Hyatt Hotels Corp

NYSE:H

Earnings Call Transcript 2019-Q1

[Operator]

Good day, ladies and gentlemen, and welcome to the First Quarter 2019 Hyatt Hotels Corporation Earnings Conference Call. My name is Mariama, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Brad O'Bryan, Treasurer and Senior Vice President, Investor Relations and Corporate Finance. Please proceed.

[Bradley O'Bryan, executive]

Thank you, Mariama. Good morning, everyone, and thank you for joining us for Hyatt's First Quarter 2019 Earnings Conference Call. I'm here in Chicago with Mark Hoplamazian, Hyatt's President and Chief Executive Officer; and Joan Bottarini, Hyatt's Chief Financial Officer. Mark will begin our call today with highlights of our first quarter operating results and then update on our integration of Two Roads as well as our progress on personalizing our guest and customer experience. Mark will then turn the call over to Joan who will provide more detail on our financial results for the quarter as well as an update on our full year outlook for 2019.

We will then take your questions.

Before we get started, I would like to remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which 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 late yesterday, along with the comments on this call, are made only as of today, May 2, 2019, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold.

You can find a reconciliation of non-GAAP financial measures referred to in our remarks on our website at hyatt.com under the Financial Reporting section of our Investor Relations link and in last night's earnings release.

An archive of this call will be available on our website for 90 days per the information included in last night's release.

With that, I'll turn the call over to Mark.

[Mark Hoplamazian, executive]

Thank you, Brad. Good morning, everyone, and welcome to Hyatt's First Quarter 2019 Earnings Call. Before I provide an overview of our results for the quarter, I want to take a moment to thank those who attended our Investor Day in March.

We made a clear statement regarding our commitment to the asset-light path that we're on with a significant expansion of our asset sell-down program.

While we are not in a position to provide details on any pending transactions at this time, we are in the process of pursuing the sale of selected assets and will provide updates as appropriate. In addition to our latest announcement relating to our capital strategy, we spent a good deal of time focused on how we expect to compete in a differentiated way by personalizing experiences through the lens of our key constituents, namely our guests, our colleagues, our customers and our owners.

We believe that we are uniquely qualified to succeed with this strategy for 3 key reasons: First, we are uniquely and consistently focused on the higher-end traveler. Second, our brands operate at the top end of their respective segments and our properties are at a consistently high level of quality with compelling design that allows us to deliver a differentiated set of experiences that resonate with our customer base. And third, our size and scale positions us to better know and personally care for our guests, our customers and our owners in a way that we believe that our primary competitors simply can't, given their much larger scale.

We recently had an opportunity to review our strategy with our hotel owners as we held an owners conference at our beautiful 1,800-room Grand Hyatt Hotel at Baha Mar in the Bahamas.

During our owners conference, we engaged with a large number of owners who provided us valuable feedback and aligned with us on our shared commitment to a differentiated path to success.

We heard consistent feedback highly supportive of our strategy to focus on personalizing the experience for our guests and our customers.

They see the results in their own hotels as we care for our guests and customers, and they feel it on a personal level as we engage with them and respond to their needs on an individual basis.

One clear area of meaningful momentum noted by our owners is the results being driven by our World of Hyatt loyalty platform. We're seeing ongoing material increases in program metrics as we continue to focus on growing and enhancing the program and leveraging strategic partnerships.

First quarter enrollments have increased over 40% compared to last year with significant numbers of enrollments occurring at the hotel level. We are very focused on the experience of our most loyal customers, and I am proud to report that our elite member customer service metrics continue to improve significantly. Also of great importance, our global room night penetration continues to expand, increasing more than 500 basis points over the last year.

World of Hyatt members now represented 41% of all room bookings in the first quarter.

One dimension of our approach to enhancing the value of membership in the World of Hyatt is our partnerships with world-class brands that have a base of highly complementary guests and customers.

Our partnership with small luxury hotels or SLH continues to drive meaningful member engagement with over 96% of the hotels in the program already seen bookings from World of Hyatt members.

Italy has been the country with the most bookings during the quarter, with over 2,000 reservations across 27 hotels in 15 different Italian cities.

Rome, a market in which we do not have a Hyatt branded presence has been the most popular with significant bookings in the 7 participating SLH hotels.

Also of note is that the single property with the most bookings is The Sukhothai Shanghai, reflecting the strength of our member base in China.

We expect to add more than 40 additional SLH hotels to the program later in May, which will bring us to over 200 hotels in the program. This materially enhances the stay opportunities for World of Hyatt members in markets where Hyatt is not represented or is underrepresented.

Further, on the partnership front, we recently announced our strategic partnership with American Airlines, which will provide frequent travelers more ways to earn miles, points and status when they fly with American or stay with Hyatt. We are presently working closely with American to operationalize and launch the partnership in the very near future.

We expect the partnership will further enhance the World of Hyatt program, increasing enrollment and room night penetration as we've seen with the SLH partnerships. We look forward to sharing more with you on our partnership with American Airlines once it is in operation.

Before leaving this topic, I'm proud to announce that the World of Hyatt has just received 2 Freddie Awards for the best hotel elite loyalty program in each of the Americas and the Middle East and Asia.

This recognition demonstrates the success we are achieving through personalized engagement with our elite members.

I'm also pleased to point out that American Airlines received the Freddie Award for best airline elite loyalty program in the Americas. These awards confirm the power that a strategic partnership of 2 of the top loyalty programs in the travel industry should have, especially in relation to our elite members who represent a high percentage of our total revenue and profitability.

Moving on to our first quarter 2019 results. I'm pleased to report that we delivered solid results with adjusted EBITDA of $187 million.

