Hyatt Hotels Corp (H) FY 2023 MD&A

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part IV, Item 15, "Exhibits and Financial Statement Schedule—Consolidated Financial Statements." For our discussion and analysis of our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Form 10-K. Effective January 1, 2023, we changed the strategic and operational oversight for our properties located in the Indian subcontinent. Revenues associated with these properties are now reported in the ASPAC management and franchising segment. Segment operating information for the years ended December 31, 2022 and December 31, 2021 have been recast to reflect these segment changes; see Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 19 to our Consolidated Financial Statements" for further information. In addition to historical data, this discussion contains forward-looking statements about our business, operations, and financial performance based on current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in "Disclosure Regarding Forward-Looking Statements" and Part I, Item 1A, "Risk Factors" included elsewhere in this annual report.

Overview

At December 31, 2023, our hotel portfolio consisted of 1,335 hotels (322,141 rooms), including:

•485 managed properties (145,664 rooms), all of which we operate under management and hotel services agreements with third-party owners;

•639 franchised properties (109,922 rooms), all of which are owned by third parties that have franchise agreements with us and are operated by third parties;

•124 all-inclusive resorts (41,427 rooms), including 110 owned by third parties (36,999 rooms) and operated under management and hotel services agreements, 8 owned by a third party in which we hold common shares (3,153 rooms) and operated under franchise agreements, and 6 operating leased properties (1,275 rooms);

•23 owned properties (10,162 rooms), 1 finance leased property (171 rooms), and 4 operating leased properties (1,697 rooms), all of which we manage;

•22 managed properties and 2 franchised properties owned or leased by unconsolidated hospitality ventures (7,636 rooms); and

•35 franchised properties (5,462 rooms) operated by an unconsolidated hospitality venture in connection with a master license agreement by Hyatt; 6 of these properties (1,246 rooms) are leased by the unconsolidated hospitality venture.

Our property portfolio also included:

•22 vacation units under the Hyatt Vacation Club brand and operated by third parties; and

•39 residential units, which consist of branded residences and serviced apartments. We manage all of the serviced apartments and those branded residential units that participate in a rental program with an adjacent Hyatt-branded hotel.

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

We believe our business model allows us to pursue more diversified revenue and income streams balancing both the advantages and risks associated with these lines of business. Our expertise and experience in each of these areas gives us the flexibility to evaluate growth opportunities across our lines of business. Growth in the number of management and hotel services agreements and franchise agreements and earnings therefrom typically results in higher overall returns on invested capital because the capital investment under a typical management and hotel services agreement or franchise agreement is not significant. The capital required to build and maintain hotels we manage, franchise, or provide services to for third-party owners and franchisees is typically provided by the owner of the respective property with minimal capital required by us as the manager or franchisor. In certain instances, Hyatt has provided funding to owners for the acquisition and development of hotels that Hyatt will manage, franchise, or provide services to in the form of cash, debt repayment or performance guarantees, preferred equity, or mezzanine debt. During periods of increasing demand, we do not share fully in the incremental profits of

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hotel operations for hotels we manage for third-party owners as our fee arrangements generally include a base amount that is, typically, a percentage of revenue from the subject hotel and an incentive fee that is, typically, a percentage of hotel profits (in certain circumstances, after satisfying certain financial return thresholds to be earned by the owner), depending on the structure and terms of the management and hotel services agreement. We do not share in the benefits of increases in profits from franchised properties because franchisees pay us an initial application fee and ongoing royalty fees that are calculated as a percentage of gross room revenues, and also at times, as a percentage of food and beverage revenues, with no fees based on profits. Disputes or disruptions may arise with third-party owners and franchisees of hotels we manage, franchise, or license to, and these disputes can result in the termination of the relevant agreement.

With respect to property ownership, we believe ownership of selected hotels in key markets enhances our ability to control our brand presence in these markets. Ownership of hotels allows us to capture the full benefit of increases in operating profits during periods of increasing demand and room rates. The cost structure of a typical hotel includes fixed costs, so as demand and room rates increase over time, the rate of growth in operating profits typically is higher than the rate of growth of revenues. The profits realized from our owned and leased hotels are generally more significantly affected by economic downturns and declines in revenues than the management and franchise fees earned from our managed and franchised properties. This is because we absorb the full impact of declining profits for our owned and leased hotels, whereas our management and franchise fees do not have the same level of downside exposure to declining hotel profitability. Hotel ownership is more capital intensive than managing or franchising hotels for third-party owners and franchisees, as we are responsible for the costs and all capital expenditures for our owned and leased hotels. See also "—Principal Factors Affecting Our Results of Operations—Expenses" and Part I, Item 1A, "Risk Factors—Risks Related to Our Business—We are exposed to the risks resulting from significant investments in owned and leased real estate, which could increase our costs, reduce our profits, limit our ability to respond to market conditions, or restrict our growth strategy."

For the years ended December 31, 2023 and December 31, 2022, 76.1% and 77.4% of our revenues, respectively, were derived from operations in the United States. At December 31, 2023 and December 31, 2022, 51.9% and 51.4% of our long-lived assets, respectively, were located in the United States.

We report our consolidated operations in U.S. dollars. Amounts are reported in millions, unless otherwise noted. Percentages may not recompute due to rounding, and percentage changes that are not meaningful are presented as "NM." Constant currency disclosures used throughout Management's Discussion and Analysis of Financial Condition and Results of Operations are not measures recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See "—Key Business Metrics Evaluated by Management—Constant Dollar Currency" for further discussion of constant currency disclosures.

We manage our business within five reportable segments, see Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 19 to our Consolidated Financial Statements." On February 23, 2024, we announced that during the quarter ending March 31, 2024, we realigned our reportable segments to align with our business strategy, the organizational changes for certain members of our leadership team, and the manner in which our CODM assesses performance and makes decisions regarding the allocation of resources. For information regarding the 2024 segment realignment, see Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 22 to our Consolidated Financial Statements."

Key Business Metrics Evaluated by Management

Revenues

We primarily derive our revenues from management and hotel services, licensing of our portfolio of brands to franchisees, owned and leased hotel operations, distribution and destination management services, and a paid membership program. Management uses revenues to assess the overall performance of our business and to analyze trends such as consumer demand, brand preference, and competition. For a detailed discussion of our primary revenue sources, see "—Principal Factors Affecting Our Results of Operations—Revenues."

Net Income (Loss) Attributable to Hyatt Hotels Corporation

Net income (loss) attributable to Hyatt Hotels Corporation represents the total earnings or profits generated by our business or total loss incurred. Management uses net income (loss) to analyze the performance of our business on a consolidated basis.

Adjusted EBITDA and EBITDA

We use the terms Adjusted EBITDA and EBITDA throughout this annual report. Adjusted EBITDA and EBITDA, as we define them, are non-GAAP measures. We define consolidated Adjusted EBITDA as net income (loss) attributable to Hyatt

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Hotels Corporation plus our pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA based on our ownership percentage of each owned and leased venture, adjusted to exclude the following items:

•interest expense;

•benefit (provision) for income taxes;

•depreciation and amortization;

•amortization of management and hotel services agreement and franchise agreement assets and performance cure payments, which constitute payments to customers ("Contra revenue");

•revenues for the reimbursement of costs incurred on behalf of managed and franchised properties;

•costs incurred on behalf of managed and franchised properties that we intend to recover over the long term;

•equity earnings (losses) from unconsolidated hospitality ventures;

•stock-based compensation expense;

•gains (losses) on sales of real estate and other;

•asset impairments; and

•other income (loss), net.

