Hyatt Hotels Corporation
Q2 2022 Earnings Call Transcript

Published: 9 Aug 2022

[Operator:]

Good morning and welcome to the Hyatt Second Quarter 2022 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Noah Hoppe, Senior Vice President, Investor Relations. Please go ahead.

[Noah Hoppe:]

Thank you, operator. Good morning, everyone, and thank you for joining us for Hyatt's second quarter 2022 earnings conference call. Joining me on today's call are Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini Hyatt's Chief Financial Officer. Before we get started, 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 on this call will be available on our website for 90 days. And with that, I'll turn the call over to Mark.

[Mark Hoplamazian:]

Thank you, Noah. Good morning and thank you to everyone for joining us today. This morning we reported our second quarter 2022 earnings results, further demonstrating the power of Hyatt's transformation into a fundamentally stronger and uniquely positioned company. The attributes that define our differentiated model include

[Joan Bottarini:]

Thanks Mark and good morning, everyone. My commentary today will cover consolidated financial results, key drivers of our strong performance and expectations I can share for the remainder of 2022. This morning, we reported second quarter net income attributable to Hyatt of $206 million and diluted earnings per share of $1.85 with our results favorably impacted by gains on sale of real estate of $251 million, the acquisition of ALG and significantly improved operating performance. Adjusted EBITDA for the quarter was $255 million. Additionally net deferrals were $25 million and net finance contracts were $15 million. As Mark mentioned, this was a record quarter. We experienced a record level of leisure demand and a rapid recovery in group and business transient demand. We translated this demand into strong rate realization, fee growth and margin expansion through excellent execution. Adjusted EBITDA for Hyatt excluding ALG was $201 million for the quarter which is approximately 13% higher than 2019, adjusted for currency and the net impact of transactions. The improved performance of the legacy Hyatt business reflects strength in our core business and new fees generated from our industry-leading growth. We reported a record level of total management franchise and other fees 27% higher than any other quarter in the company's history and up 30% to 2019 in the second quarter, driven by RevPAR expansion and industry-leading networking growth. Comparable RevPAR growth was 3% to 2019 in the Americas and 12% to 2019 in EMEA and Southwest Asia in the second quarter with our Asia Pacific region trailing. The Americas and Indian Southwest Asia Lodging segment combined resulted in an approximately 11% expansion in fees in 2019. Turning to our owned and leased portfolio. The segment generated $99 million in adjusted EBITDA for the quarter down 14% to 2019 on a reported basis, while being up 20% to 2019 when adjusted for currency and the net impact of transactions. Comparable owned and leased margins improved to 31.9% in the quarter, up 800 basis points to 2019 levels for the same set of properties, reflecting another quarter of very strong operational execution and an increase in average daily rate of 15% in 2019. International comparable owned and leased properties accounted for $9 million of adjusted EBITDA growth to 2019, driven by strong results in our European properties namely the Park Hyatt Paris and the Park Hyatt Zurich. Additionally, our Miraval portfolio continued to perform exceptionally well generating an $8 million increase in adjusted EBITDA compared to 2019. Looking ahead to the third quarter, the rate of RevPAR recovery strengthened in July benefiting from strong summer leisure travel and group demand with system-wide RevPAR in July finishing 5% ahead of 2019 and ADR growth of 17% marking the first month in which system-wide RevPAR exceeded 2019 levels. Our comparable owned and leased hotel RevPAR in July was up 12% with ADR growth of 18%. On a system-wide basis, leisure revenue maintained its strength and group revenue slightly exceeded 2019 levels in July, a remarkable milestone considering group revenue was down more than 40% in the first quarter of this year and 11% in the second quarter. Looking into August and onwards, total transient bookings remained strong with comparable transient revenue at approximately 1% higher than 2019 for the remainder of this year and 4% higher excluding Greater China. We also continue to see strong short-term demand for group with short-term group bookings at approximately 40% above 2019 levels for our Americas full service managed property. Overall the trends and trajectory are very encouraging and consistent. Demand is broadening both geographically and by segment. We have confidence that the recovery in demand will continue into the latter half of this year and we're particularly encouraged by the momentum we're seeing in Asia Pacific. Turning to ALG. The performance of the segment once again significantly exceeded our expectations. Adjusted EBITDA for the quarter was $54 million, net deferrals were $25 million and net finance contracts were $15 million. As a reminder, it's critical to assess performance of some