Q4 2019 Earnings Call

We undertake no obligation to publicly update or revise these statements for a discussion of some of the risk factors that could cause actual results to differ. Please see the risk factors section of our most recently filed form 10-K. In addition. We were referred to certain non-gaap Financial measures on this call. You can find reconciliations of non-gaap to gaap financial measures discussed in today's call in a press release and on our website at this morning Christmas. Our president and chief executive officer will provide an overview of the current operating environment, and the club is Outlook Kevin Jacobs our Executive Vice President and Chief Financial Officer will then review our fourth-quarter and full-year results and provide an update on our expectations for the year ahead following their remarks were happy to take your questions with that. I'm pleased to turn the call over to Chris. Thank you Jill and good morning everyone. Thanks for joining us today. We're happy to report that our hundredth year of hospitality wage.

Leading Innovations while further strengthening the positive impact. We're having in the communities. We serve all around the world for the full year. We grew adjusted Eva to 10% and adjusted EPS 14% both ahead of our expectations system-wide revpar growth grew nearly 1% for the year largely consistent with our recent guidance Our Brands Kentucky perform. Well, achieving the strongest market share gains. We've seen in a decade despite a more challenging environment that weighed on our type line. We also demonstrate the power of our business model and disciplined Capital allocation strategy by returning more than one point seven billion dollars or 8% of our market cap to shareholders in the form of BuyBacks and dividends turning to results for the quarter adjusted ebitda and adjusted EPS grew in the high single-digit rain range exceeding our expectations rep are declined 1% in the core birth.

As weaker-than-expected business transient performance offset, Leisure gains software business investment Trends pressured results in the US and slowing economic growth in China trade tensions and ongoing protests in Hong Kong way down performance across asia-pacific as we look to the air ahead excluding the potential impact of virus, which all discussed in a minute. We expect 20/20 top-line growth to be similar to modestly softer than 2019 consumer sentiment remains strong, but macro forecasts continue to call for positive but decelerating GDP and non-residential fixed investment growth for group bookings. Remain up the low single-digits consistent with our prior quarters commentary with that backdrop. We expect Leisure and group growth to continue to outperform business transaction.

Our strongest yet. We delivered record growth and Industry.

on the supply

Side in the US the growth forecast is slightly below the long-term average of 2% and it's expected to modestly exceed demand growth for the year which could pressure occupancy and limited great growth given these macro Trends before the impact of the coronavirus. We would expect flat to 1% rep for growth for the full year. Now. He's relates to the coronavirus it goes without saying that the safety and well-being of our team members and our guests remain a Paramount priority as we continue to carefully monitor the situation we're working with local governments and health authorities globally the best support our operations and our communities and impacted areas while there's still early days drawing on the industry's experience with stars and other similar situations. We've tried to estimate the potential impact on our business, assuming the outbreak glass around 3 to 6 months with an additional

three to six months recovery

For the full year, we would estimate a potential hundred basis point impact too comp system-wide revpar growth, assuming close hotels ultimately wind up being a non, we would expect roughly a half a point impact and unit growth which would be largely within our guidance range and a 25 to 50 million dollar impact the full year adjusted ebitda at this point roughly a hundred and fifty of our hotels in China totaling approximately thirty-three thousand rooms are closed turning wage development. We continue to deliver on our commitment to capitulate growth 2019 marked our fifth consecutive year of record approvals construction starts and open back for the full year. We achieved net unit growth of 6.6%

Also marking five consecutive years of unit growth of approximately 6 and a half percent. We open more than a hotel a day totaling approximately 470 properties 65,000 rooms, growing our portfolio to more than 6,100 properties and nine hundred and seventy thousand rooms across 119 countries and territories. Even with strong openings. We increase our pipeline 6% year-over-year to more than 380,000 387,000 rooms or roughly 40% of our existing base driven by record approvals of more than 116,000 rooms as a further Testament to the high quality of our pipeline. We had record construction starts of nearly eighty seven thousand rooms in the US starts increased 13% year-over-year with half of our Global pipeline under construction dead.

We remain confident.

In our ability to deliver at least 6% 6 per cent net unit growth for the next several years. We feel good about our future growth opportunities and ability to achieve our development goals. Given our strong track record over the last decade since our go private transaction. We have doubled the size of our system with rooms in the US up roughly 80% International. We've increased our portfolio size more than three times additionally More than 70% of our current rooms under construction are located in international markets. We have added new brands to our system doubling. Our portfolio of brands are discipline Global development strategy has allowed us to reach more guests for Morris Day occasions and better life is the power of our Network effect last month. We launched our newest brand Tempo by Hilton the latest example of our ability to anticipate guess needs and deliver unmatched.

value for customers and

And our owners Tempo is a thoughtfully designed mid-market Lifestyle brand that empowers guests to prioritize well-being and personal growth while traveling all powered by an efficient same model as with all of our organically develop Brands. We created Tempo based on feedback from literally thousands of customers owners and team members. We're excited to have that deals in various stages of development at this point in the fourth quarter our award-winning loyalty program reads a hundred million members and ended the year with more than a hundred and three million members honors members accounted for more than 64% of occupancy in the quarter up nearly a hundred and fifty basis points year-over-year the features Live digital key now live in the majority of our properties around the world in our industry-leading connected room offering we are using technology to deliver reliable friendly and memorable wage.

