Q1 2020 Earnings Call

Of workers on the front lines across many Industries and in many roles working selflessly to help keep us all safe. Also want to thank our team members around the world for their remarkable dedication hard work and sacrifice many of our own team members have been personally impacted by this crisis and yet through this adversity. They've continued to spread light and warmth of hospitality across every region. We've adapted quickly to provide hospitality and new ways in our communities and London several of our properties are home in the National Health Service and other key workers. The Hilton Orlando has been hosting the National Guard and working to distribute essential items to community residents in need and over 500 cocktails around the world are being used for Recovery efforts are properties have also donated thousands of pounds of food and supplies to local food banks through the Hilton of faith.

I think they're going to want to see people there going to be other things that happened, you know that that change but it's going to be things. I think that we're sort of forming where it will accelerate other other thing like, you know, our digital digital check in which we've had great adoption. I think we'll have massive adoption connected room where you get your in a room. You don't have to mess with the remote control or touch switches, you know, I think people will sort of adopted those things. So, you know, I think that you know, the digital world, you know was already very important to us. I think it's going to get more important because some of those Trends are are going to be accelerated but I do not you know, I wake up in life thinking about a lot of things these days I do sleep but I get up awfully early as I told Kevin but I do not worry that people are not going to want to see each other meet with each other and ultimately congregate. I think that is the human condition and I think there is an argument that on the margin I described it could it could take some two occasions. There's also a wage

Foundation we are provided.

This Disaster Response grants for organizations and communities fighting the spread of covid-19 as part of this effort our Hilton honors members have donated more than six and half a million points to these causes in partnership with American Express and our ownership Community. We committed to donating up to 1 million room nights to front-line medical professionals in the United States to support those who are putting their lives on the line to protect us since its launch just four weeks ago tens of thousands of medical professionals have booked off hundreds of thousands of rooms through the program further building on this initiative just this week we an American Express announced a partnership with World Central Kitchen off the liver freshly prepared meals at no charge from restaurants and local communities to front-line responders staying at our hotels already active in three major markets. They're playing a game.

And even better argument that people are going to want to see people more than ever. They just need to feel safe.

Right and I think when they feel safe, they will go back largely to their own patterns and behaviors looking at the at the great looking at, you know, prior activities. I think nine-eleven is is probably the most instructive while it's not the same, you know, cuz none of the this is you know, unprecedented as we keep saying, you know, there are some lessons that were learned they're like, oh, you know, basically everybody said well, you know after nine-eleven nobody traveled they videoconferencing wasn't as good but they figured out other ways to do things because they were afraid to get on planes and travel and go out, you know, you fast-forward it, you know, two or three years we had figured out how to manage the world and figured out how to not get rid of terrorism but manage it and people went back to their prior behaviors with a you know, it did accelerate a few things that were not frankly I would argue harmful that were probably helpful. I think you know the same thing that's going to happen here.

Expand this initiative in the coming weeks turning to the business to ensure. We effectively navigate this challenging time. We focused our priorities of 3/4 cup protect our people protect our Core Business and prepare for Recovery while our long-term goal Remains the Same to drive loyalty across all of our stakeholders wage current situation requires greater levels of responsiveness and preparedness in the near-term with this in mind. We've worked closely with industry associations and the administration office to Advocate on behalf of our team members and hotel owners and to help shape the broader recovery, given our leadership teams extensive crisis management experience coupled with a global nature of our business. We had a relatively early glimpse of the impact this pandemic started to have in the asia-pacific region in response. We took Swift action to protect our business wage.

I think as we get through this and we realize that you know, covid-19 and and these types of viruses are part of our our future they have been We have dealt with the season wage. There was a time where the dealing with the seasonal flu felt like this that we will we will figure out as a global Community had to deal with this we will hopefully have a vaccine time will tell I will certainly have more Therapeutics. We will certainly have better practices and procedures to make sure that we protect the very small part of the global population that is really truly most impacted by this and I think as people then start to feel like this is a safe environment. They are going to go back largely to their old behaviors. I would bet a lot of money on it and that's what Mister E would tell you.

I appreciate that and as a quick follow-up, what are your peers in the in the airline industry telling you about the pace of their restart?