Adjusting for the year-over-year impact of transactions, Easter holiday timing and other nonrecurring items, adjusted EBITDA increased approximately 6% on a constant currency basis, driven by strong growth in management and franchise fees and margin expansion in our owned and leased portfolio.

Systemwide RevPAR increased 1.8%, led primarily by increases in average daily rate with a small increase in occupancy.

During the first quarter, we delivered net rooms growth of 7.3% on a year-over-year basis, excluding the Two Roads hotels that are now part of our portfolio.

This is a terrific result, and I'm proud to announce this represents the sixth consecutive quarter of year-over-year net rooms growth of at least 7%. We expect to continue this industry-leading pace of growth well into the future, given our strong pipeline and demand for our brands globally. Including the Two Roads hotels, our net rooms growth was 13.7%, and the new Two Roads brands significantly expand our future growth potential.

Notwithstanding another very strong quarter of hotel openings, our pipeline of signed deals grew to approximately 91,000 rooms, an increase of about 25% compared to the same time last year. This rate of growth includes the addition of Two Roads hotels.

On a sequential basis, our pipeline increased by 2,000 rooms even after opening over 2,000 net rooms during the quarter. Our pipeline accounts for over 42% of our existing portfolio.

Before Joan provides more detail on our first quarter results, I'd like to provide a brief update on the progress we've made thus far in integrating the Two Roads hotels. As you know, we closed the transaction late last year and immediately began our integration efforts.

I'm pleased to share that the integration is on track and going very well. In connection with the Two Roads acquisition, we welcomed over 12,000 talented colleagues into the Hyatt family.

Given our shared commitment to genuine care and our aligned values, we found that uniting us all under a new combined brand portfolio has been quite a natural process and has gone very smoothly.

Simply put, culture matters and drives results, and that is what we are seeing.

I'd also point out that our owners conference that I referenced earlier included many owners of the hotels that joined our system as part of the Two Roads acquisition. It was clear based on discussions with those owners that there is a high level of engagement and excitement about our future together under a common set of goals and strategies to optimize performance across the brands and a great level of interest in growing our brands together.

On the technology systems and loyalty front, we are converting the hotels by brand, starting with the Thompson Hotels, which we converted in late March. The conversions include all of our core operating systems and full integration into World of Hyatt, hyatt.com and the World of Hyatt mobile app.

The results we saw in just the first few weeks have been very impressive on a year-over-year comparative basis. Realized stays booked through our direct channels were up almost 13% in room nights and almost 9% in ADR, resulting in an increase in revenue of over 22% versus the same period last year. Booking volumes on the websites are up over 80% and the percentage of total bookings that came through the website more than doubled.

World of Hyatt members accounted for about 75% of website bookings and 1/3 of overall bookings. These results are outstanding and exceeded our initial expectations, a reinforcement of both the potential of these brands within the Hyatt portfolio and the incremental benefit we can bring to our systems and loyalty program.

Joie de Vivre branded hotels will be converted in May and the Alila and Destination branded hotels will follow later this summer.

In addition to the progress we are making on the integration of existing hotels, I'd also highlight that from a development standpoint, we've seen significant developer interest in the new brands that we've added to our portfolio. We've already signed a number of new deals under these brands within the few months we've owned them. And interest levels are extremely high with both existing owners as well as new prospective owners.

With respect to the approximate 12,000 hotel rooms that we added when we closed the deal, we expect a net reduction of rooms of approximately 10% to 11% during 2019 with most of that occurring during the first half of this year, all of which is consistent with our initial underwriting.

To summarize my update on the integration by saying that we're very pleased with this acquisition and the progress we've made thus far and believe the brands will be a source of both strong performance and impressive growth going forward.

We also remain confident that we will achieve the expected stabilized returns we communicated previously.

Even as we came into the year believing that it would be a bit more challenging than last year, I am pleased with our Q1 earnings growth, and we believe that the full year will play out consistent with previously provided expectations by delivering earnings growth in line with our growth model as we discussed at our Investor Day in March. With that, I'll now turn the call over to Joan.

[Joan Bottarini, executive]

Thanks, Mark, and good morning everyone. Late yesterday, we reported first quarter net income attributable to Hyatt of $63 million and earnings per share of $0.59 on a diluted basis.

Adjusted EBITDA for the quarter was $187 million, with systemwide RevPAR growth of 1.8%.

The shift in Easter timing had a positive impact of approximately 40 basis points on our systemwide RevPAR growth for the quarter.

The impact of real estate transactions over the past 12 months resulted in a net decrease in adjusted EBITDA for the quarter of approximately $17 million compared to 2018. Excluding unfavorable transaction effects, a positive Easter impact and a settlement of approximately $8 million we received last year, our adjusted EBITDA grew approximately 6% on a constant currency basis.

This result was driven by net rooms growth of 7.3% or 13.7%, including the addition of Two Roads along with strong management and franchise fee growth and continued solid operating performance at our owned and leased hotels.

I'll now highlight our segment results, starting with our managed and franchised business where we delivered solid fee growth with base incentive and franchise fees increasing approximately 14% or 8% excluding the Two Roads hotels, both on a constant currency basis compared to the first quarter of 2018.

Total fees increased approximately 9% on a constant currency basis. We've now delivered 11 consecutive quarters of high-single to low-double-digit growth in our total fees, driven by solid RevPAR performance and industry-leading net rooms growth.

Our mix of earnings from our managed and franchise business has expanded to over 54% of adjusted EBITDA before corporate and other, up from 51% in the first quarter of 2018.