experiences

We also continue to hear great feedback for members on our Partnerships which enhance the utility of their points strengthen our system and offer guest experiences that money can't buy off. We recently expanded our partnership with Live Nation the world's leading live entertainment company to offer Hilton honors members even greater access to tickets and live music experiences additional our loyalty members can now earn and redeem Honors points when they ride with Lyft through our first-of-a-kind partnership with a leading Rideshare company looking beyond our industry-leading bulb and loyalty system. We're also proud to contribute to the communities. We serve and Lead our industry and corporate responsibility and the fourth quarter. We achieved our operation opportunity go to hire thirty thousand veterans military spouses and caregivers and expanded that commitment to hire an additional $25,000 by $25 during birth.

Where we were named the mm.

Global industry leader on the Dow Jones sustainability index the global standard for measuring and advancing advancing corporate ESG practices. We were also the only hospitality company on Fortune's 2019 Change the World list for a second year in a row overall. 2019 was a remarkable year for us. We achieved record developing hits a hundred million honors member Milestone. We're name the number one great place to work in the United States and continue to deliver on our commitment to serve any gas anywhere in the world for any traveling wage. They have as we look to the air ahead. We're confident in our ability to continue delivering for all of our Hilton stakeholders with that. I'll turn the call over to Kevin for a few more details on our results in our outlook for the future.

Thanks, Chris and good morning everyone in the quarter a system-wide revpar declined 1% versus the prior-year on a comparable and currency neutral basis as weaker-than-expected business transient demand wage and a soft group calendar offset moderate Leisure growth. We estimate the calendar shifts and one-time events tempered system-wide revpar growth by roughly 90 basis points adjusted ebitda thousand five hundred eighty six million dollars, exceeded the high end of our guidance range increasing 8% Year-over-year outperformance was largely driven by better-than-expected license fees and greater birth control as well as roughly ten million dollars of timing and unique items that offset the impact of lower-than-expected revpar in the quarter of management franchise fees increased 5% off the $558 million dollars, achieving the high end of our expected range as strong that unit growth and better performance from our Cobra and program offsets softer top-line performance dead.

diluted earnings per share

Adjusted for special items of $1 also beat expectations turning to our regional performance and Outlook fourth-quarter comparable basis points on a software corporate spending pressured business transient for full-year 2019, RAV4 grew 70 basis points as solid market share gains and good group performance. Well somewhat tempered by Week business transient Trends in the latter half of the year for full year twenty-twenty we forecast for growth consistent with our system-wide guidance given the expectation for relatively steady macro Trends in the Americas outside the US fourth-quarter redfire fell 3.2% versus the prior-year largely driven by business transient weakness across Canada and Mexico for full-year 2019, RAV4 grew 1% driven by solid Trends across South America and strong tourism in Jamaica and the Dominican Republic.

for full-year 2020 we expect

And the region to increase in the low-to-mid single-digit range largely driven by better-than-expected economic growth in Mexico and solid Trends in Canada red car in Europe. Grew 1.4% in the quarter led by continued growth across Continental Europe with particular strength in Turkey, but somewhat moderated by softer transient demand in the UK for the full-year read far in Europe grew in line with our expectations increasing 3% Largely driven by solid group and Leisure transient gains across Continental Europe and good International inbound to London. We expect full-year 2020 RAV4 growth in Europe to be in the low single-digit range with steady Trends across Continental Europe partially offset by lingering uncertainty surrounding the next phase of brexit.

And the Middle East and Africa region ref car was down 4.3% in the quarter as political tensions in Lebanon and Supply growth in the UAE continued to pressure rate for the full-year red part was down 3% in the region largely due to outside Supply growth for full year twenty-twenty. We expect read far in the region to increase in the low single-digit range in the asia-pacific region revpar fell 3.8% in the quarter with red far in China declining 7.8% due to due to the continued slow down and Leisure Travel and ongoing protests in Hong Kong for full-year 2019 RAV4 in the asia-pacific region was down 0.9% driven by softening economic Trends in China trade tensions. And the Hong Kong protest off-ramp are in China fell 3.2% for full year 2019 fulfill your 2020 unaffected by the coronavirus are as far growth expectations for the asian-pacific region wage.

in line with our system

White Guidance with the benefit from the Summer Olympics and Tokyo offsetting continued weakness in China as the coronavirus situation continues to play out. We will try to give you more specific details of effect on Regional performance. But for now we'll stick to giving you our preliminary enterprise-wide thoughts based on the assumptions that Chris laid out earlier moving the guidance for full-year 20/20 on an unaffected basis. We expect revpar growth of 0% to 1% and adjusted ebitda of 2.42 billion to 2.4 seven billion dollars. We forecast a m b p s adjusted for special items a $4.08 to $4.21 for the first quarter on an unaffected basis. We expect system-wide revpar growth to be roughly flat month. We expect adjusted ebitda 520 million to $540 and diluted EPS adjusted for special items of $0.85 to $0.91 off.