And ensure that we have sufficient liquidity to operate in these unprecedented times with travel demand at record lows. We currently have suspended operations at approximately 950 months or 16% of our hotels globally including approx 10% of our hotels in the Americas 60% of our hotels in Europe the Middle East and Africa and 15% of our hotel in asia-pacific at the hotel level. We acted quickly at the beginning of the crisis to make decisions to help our owners respond, including suspending home operations temporarily suspending brand and operating standards deferring capital expenditure requirements eliminating quality assurance audit and allowing the use of ff&e reserve for operating expenses going forward. We are working closely with our ownership Community to define the hotel operating model of the future with the goal of developing operating standard wage.

I would say I have been talking to a lot of my peers but but looking at the data to be honest, I thought you know at least in the last couple of weeks and in these days, it's like every week package but you know based on the conversations. I have had over the last couple of you know over the last month or two and then just looking at the data, you know, I think you know while we're not in some let's be clear. We're not in a you know, showing robust recovery Trends right now. We're you know, I said we are like teeny typing in China we are but the rest of the world it's like teeny tiny, you know stepped forth. I think the airlines are are are way behind and you know, if you just look at the passenger you don't mile data, you know how many Employments they're just way behind in here in here's the thing off because people are you know, those that are willing to travel are only willing to go so far from home. So I you know as I think about our teams you didn't ask but I'll answer cuz we're spending an immense amount of

Keep our custom.

Safe and drive enhanced efficiency and profitability while continuing to deliver products and service that customers will pay a premium for at the corporate level. We've reduced executive salaries furloughed nearly two-thirds of our corporate Workforce eliminated other non-essential expenses, including Capital expenditures and suspended share BuyBacks am further as a precautionary measure to preserve Financial flexibility. We drew down on the remaining amount under our credit facility pre-sold Hilton Honors points to American Express and successfully executed a bond offering all of which resulted in a pro forma cash position of three point eight billion dollars at the end of the quarter which we believe is more than adequately

Time on recovery. I spent you know, I had all

500 of our commercial leaders around around the world on a zoom call yesterday and talking about how we're retooling our approach to go to market over the next 6-12 whatever it takes 18 months and that is going to be really a much more about local business and a lot more in the beginning about drive to business. Right? So if you if you think about it, I mean sort of the the human reaction is like I'm going to I want to move I want to get out I'm starting to feel safe. I'm going to get out of my house my I'm going to go to my neighborhood. Maybe I'll you know sort of, you know, move around the page. Maybe I'll go to the region next door. Eventually. I'm going to cross the country. I'm going to I'm going to get on a plane go around the world, but I think it's in that progression. So if you think about it that way while we've seen a little bit of pick up, you know, I would I would argue almost all of it has been in drive to and we we thankfully we've been portfolio with a lot of brains, but we have a lot of drive, you know, we have you know in the world to Thursday.

Was in six or seven hundred Hampton Inns and you know, we have we have thousands. I think you know limited-service hotels in the US. We have almost four thousand of them and they are very long, you know, well set up for you know, that sort of local Street Corner type business and drive to business. So I think there's a little bit of a disconnect and there will be off for a period of time where I think we will we will likely show I think recovery at a faster Pace because we can accommodate types of demand that don't require air travel. Ultimately. We need the airlines. We need people to get on planes to get to the Nirvana which is back to more normal patterns of demand. Obviously that has to happen but in the short-term, I think it's I think it's going to be a little bit more local a little bit a little bit more drive to and and our industry if you're if you can accommodate that business is going to be ahead of the month.

I appreciate the thoughts. Thanks.

Our next question comes from Sean Kelly from Bank of America, please go ahead with your question.

Hi, good morning, everyone and it's good to hear everybody's voices again. So I wanted to switch the subject a little bit to kind of the the franchisee side of the world here, you know was just wondering if you give us a little bit more color on you know, how some of those conversations are going with your franchise Partners, you know, if it's possible and and I appreciate it's both early stage and it may be hard to give these numbers but you know any sort of sense of you know, magnitude of either, you know asks of how many your franchisees or or looking for any form of fear relief or what what that dialogue is kind of looking at looking like right now, I'm sure so is this this something I commented on for good reason in my prepared comments cuz we're spending as you would guess a huge amount of time with our franchise and brought her ownership Community because you know, they are the engine of our growth and there are you know are most important partners in business and and X wage.

Difficult for everybody but times are more difficult for them given, you know the Scituate.