of these three items; adjusted EBITDA, net deferrals and net finance contracts. Due to GAAP revenue and expense recognition requirements related to ALG's Unlimited Vacation Club business. We've provided a table on page 3 of the schedules in the earnings release for reference and net deferrals and net finance contracts as well as a supplemental presentation for modeling ALG's contribution to Hyatt. I'll take a moment to cover three areas that drove ALG's financial results. First, net package RevPAR for the same set of hotels in the Americas was up 17% to 2019 during the quarter reflecting strong net package ADR which was up 19% in the second quarter of 2019. New hotels added to the ALG resort portfolio and significantly improved performance drove $36 million in total fee revenue in the quarter. Incentive fees were notably strong and record average rates fuel expanding operating margin growth. Second, approximately 8,500 membership contracts were signed for ALG's Unlimited Vacation Club in the quarter the primary driver of performance for other revenues, net deferrals and net finance contracts. This level of sales exceeds 2019 by 20% driven by sales of memberships at higher tiers. UVC now has 125,000 active members exceeding 2019 by 30%. Third, the ALG Vacations business realized strong results with strong unit pricing, increased airlift and consumer preference for all-inclusive luxury. In the quarter, ALG Vacations reported 744,000 guest departures, which drove $256 million of distribution and destination management revenue, and $206 million of expense in the quarter reflecting approximately 20% margins on the business significantly above 2019. The strong margin levels were aided by strong seasonal demand. And on a full year basis, we anticipate margins for the Vacation business to be in the mid to high-teens. In summary, ALG posted another quarter of very strong financial results. We remain optimistic as we look into the remainder of the year for several reasons including the strength of demand in which we see no sign of softening travel restrictions that have been lifted in key ALG markets, improved airlift that is approximately 24% above 2019 levels for key Americas destinations and a favorable pricing environment. We'd also reiterate that ALG is seasonal. And while we anticipate the growth rate relative to historical periods to remain strong, the EBITDA contribution of the segment is expected to moderate relative to what was generated in the first half of the year as we enter seasonal periods of lower leisure demand and also make investments in the second half of 2022 targeted towards future growth opportunities. I'd also like to provide an update on our strong cash and liquidity position. As of June 30, our total liquidity includes nearly $2 billion of cash, cash equivalents and short-term investments up approximately $650 million from the prior quarter driven by cash flow from operations and net proceeds from asset sales. The increase in our liquidity is net of approximately $180 million of debt reduction, primarily related to the Grand Hyatt San Antonio sale and approximately $100 million in share repurchases during the quarter. In addition to our cash position, we maintained approximately $1.5 billion in borrowing capacity on our revolving credit facility. We entered into a new credit agreement during the second quarter with the maturity of May of 2027. As of June 30th, we have no debt maturities in the next 12 months. However, we will have an option beginning in the fourth quarter of 2022 to pay down a portion or all of the notes issued in the fourth quarter of 2021 and we expect to pay down a significant portion of these notes in keeping with our commitment to an investment-grade profile. Finally, I'd like to make a few comments regarding our 2022 outlook. While we acknowledge that long-term visibility remains challenging, especially in certain markets where travel restrictions remain in place, we expect full year 2022 system-wide RevPAR to grow between 55% and 60% to 2021 and to be down between 9% and 4% to 2019. This implies that RevPAR over the latter half of the year will be in the same approximate range as 2019 for the same set of comparable hotels adjusted for currency. Additionally, we continue to expect adjusted SG&A to be in the approximate range of $460 million to $465 million excluding any bad debt expense and continue to expect capital expenditures to be approximately $210 million. Lastly, turning to net rooms growth. While we recognize macro factors such as supply chain issues and COVID-related restrictions are impacting the timing of opening. As Mark mentioned, we are particularly encouraged by the volume of conversion opportunities in the second half of 2022 and expect net rooms growth for the full year to be greater than 6%. I will conclude my prepared remarks by saying that we're very pleased with our second quarter results, which demonstrates the progress we've made on our asset-light transformation and the excellent execution driving core business results by our global property and support teams. Our optimism for the future is fueled by our confidence in new teams as well as the visibility we have to continued momentum in demand. Thank you. And with that, I'll turn it back to our operator for Q&A.