review of the potential impact

Of the coronavirus and the first quarter again, assuming are closed hotels are ultimately non-comp is that there could be a roughly 100 to 150 basis point drag on system-wide revpar growth and a ten to twenty million dollar impact to adjusted ebitda in the quarter. Please note that our guidance range is do not incorporate future share repurchases moving onto Capital return. I paid a cash dividend of fifteen cents per share during the fourth quarter for a total of $172 million dollars in dividends for the year for the full year 2019. We were turned over one point seven billion dollars for shareholders in the form of BuyBacks and dividends in the first quarter our board authorized a quarterly cash dividend of $0.15 per share for 2020. We expect to return between 1.6 months and two billion dollars to shareholders in the form of BuyBacks and dividends further details on our fourth-quarter and full-year results and our latest guidance ranges can be found in the earnings release. We issued earlier this morning.

this completes our prepared remarks

We would now like to open the line for any questions. You may have Chad. Can we have our first question, please? Certainly. We will now begin the question-and-answer session to ask a question. You may press * then 1 month your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We'll pause momentarily off assemble our roster.

And our first question will come from Shawn Kelly with Bank of America, please go ahead. Hi. Good morning everyone. Thank you for all the the thank you Chris. So thank the color on sort of the the coronavirus and sort of your expectations. We understand it's very very early there, but maybe you could just help us unpack. You know, I think is we've, you know received some questions about it. I think it just sort of looking for some of the color on maybe each of the components. I think you were very clear on revpar, but could you help us understand? Maybe what you're just seeing on the ground as it relates to the development delays and wage. It sounds like you think you can stay within the six to seven guidance on bug even possibly including some of those delays, but but maybe just talk a little bit about that assumption a little bit more. Yeah, maybe to take your last part of the last part of the question first. Yes. That was what I you know, what I said in my prepared comments, I mean in terms of net unit growth, I mean obviously early days but let me think about it Thursday.

a half a point which is what we've sort of said we think the impact will be would be half roughly half our deliveries in China if you took 100% of the deliveries out, but

In perspective would be a point. We do not think that will happen. We've already delivered $1,500 plus rooms in China this year. We opened the hotel yesterday. There are parts of China that are still business as usual terms of delivery. So we do think that the half a point is reasonable to maybe conservative and is you know, largely within the bounds of our of our six to seven months in terms of the broader assumptions again, I can't stress enough that this is really preliminary that you know, this is a, you know, sort of evolving situation wage reporting at a time where we know a bunch but not you know that much, you know relative to where this thing is going. So we thought you know, it was the only responsible thing to do was to sort of like historical perspective and give give everybody the best sense that we have and you science around and and you know the around the data that we have so as as we said briefing

That's what we looked at is sort of in a range of outcomes three to six months of you know, uh escalation and impact from the outbreak and then these things don't turn around. Typically overnight another three to six months on recovery. So essentially a six to twelve month period of time and if you look at SARS and other things again, this Manor House entirely differently and and we and we don't know but if you look at prior history in the industry and impact those seem to be sort of reasonable guardrails for four years how we how we see it today and that's how we develop those and that is a holistic view when we gave you those numbers. It involves the impact that would Ripple through from nug as I talked about. It involves the impact in China those foreclosures and lesser business. It involves outbound business leaving China and it and it incorporates all of them.

That is again a scientifically as we can. Uh

Into into the outputs. I mean keeping in mind, you know a couple of other stats and then I'll park it and I'm sure they'll be other questions that China represents China in China for us to .7% of the overall ebit of the company. If you look at system-wide revenues, uh outside of China, it represents about 7% of system-wide revenues in the United States, it represents 5.2% of us system-wide revenues just you know, give context and perspective.

Thank you for the extra color. Sure. Our next question comes from Steve and Grambling with Goldman Sachs, please go ahead thanks may be changing gears to something a little bit more of a long-term strategic. Can you can you talk about your thought process as you build out some of the Partnerships in the Loyalty program and perhaps also provide a bit more color on how you're currently leveraging the customer database you have from the program as you think about marketing personalization Etc.

Yeah.

I think without diving too deeply into things that are competitive I would say, you know at a high level and much of this I've talked about what we're trying to do is log build a program where we can not only get membership up but get a higher level of Engagement and that level of Engagement as we look at it and I look at it is not just about our our highest tier members, which of course we want to keep super engaged but getting engagement throughout the entire ecosystem because in the end what we're trying to do across the entire eco-system is still direct relationships because ultimately we know that it's a better experience for our customers and it's better for our owners because it lowers our distribution costs. And so we've had a whole bunch of different things these Partnerships are part of it, but I think if you start at the at the top of the order it first is bad and this is suppose done a few years ago about creating the best value. So when you're in honors member you God

Best price when you're in honors member you get the best value meaning that your point several value.

