Franchise model

In the franchise model, Hyatt allows hotel owners to use one of the brand names and
charges a percentage of room sales earned by the hotel in return. Typically, Hyatt
charges 5% of the gross revenues for select service brands as its franchise fee against
the industry average of 4.5%. For full-services brands, Hyatt charges 6%, which is
higher than the industry average of 5.6%.

The revenue earned also includes an initial franchise fee and an “other service” fee.
In return, hotel owners receive access to trademarks, global sales efforts, operations
support, training, and distribution channels associated with Hyatt Hotels. There are
248 franchised hotel properties with 38,700 rooms and five all-inclusive properties.

Management model

In addition to the services provided in the franchise model, Hyatt also provides
professional oversight and comprehensive operations support to hotels in the
management model. Other services provided include:

 hiring, training, and supervising the hotel managers and employees

 annual budget preparation
 local sales and marketing efforts
 financial analysis
 food and beverage services

In return, Hyatt Hotels charges a base fee and an incentive fee, which are pegged to
the hotels’ revenues and operating profits, respectively. There are 264 managed
hotels with 84,300 rooms and ten residential properties.

Ownership model

In the ownership model, Hyatt Hotels is completely responsible for the day-to-day
operations of the hotels. The company may either lease or own the property and
completely bears both the risk and rewards related to the hotel’s operation.

Revenue earned under the ownership model includes 100% of the revenue earned
from the owned hotels. There are 35 hotel properties and one residential property that
are completely owned, as well as eight properties under lease.
 Revenues

 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, and other fees. Represents revenues derived from fees earned
from hotels and residential properties managed worldwide (usually under long-term
management agreements), franchise fees received in connection with the franchising of our
brands (usually under long-term franchise agreements), termination fees, and license fees
received in connection with the licensing of the Hyatt brand names through our co-branded
credit card program and vacation ownership properties. For a detailed discussion of our
management and franchise fees, see Part I, Item 1, "Business—Management Agreements—
Fees" and Part I, Item 1, "Business—Franchise Agreements—Fees."
 Other revenues. Represents revenues primarily related to our co-branded credit cards and
Exhale.
 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 the
owners of properties. These costs relate primarily to payroll costs at managed properties
where we are the employer, as well as costs associated with sales, reservations, technology,
and marketing services, and the loyalty program operated on behalf of owners. We record
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" in our consolidated statements of income

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 for housekeeping, laundry, and front desk staff and supply costs for
guest room amenities and laundry. Food and beverage costs include costs for wait and
kitchen staff and food and beverage products.
 Selling, General and Administration - 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.
 Costs incurred on behalf of managed and franchised properties. Represents costs incurred
on behalf of the owners of properties. These costs relate primarily to payroll costs at
managed properties where we are the employer, as well as costs associated with sales,
reservations, technology, marketing services, and the loyalty program operated on behalf of
owners
 Other direct costs. Represents expenses primarily related to our co-branded credit cards and
Exhale.