Kitchen, which is no essentially no demand or very little Demand yet, you know, even with furloughs and all those things they still have to pay debt service. They still have to you know, pay, you know for insurance and real estate taxes and you know yield utilities and all that fun stuff. So we've had a multi-tiered approach. Um, I'd say first and foremost and I talked about it a very little bit, you know, we and I have been deeply involved in what's been going on with the federal government both with the administration and on the hill to try and get liquidity relief for the industry, which is our ownership community and frankly trying to get relief for our front-line team members that have been furloughed and not in any way relieve for Hilton. We don't need it. We have not asked for it in any way shape or form, but we have been pushing really hard with the administration treasury, you know, I've had lots of cars.

Stations with all the right people including the president secretary mnuchin throughout the PPP reality is you know, I could go on a long time. You don't want me to you know, PVP is a really good program. And we you know Congress and the administration should be given a lot of credit for moving that fast and getting that much money into the system that will help owners and and small business folks and multiple employees keep, you know, keep, you know, stay on the payroll reality is for our industry. It hasn't been has been just cuz of the complexity of the ownership structures in the like it has not been that home the second wave. Hopefully, you know, it's more helpful, but there's a the fat is getting ready to launch a Main Street lending program, you know, which we're working very hard on to make sure that there's there is more access and so a bunch of our owners by the way lots and lots of dozens and dozens have had access to PPP. We're hoping that a much larger set of them get access to main the main wage.

Lending program and so, you know that that is an important part of what we're doing because they need a British right? I mean ultimately we're also working with the administration on stimulus for the industry when we get to the other side to get gas demand going and people re-employed but right now our owners need a bridge. So we've been working very hard in that regard. We also as I mentioned in my prepared comments have done tons of things in life of by-the-way suspending operations at 950 hotels we've ever done that right in the hundred years. We've been around other than closing hotel to tear it down or whatever. We've never done that we've suspended massive amounts of our brand standard operating standards Capital programs and a whole bunch of other things just sort of really take, you know, give them huge flexibility in in in how they operate which I think they have appreciated. It's also mentioned one of the most important things that we're doing right now, which I'm spending and our team is spending an immense amount of time time, which I mentioned very lightly is dead.

Still operating model of the future, you know, we're working with.

All of our owners franchisees across every brand every category to figure out the we've already done the short-term but intermediate and long-term, how do we use this time and accessibility as I like to say does become the mother of invention to think about, you know things that we've been exploring or thinking about and and that we think makes sense to create more efficiency wage better time to sort of think about our standards and sort of, you know, put them all in the bucket and really really put a bright light on them. And so we're doing that with deep involvement of our own advisory councils. We kick this off a couple of weeks ago and we're we're in we're in full swing and that's incredibly important work as we again get to the other side and hopefully get stimulus from the government, which I think we will and that we create an opportunity in in the intermediate-term for them to be able to operate it lower demand levels and still have profitability and then longer-term as we get back to normal have. Yep.

great greater levels of profitability than when we went into it in terms of fee relief you know I would say you you wouldn't be surprised to hear that there have been owners that have asked for fee relief wage but not not you know you know hand-over-fist and the reality is I think there's a real simple reason our fee structures as you know which is you know different for different players in the industry off all of our fee structures whether it's the franchise fee or management fee or the system charges they're all based on a percentage of Revenue so we have given the ultimate fee relief meaning when you're dead you know 90% off there really aren't many feet cuz there is not much revenue and so I think you know most of the owners everybody would like every bit of help that they can get I think most of the jobs that I have talked to sort of understand that the fees have been right size with the demand of the business that they're not at the moment you know sadly for us paying and sadly for them they're not paying us a log

Fees in any event so that you know, we will continue to look at all options with uh with our owner Community has a said there is no more important partner in a stakeholder that we have. They are the engine of opportunity for us. They're investing all the capital they have been and I believe they will as Kevin noted with with the pipeline and and nug number they will continue to do so and so we you know, we are literally in personally. I'm in Daily conversations with with huge numbers of them and I think you can ask them yourself and while we're never going to be perfect, you know, so far the feedback I get from our owner community and you can validate it is very high marks that we were we were there earlier than most understanding the severity of this. We took very decisive and bold action to provide relief early and again while we're not perfect my impression in the owners. I'm talking to and I'm

talking to hundreds of them is

So while they're hurting they they are certainly appreciating the partnership that we have provided.

