Hyatt Hotels Corp: Form 10-Q for the period ended Jun 30, 2024

This Quarterly Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements about the Company's plans, strategies, and financial performance, and prospective or future events and involve known and unknown risks that are difficult to predict. As a result, our actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "continue," "likely," "will," "would," and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the factors discussed in our filings with the SEC, including our Annual Report on Form 10-K; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the rate and pace of economic recovery following economic downturns; global supply chain constraints and interruptions, rising costs of construction-related labor and materials, and increases in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business; risks affecting the luxury, resort, and all-inclusive lodging segments; levels of spending in business, leisure, and group segments, as well as consumer confidence; declines in occupancy and average daily rate ("ADR"); limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geopolitical conditions, including political or civil unrest or changes in trade policy; hostilities, or fear of hostilities, including future terrorist attacks, that affect travel; travel-related accidents; natural or man-made disasters, weather and climate-related events, such as earthquakes, tsunamis, tornadoes, hurricanes, droughts, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases, or fear of such outbreaks; our ability to successfully achieve certain levels of operating profits at hotels that have performance tests or guarantees in favor of our third-party owners; the impact of hotel renovations and redevelopments; risks associated with our capital allocation plans, share repurchase program, and dividend payments, including a reduction in, or elimination or suspension of, repurchase activity or dividend payments; the seasonal and cyclical nature of the real estate and hospitality businesses; changes in distribution arrangements, such as through internet travel intermediaries; changes in the tastes and preferences of our customers; relationships with colleagues and labor unions and changes in labor laws; the financial condition of, and our relationships with, third-party owners, franchisees, and hospitality venture partners; the possible inability of third-party owners, franchisees, or development partners to access the capital necessary to fund current operations or implement our plans for growth; risks associated with potential acquisitions and dispositions and our ability to successfully integrate completed acquisitions with existing operations; failure to successfully complete proposed transactions (including the failure to satisfy closing conditions or obtain required approvals); our ability to successfully execute our strategy to expand our management and hotel services and franchising business while at the same time reducing our real estate asset base within targeted timeframes and at expected values; our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; declines in the value of our real estate assets; unforeseen terminations of our management and hotel services agreements or franchise agreements; changes in federal, state, local, or foreign tax law; increases in interest rates, wages, and other operating costs; foreign exchange rate fluctuations or currency restructurings; risks associated with the introduction of new brand concepts, including lack of acceptance of new brands or innovation; general volatility of the capital markets and our ability to access such markets; changes in the competitive environment in our industry, industry consolidation, and the markets where we operate; our ability to successfully grow the World of Hyatt loyalty program and Unlimited Vacation Club paid membership program; cyber incidents and information technology failures; outcomes of legal or administrative proceedings; and violations of regulations or laws related to our franchising business and licensing businesses and our international operations.

These factors are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors could also harm our business, financial condition, results of operations, or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

The following discussion should be read in conjunction with the Company's condensed consolidated financial statements and accompanying Notes, which appear elsewhere in this Quarterly Report.

Executive Overview

Our portfolio of properties consists of full service hotels and resorts, select service hotels, all-inclusive resorts, and other properties, including timeshare, fractional, and other forms of residential and vacation units.

At June 30, 2024, our hotel portfolio consisted of 1,352 hotels (325,507 rooms), including:

• 494 managed properties (147,787 rooms), all of which we operate under management and hotel services agreements with third-party owners;
• 643 franchised properties (110,429 rooms), all of which are owned by third parties that have franchise agreements with us and are operated by third parties;
• 125 all-inclusive resorts (42,749 rooms), including 111 owned by third parties (38,321 rooms) and operated under management and hotel services agreements, 8 owned by a third party in which we hold common shares (3,153 rooms) and operated under franchise agreements, and 6 operating leased properties (1,275 rooms);
• 19 owned properties (8,794 rooms), 1 finance leased property (171 rooms), and 4 operating leased properties (1,697 rooms), all of which we manage;
• 22 managed properties and 2 franchised properties owned or leased by unconsolidated hospitality ventures (7,640 rooms); and
• 42 franchised properties (6,240 rooms) operated by an unconsolidated hospitality venture in connection with a master license agreement by Hyatt; 6 of these properties (1,246 rooms) are leased by the unconsolidated hospitality venture.

Our property portfolio also included:

• 22 vacation units (1,997 rooms) under the Hyatt Vacation Club brand and operated by third parties; and
• 38 residential units (4,324 rooms), which consist of branded residences and serviced apartments. We manage all of the serviced apartments and those branded residential units that participate in a rental program with an adjacent Hyatt-branded hotel.