[Operator:]

Thank you. [Operator Instructions] The first question comes from the line of Joe Greff with JPMorgan. Please go ahead.

[Joe Greff:]

Good morning everybody. Nice results.

[Mark Hoplamazian:]

Hey Joe.

[Joe Greff:]

Mark I was hoping if you could talk a little bit in detail about the environment for divesting hotels right now compared to buyer appetite and pricing versus six months ago? How wide is the bid/ask? To what extent does the buyer universe tend out or has shifted in buyer characteristics?

[Mark Hoplamazian:]

Thanks Joe. I think the primary difference over that period of time has to do with rates and availability of debt for acquisitions. And that has a greater impact on private equity than it does on other types of buyers. I would say that we have discovered that that can work in favor of all cash buyers. And I think we took advantage of that in being able to be certain with the Irvine company about purchasing Hotel Irvine. I think that was the difference maker in being able to secure that hotel at what we think is a very compelling value. But the certainty of closing was 100% because we were a cash buyer. So, I think that's actually the key issue. I think the -- it's hard to say that it actually had a direct impact on realized values. Yes, it might -- it's a year from now. We have interest rates at this or higher levels and availability at lower levels. It might, because you're talking about a chunk of the buyer universe that needs significant leverage to make their numbers work not playing. We have a number of unique assets in our -- remaining in our portfolio of significant value, things like the Hyatt Regency in Orlando, which is really a very uniquely positioned, very high-performing hotel in the midst of the Orange County Convention Center. We have our trophy assets in Europe and the Miraval portfolio all of which continue to perform exceedingly well. And the buyer universe for a number of those properties is not really, what I would consider the market. So, we don't have a particularly -- any particular concerns. We're 1,000% confident we will get to and probably exceed the $2 billion goal that we set for the end of 2024.

[Joe Greff:]

Great. And then my second question for you guys is with respect to your target for this year to grow net rooms by greater than 6%. Obviously, ALG is experiencing stronger than expected room growth as you guys talked about. How do you think about Hyatt legacy management franchise footprint growth within that greater than 6% target? Can it accelerate from the 4.6% that you guys achieved in the second quarter? And that's all for me.

[Mark Hoplamazian:]

Yes. Yes and that is our expectation. I would say that the proportion of our growth year-to-date and prospectively, that is coming from conversions is higher than our historical levels. Historically, we were in the mid-20s. And I think we're more than 1,000 basis points above that now year-to-date and that's a gift that's going to keep on giving. So, our outlook does include significant conversion activity that's underway. The big issues with respect to Hyatt legacy growth -- rather legacy Hyatt growth has to do with China, which really took a full three to four month break. It was a hard break like, construction shutdown and completion rates stopped up until the lockdowns. 51% or thereabouts of all of the hotels that we set out at the beginning of the year that we felt was open on time. And of the remainder, a significant portion of the gap that opened up in the second quarter has come from China and to a certain extent from COVID and supply chain. So, those are the key issues but they're temporal. When we see the kind of recovery that we talked about in China in terms of the actual RevPAR recovery into July down -- basically 80% recovered in July up from 40% -- or 35% recovered in April. That's a huge a huge change that happened very rapidly. So, we know that there's going to be continued ups and downs in China, because there are other markets that will likely go through constraints and restrictions. But overall, whether we open our full measure -- scheduled to open hotels in China this year or into the first quarter of next year, it's less important to us than knowing that we got that backlog which we do. But we're really confident about our greater than 6% outlook for the year, primarily based on other substitution that we've been able to get the rest of.

[Operator:]

Our next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.