a a gold or Diamond at the highest levels, they obviously have value but you know making sure that we have lower-tier members engaged as well. And that when you think about our Amazon Deal which I didn't talk about today, but we have in the past about the lift Turn and Burn about Live Nation being able to buy tickets on Ticketmaster suddenly, you know, you have things that you know, you have relationships that allow all members to be engaged with us and when they're buying things using our points, whether it's nail clippers or diapers on Amazon or you know, a ticket to go to a concert it reminds them of why the relationship with Hilton matters and it and we know that it drives more loyalty and and repeat business the other things that we're trying to do away with Live Nation and others is you know, once-in-a-lifetime experience has been particularly for our most loyal members things that they just money can't buy and then technology

when we think of that digital key digital check-in room selection connected room and

Whole bunch of other things that were doing on the on the Innovation side and Technology, it's bad. Not only just giving them the best price the best value but then making sure that our honors members are getting the best experience and that we're using to answer your question. We're using all of the data that we're getting in how we interact with them in every element of their stay to personalize and customer is what they want the room types. They want where they want to be in a building what they you know, what their preferences are and food and beverage how they interact with the outside environment how they interact with the inside environment of the home and the outside environment the hotel. So we're we're broadly starting to really harness all of the data to ultimately personalized at Mass scale experiences that we think will continue to build loyalty. So again, this is you know, the the the the thing we've been that we've been really crazy focused on birth.

Really over the last five years in particular is engagement across.

The whole ecosystem and so when you look at you know, our hundred plus million members over half of those members and growing are engaged. So that means by definition. We have a whole bunch of lower-tier members that are engaged with us. Meaning they are buying rooms from us and we know when they become an honors member that it's high nineties percent of the time that they buy directly through us and just help us keep distribution costs as efficient as possible. That's great color as an unrelated follow-up on the pipeline. I think one of the consistent concerns that comes up in vain conversations has been is there a point where a rep are softening leads to software development and unit growth as you have conversations and see underlying financials of your owner's how do you assess the stability and strength of them both relative to history and perhaps also to other forms of real estate. I feel pretty good about it. I mean, here's the thing. This is we're having the best braids in the business matter. We talked a lot about marja.

Share what matters most the developers is absolute market share because that's what drives revenues for them when they build a new property and we have the highest by a long stretch average mortgage.

Anybody in the industry. So what what's happening is we are getting a disproportionate amount of development. Even when it is difficult in an environment like the where costs have gone up cost of financing costs wage build repairs are are tepid. We are still you know, ultimately doing pretty well. I mean our starts, you know, while while signings have continued since 2016 to go down starts actually had been going down and flipped around in the US using that example we were up about 13% and starts in the US which I think is a testament to the fact that our Our Brands are performing well enough we're we're getting a disproportionate even though it's a smaller pool. We're getting a bigger piece of a smaller pool. The other thing I'd say that's a really important note is the world's a big place. I mean, I you know, the reason we gave the stats on what we've done over ten years and what we've done over five years is to give a gift sort of a little context for the fact that during that time frame, you know, we went through the birth.

Recession we've had all sorts of good and bad things happening over that time frame yet. We have always been able to sort of pivot and and find the pockets of demand and we're capital is available to continue to grow and and and grow in a way that our owners are profiting. But also we're continuing to build our Network effect so that we're continuing a strengthened our overall ecosystem for our customers. And so, you know, the world's a big place, you know, the US has been in a slowing growth and development we've been doing you know, we've been doing fine, but it has been slowing a suspect in a in a low-growth environment that will continue to happen. I suspect will continue to get it a disproportionate share of it if we do our job and we intend to but the world's a big place and we're you know, we continue every month that's where you point out sign more deals start more deals and ultimately deliver more deals because we have you know, an ability we've being a big Global business and with brands that are performing. Yep.

Well around the world and relationships that are very deep around the world tips.

And and be strategic about where we're going and who we're going.

Thanks so much.

The next question comes from joh Graf with JPMorgan.

Go ahead Mister Gruff. Rapture line is muted on your end.

We're still unable to hear you will move on to our next question. That's from Carlo santarelli with Deutsche Bank, please go ahead. Hey guys. Thank you for starters. Good morning, Kevin. Maybe you'd be able to dispatch a little bit. Could you talk a little bit about the the lower expectations for for G&A as we look out to 2020 kind of what's driving that if I recall 2019 was flattish on that line off.

Yeah, I think Carlo if you look at I mean I think about it as sort of midpoint of Prior guidance relative to midpoint of future. So first of all, it's just I think better cost control. We we we we do a pretty good job in The Business of Being disciplined about costs and at its core, you know next year versus this year's about better cost control and we did have some a couple of a few unique items that pushed, you know, 2019 update the high end of our previously reported guidance range and you know, those are non-cash and and non-recurring so they're not going to repeat next year which gives us a bit of a headwind. It's not more that much more complicated than that great. Thank you for that. And then just one other on on kind of the the pipeline the or the the net unit growth in 2019. Are you guys able to provide any color on on kind of the the split between New Jersey? It's relative to conversions both in the in the US or or primarily in the US.

the United the way

Look at his most of the conversions occur in the US not all but most and it was roughly 80 20 new units versus conversion, which is what it's been for the last few years back very much guys. Yep. The next question is from Harry Curtis with instinet.