Additionally, we provide certain reservation and/or loyalty program services to hotels that are unaffiliated with our hotel portfolio and operate under other trade names or marks owned by such hotels or licensed by third parties. We also offer distribution and destination management services through ALG Vacations and a boutique and luxury global travel platform through Mr & Mrs Smith.

We report our consolidated operations in U.S. dollars. Amounts are reported in millions, unless otherwise noted. Percentages may not recompute due to rounding, and percentage changes that are not meaningful are presented as "NM." Constant currency disclosures used throughout Management's Discussion and Analysis of Financial Condition and Results of Operations are non-GAAP measures. See "—Non-GAAP Measures" for further discussion of constant currency disclosures.

During the three months ended June 30, 2024, we revised our definition of Adjusted EBITDA to exclude transaction and integration costs, and we recast prior-period results to provide comparability. The revised definition excludes transaction costs previously recognized in general and administrative expenses and integration costs. Previously, only transaction costs recognized in gains (losses) on sales of real estate and other and other income (loss), net were excluded from Adjusted EBITDA. As these costs may vary in frequency or magnitude, we believe the revised definition presents a more representative measure of our core operations, assists in the comparability of results, and provides information consistent with how our management evaluates operating performance. See "—Non-GAAP Measures" for an explanation of how we utilize Adjusted EBITDA, why we present it, and material limitations on its usefulness, as well as a reconciliation of our net income attributable to Hyatt Hotels Corporation to consolidated Adjusted EBITDA.

During the six months ended June 30, 2024, we realigned our reportable segments to align with our business strategy, the organizational changes for certain members of our leadership team, and the manner in which our

CODM assesses performance and makes decisions regarding the allocation of resources. A summary of our reportable segments is as follows:

• Management and franchising, which consists of the provision of management, franchising, and hotel services, or the licensing of our intellectual property to, (i) our property portfolio, (ii) our co-branded credit card programs, and (iii) other hospitality-related businesses, including the Unlimited Vacation Club following the UVC Transaction;
• Owned and leased, which consists of our owned and leased hotel portfolio and, for purposes of owned and leased segment Adjusted EBITDA, our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA based on our ownership percentage of each venture; and
• Distribution, which consists of distribution and destination management services offered through ALG Vacations and the boutique and luxury global travel platform offered through Mr & Mrs Smith. Prior to the UVC Transaction, this segment also included the Unlimited Vacation Club paid membership program.

Within overhead, we include unallocated corporate expenses.

Segment operating information for the three and six months ended June 30, 2023 have been recast to reflect these segment changes. See Part I, Item 1 "Financial Statements—Note 1 and Note 16 to our Condensed Consolidated Financial Statements" for further discussion of our segment structure.

Overview of Financial Results

Consolidated revenues decreased $2 million during the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Gross fee revenues increased $29 million and revenues for reimbursed costs increased $58 million driven by improved operating performance at our existing properties, including increased demand and ADR, and growth of our hotel portfolio compared to the quarter ended June 30, 2023. Additionally, during the quarter ended June 30, 2024, gross fee revenues increased due to management and royalty fees earned related to the management of and licensing of certain of our brands to the Unlimited Vacation Club following the UVC Transaction. Other revenues decreased $61 million, compared to the quarter ended June 30, 2023, primarily driven by the sale of the Destination Residential Management business in the third quarter of 2023 and the UVC Transaction. Owned and leased revenues decreased $27 million, compared to the quarter ended June 30, 2023, due to non-comparable hotels, primarily driven by dispositions of owned hotels.

Comparable system-wide hotels revenue per available room ("RevPAR") for the quarter ended June 30, 2024 was $149, which represented a 4.7% improvement compared to the quarter ended June 30, 2023 in constant currency. The increase was primarily driven by higher ADR across most geographies in the management and franchising segment, with the most significant increases in Asia Pacific (excluding Greater China).

Comparable system-wide all-inclusive resorts Net Package RevPAR for the quarter ended June 30, 2024 was $226, which represented a 3.0% improvement, compared to the quarter ended June 30, 2023 in reported dollars, primarily driven by higher demand and Net Package ADR. See "—Segment Results" for discussion of RevPAR by geography for our management and franchising segment.

During the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023, business transient demand continued to improve and when excluding the impact of the timing of the Easter holiday, leisure transient travel increased. We continued to experience growth in group travel as comparable system-wide group rooms revenues increased 7.8% and group booking pace was up 6.9% at our full service managed hotels in the United States for July through December 2024 compared to the same period in 2023.

For the quarter ended June 30, 2024, we reported $359 million of net income attributable to Hyatt Hotels Corporation, representing a $291 million increase, compared to the three months ended June 30, 2023, primarily driven by gains (losses) on sales of real estate and other, partially offset by an increase in the provision for income taxes. Our consolidated Adjusted EBITDA for the quarter ended June 30, 2024 was $307 million, a $28 million increase compared to the quarter ended June 30, 2023. See "—Results of Operations" and "—Segment Results" for further discussion.