We calculate consolidated Adjusted EBITDA by adding the Adjusted EBITDA of each of our reportable segments and eliminations to corporate and other Adjusted EBITDA. See "—Segment Results."

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

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

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

Adjusted EBITDA and EBITDA are not substitutes for net income (loss) attributable to Hyatt Hotels Corporation, net income (loss), or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA and EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. Because of

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these limitations, Adjusted EBITDA should not be considered as a measure of the income (loss) generated by our business. Our management compensates for these limitations by referencing our GAAP results and using Adjusted EBITDA supplementally. See our consolidated statements of income (loss) in our consolidated financial statements included elsewhere in this annual report.

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

Adjusted Selling, General, and Administrative Expenses

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

Comparable Hotels

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

Constant Dollar Currency

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

Average Daily Rate

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

Occupancy

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

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Revenue Per Available Room ("RevPAR")

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

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

Net Package ADR

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

Net Package RevPAR

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

Net Financed Contracts

Net Financed Contracts represent Unlimited Vacation Club contracts signed during the period for which an initial cash down payment has been received and the remaining balance is contractually due in monthly installments over an average term of less than 4 years. The Net Financed Contract balance is calculated as the unpaid portion of membership contracts reduced by expenses related to fulfilling the membership program contracts and further reduced by an allowance for future estimated uncollectible installments. Net Financed Contract balances are not reported on our consolidated balance sheets as our right to collect future installments is conditional on our ability to provide continuous access to member benefits at ALG resorts over the contract term, and the associated expenses to fulfill the membership contracts become liabilities of the Company only after the installments are collected. We believe Net Financed Contracts is useful to investors as it represents an estimate of future cash flows due in accordance with contracts signed in the current period. At December 31, 2023, the Net Financed Contract balance not recorded on our consolidated balance sheet was $253 million.

Net Deferrals

Net Deferrals represent the change in contract liabilities associated with the Unlimited Vacation Club membership contracts less the change in deferred cost assets associated with the contracts. The contract liabilities and deferred cost assets are recognized as revenue and expense, respectively, on our consolidated statements of income (loss) over the customer life, which ranges from 3 to 25 years. We believe Net Deferrals is useful to investors as it represents cash received that will be recognized as revenue in future periods.

Principal Factors Affecting Our Results of Operations

Our revenues and expenses are affected by a variety of factors. Revenues are principally affected by consumer demand, which is closely linked to economic conditions and is sensitive to business and personal discretionary spending levels. Certain expenses associated with our business, including interest, rent, property taxes, insurance, certain salaries and wages, and utilities costs, are relatively fixed and may increase at a greater rate than our revenues and/or may not be able to be reduced at the same rate as declining revenues. The fixed-cost nature of these expenses limits our ability to offset reductions in revenue

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through cost-cutting measures, which could adversely affect our net cash flows and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth, and when demand rapidly and significantly decreases, as we experienced with the onset of the COVID-19 pandemic. See Part I, Item 1A, "Risk Factors—Risks Related to the Hospitality Industry," and "Risk Factors—Risks Related to Our Business."

Revenues

We primarily derive our revenues from the following sources:

Revenues from hotel operations.    Represents revenues derived from hotel operations, including room rentals and food and beverage sales and other ancillary revenues at our owned and leased properties. Revenues from the majority of our hotel operations depend heavily on demand from group and transient travelers, as discussed below. Revenues from our owned and leased hotels are primarily derived from hotel operations.

Revenues from room rentals and ancillary revenues are primarily derived from three categories of customers: transient, group, and contract. Transient guests are individual travelers who are traveling for business or leisure. Our group guests are traveling for group events that reserve a minimum of 10 rooms for meetings or social functions sponsored by associations, corporate, social, military, educational, religious, or other organizations. Group business usually includes a block of room accommodations as well as other ancillary services, such as catering and banquet services. Our contract guests are traveling under a contract negotiated for a block of rooms for more than 30 days in duration at agreed-upon rates. Airline crews are typical generators of contract demand for our hotels.

Management, franchise, license, and other fees.    Represents revenues derived from fees earned from hotels and residential units managed worldwide, usually under long-term management and hotel services agreements; franchise fees received in connection with the franchising of our brands, usually under long-term franchise agreements; termination fees; license fees received in connection with the licensing of the Hyatt brand names through our co-branded credit card programs and vacation units; fees from hotel services provided to certain ALG resorts; and commission fees related to Mr & Mrs Smith. For a detailed discussion of our management and franchise fees, see Part I, Item 1, "Business—Management and Hotel Services Agreements" and Part I, Item 1, "Business—Franchise Agreements."

Distribution and destination management revenues.    Represents revenues derived from the offering of travel products and services through ALG Vacations. Offerings primarily include some or all of the following: air transportation, hotel accommodations primarily provided by third-party resorts, travel insurance, ground transportation, car rental reservations, and excursions provided by third parties.

Other revenues.    Represents revenues primarily related to our Unlimited Vacation Club paid membership program, the Destination Residential Management business, which was sold during the year ended December 31, 2023, and our co-branded credit card programs.

Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties.    Represents revenues for the reimbursement of costs incurred on behalf of third-party owners and franchisees. These reimbursed costs relate primarily to payroll at managed properties where we are the employer, as well as reimbursements for costs incurred related to system-wide services and the loyalty program operated on behalf of owners. We recognize these revenues in revenues for the reimbursement of costs incurred on behalf of managed and franchised properties and the corresponding costs in costs incurred on behalf of managed and franchised properties on our consolidated statements of income (loss).

Intersegment eliminations.    Represents management fee revenues and expenses related to our owned and leased hotels and promotional award redemption revenues and expenses related to our co-branded credit card programs at our owned and leased hotels, which are eliminated in consolidation.

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RevPAR and Net Package RevPAR Statistics

Comparable system-wide hotels RevPAR for the year ended December 31, 2023 was $141, which represented an improvement of 17.0% compared to the year ended December 31, 2022. The increase was primarily driven by higher demand and ADR across all segments, with the most significant increase from the ASPAC management and franchising segment. See "—Segment Results" for detailed discussion of RevPAR by segment.

During the year ended December 31, 2023, leisure transient travel remained strong, and we continued to see strong growth in group travel, with group rooms revenue exceeding pre-COVID-19 pandemic levels. Compared to 2022, group bookings production increased at our Americas full service managed hotels, including our owned and leased hotels, and business transient demand continued to improve.

Competition.    The hospitality industry is highly competitive. Increased supply can put significant pressure on ADR at our properties as well as those of our competitors. Increasingly, we face competition from new distribution channels in the travel industry, including large companies that offer travel services as part of their business model, peer-to-peer inventory sources, and industry consolidation. We believe our brand strength and ability to manage our operations in an efficient manner will help us to continue competing successfully within the hospitality industry.

Agreements with third-party owners and franchisees and relationships with developers.    We depend on our long-term management and hotel services agreements and franchise agreements with third-party owners and franchisees for a significant portion of our management and franchise fees revenues. The viability of our management and franchising business depends on our ability to maintain good relationships with third-party owners and franchisees. Our relationships with these third parties also generate new relationships with developers and opportunities for property development that can support our growth. We believe we have good relationships with our third-party owners, franchisees, and developers in all of our segments and are committed to the continued growth and development of these relationships. These relationships exist with a diverse group of owners, franchisees, and developers and are not heavily concentrated with any particular third party.