I'd like to share additional perspective on each of our 3 lodging segments. Starting with the Americas, which accounted for approximately 76% of our management and franchising adjusted EBITDA in Q1.

The Americas segment delivered full-service RevPAR growth of 3.1%, while select service RevPAR declined 1.5% for the quarter, as U.S. supply growth continued to outpace demand in the upscale category.

Total U.S. RevPAR declined 0.3%, weighed down by the select service numbers. Net rooms growth for the region was approximately 14%, including the Two Roads hotels. Excluding Two Roads, net rooms growth was approximately 6%.

Base, incentive and franchise fee growth of approximately 13% drove adjusted EBITDA growth of about 6% for the quarter on a constant currency basis.

Excluding the impact of the $8 million settlement from last year, adjusted EBITDA grew approximately 18% on a constant currency basis.

Full-service group rooms revenue in the Americas increased over 2.5% in constant currency, driven in large part by ramping hotels in the Caribbean.

Full-service group rooms revenue in the U.S. decreased slightly, driven by a decrease in group room nights, partially offset by rate increases.

We experienced growth in corporate group business during the first quarter with lower demand coming from association and leisure group business.

Our group revenue pace for the full year is approximately flat for 2019. U.S. group production for all years was up approximately 12% in the first quarter while in the year, for the year bookings were down approximately 9%. Looking ahead, group booking pace for all years is up.

U.S. full-service transient revenue was up slightly for the quarter with a small decrease in room nights offset by rate increases.

Moving on to our Asia-Pacific segment, which accounted for about 16% of our management and franchising adjusted EBITDA in Q1.

Full-service RevPAR for the segment increased 1.2% in the quarter, driven by increased occupancy. Full-service RevPAR in Greater China decreased by 2.7%. Japan and Southeast Asia delivered the strongest growth in the segment with RevPAR growth rates in the high- and mid-single digits respectively.

Net rooms growth for the segment was approximately 17% or 12% excluding the Two Roads hotels.

Net rooms growth in Greater China was 15% for the quarter or a bit over 13% excluding Two Roads.

Growth in comparable hotels along with strong net rooms growth drove an increase in base, incentive and franchise fees of approximately 8% in constant dollars. Adjusted EBITDA grew approximately 12% on a constant currency basis.

Moving on to our Europe, Africa, Middle East and Southwest Asia segment. This segment accounted for approximately 8% of our management and franchising adjusted EBITDA during the first quarter. Full-service RevPAR increased 3% driven by occupancy increases. Net rooms growth was 9.5% or just a bit over 8% excluding the Two Roads hotels.

Strength in parts of Europe more than offset continued softness in the Middle East. Base, incentive and franchise fee revenue for the quarter was down 1% and adjusted EBITDA increased 7%, both on a constant currency basis.

Base, management and franchise fees were up 11% in constant currency while incentive fees were down 10% in constant currency, driven largely by weakness in the Middle East.

Our owned and leased business accounted for approximately 46% of our adjusted EBITDA before corporate and other in Q1. Owned and leased RevPAR increased 2.7%. Owned and leased segment adjusted EBITDA was down approximately 9% in constant currency, driven by asset sales in 2018.

Excluding the net impact of transactions, segment-adjusted EBITDA in constant currency increased approximately 7%.

Our first quarter consolidated comparable owned and leased margins increased 120 basis points versus prior year.

Excluding the impact of Easter, comparable owned and leased margins would have increased approximately 100 basis points, driven by strong flow-through led by productivity improvements.

Before moving on to our guidance update, I'd like to briefly provide additional color on 2 of the areas I just covered. The first is our select service RevPAR growth in the U.S., which continues to be challenged with ongoing supply growth in excess of demand.

When we look at the geographic concentration of our Hyatt Place hotels in the south and southeastern parts of the U.S., we saw a greater impact in many of those markets.

STR reporting for the U.S. in Q1 shows supply outpacing demand by about 150 basis points, which is certainly creating pressure on these hotels, particularly in rate growth. Notwithstanding this pressure, our select hotels increased shares slightly in the first quarter of 2019 after having gained 2 points of share in Q1 of 2018 helped by strong performance from our Hyatt House hotels.

As we look ahead the remainder of the year, we see first half comparisons being tougher for our select properties with easier second half comparisons.

We further anticipate the supply-demand gap will lessen by the end of the year. And importantly, we have been and will continue to work closely with our franchise operators to leverage the most effective revenue management strategies to optimize performance as we work through these industry dynamics.

The second area I want to touch on is our recent results in Greater China where we saw full-service RevPAR decrease 2.7%. It's important to note that our first quarter results were negatively impacted by renovations at 3 key hotels and by a contractual change in the casino room block at our 791-room Grand Hyatt Macau property during Q3 of last year.

If you remove the impact of these 4 properties, our RevPAR in Greater China was essentially flat for the quarter. These results are a good deal lower than what we experienced last year as the softening trends started in the back half of 2018, especially in leisure demand. The first half of 2018 was exceptionally strong, up 9.3%, making for very tough comparisons in the first and second quarters of 2019.

Additionally, ongoing trade discussions seem to be weighing on transient travel both among Chinese domestic travelers and inbound international travelers, particularly from the U.S.

Excluding the casino room block change in Macau, we gained market share in Greater China during the quarter, indicating that we're getting more than our fair share of business in what is generally a softer market compared to last year.

As we look ahead and given underlying fundamentals and the stimulus plans in China, we believe the levels of demand growth will improve, and we expect to see better results in the back half of the year as we lap easier comparisons to 2018.