During the quarter ended June 30, 2024, we returned $150 million of capital to our stockholders through $134 million of share repurchases and $16 million of quarterly dividend payments.

Results of Operations

Three and Six Months Ended June 30, 2024 Compared with Three and Six Months Ended June 30, 2023

Discussion on Consolidated Results

For additional information regarding our consolidated results, refer to our condensed consolidated statements of income included in this Quarterly Report. See "—Segment Results" for further discussion.

The impact from our investments in marketable securities held to fund our deferred compensation plans through rabbi trusts was recognized on the following financial statement line items and had no impact on net income: revenues for reimbursed costs; general and administrative expenses; owned and leased expenses; reimbursed costs; and net gains (losses) and interest income from marketable securities held to fund rabbi trusts.

Fee revenues.

The increases in base management fees and franchise fees during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, were primarily driven by the Americas, including the United States, and Europe.

The decrease in incentive management fees during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily driven by Greater China and certain properties undergoing renovations in the United States, partially offset by the Middle East and Europe.

The increase in other fees during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily driven by management and royalty fees related to the management of and licensing of certain of our brands to the Unlimited Vacation Club following the UVC Transaction and increased license fees related to our co-branded credit card programs.

The increase in Contra revenue during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily in the Americas (excluding United States) driven by incremental amortization of management and hotel services agreement and franchise agreement assets and an accrued performance cure payment.

Owned and leased revenues.

Comparable owned and leased revenues increased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily driven by increased business transient demand. During the three months ended June 30, 2024, compared to the three months ended June 30, 2023, the increase was also driven by group rooms revenues and food and beverage revenues.

Non-comparable owned and leased revenues decreased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily driven by dispositions of owned hotels, partially offset by increased revenues at a recently renovated hotel in the United States.

Distribution revenues. During the three months ended June 30, 2024, distribution revenues increased $3 million, compared to the three months ended June 30, 2023, primarily due to commission fee revenues related to Mr & Mrs Smith, which was acquired in the second quarter of 2023, offset by ALG Vacations due to higher pricing in 2023. During the six months ended June 30, 2024, distribution revenues decreased $6 million as the decrease in revenues from ALG Vacations due to the normalization of demand and higher pricing in 2023 more than offset commission fee revenues related to Mr & Mrs Smith.

Other revenues. During the three and six months ended June 30, 2024, other revenues decreased $61 million and $114 million, respectively, compared to the three and six months ended June 30, 2023, primarily driven by the Destination Residential Management business, which was sold during the third quarter of 2023, and the UVC Transaction, partially offset by an increase in revenues related to our co-branded credit card programs.

Revenues for reimbursed costs.

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Revenues for reimbursed costs increased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, driven by higher reimbursements for payroll and related expenses at managed properties where we are the employer and reimbursed costs related to system-wide services provided to managed and franchised properties. The higher reimbursements for expenses were due to increased demand at our existing properties and portfolio growth.

General and administrative expenses.

General and administrative expenses decreased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily driven by decreased market performance of the underlying investments in marketable securities held to fund our deferred compensation plans through rabbi trusts and decreased professional fees and travel expenses, partially offset by an increase in payroll and related costs and the reversal of credit loss reserves on certain receivables during the three and six months ended June 30, 2023.

Adjusted general and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. See "—Non-GAAP Measures" for further discussion.

Owned and leased expenses.

The increase in comparable owned and leased expenses during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily due to increased variable expenses at certain hotels, most notably payroll and related costs.

The decrease in non-comparable owned and leased expenses during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily driven by dispositions of owned hotels, partially offset by increased expenses at a recently renovated hotel in the United States.

Distribution expenses. During the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, distribution expenses increased $8 million and $24 million, respectively, primarily driven by ALG Vacations due to an increase in certain variable costs, in part due to a change in product mix, and expenses related to Mr & Mrs Smith, which was acquired in the second quarter of 2023, most notably payroll and related costs and marketing costs.

Other direct costs. During the three and six months ended June 30, 2024, other direct costs decreased $70 million and $123 million, respectively, compared to the three and six months ended June 30, 2023, primarily driven by the Destination Residential Management business, which was sold during the third quarter of 2023, and the UVC Transaction.

Transaction and integration costs. During the six months ended June 30, 2024, transaction and integration costs decreased $5 million, compared to the six months ended June 30, 2023, primarily due to transaction costs related to the acquisitions of Mr & Mrs Smith and Dream Hotel Group in 2023.