Access to capital.    The hospitality industry is a capital-intensive business that requires significant amounts of capital expenditures to develop, maintain, and renovate properties. Third-party owners and franchisees are required to fund these capital expenditures for the properties they own in accordance with the terms of the applicable management and hotel services agreement or franchise agreement. Access to the capital that we or our third-party owners, franchisees, or development partners need to finance the construction of new properties or to maintain and renovate existing properties is critical to the continued growth of our business and our revenues. The availability of capital or the conditions under which we or our third-party owners, franchisees, or development partners can obtain capital can have a significant impact on the overall level, cost, and pace of future development and therefore the ability to grow our revenues.

Expenses

We primarily incur the following expenses:

Owned and leased hotels expenses.    Reflects the expenses of our consolidated owned and leased hotels. Expenses to operate our hotels include rooms expenses, food and beverage costs, other support costs, and property expenses. Rooms expenses generally includes compensation costs or third-party service costs for housekeeping, laundry, and front desk staff and

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supply costs for guest room amenities and laundry. Food and beverage costs include costs for wait and kitchen staff and food and beverage products. Other support costs consist of expenses associated with property-level management, including deferred compensation plans for certain employees that are funded through contributions to rabbi trusts, utilities, sales and marketing, hotel spa operations, parking and other guest recreation, entertainment, and services. Property expenses include property taxes, repairs and maintenance, rent, and insurance.

Distribution and destination management expenses.    Consists of expenses related to our ALG Vacations business, primarily costs directly related to the selling of travel products and services such as various distribution expenses, including chartered air expenses, credit card fees, commission expenses, and destination management cost of sales. Additionally, distribution and destination management expenses include compensation expenses, professional fees, sales and marketing expenses, and technology expenses.

Depreciation and amortization expenses.    Depreciation expenses represent non-cash depreciation of fixed assets such as buildings, furniture, fixtures, and equipment at our consolidated owned and leased hotels and our corporate headquarters and regional offices. Amortization expenses primarily consist of amortization of customer relationships intangibles and management and hotel services agreement and franchise agreement intangibles. Changes in depreciation and amortization expenses may be driven by renovations of existing properties, acquisition or development of new properties and/or businesses, or the disposition of existing properties through sale or closure.

Other direct costs.    Represents expenses primarily related to direct costs associated with the Unlimited Vacation Club paid membership program, the Destination Residential Management business, which was sold during the year ended December 31, 2023, and our co-branded credit card programs.

Selling, general, and administrative expenses.    Consists primarily of compensation expenses, including deferred compensation plans for certain employees that are funded through contributions to rabbi trusts, for our corporate staff and personnel supporting our business segments, including regional offices that support our management and franchising segments; professional fees, including consulting, audit, and legal fees; travel and entertainment expenses; sales and marketing expenses; bad debt expenses; and office administrative and related expenses, including rent expenses.

Costs incurred on behalf of managed and franchised properties.    Represents costs incurred on behalf of third-party owners and franchisees. These reimbursed costs relate primarily to payroll at managed properties where we are the employer, as well as costs related to system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties.

Other Items

Asset impairments

We hold significant amounts of goodwill, intangible assets, property and equipment, operating lease right-of-use ("ROU") assets, and investments. We evaluate these assets on a quarterly basis for impairment as further discussed in "—Critical Accounting Policies and Estimates." These evaluations have, in the past, resulted in impairment charges of certain assets based on the specific facts and circumstances surrounding those assets. In the future, we may be required to take additional impairment charges if there are declines in our asset and/or investment fair values.

Acquisitions, dispositions, and significant renovations

From time to time, we may acquire businesses to support our long-term growth strategy. We also routinely acquire, dispose, or undertake large-scale renovations of hotel properties. The results of operations derived from these properties do not, therefore, meet the definition of "comparable hotels" as defined in "—Key Business Metrics Evaluated by Management." The results of operations from these properties, however, may have a material effect on our results from period to period and are, therefore, discussed separately in "—Results of Operations," when material.

In 2023, we entered into the following key transactions:

•acquired Dream Hotel Group for $125 million of base consideration and up to an additional $175 million of contingent consideration;

•acquired Mr & Mrs Smith for £58 million (approximately $72 million using exchange rates as of the acquisition date); and

•sold our interests in the entities which own the Destination Residential Management business for $2 million of base consideration and up to an additional $48 million of contingent consideration.

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In 2022, we entered into the following key transactions:

•sold The Confidante Miami Beach for approximately $227 million, net of closing costs and proration adjustments, and entered into a long-term management agreement for the property upon sale;

•sold Hyatt Regency Indian Wells Resort & Spa for approximately $136 million, net of closing costs and proration adjustments, and entered into a long-term management agreement for the property upon sale;

•sold The Driskill for approximately $119 million, net of closing costs and proration adjustments, and entered into a long-term management agreement for the property upon sale;

•sold Grand Hyatt San Antonio River Walk for approximately $109 million of cash, net of closing costs; a $19 million held-to-maturity ("HTM") debt security; and $18 million release of restricted cash and entered into a long-term management agreement for the property upon sale;

•sold Hyatt Regency Greenwich for approximately $38 million, net of closing costs and proration adjustments, and entered into a long-term management agreement for the property upon sale; and

•acquired Hotel Irvine for $135 million, net of closing costs and proration adjustments.

See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 to our Consolidated Financial Statements" for further discussion on these key transactions.

Effect of foreign currency exchange rate fluctuations

A significant portion of our operations are conducted in functional currencies other than our reporting currency, which is the U.S. dollar. As a result, we are required to translate those results from the functional currency into U.S. dollars at market-based average exchange rates during the period reported. When comparing our results of operations between periods, there may be material portions of the changes in our revenues or expenses that are derived from fluctuations in exchange rates experienced between those periods. See Part I, Item 1A, "Risk Factors—Risks Related to our Business—The risks of doing business internationally, or in a particular country or region, could lower our revenues, increase our costs, reduce our profits, or disrupt our business."

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Results of Operations

Years Ended December 31, 2023 and December 31, 2022

Discussion on Consolidated Results

For additional information regarding our consolidated results, refer to our consolidated statements of income (loss) included in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Consolidated Financial Statements." See "—Segment Results" for further discussion.

The impact from our investments in marketable securities held to fund our deferred compensation plans through rabbi trusts was recognized on the following financial statement line items and had no impact on net income (loss): revenues for the reimbursement of costs incurred on behalf of managed and franchised properties; owned and leased hotels expenses; selling, general, and administrative expenses; costs incurred on behalf of managed and franchised properties; and net gains (losses) and interest income from marketable securities held to fund rabbi trusts.

Owned and leased hotels revenues.

Comparable owned and leased hotels revenues increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, driven by increased demand and higher ADR, which contributed to increased rooms and food and beverage revenues. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

Non-comparable owned and leased hotels revenues decreased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by net disposition activity in 2022, partially offset by increased revenues at a recently renovated hotel in the United States.

Management, franchise, license, and other fees revenues.

