor cost management are driving improved profitability for owners, and this competitive value proposition has directly contributed to the record development pipeline.

• Q: With some 2026 openings slipping to 2027, should investors expect 2027 net room growth to hit the midpoint or above of the 6-8% long-term guidance range? /

  A: Management confirmed that 2027 net room growth is expected to land at least in the mid-to-upper half of the 6-8% range, as delayed 20026 projects carry over to 2027. The 8-year historical average organic net room growth is 7%, so the 2026 timing shift does not change the long-term trend. New conversion brands are taking longer to open due to stricter PIP requirements, which results in higher quality, more profitable properties long-term. Fee growth, not room growth, is the key metric, and the current pipeline remains fee-accretive, sustaining the 9-11% annual fee growth target.