Depreciation and amortization expenses. Depreciation and amortization expenses decreased $15 million and $21 million, during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023, due to the UVC Transaction and dispositions of owned hotels.

Reimbursed costs.

Reimbursed costs increased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, driven by increased payroll and related expenses at managed properties where we are the employer and expenses related to system-wide services provided to managed and franchised properties. The higher expenses were due to increased demand at our existing properties and portfolio growth.

Net gains (losses) and interest income from marketable securities held to fund rabbi trusts.

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Net gains (losses) and interest income from marketable securities held to fund rabbi trusts decreased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, driven by the performance of the underlying invested assets.

Equity earnings (losses) from unconsolidated hospitality ventures.

See Part I, Item 1, "Financial Statements—Note 4 and Note 12 to our Condensed Consolidated Financial Statements" for additional information.

Interest expense. Interest expense increased $9 million and $14 million during three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023, primarily due to the issuances of senior notes in 2024 and 2023, offset by the redemption of certain of our Senior Notes in 2023. See Part I, Item 1, "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements" for additional information.

Gains (losses) on sales of real estate and other. During the three months ended June 30, 2024, we recognized the following:

• $257 million pre-tax gain related to the sale of Park Hyatt Zurich;
• $100 million pre-tax gain related to the sale of Hyatt Regency San Antonio Riverwalk; and
• $4 million pre-tax loss related to the sale of Hyatt Regency Green Bay.

During the six months ended June 30, 2024, we also recognized the following:

• $231 million pre-tax gain related to the UVC Transaction; and
• $172 million pre-tax gain related to the sale of the shares of the entities that own Hyatt Regency Aruba Resort Spa and Casino.

See Part I, Item 1 "Financial Statements—Note 4 and Note 6 to our Condensed Consolidated Financial Statements" for additional information.

Asset impairments. During the six months ended June 30, 2024, we recognized a $15 million goodwill impairment charge in connection with the sale of Hyatt Regency Aruba Resort Spa and Casino. See Part I, Item 1 "Financial Statements—Note 6 to our Condensed Consolidated Financial Statements" for additional information.

During the three and six months ended June 30, 2023, we recognized $5 million and $7 million, respectively, of impairment charges related to intangible assets, primarily as a result of contract terminations.

Other income (loss), net. Other income (loss), net increased $16 million and $15 million during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. See Part I, Item 1 "Financial Statements—Note 18 to our Condensed Consolidated Financial Statements" for additional information.

Provision for income taxes.

The increase in the provision for income taxes for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily driven by the sales of Park Hyatt Zurich and Hyatt Regency San Antonio Riverwalk. The increase in the provision for income taxes during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily driven by the aforementioned sales as well as the earnings impact from both the sale of Hyatt Regency Aruba Resort Spa and Casino and the UVC Transaction. See Part I, Item 1 "Financial Statements—Note 11 to our Condensed Consolidated Financial Statements" for additional information.

Segment Results

As described in Part I, Item 1 "Financial Statements—Note 16 to our Condensed Consolidated Financial Statements," we evaluate segment operating performance using gross fee revenues; owned and leased revenues; distribution revenues; other revenues; and Adjusted EBITDA.

Management and franchising segment revenues.

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The decrease in other revenues during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was driven by the Destination Residential Management business, which was sold during the third quarter of 2023, partially offset by an increase related to our co-branded credit card programs.

The table below includes comparable system-wide RevPAR, occupancy, and ADR by geography and for managed and franchised hotels.

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RevPAR increases at our comparable system-wide hotels during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, were driven by strong demand in business transient and group travel. Additionally, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, leisure transient travel increased when excluding the impact of the timing of the Easter holiday. During the three months ended June 30, 2024, compared to the three months ended June 30, 2023, the decrease in RevPAR in Greater China was primarily driven by a decrease in ADR. During the six months ended June 30, 2024, compared to the six months ended June 30, 2023, the RevPAR increase in Greater China is primarily due to the easing of COVID-19 pandemic travel restrictions during the first quarter of 2023.

During the three months ended June 30, 2024, we removed ten properties from comparable system-wide hotels results, including:

• in the United States, three properties that left the hotel portfolio, one property that underwent a significant renovation, and one property that temporarily suspended operations;
• in the Americas (excluding United States), two properties that left the hotel portfolio;
• in Greater China, one property that underwent a significant renovation;
• in Asia Pacific (excluding Greater China), one property that underwent a significant renovation; and
• in Europe, one property that left the hotel portfolio.

During the six months ended June 30, 2024, we removed three additional properties from comparable system-wide hotels results, including:

• in the United States, one property that underwent a significant renovation;
• in Asia Pacific (excluding Greater China), one property that left the hotel portfolio; and
• in Europe, one property that temporarily suspended operations.