The increase in base and incentive management fees during the year ended December 31, 2023, compared to the year ended December 31, 2022, was due to increased demand and ADR across the portfolio, with the largest increase in the ASPAC management and franchising segment, most notably in Greater China due to eased travel restrictions, partially offset by a decrease in incentive management fees within the ALG segment as hotel profits were negatively impacted by currency translation. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

The increase in franchise, license, and other fees revenues during the year ended December 31, 2023, compared to the same period in 2022, was primarily driven by franchise fees, most notably in the Americas management and franchising segment due to increased demand and ADR in the United States, commission fee revenues related to Mr & Mrs Smith, and

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license fees related to our co-branded credit card programs. These increases were partially offset by a decrease in other fees in the EAME management and franchising segment as the year ended December 31, 2022 included fees from the termination of a management contract for a hotel in the pipeline.

See "—Segment Results" for further discussion.

Distribution and destination management revenues.    During year ended December 31, 2023, distribution and destination management revenues increased $46 million, compared to the year ended December 31, 2022, primarily due to higher pricing. This increase was partially offset as 2022 experienced unseasonably high demand during the third quarter and included certain credits, which did not recur in 2023. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

Other revenues.    Other revenues increased $27 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by the Unlimited Vacation Club paid membership program due to amortization of incremental membership contracts, which continue to be signed at higher average prices, and our co-branded credit card programs. These increases were partially offset by the Destination Residential Management business, which was sold during the third quarter of 2023, and prior to the sale, experienced a decline in operations as certain properties were negatively impacted by the wildfires on the island of Maui, Hawaii during the year ended December 31, 2023.

Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties.

Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, driven by higher reimbursements for payroll and related costs at managed properties where we are the employer and reimbursements for costs related to system-wide services provided to managed and franchised properties. The higher reimbursements for expenses were due to improved hotel operating performance driven by increased demand, ADR, and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022, as well as portfolio growth.

Owned and leased hotels expenses.

The increase in comparable owned and leased hotels expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to increased fixed and variable expenses, most notably payroll and related costs. The year ended December 31, 2022 was also impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022, which contributed to lower variable expenses.

The decrease in non-comparable owned and leased hotels expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily driven by net disposition activity in 2022, partially offset by certain properties that recently underwent significant renovations.

Distribution and destination management expenses.    During the year ended December 31, 2023, compared to the year ended December 31, 2022, distribution and destination management expenses increased $73 million due to increases in certain

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variable overhead expenses and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.

Depreciation and amortization expenses.    Depreciation and amortization expenses decreased $29 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the use of an accelerated amortization method for certain ALG intangible assets, which resulted in increased amortization expense in 2022, as well as dispositions of owned hotels.

Other direct costs.    Other direct costs increased $56 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by Unlimited Vacation Club paid membership program and our co-branded credit card programs. The increase in the Unlimited Vacation Club paid membership program expenses was primarily due to increased marketing and overhead costs from incremental contract sales as well as increased amortization of deferred commission expenses related to membership contract sales, while the increases in our co-branded credit card programs were driven by a higher volume of point transfers. These increases were partially offset by the Destination Residential Management business, which was sold during the third quarter of 2023, and prior to the sale, experienced a decline in operations as certain properties were negatively impacted by the wildfires on the island of Maui, Hawaii that occurred during the year ended December 31, 2023.

Selling, general, and administrative expenses.

Selling, general, and administrative expenses increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by increased payroll and related costs, professional fees, travel expenses, and improved market performance of the underlying investments in marketable securities held to fund our deferred compensation plans through rabbi trusts, partially offset by a decrease in bad debt expense.

Adjusted selling, general, and administrative expenses exclude the impact of deferred compensation plans funded through rabbi trusts and stock-based compensation expense. See "—Key Business Metrics Evaluated by Management—Adjusted Selling, General, and Administrative Expenses" for further discussion.

Costs incurred on behalf of managed and franchised properties.

Costs incurred on behalf of managed and franchised properties increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, driven by increased payroll and related costs at managed properties where we are the employer and expenses related to system-wide services provided to managed and franchised properties. The higher expenses were due to improved hotel operating performance driven by increased demand, ADR, and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022, as well as portfolio growth.

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

Net gains (losses) and interest income from marketable securities held to fund rabbi trusts increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, driven by the performance of the underlying invested assets.

Equity earnings (losses) from unconsolidated hospitality ventures.

See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 4 to our Consolidated Financial Statements" for additional information.

Interest expense.    Interest expense decreased $5 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to repurchases and redemptions of certain of our Senior Notes in 2023 and 2022, offset by the issuance of senior notes in 2023. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements" for additional information.

Gains on sales of real estate and other.    During the year ended December 31, 2023, we recognized a $19 million pre-tax gain related to the sale of the Destination Residential Management business.

During the year ended December 31, 2022, we recognized the following:

•$137 million pre-tax gain related to the sale of Grand Hyatt San Antonio River Walk;

•$51 million pre-tax gain related to the sale of The Driskill;

•$40 million pre-tax gain related to the sale of Hyatt Regency Indian Wells Resort & Spa;

•$24 million pre-tax gain related to the sale of The Confidante Miami Beach; and

•$14 million pre-tax gain related to the sale of Hyatt Regency Greenwich.

See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 to our Consolidated Financial Statements" for additional information.

Asset impairments.    During the year ended December 31, 2023, we recognized $30 million of impairment charges, primarily related to intangible assets. During the year ended December 31, 2022, we recognized $38 million of impairment charges, of which $31 million related to intangibles assets and $7 million related to goodwill. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 9 to our Consolidated Financial Statements" for additional information.

Other income (loss), net.    Other income (loss), net increased $148 million from a $40 million loss during the year ended December 31, 2022 to $108 million of income during the year ended December 31, 2023. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 21 to our Consolidated Financial Statements" for additional information.

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Benefit (provision) for income taxes.

The change in the provision for income taxes and increase in the effective tax rate for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to the release of a significant portion of the valuation allowance on U.S. federal and state deferred tax assets in 2022 and the non-cash tax benefit from the foreign asset restructuring undertaken in 2023 to further integrate the Hyatt and ALG businesses. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 14 to our Consolidated Financial Statements" for further detail.

Segment Results

As described in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 19 to our Consolidated Financial Statements," we evaluate segment operating performance using owned and leased hotels revenues; management, franchise, license, and other fees revenues; distribution and destination management revenues; other revenues; and Adjusted EBITDA.

Owned and leased hotels segment revenues.

Comparable owned and leased hotels revenues increased during the year ended December 31, 2023, compared to the same period in the prior year, driven by increased group and transient demand, which contributed to increased rooms and food and beverage revenues, as well as higher ADR in most markets. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

Non-comparable owned and leased hotels revenues decreased during the year ended December 31, 2023, compared to the same period in the prior year, primarily driven by net disposition activity in 2022, partially offset by increased revenues at a recently renovated hotel in the United States.

The increase in RevPAR at our comparable owned and leased hotels during the year ended December 31, 2023, compared to the same period in 2022, was driven by strong group demand, growth in transient travel, and increased ADR. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

During the year ended December 31, 2023, no properties were removed from the comparable owned and leased hotels results.

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Owned and leased hotels segment Adjusted EBITDA.