Great. Thanks for all the all the detail Chris and then maybe a little bit more of a specific one for for Kevin. I guess, you know Kevin could you outline for us a little bit more on maybe just this month this kind of point in time working capital drag that we could potentially see as it relates to mismatching on the reimbursed cost. You know, primarily. I think it's the system fund but anything else that maybe investors should be aware of just giving you know, the the situation we're in when the Music Stops and drops as much as it is, you know kind of where you know, we're cash to be trapped for a period of time and then how you expect to recover that down the road. Yeah. Sure. Obviously, it's a question that's on a lot of people's minds. So it's a good one. You know, I think to take a step back if you think about it's really there's really three buckets of receivables Thursday we have right in in hotels that we managed. Um, you know, which is a minority the system right seven 7 roughly seventy percent of the system is franchise, but in hotels that we managed the owners responsible.

for the working capital and and all the obligations and some of those you know ultimately are paid by us and then reimbursed by owners so there's there's you know an opportunity there then you have license fees and then system charges is Chris as Chris mentioned in in his build up so those those are the three primary buckets what I would say in terms of sizing it first of all it's really early right so we're if you think about the crisis really starting in March you don't even build these things until the following month and then you give people 30 days to pay and so we're sort of just getting into it so anything we would say there would be speculative bubble that said embedded I think it's probably obvious but we're saying embedded in the discussion that we've given you both publicly and increases and some of Chris's commentary earlier is a working capital whereas we've said if things stay the way they are meeting meaning circuit 90% down in in revenue and in this environment we have you know at least 24 month

Liquidity and you've got our cash balance and so you can sort of just do the math and realize that if things stay the way they are there is an embedded cash drag in there that that could be, you know in the hundreds of millions of dollars ultimately and so but but of course, it depends on duration of the cycle how it plays out and ultimately, you know, we believe is Chris just got done explaining that the business is healthy. It's going to come back and when it comes back, we think we're going to get paid.

Thank you very much.

And our next question comes from Anthony howl from Barclays. Did you have with your question? Hello. Good morning. Everyone morning. So Lumber turn off changes such a nasty market for new hotel construction. Do you think lenders may require higher Equity contributions or higher cash reserves and couldn't be a headwind for construction in the yarn that unit growth over the medium-to-long term. Yeah. That's a good question Anthony and the reality is is, you know, we don't really know but what what I think is that generally when you come out of these crises, you know lenders get appropriately more cautious all my life. I would say that, you know even pre covid-19.

Not actually financed all that.

Preferably you're talking about like 50% loan to cost and I would say, you know, personally, I think that when the when the business recovers The Lending Community will be there and you know life as hotels are productive and profitable Investments that they'll be able to be financed. And then I think the last thing I'd add is you have to remember the amount of liquidity that is in the system. You know what you're talking about like tripling plus of the money supply from quantitative easing and then even more and even more Capital being injected into systems. Globally. There's going to be plenty of capital you looking for productive yields and I would say, you know for some period of time it will be a distressed environment and then it will end as it always does it will recover back to normal.

Got it may just one more. You mentioned that you relax brand standards across across-the-board owners. How do you manage that with customer expectations that you start to see recovery you Hilton Honors its back on for a very consistent, you know experience across the board customers going to be returning to you have seen no breakfast buffets or whatnot. How do you manage that? Uh going forward? It's a really good question. I think in the short term, you know as we've been talking to customers and serving customers. They you know, everybody gets what's going on in the world. So they're incredibly lenient and so we have not, you know, we're not serving sadly that many customer but those that we are they were mostly on the front lines of recovery efforts have been fine with all of the standard changes and suspension of of certain elements of the the service the work that I described that we're doing is sort of you know in the intermediate and long-term in making sure that we won create the most efficient operating model into obviously wage.