The table below includes comparable system-wide Net Package RevPAR, occupancy, and Net Package ADR by geography and for managed and franchised all-inclusive resorts.

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Net Package RevPAR increases at our comparable all-inclusive resorts during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, were driven by strong demand and Net Package ADR.

During the three months ended June 30, 2024, we removed two properties in the Americas (excluding United States) from comparable system-wide all-inclusive resorts results, including one property that underwent an expansion and one property that left the hotel portfolio.

During the six months ended June 30, 2024, we removed nine additional properties from comparable system-wide all-inclusive resorts results, including:

• in the Americas (excluding United States), one property that underwent an expansion and one property that left the hotel portfolio; and
• in Europe, six properties that experienced seasonal closures and one property that left the hotel portfolio.

Management and franchising segment Adjusted EBITDA.

Adjusted EBITDA increased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily driven by the increases in gross fee revenues and results of our co-branded credit card programs recognized in other revenues and other direct costs, partially offset by an increase in general and administrative expenses, which was primarily due to an increase in payroll and related costs and the reversal of credit loss reserves on certain receivables during the three and six months ended June 30, 2023. The sale of the Destination Residential Management business, which was sold during the third quarter of 2023, resulted in decreases in other revenues and other direct costs.

Owned and leased segment revenues.

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During the three and six months ended June 30, 2024, we removed three and four properties, respectively, from comparable owned and leased hotels results as the properties were sold. These properties remain in our hotel portfolio under long-term management and franchise agreements.

Owned and leased segment Adjusted EBITDA.

Our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA increased during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily driven by improved hotel performance as well as new hotels related to our unconsolidated hospitality venture in India.

Distribution segment revenues.

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Other revenues decreased during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, driven by the UVC Transaction.

Distribution segment Adjusted EBITDA.

Adjusted EBITDA increased during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily driven by the UVC Transaction, partially offset by the increases in distribution revenues and distribution expenses (see "—Results of Operations" for further discussion).

Adjusted EBITDA decreased during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily driven by the decrease in distribution revenues and increase in distribution expenses (see "—Results of Operations" for further discussion). The UVC Transaction resulted in decreases in other revenues, general and administrative expenses, and other direct costs.

Overhead.

Adjusted EBITDA increased during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily driven by decreases in professional fees and travel expenses, partially offset by an increase in payroll and related costs.

Adjusted EBITDA was flat during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, as the increase in payroll and related costs were offset by decreases in professional fees and travel expenses.

Non-GAAP Measures

Adjusted Earnings Before Interest Expense, Taxes, Depreciation, and Amortization ("Adjusted EBITDA")

We use the term Adjusted EBITDA throughout this Quarterly Report. Adjusted EBITDA, as we define it, is a non-GAAP measure. We define consolidated Adjusted EBITDA as net income (loss) attributable to Hyatt Hotels Corporation plus our pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA based on our ownership percentage of each owned and leased venture, adjusted to exclude the following items:

• interest expense;
• benefit (provision) for income taxes;
• depreciation and amortization;
• amortization of management and hotel services agreement and franchise agreement assets and performance cure payments, which constitute payments to customers (Contra revenue);
• revenues for reimbursed costs;
• reimbursed costs that we intend to recover over the long term;
• transaction and integration costs;
• equity earnings (losses) from unconsolidated hospitality ventures;
• stock-based compensation expense;
• gains (losses) on sales of real estate and other;
• asset impairments; and
• other income (loss), net.

We calculate consolidated Adjusted EBITDA by adding the Adjusted EBITDA of each of our reportable segments and eliminations to overhead Adjusted EBITDA.

Our board of directors and executive management team focus on Adjusted EBITDA as one of the key performance and compensation measures both on a segment and on a consolidated basis. Adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operations both on a segment and on a consolidated basis. Our President and Chief Executive Officer, who is our CODM, also evaluates the performance of each of our reportable segments and determines how to allocate resources to those segments, in part, by assessing the Adjusted EBITDA of each segment. In addition, the compensation committee of our board of directors determines the annual variable compensation for certain members of our management based in part on consolidated Adjusted EBITDA, segment Adjusted EBITDA, or some combination of both.

We believe Adjusted EBITDA is useful to investors because it provides investors with the same information that we use internally for purposes of assessing our operating performance and making compensation decisions and facilitates our comparison of results with results from other companies within our industry.