Noncomparable owned and leased hotels Adjusted EBITDA decreased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to disposition activity in 2022. Comparable owned and leased hotels Adjusted EBITDA increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher demand and ADR in most markets, partially offset by increased fixed and variable expenses, most notably payroll and related costs. The increase in Adjusted EBITDA at our comparable owned and leased hotels during the year ended December 31, 2023, compared to the same period in the prior year, was also driven by the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.

Our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA increased during the year ended December 31, 2023, compared to the same period in 2022, primarily driven by improved hotel performance and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022.

Americas management and franchising segment revenues.

The increase in management, franchise, license, and other fees during the year ended December 31, 2023, compared to the year ended December 31, 2022, was driven by increases in management and franchise fees primarily due to strong demand in both group and transient business, as well as portfolio growth. The decrease in other revenues was driven by the Destination Residential Management business, which was sold during the third quarter of 2023, and prior to the sale, experienced a decline in operations as certain properties were negatively impacted by the wildfires on the island of Maui, Hawaii during the year ended December 31, 2023.

The RevPAR increase at our comparable Americas system-wide hotels during the year ended December 31, 2023, compared to the year ended December 31, 2022, was driven by improved group and transient travel. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

During the year ended December 31, 2023, we removed 11 properties from the comparable Americas system-wide hotels results as nine properties left the portfolio, one property temporarily suspended operations, and one property underwent a significant renovation.

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Americas management and franchising segment Adjusted EBITDA.

Adjusted EBITDA increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by the increase in management and franchise fees, partially offset by an increase in selling, general, and administrative expenses, primarily due to payroll and related costs. Additionally, during the year ended December 31, 2023, compared to the year ended December 31, 2022, the decrease in other revenues was partially offset by a decrease in other direct costs related to the Destination Residential Management business, due to both the aforementioned sale and impact of the wildfires on operations during the year ended December 31, 2023.

ASPAC management and franchising segment revenues.

Management, franchise, license, and other fees increased during the year ended December 31, 2023, compared to the same period in the prior year, due to increases in management fees across most markets driven by strong demand and ADR. In Greater China, management fees increased due to the easing of COVID-19 pandemic travel restrictions.

Comparable ASPAC system-wide hotels RevPAR increased during the year ended December 31, 2023, compared to the same period in the prior year, due to increased demand and ADR in all markets, with the increase in Greater China primarily due to travel restrictions being eased resulting in RevPAR rates exceeding pre-COVID-19 pandemic levels beginning in the second quarter of 2023.

During the year ended December 31, 2023, we removed six properties from the comparable ASPAC system-wide hotels results as three properties are undergoing significant renovations, two properties left the hotel portfolio, and one property experienced a seasonal closure.

ASPAC management and franchising segment Adjusted EBITDA.

Adjusted EBITDA increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by the increase in management fees.

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EAME management and franchising segment revenues.

The increase in management, franchise, license, and other fees during the year ended December 31, 2023, compared to the year ended December 31, 2022, was driven by increases in management and franchise fees, primarily in Western, Southern, and Northern Europe, due to higher demand and ADR resulting from travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022. The management and franchise fees increase was partially offset by decreased other fees as the year ended December 31, 2022 benefited from fees related to the termination of a management contract for a hotel in the pipeline.

Comparable EAME system-wide hotels RevPAR increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by increased demand and ADR throughout most markets driven in part by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

During the year ended December 31, 2023, we removed three properties from the comparable EAME system-wide hotels results as two properties left the hotel portfolio and one property underwent a significant renovation.

EAME management and franchising segment Adjusted EBITDA.

Adjusted EBITDA increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the increases in management and franchise fees and decreases in selling, general, and administrative expenses driven by the reversal of bad debt reserves on certain receivables.

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Apple Leisure Group segment revenues.

Owned and leased hotels revenues increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to increased Net Package RevPAR.

Management, franchise, license, and other fees increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to improved hotel performance, which resulted in increased base management fees and fees from hotel services, partially offset by decreased incentive management fees as hotel profits were negatively impacted by currency translation.

Distribution and destination management revenues increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher pricing. This increase was partially offset as 2022 experienced unseasonably high demand during the third quarter and included certain credits, which did not recur in 2023. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

Other revenues increased during the year ended December 31, 2023, compared to the same periods in the prior year, primarily driven by amortization of incremental Unlimited Vacation Club membership contracts, which continue to be signed at higher average prices.

Segment revenues during the year ended December 31, 2022 were negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

The Net Package RevPAR increase at our comparable ALG system-wide hotels during the year ended December 31, 2023, compared to the year ended December 31, 2022, was driven by strong Net Package ADR. The year ended December 31, 2022 was also negatively impacted by travel disruptions as a result of the COVID-19 Omicron variant in the beginning of 2022.

During the year ended December 31, 2023, we removed five properties from the comparable ALG system-wide hotels results as three properties experienced seasonal closures, one property will be closed for an extended period due to hurricane damage, and one property left the hotel portfolio.

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Apple Leisure Group segment Adjusted EBITDA.

Adjusted EBITDA decreased during the year ended December 31, 2023, compared to the year ended December 31, 2022, as the aforementioned increases in revenues were more than offset by increased expenses within the Unlimited Vacation Club paid membership program and ALG Vacations. The increase in other direct costs related to the Unlimited Vacation Club were primarily driven by increased marketing and overhead costs from incremental contract sales as well as increased amortization of deferred commission expenses related to membership contract sales. The increase in distribution and destination management expenses related to ALG Vacations was driven by certain variable overhead expenses and the recovery from the COVID-19 Omicron variant that negatively impacted travel in the beginning of 2022. Further, the year ended December 31, 2022 included certain credits for ALG Vacations, which did not recur in 2023.

During the year ended December 31, 2023, Net Deferrals increased due to the sale of the Unlimited Vacation Club membership contracts. The increase was less than the increase during the year ended December 31, 2022 due to higher recognition of revenues and expenses in the current period as a result of incremental Unlimited Vacation Club membership contracts. Net Financed Contracts increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, due to Unlimited Vacation Club membership contract sales and higher pricing.

Net Deferrals represent cash received in the period for both membership down payments and monthly installment payments on financed contracts, less cash paid for costs incurred to sell new contracts, net of revenues and expenses recognized on our consolidated statements of income (loss) during the period.

Net Financed Contracts represent contractual future cash flows due to the Company over an average term of less than 4 years, less expenses that will be incurred to fulfill the contract, net of monthly cash installment payments received during the period. At December 31, 2023 and December 31, 2022, the Net Financed Contract balances not recorded on our consolidated balance sheet were $253 million and $186 million, respectively.

Corporate and other.

Revenues increased during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily driven by commission fee revenues related to Mr & Mrs Smith and license fee revenues and other revenues related to our co-branded credit card programs. These increases were partially offset by higher expenses related to our co-branded credit card programs and certain selling, general, and administrative expenses, primarily related to Mr & Mrs Smith.

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Non-GAAP Measure Reconciliation

The table below provides a reconciliation of our net income (loss) attributable to Hyatt Hotels Corporation to EBITDA and a reconciliation of EBITDA to consolidated Adjusted EBITDA:

Liquidity and Capital Resources

Overview

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

During the year ended December 31, 2023, we issued senior notes for approximately $596 million of net proceeds from the sale, which was used, together with cash on hand, to repay $638 million of certain outstanding senior notes at maturity. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements" for additional information.