Continue as you imply that there's employed your question to drive premium market share. I mean, we're not you know, we we continue to have D premium markets here in the initial. We have no plan to give that up. I you know, the the trick is as we transition from the intermediate to the longer-term. What are the things that you basically put back in to you know, the standards and what do you mean what do you leave out and or change and that sort of you know, I can't give you the answer and not because I don't want to I don't have it yet. I mean that's the work that we are doing right now. I suspect that way. You know, what we will do is, you know test a whole bunch of different things. I know we will as will others during the intermediate time frame when customers are very forgiving and I'm going to do is it Ur, eight, you know with the objective making sure that we are delivering premium product and service always to get our market share premiums, but we wash

Drive efficiency. So short term is easy intermediate-term. I think will be a a significant opportunity for testing when you're still in a relatively low demand environment where customers are still quite, you know, sort of accepting of of things that are different and then I think what we learn in that intermediate time frame we will, you know, sort of institution as our longer-range standards, and we're working we're working through all of that. I think they'll be a whole bunch of things that will do that will be more efficient long-term, and they're going to be some that we're going to, you know, some thoughts towards it. We are going to that. Our customers are going to want in a more normalized environment, and we're going to reinstitute. Thank you.

Question comes from Steve and Grambling from Goldman Sachs, please. Go ahead with your question. Good morning. Everyone to related follow-ups first on the working capital drag you cited in the hundreds of thousands of dollars. Potentially you actually it depends on how long this will last. So on the cash burn and months of liquidity you provided in the debt deal. I think you were assuming that this is maybe you can elaborate on whether you're assuming this is a consistent drag each quarter or if that would potentially moderate even if things remain week and then second, can you talk a little bit more about what you're seeing from consumers as it relates to the Loyalty program you have some of them are ships you have and how that may impact the model both during this period and then also how you ensure customer engagement to position yourselves to use this asset to take share and eventual recovery.

Yeah, so on the working capital Steven, I would say look the assumptions that we gave publicly which again just to make sure everything everyone's clear, you know as part of the bond deal. We said eighteen to twenty-four months that was pretty much money for the for the bond deal and we ended up upsizing that deal. So that's sort of how you get to the longer end of that range. I would say that again the when the crisis is new, you know things off a sharper. So I will the way I'd characterize it is, you know, the first month's you know, second quarter of this year probably would be the worst on that front and then it would moderate from there. But again the assumption that I'm now home or you know, the 24 month or $20 at least 24 months are basically you have little or no rather that way that you stay that way in from that perspective again, I said, it would be a little bit off at the beginning and then it would be relatively flat again in that in that under those assumptions with any kind of recovery curve it gets better from there.

And then on the Loyalty program side just any kind. You can provide them. Yeah, we we have done a bunch of things. If you look at it, I'd say first of all not that we have a great business, but our honor is occupancy with the modest business we have has skyrocketed. So, you know, it was already very high and now it's now it's a lot higher because they've you know, seemingly they are more willing to travel that I guess non-hunters members, but what we've been focused on during this time frame and you can see it in a lot of the things I talked about and that you would see publicly is people aren't travelling that much. So what can we do to build loyalty? You know, we can give them flexibility, you know, so we in the industry we were the first ones I believed certainly we were very early to come out and give very significant cancellation flexibility. We were definitely the first come out and give status, you know, allow people to remain Club.

Status we were definitely the first to come out and say we weren't going to we're not going to have points expire. We did a bunch of things to say to her honors members. No fault of your own you can't travel and we're not going to hold that against you. We've been communicating with them regularly and so far I'd say that's going well the work that we're doing in the community. We're doing that cuz we want to be part of the solution not off to our million room nights with Amex the First Responders for free our world Central Kitchen work all of the other work that we're doing is is about sort of continuing to build the the our brand the honors brand with consumers who are sitting around and can't move but they're watching a lot of TV and reading a lot doing a lot of social media and they're seeing these things. The net result is, you know, in terms of our numbers our marketing teams been looking at it, you know, like intense it consider a purchase of our product net promoter score, whatever those numbers have gone wage.

through the crisis, you know as a result, you know people realizing

You know, we're doing the right things and so, you know my attitude, you know, which is the way I think about life when you go into this just like the way I thought about it when we went into the Great Recession was different but similar is when when everything is good. It's really hard to differentiate yourselves. I mean, I think we have I think we've done a great job but you you know, you get you know, come back in an arms race when everything is bad, you know people peel off and go different directions and you have a real opportunity to differentiate differentiate yourself. And so what I've said from the time we got in this crisis has as much as we need to, you know, solidify the core and deal with liquidity which Kevin and the team have done an amazing job on and you know and protect the you know and deal with the cost structure Thursday. We have been crazy focused on making sure we are listening to customers, you know, particularly honors members and and doing the right thing for them that we are crazy.