Good morning, everybody. Just a quick follow-up on the domestic development pipeline as you as you travel around the country and and look at the age and relevance and competitiveness of some of the older hotels in the bigger markets. What I'm wondering is the 70% of your pipeline being International in the US. This is not an opportunity to given the age of these competitive hotels to to begin focusing on that as a development opportunity. What are the returns there to the owners? Yeah. That's a that's a great question and answer is yes, and that that is not something that we have missed. We've been focused on it. I'd say in a couple of primary ways and a bunch of other ancillary ways. The first is is in conversions, you know, which which you know as as the operating environment gets more difficult as I said lots of different times. I think it provides

a a bigger

Opportunity for people to want to come into our system because you know, they get higher market share they can reduce costs because we have you know ability with our system size and strength to drive, you know, better Education costs and like so that is one way where you know, we can continue to grow even when they're they're maybe less or new construction the other that involves new construction home. The other major way, you know are are some of the new brands that we've developed that I think are in a sense category Killers. I think true being the greatest example of that where we wanted a couple of years ago. We have over a hundred hotels open another 350 400 in the pipeline. It is like a rocket ship in in the the the the the answer the question of why is because of what you're saying. It is competing in a category where the bulk of the product with all respect to its comp said our older hotels that are not real.

Went to today's custom.

His needs and so that to a degree by the way, we are trying to do in a whole bunch of different segments. I think if you look at Tempo to a degree, there's there is a bit of that. We think that project is something that that is very unique to the market. I think true in terms of the scale of opportunity and and the and the cost of entry and how it how it goes. It's disproportionate market share to the competition in this environment, which is a tougher environment provide certainly in the context of the biggest opportunity.

That's helpful. Quick follow-up going back to your business transient demand particularly domestically. Let me think. It's holding back CEOs at this point. Now that we're looking at least the at least the early Innings of a trade deal. Eventually the coronavirus is going to recede from the CNN and fox headlines off. And do you think it's concerned about the election where we are in the economic cycle? Is there some scenario that you can think of that that lifts this business transient dead. And yeah, I think I think it's a you know, it's a bunch of things. First of all, I'd say, you know the way most things work is people make budgets in the fall of Prior year and how much they're going to spend in capex and how much hiring they're going to do and it's not that they and how much travel sort of as a knock-on effect that that will occur and it's not that they never change those and it's not the bulb

their biggest fan in the expense category, but it is

But they traditionally don't change them quickly and they certainly don't change it that you know typically early in the year very early in the year. So I think to a degree if you think about when things got heated right the things that you described were not resolved, right you were in the middle of a trade War election uncertainty Global uncertainty generally et cetera et cetera et cetera. So I think it takes a little time to sort of work its way through there are obviously not the you know, big on the negatives. There are some other uncertainties we're not election cycle and you know, the outcomes are Broad and I think there's you know some concern about that and coronavirus. Well, you know, our belief is that you know, most you know, the countries around the world including China are being quite responsible and it will be managing it is a risk and so I think you take sort of accommodation of budget Seasons where it was greater things stabilized but a few other risk, and I think it has made for Thursday.

Sort of the business transy and growth to be temperature now.

Here, here's the thing that I want to be really clear that I don't want to get ahead of myself. Right in the sense that it's you know, it's it's early in the year and it's hard to know but I would say even over the last few years. So I guess I sat here yesterday getting my weekly update from our at our executive committee meeting over the last two or three weeks. We have started to see in terms of Advance bookings which are you know, in business transient are all short-term. But you know real time we have finally started to see those come back to like they were very anemic and we've now started to see Advance booking growth come back that's a few weeks of data again. I don't you know, I want to emphasize that but you know, that might be a consequence again on a lag effect people starting to age, you know settle settle down a bit. I think when you look at the segments for the year Harry and others, I mean, I think we still would believe as I said in my prepared comments that game

we're a group position is and given the strength of the consumer that those will

Lead the charge and be above business transient, but we do think all all segments. It will be at a lower rate, but all segments will grow and we have a little you know, we're we're hopeful that business Trends. We're seeing some early signs and we are hopeful that those are sustained.

So always an insightful. Thanks. Thank you.

The next question will move back to joh Graf with JPMorgan, please go ahead morning guys. Can you hear me now? Yeah. Yep here. They're welcome. Great. Thank you. I was going to ask you Chris about how you view you as corporate transient, but I think you'd have to answer there but I did hear you that you would expect that to post some positive growth in 2020. We would yeah modest and then Thursday and hopeful that we're you know, we're at the beginning stages a little bit more pick up, but I don't want to get ahead of myself and we'll we'll obviously update you as the year goes on. I appreciate that and then when a cat Les you what percentage of of your new signings were were hotels in China.

I would that's a good.

And I would say twenty in the 2018. Yeah. Yeah, and I know Hilton back in the Stars days was a different company different management running it when you go back and maybe look at SARS as as maybe some sort of a no case study and this is more from the development side. Did you see sent you done? This was the the The Rebound in signings coterminous with the rebound and operating demand Trends or was there some sort of lead or lack one versus the other it was pretty consistent again different world different time. China was in an entirely different sort of marketplace money, but they they all sort of coincident in you know at the same time started to recover and they recovered reasonably rapidly dead.