We expect to successfully execute our commitment announced in August 2021 to realize $2.0 billion of gross proceeds from the disposition of owned assets, net of acquisitions, by the end of 2024. As of February 23, 2024, we have realized $961 million of proceeds from the net disposition of owned assets as part of this commitment. On February 9, 2024, we completed the sale of the entities that own Hyatt Regency Aruba Resort Spa and Casino for a sales price of $240 million, including $41 million of seller financing. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 7 to our Consolidated Financial Statements" for additional information.

We may, from time to time, seek to retire or purchase our outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan or an ASR transaction. Such repurchases or exchanges, if any, will depend on prevailing market conditions, restrictions in our existing or future financing arrangements, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. During the year ended December 31, 2023, we returned $453 million of capital to our stockholders through share repurchases, and we paid $47 million of quarterly dividends.

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

Recent Transactions Affecting Our Liquidity and Capital Resources

During the years ended December 31, 2023 and December 31, 2022, various transactions impacted our liquidity. See "—Sources and Uses of Cash."

Sources and Uses of Cash

Cash Flows from Operating Activities

Cash provided by operating activities increased $126 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, due to strong performance across the portfolio and a decrease in cash paid for interest, partially offset by an increase in cash paid for taxes.

Cash Flows from Investing Activities

2023 Activity:

•We invested $198 million in capital expenditures (see "—Capital Expenditures").

•We acquired Dream Hotel Group for $125 million of cash.

•We acquired Mr & Mrs Smith for £58 million, approximately $72 million of cash, or $50 million net of cash acquired, using exchange rates as of the acquisition date.

•We issued $43 million of financing receivables.

•We invested $30 million in a convertible debt security.

•We transferred $10 million of cash related to advanced deposits to the buyer of the Destination Residential Management business.

•We received $93 million of net proceeds from the sale of marketable securities and short-term investments.

2022 Activity:

•We received $227 million of proceeds, net of closing costs and proration adjustments, from the sale of The Confidante Miami Beach.

•We received $136 million of proceeds, net of closing costs and proration adjustments, from the sale of Hyatt Regency Indian Wells Resort & Spa.

•We received $119 million of proceeds, net of closing costs and proration adjustments, from the sale of The Driskill.

•We received $109 million of cash consideration, net of closing costs, from the sale of Grand Hyatt San Antonio River Walk.

•We received $108 million of net proceeds from the sale of marketable securities and short-term investments.

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•We received $54 million of proceeds related to the sales activity related to certain equity method investments and the redemption of HTM debt securities.

•We received $38 million of proceeds, net of closing costs and proration adjustments, from the sale of Hyatt Regency Greenwich.

•We received $17 million of proceeds from financing receivables.

•We invested $201 million in capital expenditures (see "—Capital Expenditures").

•We acquired Hyatt Regency Irvine for $135 million of cash, net of closing costs and proration adjustments.

•We paid $39 million related to the ALG Acquisition for amounts due back to the seller for purchase price adjustments.

•We issued $25 million of financing receivables.

Periodically, we enter into like-kind exchange agreements upon the disposition or acquisition of certain properties. Pursuant to the terms of these agreements, the proceeds from the sales are placed into an escrow account administered by a qualified intermediary and are unavailable for our use until released. The proceeds are recorded as restricted cash on our consolidated balance sheets and released (i) if they are utilized as part of a like-kind exchange agreement, (ii) if we do not identify a suitable replacement property within 45 days after the agreement date, or (iii) when a like-kind exchange agreement is not completed within the remaining allowable time period.

Cash Flows from Financing Activities

2023 Activity:

•We repaid certain of our outstanding senior notes at maturity for approximately $642 million, inclusive of $4 million of accrued interest.

•We repurchased 4,123,828 shares of Class A common stock for an aggregate purchase price of $453 million, inclusive of the payment of a $9 million liability for the repurchase of 106,116 shares recorded at December 31, 2022.

•We paid three quarterly $0.15 per share cash dividends on outstanding shares of Class A and Class B common stock totaling $47 million.

•We repurchased $18 million of certain senior notes.

•We issued senior notes and received approximately $596 million of net proceeds, after deducting $4 million of underwriting discounts and other offering expenses.

2022 Activity:

•We repurchased 4,233,894 shares of Class A common stock for an aggregate purchase price of $369 million.

•We redeemed our outstanding $350 million of 3.375% senior notes due 2023, for approximately $353 million, inclusive of $3 million of accrued interest.

•We redeemed our outstanding $300 million of floating rate senior notes due 2023, for approximately $302 million, inclusive of $2 million of accrued interest.

•We repurchased $58 million of certain senior notes.

•We utilized $8 million of restricted cash to defease the Tax-Exempt Contract Revenue Empowerment Zone Bonds, Series 2005A and Contract Revenue Bonds, Senior Taxable Series 2005B (collectively, the "Series 2005 Bonds").

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

(1) Excludes approximately $548 million and $538 million of our share of unconsolidated hospitality venture indebtedness at December 31, 2023 and December 31, 2022, respectively, substantially all of which is non-recourse to us and a portion of which we guarantee pursuant to separate agreements.

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

Capital Expenditures

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

The decrease in capital expenditures is primarily driven by renovation spend at certain owned hotels in 2022, partially offset by renovations of a recently acquired property in 2023 and increased maintenance and technology spend. Total capital expenditures for the years ended December 31, 2023 and December 31, 2022 included $28 million and $26 million, respectively, related to ALG. Our capital expenditures continue to be below pre-COVID-19 pandemic levels, primarily as a result of our net dispositions of owned assets.

Senior Notes

The table below sets forth the outstanding principal balance of our various series of senior unsecured notes (collectively, the "Senior Notes") at December 31, 2023, as described in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements." Interest on the outstanding Senior Notes is payable semi-annually.

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In the indenture that governs the Senior Notes, we agreed not to:

•create any liens on our principal properties, or on the capital stock or debt of our subsidiaries that own or lease principal properties, to secure debt without also effectively providing that the Senior Notes are secured equally and ratably with such debt for so long as such debt is so secured; or

•enter into any sale and leaseback transactions with respect to our principal properties.

These limitations are subject to significant exceptions.

The indenture also limits our ability to enter into mergers or consolidations or transfer all or substantially all of our assets unless certain conditions are satisfied.

If a change of control triggering event occurs, as defined in the indenture governing the Senior Notes, we will be required to offer to purchase the Senior Notes at a price equal to 101% of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase. We may also redeem some or all of the remaining Senior Notes at any time prior to their maturity at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption plus a make-whole amount, if any. The amount of any make-whole payment depends, in part, on the yield of U.S. Treasury securities with a comparable maturity to the Senior Notes at the date of redemption.

We are in compliance with all applicable covenants under the indenture governing our Senior Notes at December 31, 2023.

Revolving Credit Facility

On May 18, 2022, we entered into a credit agreement with a syndicate of lenders that provides for a $1.5 billion senior unsecured revolving credit facility (the "revolving credit facility") that matures in May 2027. The credit agreement refinanced and replaced in its entirety our Second Amended and Restated Credit Agreement dated January 6, 2014, as amended. The revolving credit facility provides for the making of revolving loans to us in U.S. dollars and, subject to a sublimit of $250 million, certain other currencies, and the issuance of up to $300 million of letters of credit for our own account or for the account of our subsidiaries. We have the option during the term of the revolving credit facility to increase the revolving credit facility by an aggregate amount of up to an additional $500 million provided that, among other things, new and/or existing lenders agree to provide commitments for the increased amount. We may prepay any outstanding aggregate principal amount, in whole or in part, at any time, subject to customary breakage costs and upon proper notice. The credit agreement contains customary affirmative, negative, and financial covenants; representations and warranties; and default provisions.

