Hyatt's Q3 2025 Earnings Call: Contradictions Emerge on Group Bookings, Co-Brand Credit Card Deal, All-Inclusive Demand, and Net Rooms Growth

Guidance:

• Full-year 2025 RevPAR expected 2.0% to 2.5% (Q4 implied 0.5% to 2.5%); U.S. RevPAR ~1% for Q4 and full year.
• Net rooms growth raised to 6.3%–7.0% (excludes Playa additions).
• Gross fees expected $1.195B to $1.205B (~9% increase at midpoint).
• Adjusted G&A $440M to $445M; run-rate costs expected moderately below 2024 in 2026.
• Adjusted EBITDA $1.09B to $1.11B; adjusted FCF $475M to $525M (excludes $117M deferred tax cash paid).
• Capital returns ~ $350M in 2025; Playa Q4 outlook lowered ~$7M at midpoint.
• Credit-card economics: ~$50M EBITDA in 2025, ~$90M in 2026, ~$105M in 2027.

Business Commentary:

* RevPAR Growth and Segment Performance: - Hyatt reported system-wide RevPAR growth of 0.3% for Q3, impacted by a holiday shift and onetime events in the previous year. - Luxury brands generated the highest RevPAR growth, up approximately 6% across their portfolio, while leisure transient RevPAR increased by 1.6% compared to last year. - The performance was affected by easier comparisons from onetime events in 2024 and challenging year-over-year comparisons, particularly in group travel.

• Transactions and Asset Strategy:
• Hyatt completed the sale of a hotel in Mexico for approximately $22 million and is on track to close the real estate transaction with Tortuga Resorts by the end of the year.
• The company has three hotels under contract with signed agreements and expects all six hotels to close in early 2026, contributing to their goal of exceeding 90% asset-light earnings mix.

• The strategic move is aimed at focusing on higher-margin, fee-driven businesses and reducing exposure to hotel ownership risks.

• Loyalty Program and Membership Growth:

• World of Hyatt surpassed 61 million members, an increase of 20% year-over-year.
• The loyalty program continued to be one of the fastest-growing global hospitality programs with membership increasing nearly 30% annually since 2017.

• The program's success is attributed to a strong focus on personal connections, member engagement, and consistent benefits, making it attractive to high-end travelers.

  

• Development Pipeline and Brand Expansion:

• Hyatt's development pipeline increased by more than 4% to last year, with approximately 141,000 rooms.
• The introduction of the Hyatt Select and Unscripted by Hyatt brands has contributed to a significant rise in new deals, with many more in discussion.
• The company signed a master franchise agreement with Homeinns Hotel Group to develop Hyatt Studios across China, expanding their upper mid-scale brand presence.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted encouraging momentum: "RevPAR growth of 0.3%" and noted strong pipeline/net rooms growth (over 12% reported; 6.3%–7% outlook). Loyalty strength: "World of Hyatt surpassed 61 million members, an increase of 20% year-over-year." They raised capital-return guidance citing a new Chase agreement and forecast credit-card economics rising from ~$50M (2025) to ~$90M (2026) and ~$105M (2027).

Q&A:

• Question from Steven Pizzella (Deutsche Bank): As we start to think about next year, realizing it is still early, but with the trends you are seeing in your pipeline and the positive commentary, how are you thinking about net rooms growth going into 2026 and beyond?
  Response: Organic rooms growth is extremely strong; management expects continued acceleration and is confident in roughly 6%–7% net rooms growth for 2026.

• Question from Bennett Rose (Citi): I just wanted to ask you a little bit about kind of what you're seeing so far in terms of group pace in the U.S. and kind of internationally for 2026, anything you can share on that.
  Response: Group pace into 2026 is up in the high single digits with ~60%–65% of business already on the books; management is highly confident group will be a tailwind into 2026.

• Question from Benjamin Chaiken (Mizuho): I want to clarify the G&A comment earlier... is the reference below 2024 for 2026, and what's driving the lower number?
  Response: Adjusted G&A is expected to be moderately below 2024 in 2026, driven by organizational changes and efficiency actions despite recent M&A-related incremental costs.

• Question from Richard Clarke (Bernstein): The $50M uptick in capital returns — is that coming from the extra $47M from Chase and how do restructuring charges factor in; could returns approach 100% of FCF next year?
  Response: The incremental return is funded by the upfront Chase payment (net of restructuring charges); management is on track to increase FCF-to-EBITDA conversion and move toward its conversion targets in 2026.

• Question from Stephen Grambling (Morgan Stanley): Can you outline assumptions underpinning the EBITDA step-up from the co-brand card in '26 and '27, and how upfront payment is treated?
  Response: Upfront payment is amortized over the agreement; estimates are conservative and the $50M/$90M/$105M cadence could have upside as World of Hyatt membership and room growth increase.

• Question from David Katz (Jefferies): More color on the Home Inns master agreement economics and its impact on net unit growth?
  Response: Hyatt Studios will be fee‑positive; UrCove is a 50% JV where Hyatt earns fees plus JV upside; ~50 hotels (~100–125 rooms) — modest net-room impact but meaningful commercial and network benefits.

• Question from Shaun Kelley (Bank of America): Can you provide more insight on the cost program: why now, what catalyzed it, and what it enables?
  Response: Reorganization to a brand-focused model, agile ways of working and expanded AI deliver staffing and third‑party cost efficiencies, enabling better owner support and lower run‑rate G&A over time.