Adjusted EBITDA excludes certain items that can vary widely across different industries and among companies within the same industry, including interest expense and benefit (provision) for income taxes, which are dependent on company specifics, including capital structure, credit ratings, tax policies, and jurisdictions in which they operate; depreciation and amortization, which are dependent on company policies including how the assets are utilized as well as the lives assigned to the assets; Contra revenue, which is dependent on company policies and strategic decisions regarding payments to hotel owners; and stock-based compensation expense, which varies among companies as a result of different compensation plans companies have adopted. We exclude revenues for reimbursed costs and reimbursed costs which relate to the reimbursement of payroll costs and for system-wide services and programs that we operate for the benefit of our hotel owners as contractually we do not provide services or operate the related programs to generate a profit over the terms of the respective contracts. Over the long term, these programs and services are not designed to impact our economics, either positively or negatively. Therefore, we exclude the net impact when evaluating period-over-period changes in our operating results. Adjusted

EBITDA includes reimbursed costs related to system-wide services and programs that we do not intend to recover from hotel owners. Finally, we exclude other items that are not core to our operations and may vary in frequency or magnitude, such as transaction and integration costs, asset impairments, unrealized and realized gains and losses on marketable securities, and gains and losses on sales of real estate and other.

Adjusted EBITDA is not a substitute for net income (loss) attributable to Hyatt Hotels Corporation, net income (loss), or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income (loss) generated by our business. Our management compensates for these limitations by referencing our GAAP results and using Adjusted EBITDA supplementally. See our condensed consolidated statements of income (loss) in our condensed consolidated financial statements included elsewhere in this Quarterly Report.

See below for a reconciliation of net income (loss) attributable to Hyatt Hotels Corporation to consolidated Adjusted EBITDA.

Adjusted General and Administrative Expenses

Adjusted general and administrative expenses, as we define it, is a non-GAAP measure. Adjusted general and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. Adjusted general and administrative expenses assist us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operations, both on a segment and consolidated basis. See "—Results of Operations" for a reconciliation of general and administrative expenses to Adjusted general and administrative expenses.

ADR

ADR represents hotel room revenues, divided by the total number of rooms sold in a given period. ADR measures the average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in our industry, and we use ADR to assess the pricing levels that we are able to generate by customer group, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described below.

Comparable system-wide and Comparable owned and leased

"Comparable system-wide" represents all properties we manage, franchise, or provide services to, including owned and leased properties, that are operated for the entirety of the periods being compared and that have not sustained substantial damage, business interruption, or undergone large scale renovations during the periods being compared. Comparable system-wide also excludes properties for which comparable results are not available. We may use variations of comparable system-wide to specifically refer to comparable system-wide hotels, including our wellness resorts, or our all-inclusive resorts, for those properties that we manage, franchise, or provide services to within the management and franchising segment. "Comparable owned and leased" represents all properties we own or lease that are operated and consolidated for the entirety of the periods being compared and have not sustained substantial damage, business interruption, or undergone large-scale renovations during the periods being compared. Comparable owned and leased also excludes properties for which comparable results are not available. We may use variations of comparable owned and leased to specifically refer to comparable owned and leased hotels, including our wellness resorts, or our all-inclusive resorts, for those properties that we own or lease within the owned and leased segment. Comparable system-wide and comparable owned and leased are commonly used as a basis of measurement in our industry. "Non-comparable system-wide" or "non-comparable owned and leased" represent all properties that do not meet the respective definition of "comparable" as defined above.

Constant Dollar Currency

We report the results of our operations both on an as-reported basis, as well as on a constant dollar basis. Constant Dollar Currency, which is a non-GAAP measure, excludes the effects of movements in foreign currency exchange rates between comparative periods. We believe constant dollar analysis provides valuable information regarding our results as it removes currency fluctuations from our operating results. We calculate Constant Dollar Currency by restating prior-period local currency financial results at the current period's exchange rates. These restated amounts are then compared to our current period reported amounts to provide operationally driven variances in our results.

Net Package ADR

Net Package ADR represents net package revenues divided by the total number of rooms sold in a given period. Net package revenues generally include revenue derived from the sale of package revenue at all-inclusive resorts comprised of rooms revenue, food and beverage, and entertainment, net of compulsory tips paid to employees. Net Package ADR measures the average room price attained by a hotel, and Net Package ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. Net Package ADR is a commonly used performance measure in our industry, and we use Net Package ADR to assess the pricing levels that we are able to generate by customer group, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Net Package RevPAR

Net Package RevPAR is the product of the Net Package ADR and the average daily occupancy percentage. Net Package RevPAR generally includes revenue derived from the sale of package revenue comprised of rooms revenue, food and beverage, and entertainment, net of compulsory tips paid to employees. Our management uses Net Package RevPAR to identify trend information with respect to room revenues from comparable properties and to evaluate hotel performance on a regional and segment basis. Net Package RevPAR is a commonly used performance measure in our industry.