Our revolving credit facility is intended to provide financing for working capital and general corporate purposes, including commercial paper backup and permitted investments and acquisitions. At both December 31, 2023 and December 31, 2022, we had no loan balance outstanding. At both December 31, 2023 and December 31, 2022, we had $4 million outstanding undrawn letters of credit issued under our revolving credit facility, and reduced availability thereunder. At December 31, 2023, we had $1,496 million of borrowing capacity available under our Revolving Credit Facility, net of outstanding undrawn letters of credit. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements."

Interest rates on outstanding borrowings are based on, at our option, either an adjusted Secured Overnight Financing Rate ("Adjusted Term SOFR") or an alternate base rate, with margins in each case based on our credit rating or, in certain circumstances, our credit rating and leverage ratio.

Borrowings under our revolving credit facility bear interest, at our option, at either one, three, or six month Adjusted Term SOFR plus a margin ranging from 0.775% to 1.250% per annum, or the alternative base rate plus a margin ranging from 0.000% to 0.250% per annum, in each case depending on our credit rating by any of S&P, Moody's or Fitch or, in certain circumstances, our credit rating and leverage ratio.

Our revolving credit facility provides for a facility fee ranging from 0.090% to 0.225% of the total commitments of the lenders under the revolving credit facility depending on our credit rating or, in certain circumstances, our credit rating and leverage ratio. The facility fee is charged regardless of the level of borrowings.

At December 31, 2023, the interest rate for a one month Adjusted Term SOFR borrowing under our revolving credit facility would have been 6.505%, or Adjusted Term SOFR, inclusive of a 0.100% credit spread adjustment, of 5.455% plus the applicable margin of 1.050%.

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We are also required to pay letter of credit fees with respect to each letter of credit equal to the applicable margin for Adjusted Term SOFR loans on the face amount of each letter of credit. In addition, we must pay a fronting fee to the issuer of each letter of credit of 0.10% per annum on the face amount of such letter of credit.

Our revolving credit facility contains a number of affirmative and restrictive covenants, including limitations on the ability to place liens on our direct or indirect subsidiaries' assets; to merge, consolidate, and dissolve; to sell assets; to engage in transactions with affiliates; to change our direct or indirect subsidiaries' fiscal year or organizational documents; to make restricted payments.

The revolving credit facility also contains a financial covenant that limits our maximum leverage, consisting of the ratio of Consolidated Adjusted Funded Debt to Consolidated EBITDA, each as defined in the revolving credit facility, to not more than 4.5 to 1. The financial covenant is measured quarterly. Our outstanding Senior Notes do not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios.

Letters of Credit

We issue letters of credit either under the revolving credit facility as discussed above or directly with financial institutions. We had $256 million and $263 million in letters of credit issued directly with financial institutions outstanding at December 31, 2023 and December 31, 2022, respectively. At December 31, 2023, these letters of credit, which mature on various dates through 2024, had weighted-average fees of approximately 159 basis points. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."

Surety and Other Bonds

Surety and other bonds issued on our behalf were $253 million at December 31, 2023 and are generally off-balance sheet arrangements. These primarily relate to our insurance programs, litigation, taxes, licenses, liens, and utilities for our lodging operations. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."

Other Indebtedness and Future Debt Maturities

Excluding $3,035 million of Senior Notes, all other third-party indebtedness was $21 million, net of $13 million of unamortized discounts and deferred financing fees, at December 31, 2023.

At December 31, 2023, $751 million of our outstanding debt will mature within the next 12 months. We believe we will have adequate liquidity to repay or refinance our current debt obligations.

Contractual Obligations

Our significant contractual obligations at December 31, 2023 include debt, finance and operating lease obligations, purchase obligations, and other commitments, primarily related to deferred compensation plan liabilities.

Our short-term and long-term debt obligations are discussed above and in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 11 to our Consolidated Financial Statements," and our short-term and long-term finance and operating lease obligations are discussed in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 8 to our Consolidated Financial Statements."

Purchase obligations at December 31, 2023 were $15 million, which are due in the short term and primarily consist of construction and renovation commitments at certain owned hotels.

Other commitments primarily consist of deferred compensation plan liabilities, with $5 million due in the short term and $515 million due in the long term. This excludes $407 million in long-term income taxes payable due to the uncertainty related to the timing of the reversal of those liabilities.

We enter into contracts with certain airlines for commercial air transportation provided by third-party air carriers and chartered air transportation provided by ALG Vacations. Obligations under these contracts are due in the short term and may be renegotiated based on customer demand.

Guarantee Commitments

We enter into performance guarantees with third-party owners related to certain hotels we manage, which require us to guarantee payments to the owners if specified levels of operating profit are not achieved by their hotels. Under these performance guarantees, we may be required to fund up to $30 million within the next 12 months and up to $74 million

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thereafter. Through acquisitions, we acquired certain management and hotel services agreements with performance guarantees based on annual performance levels. Contract terms within certain management and hotel services agreements limit our exposure, and therefore, we are unable to reasonably estimate our maximum potential future payments under these guarantees.

We also enter into debt repayment guarantees with respect to certain unconsolidated hospitality ventures and certain managed or franchised hotels. Our debt repayment guarantee commitments include $268 million that expire within the next 12 months and $72 million that expire thereafter. Certain of the underlying debt agreements have extension periods which are not reflected in the aforementioned figures. With respect to certain of these guarantees, we have reimbursement agreements with our unconsolidated hospitality venture partners or the respective third-party owners or franchisees that reduce our maximum potential future payments and are not reflected above.

See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."

Investment Commitments

Our investment commitments represent our commitment, under certain conditions, to lend, provide certain consideration to, or invest in various business ventures. At December 31, 2023, we expect to fund commitments of $135 million within the next 12 months and $342 million thereafter. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."

Critical Accounting Policies and Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the related disclosures in our consolidated financial statements and accompanying notes.

A number of our accounting policies, which are described in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 2 to our Consolidated Financial Statements," are critical due to the fact they involve a higher degree of judgment and estimates. Those accounting policies and other critical estimates are included below. As a result, these accounting policies could materially affect our financial position and results of operations. While we have used our best estimates based on the facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period. In addition, changes in the accounting estimates that we use are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations. Although we believe our estimates, assumptions, and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions. Management has discussed the development and selection of these critical accounting policies and estimates with the audit committee of the board of directors.

Loyalty Program Future Redemption Obligation and Revenue Recognition

We utilize an actuary to assist with the valuation of the deferred revenue liability related to the loyalty program. Changes in the estimates, including the anticipated timing of future point redemptions and an estimate of the breakage for points that will not be redeemed, could result in further material changes to our liability and the amount of revenues we recognize when redemptions occur. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 3 to our Consolidated Financial Statements."

At December 31, 2023, our total deferred revenue liability related to the loyalty program was $1,130 million. A 10% decrease in the breakage assumption would increase our deferred revenue liability related to the loyalty program by approximately $62 million.

