Q4 2023 Hilton Worldwide Holdings Inc Earnings Call
Good morning, and welcome to the Hilton fourth quarter 'twenty twenty-three earnings conference call.
Operator: Good morning, and welcome to the Hilton fourth quarter 2023 earnings conference call. All participants will be in a listen only mode.
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Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's prepared remarks, there will be a question and answer session. To ask a question, you may press the star key, then one on your telephone keypad.
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Operator: And to withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Jill Chapman, Senior Vice President, Investor Relations and Corporate Development. You may begin. Thank you, MJ.
I would now like to turn the conference over to Jill Chapman Senior Vice President Investor Relations and corporate corporate development you may begin.
Jill Slattery: Thank you Andrew welcome to Hilton's fourth quarter and full year 2023 earnings call before we begin we would like to remind you that our discussions. This morning will include forward looking statements actual results could differ materially from those indicated in the forward looking statements.
Jill Slattery: Welcome to Hilton's fourth quarter and full year 2023 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking... Actual results could differ materially from those indicated in the forward-looking statements. Forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to update or revise these. For a discussion of some of the factors that could cause actual results to differ, please see the risk factor section of our most recently filed Form 10-K. In addition, we will refer 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 our earnings press release, and on our website at ir.hilton.com.
Jill Slattery: And forward looking statements made today speak only to our expectations as of today, we undertake no obligation to update or revise these statements for a discussion of some of the factors that could cause actual results to differ please see the risk factors section of our most recently filed Form 10-K.
Jill Slattery: In addition, we will refer 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 our earnings press release and on our website at IR Dot Hilton Dot com.
Christopher J. Nassetta: This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment and the companies at work. Kevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our fourth quarter and full year results and discuss our expectations for the year. Following their remarks, we will be happy to take your questions. With that, I'm pleased to turn the call over to Chris. Thank you, Jill.
Jill Slattery: This morning Christmas Ida, our President and Chief Executive Officer will provide an overview of the current operating environment and the company's outlook, Kevin Jacobs, Our Chief Financial Officer, and President of Global Development will then review, our fourth quarter and full year results and discuss our expectations for the year. Following their remarks, we'll be happy to take your questions with that in place.
Jill Slattery: The call over to Chris. Thank you Jill good morning, everyone and thanks for joining US today, we are happy to report a great end to what was another really strong year for Hilton for the year system wide Revpar grew 12, 6% versus 2022 with solid growth.
Christopher J. Nassetta: Good morning, everyone, and thanks for joining us today. We are happy to report a great end to what was another really strong year for Hilton. For the year, system-wide REV PAR grew 12.6% versus 2022, with solid growth across every major region and chain scale. Compared to 2019, REV PAR increased 10.7%. Strong top-line performance drove record-adjusted EBITDA of nearly $3.1 billion, up roughly 20% year-over-year to the highest level in our company's history. During the year, we launched two new brands, introduced new innovations, expanded our partnerships, and opened a near record number of rooms, all of which further strengthened our network and enabled us to welcome more guests than ever before. Our strong top and bottom line performance drove significant free cash flow, enabling us to return $2.5 billion to Sherald.
Chris: Across every major region and chain scale compared to 2019, Revpar increased 10, 7% strong top line performance drove record adjusted EBITDA of nearly $3 $1 billion up roughly 20% year over year to the highest level in our company's history.
Chris: The ear, we launched two new brands introduced new innovations expanded our partnerships and.
Chris: And opened a near record record number of rooms, all of which further strengthened our network and enabled us to welcome more guests than ever before our strong top and bottom line performance drove significant free cash flow, enabling us to return $2.5 billion to shareholders.
Christopher J. Nassetta: Turning to results for the quarter, system-wide REPR increased 5.7% year-over-year, exceeding our expectations, driven by strong international and group trends. Group Rev Par rose 6% year-over-year due to an uptick in small company meetings and convention demand. Business transient recovery continued in the quarter, with REBPAR up more than 4 percent, boosted by gains in both rate and occupancy. As expected, leisure transient REVPAR increased 3%, decelerating modestly versus the third quarter, largely due to seasonality.
Chris: Turning to results for the quarter system wide Revpar increased five 7% year over year exceeding our expectations driven by strong international and group trends.
Chris: Group Revpar rose, 6% year over year due to an uptick in small company meetings and convention demand business transient recovery continued in the quarter with revpar up more than 4% boosted by gains in both rate and occupancy.
Chris: As expected leisure transient revpar increased 3% decelerating modestly versus the third quarter largely due to seasonality.
Christopher J. Nassetta: Compared to 2019, system-wide REVPAR grew 13.5% in the quarter, up more than 200 basis points sequentially compared to the third quarter. Demand continued to improve, with December system-wide occupancy reaching a 2019 peak level. Group REBPAR outperformed expectations, increasing 8% versus 2019 and up more than 700 basis points sequentially versus the third quarter. Business Transient continued to recover, growing 5% versus 2019.