Occupancy

Occupancy represents the total number of rooms sold divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of a hotel's available capacity. We use occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.

RevPAR

RevPAR is the product of the ADR and the average daily occupancy percentage. RevPAR does not include non-room revenues, which consist of ancillary revenues generated by a hotel property, such as food and beverage, parking, and other guest service revenues. Our management uses RevPAR to identify trend information with respect to room revenues from comparable properties and to evaluate hotel performance on a regional and segment basis. RevPAR is a commonly used performance measure in our industry.

RevPAR changes that are driven predominantly by changes in occupancy have different implications for overall revenue levels and incremental profitability than do changes that are driven predominantly by changes in average room rates. For example, increases in occupancy at a hotel would lead to increases in room revenues and additional variable operating costs, including housekeeping services, utilities, and room amenity costs, and could also result in increased ancillary revenues, including food and beverage. In contrast, changes in average room rates typically have a greater impact on margins and profitability as average room rate changes result in minimal impacts to variable operating costs.

The table below provides a reconciliation of net income attributable to Hyatt Hotels Corporation to consolidated Adjusted EBITDA:

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Liquidity and Capital Resources

Overview

We finance our business primarily with existing cash, short-term investments, and cash generated from our operations. As part of our long-term business strategy, we use net proceeds from dispositions to pay down debt; support new investment opportunities, including acquisitions; and return capital to our stockholders, when appropriate. If necessary, we borrow cash under our revolving credit facility or from other third-party sources and raise funds by issuing debt or equity securities. We maintain a cash investment policy that emphasizes the preservation of capital.

During the three months ended June 30, 2024, we issued the 2029 Notes and the 2034 Notes and received $786 million of net proceeds, which are intended to be used to repay the outstanding balance on the 2024 Notes at or prior to maturity and for general corporate purposes. See Part I, Item 1 "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements" for additional information.

We expect to successfully execute our commitment announced in August 2021 to realize $2.0 billion of gross proceeds from the disposition of owned assets, net of acquisitions, by the end of 2024. As of August 6, 2024, we have realized $1,496 million of proceeds from the net disposition of owned assets as part of this commitment.

We may, from time to time, seek to retire or purchase our outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities in open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an accelerated share repurchase transaction. Such repurchases or exchanges, if any, will depend on prevailing market conditions, restrictions in our existing or future financing arrangements, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. During the quarter ended June 30, 2024, we returned $150 million of capital to our stockholders through $134 million of share repurchases and $16 million of quarterly dividend payments. See Part I, Item 1 "Financial Statements—Note 13 to our Condensed Consolidated Financial Statements" for additional information.

We believe that our cash position, short-term investments, cash from operations, borrowing capacity under our revolving credit facility, and access to the capital markets will be adequate to meet all of our funding requirements and capital deployment objectives in both the short term and long term.

Recent Transactions Affecting our Liquidity and Capital Resources

During both the six months ended June 30, 2024 and June 30, 2023, various transactions impacted our liquidity. See "—Sources and Uses of Cash."

Sources and Uses of Cash

Cash Flows from Operating Activities

Cash provided by operating activities increased $48 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to improved performance across the hotel portfolio and a decrease in cash paid for taxes, partially offset by an increase in cash paid for interest.

Cash Flows from Investing Activities

During the six months ended June 30, 2024:

• We invested $785 million in net purchases of marketable securities and short-term investments.
• We issued $85 million of financing receivables.
• We invested $76 million in capital expenditures (see "—Capital Expenditures").
• We acquired the me and all hotels brand name for $28 million, inclusive of closing costs.
• We received $3 million of net proceeds from the sale of Hyatt Regency Green Bay.
• We received $41 million of net proceeds from the UVC Transaction.
• We received $173 million of net proceeds from the sale of the shares of the entities that own Hyatt Regency Aruba Resort Spa and Casino.
• We received $226 million of net proceeds from the sale of Hyatt Regency San Antonio Riverwalk.
• We received CHF 220 million (approximately $244 million) of net proceeds from the sale of Park Hyatt Zurich.

During the six months ended June 30, 2023:

• We acquired Dream Hotel Group for $125 million of cash.
• We invested $80 million in capital expenditures (see "—Capital Expenditures").
• We acquired Mr & Mrs Smith for £58 million, approximately $72 million of cash, or $50 million net of cash acquired, using exchange rates as of the acquisition date.
• We invested $30 million in a convertible debt security.
• We issued $20 million of financing receivables.
• We received $78 million of net proceeds from the sale of marketable securities and short-term investments.