[Shaun Kelley:]

Hi. Good morning, everyone. Thanks for taking my question. I just wanted to dig into ALG a little bit more. We're obviously starting to get a lot of questions about the Leisure business and wondering not just how strong it is, but how we're going to be able to sort of repeat the levels of demand that we've experienced so far. So, I was wondering if you could just help us think about this business line -- kind of structural versus cyclical. So, how much of the growth are we experiencing is due to new rooms to add to that system since 2019 growth in the Vacation kind of the Unlimited Vacation Club offering versus just the RevPAR piece? I know it's maybe a little bit detailed, but help us think about kind of those two areas of the business, so we can get a better sense of how much of that growth we can keep if demand does normalize a little bit.

[Joan Bottarini:]

Yes. Maybe Shaun, I'll start with a couple of comments about the seasonality question that you raised. Clearly, we saw exceptional demand across all of the Leisure-oriented businesses within ALG in the first half of the year. And traditionally, you would find that, the latter half of the third quarter and the beginning of the fourth quarter, you see some seasonality just flowing in leisure demand. But we're frankly still learning about the business. And we do see that, there's been some tailwinds with respect to the reduction in – or the limitations being reduced on travel to the Caribbean and Latin America, back into the US. So that provides a tailwind. And we're seeing that, the growth that you just mentioned, the new unit growth is actually helping to also fill in some of the areas that may have been a little bit slower. So it's a learning process for us. The momentum is exceptionally strong. As we look forward into the holiday period, we are up significantly into the festive period, and even we're seeing some strong momentum into the first quarter of 2023. And then just maybe a comment before, I turn it to Mark is that, on the record levels of fees that we generated in the quarter ALG contributed about 20% of those fees. And about 50% of that is coming from incentive fees. So ALG contributes a significant portion of incentive fees. And as you mentioned that, with new unit growth – new unit growth will continue to provide a tailwind for us as those hotels that are opening -- are ramping into the future.

[Mark Hoplamazian:]

Yeah. So there are a couple of other things that, I'd just add to that. First, gross package revenue in July was something like 74% above the same period in 2019, which is a staggering number. A lot of that is the growth, the actual organic growth in the portfolio. We are more than 50% bigger as an enterprise as a network than we were three years ago. The pacing that Joan referenced is quite remarkable. I mean, we're seeing Q3 business on the books up over 35% and pacing in July for the remainder of the year close to 40% or a bit above that actually relative to 2019. So we're getting both the benefit of the growth of the system, and the pacing those data for all comparable ALG resorts. Part of that is being driven also by Europe. Europe was very disruptive last year, because the Omicron scare sort of persisted into late in the summer – or sorry the Delta impacted. So we really didn't get a full season in Europe, and this year we will get really the bulk of the season. But also in the next – into the first quarter of next year Joan mentioned, we're tracking mid-teens increases in ADR year-over-year, with about 25% of the business on the books already for the quarter. So this is not something that's a flash in the pan. And I think, there's a misconception that it's all a bunch of volatility and that's just incorrect. We're seeing actual trend lines that are very clear. And I would say, with the increase in lift, which is significant into the key markets in the Americas, we're able to actually get passengers, to where we have resource which is really important. On the UVC question, our growth model when we purchased the company the underwriting was to maintain, all of the metrics that UVC had historically meaning the number of guests that we introduced to the UVC product, and also the conversion rates of those who come to investigate and to those who buying. We haven't assumed any major changes in those rates in our projections. So a lot of it is being driven by net rooms growth. The other thing I would say, though, is that the entirety of our UVC member base only represents 13% of our total room revenue at ALG. So there's a massive amount of room to grow. And the last thing is on vacations. Vacations is fundamentally a completely different business than it was in 2019. They have fundamentally changed the cost model. A lot of machine learning and AI has been applied in the processes that they have. The software platform it runs on is a business that actually enjoys software margins. The ground -- the destination management company Amstar enjoys very healthy margins and very solid attachment rates of like 75% of all vacation business that's booked. So while we are tracking lower in terms of the total number of passengers that were moving through vacations they are to higher-margin markets. And the margins of the business have -- they bear no resemblance to where they were before. As a consequence of that, as we look into the latter half of the year, we do plan to make significant investments behind our B2C platform. So some measure of the SG&A that we will spend in the latter half of the year we'll be going to building and strengthening our B2C activities and promotional activities with respect to all of our resorts in Europe and in the Americas because we feel we're selling into strength at this point.