• Question from Duane Pfennigwerth (Evercore ISI): On capital allocation priorities — does the order change between deleveraging, returns, and growth investments?
  Response: Priority is delevering (Playa sale proceeds to repay the delayed-draw loan) and reaching investment‑grade by end‑2027, while continuing disciplined shareholder returns and pursuing selective, value‑creating growth.

• Question from Michael Bellisario (Baird): How has room-night contribution from World of Hyatt tracked year-to-date and how does closing the gap to peers affect owner value?
  Response: Penetration is mid‑40s and growing (>20% membership growth YoY); members stay longer and spend more, strengthening direct channels and owner economics.

• Question from Brandt Montour (Barclays): How confident are you about RevPAR reaccelerating into next year given business transient, group, leisure, and events like the World Cup?
  Response: Management expects incrementally positive RevPAR in 2026 (U.S. roughly flat to slightly positive) supported by World Cup, America 250, data‑center activity and robust leisure demand.

• Question from Charles Scholes (Truist Securities): You were cautious on China three months ago; how are you feeling today about that market?
  Response: Incrementally more positive: strong upper‑upscale and luxury room demand and a healthy pipeline in Greater China, though F&B/banqueting remains weak and capital markets constraints persist.

• Question from Conor Cunningham (Melius Research): On free cash flow conversion — given credit card deal, G&A savings and revPAR momentum, how do working capital or hotel sales limit reaching >50% conversion?
  Response: Credit-card economics and incremental fees from Playa post-sale will materially help; one‑time items in 2025 normalize and management expects to exceed 50% FCF conversion in 2026.

• Question from Chad Beynon (Macquarie): Impact of the government shutdown and FAA capacity cuts on Q4 travel?
  Response: Direct government business is small so impact is limited; reduced airlift poses some risk but hotel teams' agility and AI-enabled revenue management should mitigate effects.

• Question from Meredith Prichard Jensen (HSBC): On ALGV distribution — what are you seeing and how will broadening Playa programs affect the mix and optimization?
  Response: ALGV is a strategic packaging platform (~2.5M customers, many agents); management is optimizing markets, improving efficiency with automation/AI, and Playa expands attractive inventory for that channel.

Contradiction Point 1

Group Bookings and Revenue Expectations

It involves differing expectations regarding the trajectory of group bookings and their impact on revenue, which is crucial for investor expectations.

What is the group pace for 2026? - Bennett Rose (Citi)

20251106-2025 Q3: End of the quarter with group pace into 2026 up in the high single digits. Over 60% of business is on the books and date patterns remain attractive. - Mark Hoplamazian(CEO)

How do you expect RevPAR improvements to progress this year? What factors support optimism for year-end performance? - Conor Cunningham (Melius Research)

2025Q2: Group pace for 2026 is up 8% versus 2025. Full cycle bookings into 2026 are up 3%. We're forecasting about 5% growth in group business for the fourth quarter compared to Q3. - Joan Bottarini(CFO)

Contradiction Point 2

Co-Brand Credit Card Deal Impact

It pertains to the expected financial impact of the new co-brand credit card deal, which is significant for financial forecasting and investor expectations.

What assumptions underlie the projected EBITDA growth from co-brand credit cards in 2026 and 2027? - Stephen Grambling (Morgan Stanley)

20251106-2025 Q3: Strong results from the new card agreement with Chase, expected to double earnings by 2027. - Joan Bottarini(CFO)

Are there any updates on the co-branded credit card negotiations? - Stephen Grambling (Morgan Stanley)

2025Q2: We will provide updates as soon as we have specific details to share. We feel confident about the economics, but we will provide more information in the future when we have firm agreements in place. - Joan Bottarini(CFO)

Contradiction Point 3

All-Inclusive Demand and Market Performance

It highlights discrepancies in the reported performance and trends of Hyatt's all-inclusive business segment, which is a crucial part of the company's revenue mix.

Can you explain the economics of the $50 million cost reduction? - Benjamin Chaiken (Mizuho)

20251106-2025 Q3: Overall, we’re encouraged by the strength of demand across all of our markets with particular strength in the all-inclusive segment. Across our Americas region, we saw all-inclusive RevPAR increase 44% for the quarter. - Joan Bottarini(CFO)

What factors would prevent proceeding with the Playa transaction, and how confident are you in meeting the key conditions? - Patrick Scholes (Truist Securities)

2025Q1: February was slightly below our expectations, and March was slightly above our expectations, resulting in Q1 all-inclusive Net Package RevPAR that was about 2% below our expectations. - Joan Bottarini(CFO)

Contradiction Point 4

Net Rooms Growth Expectations

It involves differing expectations for net rooms growth, which is crucial for assessing the company's expansion and potential revenue impact.

How do you expect net rooms growth to proceed through 2026 and beyond? - Steven Pizzella (Deutsche Bank)

20251106-2025 Q3: Organic growth is extremely strong, with 38 hotels planned to open in the fourth quarter. The pipeline additions are 35% in Asia Pacific and 35% in the U.S. Confident in achieving 6-7% net rooms growth in 2026, with more opportunities for glass half full than empty. - Mark Hoplamazian(CEO)

What is the outlook for net unit growth (NUG) in 2025, and is there an ongoing impact from elevated attrition? - Ben Chaiken (Mizuho)

2024Q4: Net rooms growth is expected to be stronger in 2025, driven by early openings of 9,000 rooms this year. Our outlook accounts for a mix of new openings and conversions, with over 60% of openings expected in the first half. We assumed significant attrition associated with the Lindner Group's insolvency process, totaling an excess of 2,000 rooms, which is a conservative approach. - Mark Hoplamazian(CEO)