I'd also like to highlight that our rooms signings in Greater China were up almost 20% year-over-year in Q1, so we are not seeing any slowdown on the development front as we continue to maintain strong momentum given the demand for our brands in China.

So notwithstanding some short-term weakness in reported RevPAR for Greater China, we remain confident in the strength of our brands and our growth potential in the region and expect to see improvement in the back half of the year.

Before moving to our guidance update for 2019 operating metrics, I'd like to briefly cover shareholder capital returns. Through April 26, we've returned approximately $138 million to shareholders. Inclusive of dividends, an approximately $550 million remains on our existing share repurchase authorization.

Our full year guidance for shareholder capital returns remains at approximately $300 million at this time and as a reminder, does not contemplate the return of proceeds from potential asset sales, which could occur during 2019.

I will conclude my prepared remarks by providing an update on our outlook for the year, largely consistent with the 2019 guidance we provided during our fourth quarter earnings call held in February.

We continue to expect RevPAR growth in the range of 1% to 3% after considering the continued pressure coming from U.S. select service I discussed earlier. We are also reaffirming our full year 2019 adjusted EBITDA in the range of $780 million to $800 million, resulting in a year-over-year growth consistent with our growth model as I reviewed during our Investor Day in early March.

I'd like to expand on how we expect our earnings to play out over the remainder of the year.

I reviewed in March and now reaffirm our expectation of a full year growth rate of about 6% after excluding the impact of real estate transactions and currency.

Based on a number of factors, including quarterly comparisons and the profile of our group business through the year, we expect that reported growth during the second half of the year will be in the high-single digits and more heavily weighted to the fourth quarter. Conversely, we expect the first half of the year to be more challenging and deliver a reported decline in adjusted EBITDA in the mid-single digits.

Moving to our net rooms growth. We are confirming our prior guidance of 7% to 7.5% for the year and continue to see very strong momentum in signings, supporting further expansion of our pipeline.

SG&A expectations for the year remain at approximately $345 million inclusive of approximately $25 million in onetime integration costs related to Two Roads.

For a full update on our 2019 guidance, please refer to our earnings release and supporting schedules.

In conclusion, we are pleased with our first quarter results marked by solid growth in fees, healthy margin improvements in our owned and leased hotels and strong net rooms growth.

We are successfully integrating Two Roads, and we're seeing very strong developer interest across our expanded brand portfolio, which we believe will continue to drive industry-leading net rooms growth going forward.

We shared with you in March our expanded asset sell-down commitment and are moving forward on that front as we continue to focus on shifting our earnings mix to management and franchise fees.

And with that, I'll turn it back to Mariama for Q&A.

[Operator]

[Operator Instructions] Your first question comes from Smedes Rose with Citi.

[Bennett Rose, analyst]

I wanted to ask you, you mentioned moving forward with some potential asset sales. And just wondering are you seeing any hesitation on the part of buyers, given that apparently, the high-end portfolio is now currently on the market? Do you think people are perhaps waiting to see kind of what happens there and potential after sales of that portfolio? Or are you not really any -- seeing any change on that front?

[Mark Hoplamazian, executive]

Thanks, Smedes. What I would say in general is that there remains a significant amount of capital that's dedicated to or available to for these kinds of transactions on a global basis. By way of reminder, we have a global portfolio, so some of what we are looking at and mapping out over the next few years will include non-U.S. properties.

And what I would say is the interest in the properties that we are pursuing the sale of at this point has been high, and I can't -- I guess what I would say is I don't see any significant difference in say the interest that we saw when we sold properties in the first quarter of last year in terms of initial indications of interest and people interested in spending time looking at the properties that we're pursuing the sale of. So -- because I think it's very hard to compare any 2 processes. It depends on the markets, and it depends on the assets that are being sold.

[Bennett Rose, analyst]

Okay. That makes sense. And then I just wanted to ask you, have you -- you mentioned you had your owners meeting with -- and Two Roads owners came as well, have you been able to, I guess, share with them what you think the sort of overall impact to their margin will be as owners as they integrate into the Hyatt system? It sounds like there's quite a bit of revenue opportunity. But are there, I guess, netted with probably higher cost as well, kind of how does that come out for them at this point?

[Mark Hoplamazian, executive]

Yes. There's no question. This is the key part of the discussion. I would say there is another part of the discussion as well, which is how we preserve the unique qualities of the brands that they invested behind, and I'll come to that in a second. But we've been very deliberate and very comprehensive in how we thought about how we can provide the full complement of services, chain services to these hotels.

One thing that we're doing concurrently with the integration is working to simplify the model that we use going forward with respect to chain services. When I say chain services, what I include there is technology, distribution, sales and marketing primarily. And because I think that providing better transparency and visibility to what services owners pay for and linking that to results is actually an opportunity for us that we're not going to squander. So it was the reason why we have mapped this out over the course of an entire year as opposed to doing it faster is because we want to take the opportunity now to put ourselves in a better situation. When I say us, I mean us and our owners, to better understand what they are paying for and how that relates to results.

The top line results, of course, they have -- we have to demonstrate what they are before people can understand them. The data that I shared with you relates to the Thompson Hotels that have been converted and simply put there, they're really extremely strong, well in excess of what we expected to be able to see this quickly. And so -- and we've obviously just begun. We're not even 4 weeks into the post-integration period. And so I think we will be able to continue to demonstrate what the top line opportunity is. And with respect to the -- all of the other expenses that come with the integration, with the simplification, I think it's unambiguous in our mind that we're going to be able to drive better margins and better profitability for the hotels.