Focus on our owners as I've already talked a lot about to do everything we can for them that we're crazy involved, you know in our communities so that people remember that you know, we were cuz that we were part of the solution because that will continue to build loyalty and obviously as impactful as it has been to our team members that were as were impacting them were doing it in the right way in a way that you know is really take taking care of them as best we can and so my attitude is well, this is all painful, you know, there's no other way to describe it off what we do now will decide, you know will determine our future and we are absolutely committed as a team and a company to continue to differentiate ourselves with all of our wage orders and to come out the other side of this stronger including with our Hunters members and so far. We're I think doing a very good job doing that. That's great. Thanks so much.

Our next question comes from Bill Crow from Raymond James, please go ahead with your question. Good morning folks Chris based on your discussion. I think it was with Harry earlier. It sounds like your view is the primary gating factor for travel is not the hotel. It's the the airplane and if that's the case is that fair to suggest that that no matter how much they discount fares. It's probably not going to be as stimulative as it would have been and in in Prior down and then the second part of that is does that also mean that the larger Coastal Gateway markets come back for later than the rest of the country.

Well to a degree yes, but let me let me reframe it a little bit but what I was saying, which is right that to get back to full recovery. I think the airlines are getting people have to be comfortable to get on planes planes have to be flying. You know, there's a bunch of the business particularly in the big, you know in the major markets that are you know that it's fly to Rome. Um, and so to get the full recovery have to have that I absolutely believe you can get a a significant amount of recovery before you before you get there. I think it's Bill may I wish I had all the answers. I think it's wrapped up in a whole bunch of different things that relate to what's going on with vaccines Therapeutics, you know human nature, you know, uh life, you know, and and just a comfort factor. My my own belief is as you continue to get more testing, which is what I've been reinforcing with the White House and everybody that will listen and log

including antibody testing that

You are going to understand that cuz the data is pretty clear that while this is a terrible virus and it's affecting people's lives and it is killing people with this horrific and and every light is important when you get down to it, it has infected a lot more people that we know and the mortality rate is much much lower than people have Thursday and the real data suggest, you know, there's a very small part of the population that is really at risk. I think the more of the testing data that comes out even with vaccine or therapeutic the more people are going particularly those that are not as at-risk the more comfort that they are going to have with a vaccine and or therapeutic. I think you you know, I think it's game-changing and so I'm not I'm not trying to be a basis. I just think it's going to be hit or I think you're going to have drive to business. You're going to have some you know, fly to business wage.

How people are going to you know, socially space wear masks and all that and there will be people that that go out the more they understand the real mortality rate. The more therapeutic send or vaccine projects. We have I think it will as I said two or three different times, I think you know, when you wake up in a couple of years it'll feel a lot more like it did ninety days ago than it does now and change the path depends on a whole bunch of variables that are not particularly well-known, but I think it will progress we will recover first with more drive to some summer fly to and that will happen. I mean people are you know, you're going to use this summer you start looking at the airline numbers and you're going to see a big shift up is not going to be anywhere near and you know where it was. But in my opinion you this summer you will see a heck of a lot more people getting on planes in an airport than you see right now. So I think it's just going to be a progression. I hope you're right. Yep.

Of course if I could just follow up with one one other question that that I'm not sure you can answer but as you look out you talking about two or three four years out and using this. For Innovation and and whatnot. You take the the operating cost or cost per per occupied room will be lower or higher as as we start to stabilize this industry loan know for sure lower. I mean just because all the things that were working on. I can't tell you how much lower cuz I don't have the answer yet, but they're clearly clearly, you know, I mean, there are a few things bill as you might guess that that are going to cost a little bit more like our Clean Stay standard working with lights on Mayo, you know. Yeah, I mean Lysol products maybe a little more expensive than the products that use that that's relatively insignificant the other things that that were thinking about in terms of garnering efficiencies, you know vastly outweigh that so I think I think we wage

On a stabilized basis operating costs are going to go down. Well, thank you. Wish we could see you in.

In person or something, but all right. Thanks Chris.