[Shaun Kelley:]

Thank you for all the detail. And maybe just as a follow-up and just really sticking with the same theme. Obviously, the business has changed pretty dramatically when we factor in ALG. And when we just think about the enterprise-wide, let's call it, EBITDA or operating income. Can you help us just think about how typical seasonality should progress maybe a little bit for modeling purposes just so we can not get too far out over our skis or over our umbrellas?

[Mark Hoplamazian:]

Yes. It's a little tough to answer with specificity only, because look the first half of the year is much stronger than the second half in terms of earnings generation for a business like ALG. Having said that, July all of the trends that we saw in July have continued -- sorry, in the second quarter continued into July. I just gave you the pacing numbers for the third quarter and the remainder of the year. So I would say that there is seasonality. We -- remember -- remind ourselves that we live in a seasonal business, and we -- and the second rule is never forget that rule. So we don't think we'll see the same persistent level of earnings through the remainder of the year. However, I would say, we are confident about the back pressure of demand that will persist. And I think our job right now is to optimize what we're doing and to pull World of Hyatt through in a more aggressive way. The beginning of that has been fantastic. And I think the result of that is going to be more direct channel, more group, because we're starting to sell group into the ALG portfolio and vice versa. We've gotten good references from ALG to the legacy high portfolio. So I would say, yes, the second half will be a lower earnings level in part also because of some of the investments that I just mentioned. We're going to be -- these are not persistent investments that will be every year forever more. These are very targeted to building out some strength in some certain areas that we believe will accelerate our ability to generate more direct channel across the whole system.

[Operator:]

Our next question comes from Michael Bellisario with Baird. Please go ahead.

[Michael Bellisario:]

Thank you. Good morning everyone.

[Joan Bottarini:]

Good morning.

[Mark Hoplamazian:]

Good morning.

[Michael Bellisario:]

Mark big picture question before I talk about next steps for the company ALG is performing well. You just explained that asset sales are progressing. So kind of how do you think about the next drivers if it's not premature to do so? And maybe how do you think about the white space within the portfolio today as it sits?

[Mark Hoplamazian:]

Well, I think, we are really optimally positioned. We've got -- we produced remarkable results in the second quarter with a 1,000 basis point gap to 2019 occupancy levels really all of which is group and transient related. While we're getting back to 2019 levels just now, we're ahead of 2019 in July. Our group is back to 2019 levels in July. So we're recovering in those areas back to 2019 levels. That sounds great, but the fact is that the backdrop for that is that GDP is up 17% over the last three years. Personal consumption is up 19%. Non-residential fixed investments are up in the high teens, and RevPAR is now just recovered. So if you look at total share of wallet of the consumer, it's not even close to where it was pre-pandemic for travel. And I would say that in times of economic uncertainty, we don't have a crystal ball. And I don't know if there's going to be any significant pressure in the overall economy. There are a lot of counter veiling forces -- I can tell you that our customer base is rock solid and all of the forward-looking data that we shared including the fact that our top 10 customers are 80% recovered in business transient and growing is really great evidence that across our portfolio, we expect to continue to execute, to continue to drive higher loyalty penetration, which is now approaching 50% of our total room count -- room revenue. Direct channel which is approaching 75% of our total high channel that is of total production with a concurrent reduction in OTA penetration. And all of that spells great news for our owners. So I would say the coming year and two is about continuing to execute against our plan. And we are going to meet our sell-down requirements. And I do want to take a minute on that. So from the beginning of our affirmative sell-down commitment that is 2017, we had sold $3.7 billion worth of real estate at over 17 times earnings. During that period of time, we also acquired -- spent about $3.5 billion on platforms that is Miraval, Two Roads and ALG, which have yielded platforms that have significant prospective growth that we created at high single-digit to very low double-digit multiples. So the value creation in that trade is somehow maybe misconfused. I just wanted to remind everybody that this is -- there's a method to how we went about doing this because we wanted to have the capacity to be able to spend $3.5 billion on transformative acquisitions. And by rapidly disposing of the entire portfolio of our real estate and distributing the cash to shareholders puts us in a position in which we are needing to issue new stock at uncertain times. So from my perspective, I think our plan has actually been executed extraordinarily well. As it relates to Irvine, we have demonstrated through Mexico City and the Hyatt Regency Indian Wells and Ventana, the capacity to acquire, renovate, reposition and sell in some cases in very short order assets. And that's precisely what we plan to do. So if you look back this hotel went independent in 2014. It was shut down from 2020 to 2022. So our multiple of acquisition, if you look at an independent hotel unaffiliated in many ways from 2019 levels is about 15 times, but we think we're creating an asset here in the high single-digits after a significant renovation program which could be in the range of $40 million. We haven't finalized the exact budget. But even if you add $40 million to the $135 million purchase price. That only gets you to $323,000 a key which in a market like Irvine has an extraordinary result for a full-service hotel. By the way over that period of time, all of the office space around the hotel has been filled by companies that show up in our top 10. So this is a market that's dead center for us. It's the center of the bull's eye in terms of people that we want to serve more. So I think that the evolution of the company is -- I think people are catching up to realizing the earnings power of this the fact that we have moved affirmatively and very significantly into an asset lighter model and that's going to continue. The fee generation coming out of ALG is additive to that and an accelerant and the growth that we're going to see remains the highest in the industry. And ALG is accelerating. So I just -- I see a lot of things that we put into place that we will continue to execute against. We are looking at other potential acquisitions that fall into the same category. But growth platforms that we can execute on, that would fit into our portfolio, that strengthen our position in the high-end traveler. We are by far the company that has the highest concentration of luxury and lifestyle and resort now. And with over 50% of our revenues coming from leisure travelers, we're exceedingly well positioned as we head into next year.