Yep.

Got it. Thank you guys.

Thanks, Jeff. Next question comes from smedes Rose with City, please go ahead.

Hi, thanks. I wanted to ask you two quick questions. You know, the first is when you look at the Gap in true and Hampton, it stands at about $15, but we continue to see outside his growth spurt true and kind of flattish for Hampton. And you know, how much compression do you think between those brands do we'll see and and just have longer-term ramifications for for Hampton Inn owners. Is there cannibalization going on? There are other factors just drives the different. I mean, I'm sure there's a market where you could find an owner that would say, you know, we're competing they're competing with a you know, between two and Hampton, but when we look at the aggregate Thursday, and we and literally look at every Market cuz through is not so big that we can't I don't think we're seeing any cannibalization that the the price point between them is still you know, 15 - 20% when you look at it when you look at the growth rate, what's happening is you have Hampton that is a very high market share it just at a point where it's very, you know, you're talking about one month.

20 and true

Is performing unbelievably well, but it's still ramping up. I mean, you're only as 113 hotels. It's a very new brand and while its way outperforming the competition it is not performing at that level. And so that that's what's going on. There's still a good spread. We think there will continue to be a good spread. These are attracting, you know, some similar customer but the bulk of the customers that are being attracted are as intended, you know that those that want a little bit bigger room and are willing to pay a little bit more our our life, you know back, you know are in the Hampton and and a little to pay a little bit less a little bit smaller room and it different sort of design ethos or are headed to the truth. So we look at it super careful because keeping, you know eighteen Brands and their swim Lanes is a very important thing. And as I said, you're never going to be able to argue that they don't occasionally compete because to a degree they all do around the edges, but they have dead.

Sort of in in their main.

And ultimately attract demand from that Main swimlane and we're obsessive about looking at that. We think through and Hampton are are both doing great Hampton still the best hotel brand of the world. I think if you look at it by market share growth and growth and units customer satisfaction owner returns and satisfaction. It's still the best brand in the world true is true is going to do incredibly well at a lower price point and I think you know eventually be equivalent in terms of of its strength, but it's something different. Yeah. I mean that just add crystals office, but the the difference in the sample sizes of the two in terms of just the number of Campo tells and then the percentage in each group of Campo tells that are ramping hotels. It's it's sort of night and day before those two Brands. So just keep that in mind when you're looking at, our growth. Okay? Yeah that that's helpful. Thank you, and I just wanted to ask you I mean, obviously there's been a lot of media around whether or not Hilton Grand Vacations have sold. I wanted to ask you a technical job.

I guess if it were sold is your licensing fee the fee Arrangement transfer automatically or is that an opportunity to renegotiate and maybe broadly what are the parameters of an?

That you would be willing to license this Brands to yeah, we're not I'm not going to comment much on that first anything related to anything or not. Do you should talk to them about as long as the hills and I think which is a matter of public disclosure when we spun the company. We were incredibly thoughtful about our contractual Arrangements, which we think give us all of the main things that we need to make sure that we're protecting the two things that we care about which is our brand and our fee stream and beyond that. I'm not going to comment.

Okay. Thank you.

The next question is from Robin Farley with UBS, please go ahead great. Thank you. Two questions. First is I'm sorry if I missed the opening remarks, but I don't know if you said you're off of her index and Q4 and then my other question was just on on share repo your remaining authorization looks like sort of less than a quarter's worth of like based on what you've done. The last year's lesson of quarters worth remaining and the board I guess did authorize some things related to the dividend in February, but it looks like they did not authorize any additional share repurchase. And so it looks like you're close to running out. Just wondering how to interpret that thanks. Yeah. I don't I don't think we've mentioned fourth quarter full year. We said was up the biggest increase we've seen was 140 basis points system might increase for the year. Fourth quarter was relatively flat to slightly up as we expected given the comparability issues and the group positioning dead.

in the various quarters throughout the

So no, no surprises there and again a full year share game. That's the best that I've seen in my going on thirteen years with the company and Robin. I'll take this off the repurchase one. I think you know you while you are factually correct and you know, of course any any incremental reauthorization would would be up to our board of directors, but I think you should not read into anything related to the office and you should just think about our Capital allocation strategy as we've articulated at continuing to live on right and we gave you guidance for what we're going to do so assume that we will live up a guidance perimeters.

Okay, sounds good. And then just last clarification I think in your introductory remarks when you were recapping Q4. I think you said that the calendar hurt by by $90. I just wanted to clarify that cuz it seemed like the month of December got a huge Boost from the calendar. And so I didn't know if that was just any color off December is a very small month relative to the other months and impact of the house Jewish holidays and otherwise greatly outweigh the benefits. Yeah plus plus day a week shifts throughout the rest of the quarter. So yes, we did was about a 90 basis-point impact on the quarter.

Okay, great. Thank you.

The next question is from Patrick shoulders with SunTrust.