I've mentioned earlier that we do expect a net reduction in the portfolio. We came into the transaction with very high visibility into the nature and profile of the ownership groups and also specific hotel dynamics, specific property level dynamics that led us to expect and model attrition. And so the figure that I cited, which is a reduction of 10% to 11% in net rooms over the course of the first year, is consistent with what we came into the deal expecting.

The good news is that I think we'll probably do better on the new signings over the course of the year than we might have expected. So I would say that all things considered, we're sort of where we expected to be with a positive upside surprise on the revenue side post-integration of the Thompson Hotels.

[Operator]

Your next question comes from Shaun Kelley with Bank of America.

[Shaun Kelley, analyst]

I just wanted to talk -- I appreciate all the color on the loyalty program and some of the gains you're seeing there. Mark or Joan, could you speak a little bit more broadly about just how much of your overall revenue right now is coming from proprietary channels? And sort of what you're doing for owners across all of your proprietary channels to kind of continue to drive that mix higher.

[Mark Hoplamazian, executive]

Yes. So it's a key area of focus, Shaun, and what I would say is our total direct channels -- total direct Hyatt channels is approaching 70% of total volume. And it's an area that we are leaning heavily in to for -- on a couple of different dimensions. The first point that I would make is that as you know, and I think as we stated many times, we have a relatively higher group mix when you compare us to some of the other larger competitors in the U.S. And that is a really important direct channel for delivery of rooms and the revenue to our hotels and by the way, a significant area of strength when it comes to a number of the hotels in the Two Roads portfolio because our national sales effort is deeper and broader and more powerful in terms of throughput than what they had available to them before.

And then with respect to the remainder, I talked a lot about the World of Hyatt program, so I'm not going to go back over the data there. What I will say is that we are focused on and dedicating a significant amount of effort and investment into enhanced -- significantly enhanced digital resources and tools and engagement across our app and the other digital channels that we've got and that's on a global basis. So we're investing very heavily behind World of Hyatt app in the digital environment, and we are also doing something similar in China on a discrete basis because the go-to-market digital efforts there are distinct and different to the rest of the world. And we have seen already, and it's still early days because I would say that we've significantly spooled up our investment in the fourth quarter of last year, and we will remain at a high level of investment over the next couple of years. So we are already seeing some great results in terms of the expansion of our digital channels, and we expect to continue to lean into that heavily as we complete our investments in that area.

[Operator]

Your next question comes from David Katz with Jefferies.

[David Katz, analyst]

Look, I think what we've seen so far, and we came into this 1Q expecting to see a lot more issues domestically than we actually have. We were sort of expecting weather and calendar shifts and shutdowns and it's -- seemingly it turns out to be just a little bit better than what we thought. What -- can you help us just understand or your interpretation of maybe that disconnect? Were we just being overly pessimistic? Or it's something else close that gap or eclipse that with those efforts?

[Mark Hoplamazian, executive]

Yes. I -- it's a little hard for me to compare to a generalized sense amongst economists or what's going on in the economy. But what I can talk about is how we've seen our business evolve and how that relates to maybe how we came into the year in our own mindset.

So a couple of things. One is, I think part of the reason why there might be some difference of perception at this point is because of the dynamics in December. And I'm not even talking about fourth quarter, I'm talking about December. And specifically, I'm talking about the impact psychological and otherwise, what happened to the markets in December and the expectations about what was going on with the economy. Very little of that fear and concern actually was realized in the first quarter, obviously.

So I think that's the backdrop. But I would say overall, we see total demand in the Americas holding up. And further, I would say we don't see any areas in which we have any particular concerns looking forward.

So I thought I'd just provide some color and context for how we see those different segments, group and transient in particular. So from the group side, the quarter was a bit weaker in group than we did -- than we came into the year expecting. But it turns out that it was really driven by just 2 specific dynamics.

The first is Chicago. We have our largest percentage of convention hotel inventory here in Chicago, and Chicago had a very weak first quarter. The overall Central business district in Chicago as a market was down over 11%, and that was primarily driven by citywide volumes that were off materially from last year. And for us just to give you a reference point here, Chicago by itself represented 170 basis point drag for our group results across the entirety of the U.S. in the quarter. And so -- now that was unexpectedly weak short-term performance. But I would also note that our 2 largest city center convention hotels in Chicago are seeing pace in 2020 up in the low teens. So we absolutely see this as a temporary issue, but it did have a big impact in the quarter. The second thing that happened in the quarter is that we experienced some attrition in the attendance at groups at 3 particular hotels, but really 1 very large convention in one of our hotels. But in that case, it had less to do with the ultimate attendance to the event and more to do with the sequence of events over which the room block was released by the meeting planner. So it was sort of like an unintended consequence of just how it was handled, so it doesn't really suggest to us that we have a fundamental demand issue.

Corporate group revenue was encouragingly up in the quarter and rates were up in the mid-single digits, so that was really encouraging. And the Americas overall saw a mid-single digit rate increase along with a slight decline in room nights, which had something to do with the other dynamics I mentioned.

So we also reported that in-the-quarter bookings and future pace. So in-the-quarter for the year was down but we saw an increase in new business booked by corporate customers in the first quarter, both for-the-quarter and for the remainder of the year, so the corporate side is holding up. The almost 9% decline that we reported in the year for-the-year bookings was really largely driven by the attendance attrition that I mentioned a minute ago and some decline in association bookings for the remainder of the year. And we saw a slight increase in cancellations, nothing that we are fundamentally concerned about. So in terms of the actual new business bookings for the future periods, that was down about 2%, even though the published headline is 9% and that difference is mostly the attrition in attendance that I mentioned earlier. And then with respect to future bookings, it continues to be strong for out years and our pace for 2020 was about 60% of the business booked now is looking -- our pace looks like it's up mid-single digits. So -- will we see variability over the course of the year, yes, our tentative volume in the second quarter is weak. It's much stronger in the fourth quarter, so which is -- contributes to some of the comments that Joan made about the profile of our year. But again, lead volumes are intact, and we just don't see fundamental demand issues at this point.