[Michael Bellisario:]

Got it. Very helpful. Thanks. And just one very quick follow-up on net unit growth. You mentioned delays with openings and starts any impact on signings and where our signings at today versus 2019 levels?

[Mark Hoplamazian:]

We maintained our pipeline and signing has slowed in China for sure. People have basically put pens down for the time being. And I would say that the signing rate for upscale and mid-scale hotels in the US has also slowed because of financing primarily. I should say – I'll correct that. Signings haven't necessarily flowed. The inclusion in our pipeline includes in our opinion – they have to be fully financed deals in order to make it into our pipeline stack. So our signing activity and the LOI activity remains at a very healthy level but they're not showing up in the pipeline yet because they're not fully financed. So we are maybe very conservative when it comes to including what's in pipeline and what is out.

[Operator:]

Our next question comes from the line of Patrick Scholes with Truist Securities. Please go ahead.

[Patrick Scholes:]

Hi, guys. Good morning, everyone. I believe you talked previously about low double-digit unit growth for your ALG pipeline. I'm wondering how does that compare versus the market. What is the overall competitive supply growth in those markets right now?

[Mark Hoplamazian:]

Thanks for the question. First of all we had said that we would – we expected low double-digit growth for the year. We've already met that in the first half of the year with a lot of activity underway. So I think once again ALG is proving to be really effective at translating their integrated platform into a differentiated position when it comes to competing for new properties including conversions by the way. ore than 50% of the total conversions we've had year-to-date are in the ALG portfolio. With respect to the marketplace, the market frankly is if you look at just rooms, it's dominated exclusively by owner operators, the Spanish companies and some others that primarily operate with building and then operating their own hotels. And the pace of growth there is necessarily limited by the capacity and – both the financial capacity and the organizational capacity to continue to build hotels and to find sites that are attractive. ALG on the other hand is really the only scaled brand management company, which is strictly management in its business model in the world. So we feel like we've got the opportunity to do innovative deals for conversions of either single or collections of properties, where families invested in resorts but are not prepared to continue to invest behind the platform that's required to continue to be a great operator. So that's really where the opportunity set lies. We have a global footprint with a growing level of activity across our other regions that is the Middle East and in Asia Pacific, where our teams are now spending more time together. One interesting development since we were last on the phone with you all is that we announced that an ALG executive, Javier Aguila, who was the founder of the Alua brand and ran ALG's European operations will become the new Group President for our EMEA and Southwest Asia region part and that will take effect in a couple of months' time. And there's a lot there. Javier is an extraordinary leader, but he also understands the deal market in Europe extraordinarily well, having worked in private equity before he got into the hotel business and he knows the all-inclusive market extraordinarily well. So we have a remarkable benefit of having two organizations that are working really well together. And I think that's just going to continue to support further growth not just in Europe and in the Americas but really global.