Hey, good morning. Chris and Kevin just a follow-up question here or perhaps a point of clarification when you talked about the possible rev card declines due to the virus and the ebitda that is just mainland China, correct? And you know, have you thought about what the potential impact might be dead, you know outside of china such as in other countries in asia-pacific. And are you seeing any domestic cancellations from domestic Travelers who are not Asian bound at this point? Yeah. I know. I'm Patrick that those estimates are system-wide. So the the, you know, obviously the the, you know, the Lion's Share of the impact will be felt them on the ground in China and in Asia, but those are system-wide estimates and if you think about, you know, overall, you know, China inbound to the us on our overall system-wide basis is still quite small. It's about twenty basis points and then China inbound on the system-wide basis outside of China is about 7 month.

Basis points. Oh those estimates do fact.

the whole business

Okay, follow-up question here shifting gears. You know, how concerned are you today about owner push back on dilution issues. When you add any new hotels that are competitive with your existing Hilton brand of products in the same Market certainly at the Alice conference talking to owners would definitely send some frustration about the proliferation of Brands coming in and their markets. Yeah. I mean, it's something you know, when I when I talked about the process thoughts in my prepared comments about how we launched Tempo similar to how we launched every brand we are under Community is deeply involved like in the tempo launch. We had an owner committee that worked with us through the process for over the last year and we're part of the launch and we're super supportive. I can't say that you know that we're perfect there. Occasionally. We're you know, we're going to have wage.

That have issues with it. But back to my earlier comments about an answering the question about true and Hampton.

We're always incredibly focused on trying to develop brands that we think really are unique demandbase and customer segments that they may around the edges, but that they have a demand-based that can ultimately Drive their success without cannibalizing our existing Brands and so given that we are obsessive about that given that we involve a broad base of owners with us in the development of these Brands. I am not ultimately particularly worried about it, but we have a lot of brands at eighteen. We have a lot fewer than some of our competitors and so well, I'm not well I'm not going to say I've never had a discussion with an owner that has had concerns my honest and objective view is I have not had a lot of pushback from owners basically given so many of them are so deeply involved in helping us develop these brands

Okay. Thank you for the color.

The next question is from Bill Crow with Raymond James. Good morning guys. Good morning. The first question coronavirus wage and and Kevin. I appreciate the the details on the percentage contribution in the US and elsewhere, but certainly the every Market is different and I'm just wondering whether you're seeing a a bigger impact a material impact at this point on some of the West Coast markets or New York or worse a a Paris and and whether you've started to see any cancellations in Tokyo related to the Olympics off. So first well second part is a little bit easier know we are not seeing any cancellations relate to the the Olympics. In fact pre-olympic activity is is gearing up as we speak and we expect that to be business as you age. Of course again, if something changes in terms of the breadth and the reach of the virus, you know, that that we'd have to update our guidance of if things were if that things were that bad so that one's easy on the second page.

Point you're obviously correct. There are markets that have a higher concentration of Chinese inbound. We're trying to size it for us. So others that would be

More concentrated in those markets might size it differently, but just to give you a little bit more context. I mean, you know on an overall basis, you know or overall International inbound wage is about 5% and it only gets up to about 20% in you know, key Gateway cities like New York and West Coast cities and that's all inbound. Not just China. So China on a relative basis while an important job market in one that we've been all working really hard to cultivate is not so impactful that it's going to change the answer, you know beyond what we've said. All right, that's helpful. And then my follow-up is on the pipe. Am I think we all we all understand what's going on with cost inflation and construction the US and what's going on with the labor cost inflation in the US. Are you seeing similar Trends globally month? And I know that's a hard thing to categorize but your major areas of focus you see in that sort of inflation.

No, I mean you're right in and implied. Your question is the world the big place and it's you know, different sort of story everywhere you go, but I would say that broadly the answer is no the the biggest pressure that we've seen in terms of cost increases on input costs for development have been in the US in terms of our large markets around the world. Now importantly those have moderated they're still they're not going down but they're they're still growing but if you look at the last, you know, two to four years, I would say our view was those input costs were going up in high single-digit low double-digit. If you look at what we see right now, it's sort of a little bit above inflation, you know, it's sort of like 3% vs 8 to 10% So again, they're going up, you know rep cars aren't going up that much all the pressure that has been implied in a bunch of questions exist dead.

But the pace at which is going.

Is less and again, you know having a you know, industry-leading mortgage here across the entire brand portfolio and and with each individual brand means that what is getting done is more. You know, what we our brains are more financeable and we're getting you know, we're getting an unfair share if you will of that development activity, but this is the market has been off the you know of the big markets the most impacted by that phenomena. The next question is for Thomas Allen of Morgan Stanley.