Our next question comes from Robin Farley from UBS, please go ahead with your question. Great. Thank you. Most of my questions have been asked but I did want to follow up on the unit growth question. And I appreciate how difficult it is to have visibility on this you were talking about financing that they'll be Capital available. But I guess that just thinking about it from a perspective of owner appetite and it and off and when you kind of look at historic downturns, you know anything under construction as you pointed out would open and the the the decline or or like a slower rate of growth typical Supply would usually come a year or two later because of those new projects. So I wonder if you could talk about kind of odor appetite seems like given even what you're saying about how it could take a couple of years to get back to 2019 levels that that maybe in an owner or developer that hasn't put a shovel in the ground yet would would be rethinking anything that's not under construction.

That then we would see you know, something much lower than mid single-digit growth in terms of of pipeline kind of a year or so out from now. Yeah, I listen. It's a good point Robin and certainly that is generally how it worked last time. Although although not really. I mean, I think the first year the first year after Thursday's great financial crisis was the the low point and then it sort of started building from there. There. There was another year in 2012. We're we're sort of stayed low slash down to touch because of what you're describing the difference. This time is is it's delayed right? I mean, it's it's a it's a different crisis and you've just got construction that's being suspended things are going to take longer and it's not going to push and then the other thing is you've had, you know, we this is coming at the end of a cycle. So you just had you've had a bunch of deliveries and their existing hotels and there's going to be dead.

A little bit less demand for a while and more. We think more demand for our engine. So we do think will drive a higher level of conversions going forward and thus we think a growing trajectory from here. Well, you know, we'll see what happens wage what we think. Okay? No great that that's helpful. And then one other sort of point on the same topic is, you know, we we look at all the data historically for hotel removals right hotels that that close and reopen in previous downturns and and like interestingly that doesn't go up a lot even you know nine that wasn't really that much above average. I would assume that you don't expect removed to be at a higher rate this year is what you know with this issue as well or I mean, but tell me if that's if that's not that's accurate that's accurate. We think removals will be will be will be very normal.

Okay, that's great. Thank you very much.

In our next question comes from Thomas Allen from Morgan Stanley, please go ahead with your question.

Hey, good morning. Just in terms of BuyBacks. Just so in the prepared remarks on the in the press release that said Hilton formulates his major buyback program. The program remains authorized. You may resume share repurchases in the future at any time. You know, how do you think about the buyback program? How do you think about the right leverage levels any Clarity? That would be helpful. Thank you. Yeah it really good question. I'd say, you know a little bit early given where we are to to have, you know, sort of a be dispositive about it, but I don't think long-term. We have a in the short-term. I'm not going to be doing dividends and BuyBacks. We've made that pretty clear as we get back to, you know recovery and more normalized environment. I don't think our Capital allocation strategy has really changed me that one might argue, even though you know, I think from a liquidity point of view we find ourselves in a really good position. And we you know, we we we did the right things not just those crisis but pre-crisis.

Terms of having credit available, you know maturity schedule that was very attractive. You know those weren't you know, those weren't um, you know lucky. I mean we knew we were at the end of a business cycle and those are things we planned out to make sure that we had all the financial flexibility we would need now did we know we would have covid-19 of course not but we knew were at the end of the business cycle and we wanted to have, you know be really set up well for it and Thursday we are and so I'd say, you know, they'll this should it should hopefully be the greatest test of all time for a balance sheet. It's hard to believe another one could be worse given what's happened and I think you know why they don't feel like we're in a really good position to sort of pass that test and and you know have the liquidity and the credit profile to get through it. So I don't think when we get back to normalize environment we have we have a life too much of a different view of what I was going to say is you could argue you know about would you be a little bit lower leverage, you know than you than you might have been. I'm sure we will de birth.

That and this isn't the time to conclude that but more broadly. We will definitely resume at some point when we get to a normalized environment. You know, I believe Thursday would be to resume sort of where we you know where we left off in terms of our Capital allocation.

Thank you. Okay, I think that's it. Well, it's an interesting call in interesting times. We appreciate everybody's time. I know we've been talking with lots of people sort of as this has been going on obviously happy to continue doing that as we work our way through this as we said in our comments second quarter will not be pretty but hopefully third-quarter and forth will will be back on the road to recovery. So everybody stay safe stay well and we're going to keep working awfully hard to do the right things here and we'll look forward to catching up with you and updating you on where we are after the second quarter.

Ladies and gentlemen with that will conclude today's conference. We do. Thank you for joining. You may now disconnect your lines.