To speak just briefly on transient, I would say basically holding up pretty well both in business and leisure. Resorts continue to be solid. We're running very high occupancies on our resorts having now something like 6 or 7 or 8 quarters straight of very healthy leisure demand. So we're not going to see much more traction on the occupancy side. It's going to be all on rate going forward. Of course, the first quarter also was a comp to Easter last year, so that had some impact. But overall, I would say aside from China, leisure demand across the whole globe has been actually relatively healthy. So that hopefully will give you a little bit more color in terms of what we're seeing and what our outlook is and kind of how we feel about it.

[Operator]

Your next question comes from Stephen Grambling with Goldman Sachs.

[Stephen Grambling, analyst]

Two questions. First, can talk about your various experiences with onefinestay and Oasis? And whether this could potentially be something you revisit in the future given one of your peer's expansion there? And second, last year at this time you signed a partnership in China for select service brands. How has that relationship evolved as you think about, I think, it was 50 hotels that you were hoping to sign over a 5-year period?

[Mark Hoplamazian, executive]

Great. With respect to the home sharing or residential strategy, so to speak, I guess what I would say is -- the first thing I would say is that we have a presence in residential through branded residential developments that we got that are part of our system through service departments. Those are largely in India and the Middle East with the destination resort management business, which is a property management company platform that we bought with the Two Roads acquisition. They've got 3,000 units in mostly ski destinations and in Hawaii. And then finally, our relatively small timeshare and fractional business. So those are the ways in which we participate in residential at this point. We obviously had, early on, several years ago, looked to better understand and learn about the sharing platform concept that started with our investment in onefinestay, which we sold when Accor bought that company. And then subsequently, we made an investment in Oasis, which also got sold to one of its competitors. And I would say that one of the learnings that we came away from those experiences with is that the -- that when you're dealing with high-end properties and you're trying to maintain a level of quality on a consistent basis, the delivery model is expensive and hard to get to a point where you are missing, from a financial return perspective, a sustainable model. I think that over time that model, in a true sharing platform kind of model, is getting more challenging because of regulatory issues. So the regulatory environment's gotten tougher and more stringent over the last couple of years. You've seen, at least based on publically reported data, the impact -- the negative impact that's had on listings in a number of markets for some of the larger platforms, and I think that that's going to persist. So that's why I think you see some evolution of the model where the practice is to really focus more on controlled inventory and the like. So those are my observations about our prior history in that area.

But we're really excited about the destination resort management business that we've got a large portfolio of very high-quality residences that are now going to be made a part of the -- of our system, and so we're excited about that on the leisure side. And we continue to evaluate whether there is a way in which we might also participate in, what I would describe as a more B2B, corporate focused urban residential play. But it's unlikely going to involve anything that looks like a sharing platform.

With respect to the Home Inns partnership, we continue to work with Home Inns on finalizing the details of the brand itself, and we are looking to have that in place to be able to launch later this year.

We also did another JV with another group, called Minyoun, which is focused on the Hyatt Place and Hyatt House brands with some Hyatt-centric opportunities as well. And so that actually has panned out to be successful relative to our initial expectations. I don't have a specific number to share with you, but I think the total number of hotels that are in play at this point is -- it's under 10, it's between 5 and 10 hotels at this point. And we continue to work closely with them to sign additional hotels, which we believe we will benefit from their access to unusual conversion opportunities in China and that's really -- that was one of the key motivators for us to do the deal with Minyoun.

[Operator]

Your next question comes from Michael Bellisario with Baird.

[Michael Bellisario, analyst]

On the strategic front, it generally seems like you've been more focused on partnerships lately versus maybe outright acquisitions kind of Two Roads aside. I guess 2 parts. One, has it been intentional? And then kind of how do you see more partnerships filling in any gaps that you might have within your broader platform today?

[Mark Hoplamazian, executive]

Great. So when we first started down the path and described the idea of extending the Hyatt brand and -- for the purposes of increasing the opportunities for engagement with our guests as well as enhancing the meaning of those experiences, the relevancy of the brand, we identified at that time that we would pursue 3 different modes of engagement. The first is build, the second is buy, and the third is to partner. So I would say that we've engaged in all 3.

It happens that we've been able to put together a couple of partnerships that I think are already demonstrating some serious power in enhancing the value of the World of Hyatt membership proposition.

The Small Luxury Hotels partnership was really a fantastic match because they -- 90% of the properties were in markets in which we were not present with Hyatt-branded hotels. And they are all -- each and everyone is a very, very high-quality property. I think the ADR remains very close to $400 a night in terms of their bookings -- our bookings into their system. And for them, they were plugging into a very qualified high-end traveler customer base that had a lot of demand for the locations in which they were based. So the proposition from a World of Hyatt member perspective and from an owner's perspective for the independent luxury hotels in SLH was a win-win and has turned out to be a great enhancer of the value proposition for World of Hyatt.

It does not and has not hindered our focus on expanding in those markets. We just announced this past week that we've opened 2 new Hyatt Centrics, one in Milan and one in Venice. We will continue to expand our branded presence in those markets, but in many cases, the small luxury hotels are in a lot of markets in which we get to for some time.