Cash Flows from Financing Activities

During the six months ended June 30, 2024:

• We issued senior notes and received approximately $786 million of net proceeds from the sale, after deducting $14 million of underwriting discounts and other offering expenses.
• We paid two quarterly $0.15 per share cash dividends on outstanding shares of Class A and Class B common stock totaling $31 million.
• We paid $40 million of withholding taxes for stock-based compensation.
• We borrowed CHF 41 million (approximately $44 million) in conjunction with the sale of Park Hyatt Zurich.
• We repurchased 3,422,531 shares of common stock for an aggregate purchase price of $522 million.

During the six months ended June 30, 2023:

• We repurchased 1,987,560 shares of Class A common stock for an aggregate purchase price of $214 million, inclusive of the payment of a $9 million liability for the repurchase of 106,116 shares recorded at December 31, 2022.
• We repurchased $18 million of our Senior Notes.
• We paid one quarterly $0.15 per share cash dividend on outstanding shares of Class A and Class B common stock totaling $16 million.

We define net debt as total debt less the total of cash and cash equivalents and short-term investments. We consider net debt and its components to be an important indicator of liquidity and a guiding measure of capital structure strategy. Net debt is a non-GAAP measure and may not be computed the same as similarly titled measures used by other companies. The following table provides a summary of our debt-to-capital ratios:

(1) Excludes approximately $451 million and $548 million of our share of unconsolidated hospitality venture indebtedness at June 30, 2024 and December 31, 2023, respectively, substantially all of which is non-recourse to us and a portion of which we guarantee pursuant to separate agreements.

(2) Excludes $3 million of cash and cash equivalents reclassified to assets held for sale at December 31, 2023.

Capital Expenditures

We routinely make capital expenditures to enhance our business. We classify our capital expenditures into maintenance and technology and enhancements to existing properties. We have been, and will continue to be, disciplined with respect to our capital spending, taking into account our cash flows from operations.

The decrease in capital expenditures is primarily driven by a decrease in renovation spend at certain owned hotels, partially offset by increased maintenance and technology spend at certain regional offices.

Senior Notes

The table below sets forth the outstanding principal balance of our Senior Notes at June 30, 2024, as described in Part I, Item 1 "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements." Interest on the outstanding Senior Notes is payable semi-annually.

We are in compliance with all applicable covenants under the indenture governing our Senior Notes at June 30, 2024.

Revolving Credit Facility

Our revolving credit facility is intended to provide financing for working capital and general corporate purposes, including commercial paper backup and permitted investments and acquisitions. At both June 30, 2024 and December 31, 2023, we had no balance outstanding. See Part I, Item 1 "Financial Statements—Note 9 to our Condensed Consolidated Financial Statements."

We are in compliance with all applicable covenants under the revolving credit facility at June 30, 2024.

Letters of Credit

We issue letters of credit either under our revolving credit facility or directly with financial institutions. We had $101 million and $256 million in letters of credit issued directly with financial institutions outstanding at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, these letters of credit, which mature on various dates through 2025, had weighted-average fees of approximately 92 basis points. See Part I, Item 1 "Financial Statements—Note 12 to our Condensed Consolidated Financial Statements."

Critical Accounting Policies and Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have disclosed those estimates that we believe are critical and require complex judgment in their application in our 2023 Form 10-K, with an additional consideration below.

Guarantees

We enter into performance guarantees related to certain hotels we manage. We also enter into debt repayment and other guarantees with respect to certain unconsolidated hospitality ventures, certain hospitality venture partners, certain managed or franchised hotels, and indemnifications provided as a result of certain dispositions for liabilities incurred prior to sale. We record a liability for the fair value of these guarantees at their inception date. In order to estimate the fair value, we generally use either scenario-based weighting, which utilizes a Monte Carlo simulation or a probability-based weighting approach to model the probability of possible outcomes, or the with and without method under the income approach, which calculates the difference in present value of anticipated cash flows with and without the guarantee. The valuation methodology includes assumptions and judgments regarding probability weighting, discount rates, volatility, hotel operating results, hotel property sales prices, and timing of expected cash flows. Our assumptions are based on our knowledge of the hospitality industry, market conditions, location of the property, contractual obligations, and likelihood of incurring costs related to claims for which we indemnify third parties, as well as other qualitative factors. See Part I, Item 1 "Financial Statements—Note 4 and Note 12 to our Condensed Consolidated Financial Statements."

We are exposed to market risk, primarily from changes in interest rates and foreign currency exchange rates. In certain situations, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objectives described above, and we do not use derivatives for trading or speculative purposes. At June 30, 2024, there have been no material changes to our market risk previously disclosed in response to Item 7A to Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Disclosure Controls and Procedures. We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this Quarterly Report, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.

There has been no change in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

At June 30, 2024, there have been no material changes from the risk factors previously disclosed in response to Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.