[Patrick Scholes:]

Okay. Thank you.

[Operator:]

Our last question comes from Dori Kesten with Wells Fargo. Please go ahead.

[Dori Kesten:]

Thanks. Good morning. Just two follow-up questions on ALG. Can you give the relationship between gross booking pace heading into a month or quarter versus the actual net package RevPAR that you achieved? I'm just trying to translate 44% pace into RevPAR?

[Mark Hoplamazian:]

It would be roughly the same. However, we did mention that non-pack revenue is actually growing at a higher rate than package revenue was and package RevPAR. So I would say that it's roughly the same with some upside from non-package revenue that's not embedded in the net package revenue ADR -- sorry RevPAR that we report on.

[Joan Bottarini:]

Similar to the total RevPAR pace that we provide and on group for example, and the translation to total revenue, which includes all of the SMB, the legacy Hyatt portfolio.

[Mark Hoplamazian:]

Yeah. This is -- that's a really important reminder. So let me just take a minute on that. So in the second quarter when we look at banquet spend, I’m talking about legacy Hyatt now. Banquet in US managed hotels represented 46% of our total revenue base in the second quarter, 46%. So we spend a lot of time talking about RevPAR progression and rooms, but there's this entire other business, which by the way has been operating at a revenue level -- banquet spend per occupied guest room level, 4% above 2019 levels and driving margins that are now in excess of 50%. So our total revenue base and therefore by the way our fee-based is being driven, fully half of it now is being driven by banquet spend. And when you look at pace for banquets and group events pace, July through December we're at 98% of 2019 levels. And just by way of reminder, our pace into the remainder of the year at the end of July it's 93%. Local event is at 70%, but the group events case is at 98%. So the overall is about 90%. That's a remarkable achievement in the same way that you would need to remember that banqueting and F&B is a really important part of our business. And by the way a differentiator for us and for ALG. You would need to remember that for ALG. That's just groups -- that's just for group. The banqueting dining revenue base that I mentioned is just for groups. So it doesn't include outlets and other F&B revenue. So I would say it's got the same relationship. The non-package revenue success that ALG resorts have demonstrated is something that we're actually tapping into. We are putting together a team to pull some of their F&B and programming across the Hyatt properties. And at the same time, we're taking Hyatt well-being programming that we are now expanding across our portfolio and pulling it into ALG. So we think that the opportunity set for non-RevPAR driven revenue growth is higher probably than our RevPAR outlook in any period, because we continue to provide really compelling experiences that our guests are paying a lot for.

[Dori Kesten:]

Got you. Thanks. And then, my last one is, now that you now that you've owned the business for about 10 months, do you have any different views on whether distribution needs to remain part of team UVC to achieve the best results across the three businesses?

[Mark Hoplamazian:]

I would say that to date, we are -- we remain in learning mode with respect to Vacations, learning and admiration. I think that the plan that they set out three years ago to transform that business has been executed excellently. The margin progression is running ahead of anything that I think they expected or we did. A lot of the choices that they made -- delivered choices they made have paid off. So, I sit in great admiration for that team and also a key awareness that the integrated approach that we take, does actually matter to our owner base. Having said all of that, it is a business that has different attributes than our core business. But as we sit here right now, I would say, we have benefited, both at legacy Hyatt Hotels as well as the ALG portfolio from learning and from continuing to uncover ways in which we can leverage the Vacations platform in different ways. So right now, our outlook is to continue to go down that learning path and make sure that we're maximizing the opportunity set that we can identify for maximizing value with no plans at this point with respect to any nonorganic transactional activity.

[Noah Hoppe:]

All right. Well, thank you to everyone for taking the time to join us today. Take care. We look forward to speaking with you again soon.

[Operator:]

This concludes today's conference call. Thank you for participating and have a wonderful day. You may now disconnect.