With respect to further partnerships, we are actively looking at a number of opportunities in the wellness and well-being space. We've already made investments in that space through Miraval and Exhale and through the expansion of those brands. What we're getting out of that is tremendous intellectual property and practices that we are designing into how we are differentiating what we're doing for our corporate customers, especially in the meeting side. We will continue to lean heavily into that. But you can expect that most of what we will focus on prospectively in the well-being area will not be through acquisition but through partnerships and building programming internally. So I would say that that's our current outlook and our current focus.

[Operator]

Your next question comes from Gregory Miller with SunTrust Robinson.

[Gregory Miller, analyst]

I'm online for Patrick Scholes. First, I have a related question on the JV with Home Inns in China. I'm trying to get a better understanding as to why an upper-mid-scale brand is the appropriate fit as an entry point for an emerging Chinese Hyatt consumer? Is there precedence to suggest that customers in emerging markets will naturally gravitate over time from being our mid-scale customers to one that is a more traditional Hyatt upper up-scale customer, such as an expectation of significantly more disposable income as the consumer ages? Or is part of the focus going from an upper mid-scale product to Hyatt Place or Hyatt House stay, generally speaking?

[Mark Hoplamazian, executive]

I think it's sort of an intersection of the 2 dynamics that you mentioned, the pace of growth -- rate of growth in income -- incomes with respect to the target audience for the brand that we are working on -- with on -- with Home Inns on is very high. So we're seeing people who are in the workforce and are being promoted and also increasingly traveling for work and increasingly for leisure as well. What Home Inns had identified is significant demand at a price point and a quality level outside of the envelope of where they currently compete. We were seeing a significant number of new entrants into the Hyatt system coming out of that same category of consumers. And the reason why it made sense for each of us is because we don't now participate and don't plan to participate going down lower than the JV brand that we're doing with them, and they don't have current plans to compete higher. So -- and our brand strength in China is such that it would take a long time for them to, I think, create something that is nearly as compelling and attractive from a consumer's perspective than the Hyatt's presence in China currently.

So what we expect is that the -- this JV area of highly qualified people in the workforce that are -- that see their incomes growing at a very fast pace will be a significant feeder system, if you will, into the Hyatt brands. And yes, the adjacent brands are Hyatt Place and Hyatt House brands. But they will operate and do operate at a material increment in terms of ADR to where the joint venture brand, the high-end mid-scale brand will be positioned. So that's the theory behind it, and it's tested on -- I guess on both their side and our side with respect to what we're seeing in the consumer behavior.

[Gregory Miller, analyst]

And just I have a related question on World of Hyatt. You have such a strong growth rate year-over-year, and I'm curious how long do you think that this may last for? Or what kind of a normalized run rate of new member growth you think is more likely in the next couple of years?

[Mark Hoplamazian, executive]

Yes. I -- it's really difficult for me to start guessing at sustained growth rates. What I can tell you is the traction that the team has already realized in a very deliberate approach that we've taken, it's -- we're 1 year into a very focused strategy with respect to driving participation rates and also the revenue penetration rates. And I would say that we are still extremely early in the proposition of being able to fully leverage the SLH relationship. We will have a couple of hundred of SLH's 530 hotels by the end of May, so we've got a long way to go there. And we haven't even yet begun the partnership with American Airlines, which we have extremely high confidence is going to have a big -- represent a big opportunity both of them and for us. And so I would say we do have a very significant momentum, and obviously, we're seeing great early results here. And our intention is to actually accelerate what we're doing over the coming year or 2, not just to sustain what we've already got.

[Operator]

Your next question comes from Thomas Allen with Morgan Stanley.

[Thomas Allen, analyst]

So in your prepared remarks, you talked about how you expect the U.S. select service gap between supply and demand to lessen as we get later in the year. Can you just give us some more color on that comment?

[Joan Bottarini, executive]

Sure. We've seen the select service growth in supply outpacing demand since last year -- since early in 2018. And so that gap is expected to narrow based on what we've -- industry metrics that we have seen. So over the course of this year, we'll be able to absorb some of that supply in the markets that we operate in. I also made mention of the concentration of some of our hotels and the mix of some of our hotels in markets where there is a pronounced gap today. And when we look at the last half of the year as this gap lessens, we'll be able to improve our results in the last half of the year.

[Thomas Allen, analyst]

So the comments were on supply rather than demand? Are you expecting a pickup in demand too?

[Joan Bottarini, executive]

Expecting a pickup in demand as well. And we will also -- when you -- I also mentioned in my prepared remarks how the first half, second half dynamic is even more pronounced as we look at the profile, Mark mentioned the profile of growth over the course of the year. We'll have some easier comps in the second half of the year as it relates to select service business, and we expect demand to improve as well.

[Mark Hoplamazian, executive]

The only thing I would add to those comments is, I think, the profile is exactly as Joan described it. There are a couple of particular issues that we see that will have -- we expect to have an impact on demand over the course of the year. The stimulus in China, for example, is significant. And based on my discussions with both Chinese company -- Chinese hotel company executives as well as with bankers and other industrial companies and development companies in China, the strong expectation is that the stimulus that's been put into place is going to start to see results and come to life in the third and fourth quarter, maybe more in the fourth quarter than the third, but we do believe that that's going to continue to stimulate demand. On the U.S. front, I would only just add that we are paying like everyone is, extremely close attention to what's happening in corporate, both transient and group. And our outlook does assume that we will see some enhanced strength over the course of the year based on what we're seeing underway in the corporate behavior currently.