Thank you. Good morning. Chris following up on your earlier comments about seeing some strengthening in bookings over the past few weeks. Is there any way to quantify it or maybe qualitatively does it kind of feel like we're back to the bookings you were seeing when in the US is more like 2% versus 1% Any color would be helpful, you know Thomas I don't want to be home, but I I I

let in

That was saying it's really early a couple of weeks two or three weeks a day too. So I know I can't give you a whole lot more color other than to say it's gone from like flat wanting to you know, sort of a glad to wanting to be negative to you know, showing Positive Growth so I can't gauge it whether it feels like, you know, one or two. It just it's too early but she says like every quarter will be back will report and we'll have, you know a little bit more data to give you and have a better sense of it because we're just getting into the business transaction travel season cuz you know that works in the first part of the year January the first part of January sort of a wash cuz nobody wants to travel so I'd I'd love to give you more. I just don't I just don't have one that's off the most sort of color I can get at the moment.

Helpful, and then just on on the net growth to detail questions. Just how has a tradition or closings tracked and then Thursday update on time lines of construction. Thank you. A tradition has been tracking about the same no difference over the last few years when we look at it. And in terms of delayed pre coronavirus that will obviously likely cause it will cause some amount of delay which is why we gave the overlay on that outside of that. We have not really seen it. I mean, we you know it over if you look at it over the last five years have we seen things take a little longer to get done a few more months of construction the like yeah, I think the technical data says yes, but in terms of our guidance over the last few years, we sort of baked all of that into our thinking and continue to so nothing, you know, nothing material that we see there and no no big boss.

Trend on attrition steady as as it goes.

Well, thank you. And our next question will be from Jared with wolf research, please go ahead. Hi. Good morning everyone. Thanks for taking that question. So our growth and rough part guidance for 2020 together is slightly higher than the MFG guidance. Would you say that's coming more from license fees or maybe in Santa fe's with which is lighter revpar environment or is there something else that you would call out a little first of all license fees is in is in the is included in the fee guide. And so again, it's a little bit of the cost control that I was talking about Iraq and and nothing more than that chaired.

Okay, great. Thank you. And then can you just talk about what's next on the brand introduction front now that you've announced Tempo and then I guess related to this idea you've talked about how strong true has been do you think there's any opportunity to introduce anything at a price point even further below or true is at right now.

I'll answer the second first. I don't think so. We're not I mean first of all, you know, I've been pretty consistent and saying pre Tempo we working on two different brands Tempo was wage of them upscale lifestyle. I've also said we we have been lightly working on a luxury lifestyle. And so at some point we will we will launch a luxury Lifestyle brand. We're not in a rush to do it. Obviously, we launched three brands basically last year. We've launched one this year. I want to give them all their proper Birthright and make sure they're really working eighteen Brands to the earlier commentary we think is enough money to be able to accomplish what we want to accomplish with our Network effect. And so we're going to take a little bit of a break and get the ones we got, you know out there working and working really well and someday I will do something in luxury lifestyle and the environment we're in it's not going to be you know, in any environment. It's not going to be a gargantuan brand bye-bye number of units and in today's environment, you know the wage

help

His less anyway, so I want our teams Focus.

Done what we have launched and to get it going as it relates to as it relates to true. I don't think so. I mean it took it took the better part of you know, I'd say 7 years, you know and thinking and and you know an engineering to launch true. And the reason it took so long is we had a lot of other things going on, but it was like we were trying to figure out how to engineer a cost to build a product that cost to operate and clean and and and the like topics and capex that would deliver a return based on a rate that we would get that would be a 15 to 20% lower than Hampton but still deliver Hampton like returns, you know, which I would say is sort of a nun leverage return on total cost of eleven or twelve percent, you know, it's stabilization because that's where we know you can attract the owner Capital to you know to to make to make the magic and we spend a lot of time doing it. It's hard the lower the price point the harder it gets off.

To be able to engineer it in a way where you can get those returns and importantly it's really hard to be able to do it sustainably. So the problem, you know, you gotta be able to build it at a cost. You gotta be able to operate a page and you got to be able to renovate it, you know, in terms of percentage of Revenue that can go go towards keeping it up over twenty or thirty years and deliver those returns and the lower you go and insult absolute red part or eighty are the harder it gets because the higher percentage you are having to reserve in order to keep these things fresh over a longer period of time we took it out and trip but it took a lot of work and engineering and it's working. I believe going to a price point lower than that. It would be very hard for us or anybody if not impossible and Thursdays. So we have we we are not in any way working on that and never say never but I I I I think it's very hard to go much lower in price point. Yep.

ultimately deliver a product that over a long

Span of time the Arc of time of twenty and thirty years. These brands are were a hundred years old these Brands got a last a long time that you can maintain a brand like we have over 30 plus years Hampton that's still is a category killer because you can force you have returns that are high enough to force the investment in overtime to make sure they stay relevant. So it's a long way to way of saying no, I do not I do not see us doing that. Great. Thank you very much.

Happy to ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over the Christmas set up for any closing remarks. Thanks everybody for the time today. We come back a lot of territory. Obviously, there's some moving Parts out there particularly in a pack and with coronavirus we try to do our best to give you some Contours or guardrails. They had to think about it. We hope it was a couple obviously as the year plays out. We will we will keep keep up with you and and give you more information. As I said my comments. We're super excited about what we accomplished in nineteen and twenty twenty is off to a great start and we'll we'll talk with you after the first quarter. Thanks again for the time.

The conference has now.

Fluted thank you for attending today's presentation. You may now disconnect.

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