Equity Method Investments

We assess investments in unconsolidated hospitality ventures accounted for under the equity method for impairment quarterly. We use judgment to determine whether or not there is an indication that a loss in value has occurred and whether a decline is deemed to be other than temporary, and we consider our knowledge of the hospitality industry, historical experience, location of the underlying venture property, market conditions, and venture-specific information available at the time of the assessment. When there is an indication that a loss in value has occurred, judgment is also required in determining the assumptions and estimates to use when calculating the fair value.

Changes in economic and operating conditions impacting these estimates and judgments could result in impairments to our equity method investments in future periods. Historically, changes in estimates used in the impairment assessment process

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have not resulted in material impairment charges in subsequent periods as a result of changes made to those estimates. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 4 to our Consolidated Financial Statements."

Acquisitions

Assets acquired and liabilities assumed in acquisitions are recorded at fair value as of the acquisition date. We use judgment to determine the fair value of the assets or businesses acquired and to allocate the fair value to identifiable tangible and intangible assets. Generally, tangible assets acquired include property and equipment, and intangible assets acquired may include management and hotel services agreement and franchise agreement intangibles, brand intangibles, customer relationships intangibles, other intangibles, or goodwill in a business combination. Changes to the significant assumptions or factors used to determine fair value, in particular, assumptions related to cash flow projections, including revenue projections, and the selection of discount rates, could affect the measurement and allocation of fair value. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 7 and Note 9 to our Consolidated Financial Statements."

Contingent Consideration

Contingent consideration payable arising from acquisitions is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. In order to estimate the fair value, we generally utilize a Monte Carlo simulation to model the probability of possible outcomes. Changes to the significant assumptions or factors used to determine fair value, in particular, assumptions related to the selection of discount rates, probabilities of achieving the contractual objectives, and timing of payments, could affect the fair value measurement upon acquisition and each reporting period thereafter.

Contingent consideration receivable arising from dispositions is recorded at fair value as an asset upon sale. In order to estimate the fair value, we generally utilize a Monte Carlo simulation or a probability-based weighting approach to model possible outcomes. Changes to the significant assumptions or factors used to determine fair value, in particular, assumptions related to the selection of discount rates, probabilities of accomplishing the contractual objectives, operating results, and timing of payments, could affect the fair value measurement upon sale.

See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 7 and Note 15 to our Consolidated Financial Statements."

Goodwill and Indefinite-Lived Intangible Assets

We evaluate goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year using balances at October 1 and at interim dates if indicators of impairment exist.

We are required to apply judgment when determining whether or not impairment indicators exist. The determination of the occurrence of a triggering event is based on our knowledge of the hospitality industry, historical experience, location of the property or properties, market conditions, and specific information available at the time of the assessment. The results of our analysis could vary from period to period depending on how our judgment is applied and the facts and circumstances available at the time of the analysis. Judgment is also required in determining the assumptions and estimates used when calculating the fair value of the reporting unit or the indefinite-lived intangible asset.

Historically, changes in estimates used in the goodwill and indefinite-lived intangible assets valuations have not resulted in material impairment charges in subsequent periods, and at December 31, 2023, changes in certain assumptions and estimates used in the fair value calculations, including a 10% decline in the underlying cash flows or a 1% increase in the discount rate or terminal capitalization rate, would not result in a material impairment charge. In periods close to an acquisition, we would expect fair value to approximate carrying value and do not consider this to be indicative of an impairment risk, absent other factors. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 9 to our Consolidated Financial Statements."

Property and Equipment, Operating Lease ROU Assets, and Definite-Lived Intangible Assets

We evaluate property and equipment, operating lease ROU assets, and definite-lived intangible assets for impairment quarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the assets by comparing it to the projected undiscounted cash flows of the assets. We use judgment to determine whether indicators of impairment exist and consider our knowledge of the hospitality industry, historical experience, location of the property, market conditions, and property-specific information available at the time of the assessment. The results of our analysis could vary from period to period depending on how our judgment is applied and the facts and circumstances available at the time of the analysis. When an indicator of impairment exists, judgment is also required in determining the assumptions and estimates to use within the recoverability analysis and when calculating the fair value of the asset or asset group, if applicable.

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Changes in economic and operating conditions impacting these estimates and judgments could result in impairments to our long-lived assets in future periods. Historically, changes in estimates used in the property and equipment and definite-lived intangible assets impairment assessment have not resulted in material impairment charges in subsequent periods as a result of changes made to those estimates. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 5 and Note 9 to our Consolidated Financial Statements."

Incremental Borrowing Rate and Accounting for Leases

In determining the present value of our operating lease ROU assets and lease liabilities, we estimate an incremental borrowing rate ("IBR") by applying a portfolio approach based on lease terms. Certain of our leases have terms that exceed 30 years. Given the lack of publicly available data for longer-term borrowing rates, determining the IBR for certain of our longer-term leases requires additional judgment. Changes in these estimates could result in a material change to our lease liabilities. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 8 to our Consolidated Financial Statements."

At December 31, 2023, we had $314 million of total operating lease liabilities recorded on our consolidated balance sheet. A 1% decrease in our estimated IBR would increase our total operating lease liabilities by approximately $23 million.

Guarantees

We enter into performance guarantees related to certain hotels we manage. We also enter into debt repayment guarantees with respect to certain unconsolidated hospitality ventures and certain managed or franchised hotels. We record a liability for the fair value of these guarantees at their inception date. In order to estimate the fair value, we use scenario-based weighting, which utilizes a Monte Carlo simulation to model the probability of possible outcomes. The valuation methodology includes assumptions and judgments regarding probability weighting, discount rates, volatility, hotel operating results, and hotel property sales prices. Our assumptions are based on our knowledge of the hospitality industry, market conditions, and location of the property, as well as other qualitative factors. See Part IV, Item 15 "Exhibits and Financial Statement Schedule—Note 15 to our Consolidated Financial Statements."

Income Taxes

Judgment is required in addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws, or interpretations thereof). In addition, we are subject to examination of our income tax returns by the IRS and other tax authorities. A change in the assessment of the outcomes of such matters could materially impact our consolidated financial statements.

We evaluate tax positions taken or expected to be taken on a tax return to determine whether they are more likely than not of being sustained, assuming that the tax reporting positions will be examined by taxing authorities with full knowledge of all relevant information, prior to recording the related tax benefit in our consolidated financial statements. If a position does not meet the more likely than not standard, the benefit cannot be recognized. Assumptions, judgments, and estimates are required to determine whether the "more likely than not" standard has been met when developing the provision for income taxes. A change in the assessment of the "more likely than not" standard with respect to a position could materially impact our consolidated financial statements. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 14 to our Consolidated Financial Statements."

Deferred Income Taxes – Valuation Allowance

We assess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when it is more likely than not that some or all of our deferred tax assets are not realizable. This assessment is completed on a jurisdiction-by-jurisdiction basis and relies on the weight of all positive and negative evidence available. Cumulative pre-tax losses for a three-year period are considered significant objective negative evidence that some or all of our deferred tax assets may not be realizable. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. Judgment is required when considering the relative impact of positive and negative evidence. The weight given to the potential effect of positive and negative evidence is commensurate with the extent that it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary to support a conclusion that a valuation allowance is not needed. We consider the availability of objectively verifiable evidence in determining our ability to utilize deferred tax assets. We use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when estimating future income and scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. See Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 14 to our Consolidated Financial Statements."

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