The last thing I would say is that our share results, index results for the quarter were fantastic. So even though we did have a contraction in our select RevPAR progression, we held our own in terms of share in our select brands in the U.S. But across the world, we were up in virtually every market -- every region, both for each of select service and full-service hotels. And they ranged in -- by region, they were all between mid-2s and 3%, so -- except for select service Americas, which was about flat. So as a system, we were -- we saw index as we measured against our comp sets up about 240 basis points for the quarter. So we're really encouraged that while we did see a weaker quarter in China and a weaker quarter in select in the U.S. that this is -- these are really market dynamics and not really Hyatt-specific.

[Operator]

Your next question comes from Kevin Kopelman with Cowen.

[Kevin Kopelman, analyst]

It's Kevin Kopelman. Can you give us an update on the pipeline? You had a strong growth last year but it was lumpy with a big uptick in actual contract signings in Q4. Can you -- so can you just give us an update on how you see signings playing out this year compared to last year, and what the tenor of those development conversations have been?

[Mark Hoplamazian, executive]

Sure. So the -- first of all, I would say that I was pleasantly surprised to see the activity right out of the blocks early in the year. And I would -- we're ahead of where I would've guessed that we would be at this point. Part of that has to do with just the cadence with which development deals come through the system. And no matter how much we try not to burden our legal teams and our design teams and the development teams in the fourth quarter, it always seems that the fourth quarter ends up being the big quarter for signings. In this case, we've seen a steady increase in the flow of deal activity, especially in China where a lot of the first quarter activity was base. And so we're seeing the natural cadence start to actually get more balanced over the course of the year.

I -- of course, I have to believe that the fourth quarter is going to be again the big quarter, the biggest quarter of signings. A lot of this has to do with kind of year-end mentality amongst our development partners. But I've been really encouraged to see demand levels across the board. And we're also starting to see more conversion opportunities, which is not typically or historically represented a big -- a big portion of our total development activity but is now representing an increased level of it. And so we're encouraged by all of that. I would say that yes, we've seen, on the U.S. select service front, the time period between signing and opening continued to extend. So it's -- it takes longer to get from a signed deal to an open hotel. And that's been extending or lengthening over the last several years. Some of that has to do with the entitlement processes and some of that has to do with just construction constraints. But apart from that particular comment, I would say we're seeing continued health across the world. And happily, also we're starting to actually be able to sign really important brand builders into our system. So we've not made a lot of PR commentary about this but we have our first Park Hyatt representation in London now in our pipeline, and we're very excited about that. We're thrilled to see the openings of the Andaz hotels in Europe and Munich and in Vienna. And so by brand -- and I mentioned earlier the centric hotels in Italy. I think by brand, we're seeing some really important brand-building openings. So I would say overall nothing but good news on the pipeline front.

[Operator]

Your last question comes from the line of Vince Ciepiel with Cleveland Research.

[Vince Ciepiel, analyst]

Question, I wanted to come back to domestic and I know with some helpful color around that you talked about Chicago as well as some isolated group impacts at specific hotels, which probably pressured full-service domestically a little bit more than one would have thought. But as you're thinking about this year, I think in the release you noted that the underlying business trends are relatively consistent with your expectation entering the year. And just within the 1% to 3% systemwide range, are you thinking that domestic materializes within that range? Or we continue to see kind of this dynamic of international above the range and domestic a bit below it throughout the course of '19?

[Joan Bottarini, executive]

We see as we think about the remainder of the year, and I'll go back to the profile again. That comment is important to us as we think about our outlook as far as the second half of the year because it will translate into RevPAR growth and a greater earnings growth in the second half of the year relative to the first half of the year. And we do see that international markets will be slightly better than the U.S. markets. But commenting on the 2 that I referred to in my prepared remarks, select service is we expect that growth to be better in the second half of the year, China we expect to be better in the second half of the year. And for the reasons I described as far as the easier comps but also the select segment, it will be helped by the improving supply-demand dynamics and some revenue management strategies that we're also employing that are taking form and seeing good results. And in China, Mark mentioned, the stimulus and some of those hotels that I mentioned in my prepared remarks that coming out of renovation. So in summary, the U.S. market will be a little bit weaker within the -- on the lower end of the range within the 1% to 3% range and international markets will be better, is our expectation.

[Vince Ciepiel, analyst]

Perfect. And your owned business RevPAR there was actually pretty impressive and margins came through nicely. Just curious how you're thinking about the trajectory for margin throughout the course of this year in light of those trends?

[Joan Bottarini, executive]

Thank you for the question. We did have healthy margin growth in our owned and leased portfolio at 120 basis points and 2.7% of RevPAR growth. We did have good rate realization in the quarter. Rates were up 3.4% across the portfolio. But really the great flow-through is led by productivity improvements. We've implemented processes at the property level with labor-management initiative and that has been going on for some time now and it continues to yield results and great outcomes from the excellent execution from our operations team. It also includes some mindset thinking around our F&B operations at the property level. So we're seeing very strong growth in the F&B areas. And moving around, looking at volumes and potentially changing our offerings at the property has helped us to actually serve our guests better. So we're delivering good margins and we're also doing all of this without negatively impacting the guest experience.

[Mark Hoplamazian, executive]

I'll add just one other thing on owned and leased front. And that is we have 1 hotel in Asia that is under significant renovation at this point and will be in renovation through the second quarter. So in terms of the progression over the course of the year that will also tend to have a somewhat depressive -- small but somewhat lowering kind of force in the first of and a raising kind of force in the second half, if you will.

[Operator]

There are no further questions at this time. I will now turn the call back over to the presenters.

[Mark Hoplamazian, executive]

Thank you, Mariama. And thank you to everyone for taking the time for joining us for the call today, and we look forward to speaking with you soon.

[Operator]

This concludes today's conference call, you may now disconnect.