Chris: Impair the 2019 system wide Revpar grew 13, 5% in the quarter up more than 200 basis points sequentially compared to the third quarter demand continued to improve with December system wide occupancy, reaching 2019 peak levels group Revpar out.
Chris: Performed expectations, increasing 8% versus 2019.
Chris: And up more than 700 basis points sequentially versus the third quarter business transient continued to recover growing 5% versus 2019.
Christopher J. Nassetta: As expected, Leisure REBPAR remained strong, growing 25% versus 2019 and decelerating sequentially due to calendarship. As we look to the year ahead, we expect system-wide top-line growth of 2 to 4 percent versus 2023. We expect performance to be driven by continued growth across all major regions, with international markets modestly outpacing the U.S. We also expect positive red part growth across all segments, driven by continued recovery in business transient and group travel, coupled with steady leisure demand. We expect continued recovery in small company meetings and large association and convention business to drive strong group performance.
As expected leisure Revpar remained strong growing 25% versus 2019, and decelerating sequentially due to calendar shifts.
Chris: As we look to the year ahead, we expect system wide topline growth of 2% to 4% versus 2023, we expect performance to be driven by continued growth across all major regions with international markets modestly outpacing the U S. We also expect positive revpar growth across all.
Chris: Segments, driven by continued recovery in business transient and group coupled with steady leisure demand. We expect continued recovery in small company meetings and large association in convention business to drive strong group performance for 'twenty 'twenty four group position is up 16%.
Christopher J. Nassetta: For 2024, group position is up 16% year-over-year, with small company meetings increasing as a percentage of mix, further demonstrating the value of small and medium-sized businesses, given higher rates and greater resiliency. Turning to development, we continue to see positive momentum throughout the year, opening 24,000 rooms in the fourth quarter, marking the largest quarter of openings in our history. We achieved several milestones in the quarter, including the openings of our 250th True Hotel and our 1,000th Hilton Garden Inn. We also reached 70,000 rooms globally for Home 2. Additionally, we celebrated the opening of Signia by Hilton Atlanta, the city's largest ground-up development in over 40 years. The property, strategically located next to the Georgia World Congress Center and Mercedes-Benz Stadium, features nearly 1,000 rooms and over 100,000 square feet of meeting space, including the largest hotel ballroom in Georgia.
Chris: Year over year with small companies meetings, increasing as a percentage of mix further demonstrating the value of a small and medium sized businesses, given higher rates and greater resiliency.
Chris: Turning to development, we continue to see positive momentum throughout the year opening 24000 rooms in the fourth quarter, marking the largest quarter of openings in our history, we achieved several milestones in the quarter, including the openings of our 250 of true hotel and our 1000th Hilton Garden Inn.
Chris: We also reached 70000 rooms globally for home to Additionally, we celebrated the opening of Cigna by Hilton Atlanta, the city's largest ground up development in over 40 years. The properties strategically located next to the Georgia World Congress Center, Edinburgh and Mercedes Benz.
Chris: <unk> features nearly a thousand rooms, and over 100000 square feet of meeting space, including the largest hotel ballroom in Georgia.
Chris: For the full year, we opened 395 hotels totaling approximately 63000 rooms and achieved net unit growth of 4.9% conversion activity remains strong accounting for 30% of openings and demonstrating the strong value proposition our system continues to <unk>.
Christopher J. Nassetta: For the full year, we opened 395 hotels, totaling approximately 63,000 rooms, and achieved net unit growth of 4.9%. Conversion activity remains strong, accounting for 30% of openings and demonstrating the strong value proposition our system continues to deliver for owners. Full service and collection brands represented the large majority of conversions and continue to gain traction with owners. Both Curio and Tapestry opened more hotels in 2023 than in any other year. Even with robust openings, our pipeline reached the highest level in our history, driven by record signings of 130,000 rooms, up 45% year-over-year and up 12% compared to pre-pandemic levels. At year-end, our pipeline totaled over 462,000 rooms, with roughly half under construction following a strong year in construction start.
Chris: Liver for owners full service and collection brands represented the large majority of conversions and continue to gain traction with owners, both curio and tapestry opened more hotels in 'twenty two 'twenty three than in any other year.
Chris: Even with robust openings, our pipeline reached the highest level in our history driven by record signings of 130000 rooms up 45% year over year and up 12%.
Chris: Compared to pre pandemic levels at year end, our pipeline totaled over 462000 rooms with roughly half under construction following a strong year in construction starts.
Christopher J. Nassetta: For the full year, starts increased 15% driven by the U.S. We continue to have more rooms under construction than any other hotel company, with approximately one in every five hotel rooms under construction globally slated to join our system. As we look to the year ahead, we expect continued positive momentum in signings, starts, and conversions to drive even stronger openings, boosted by our two newest brands, Spark and LiveSmart Studios. For the full year, we continue to expect NEC Munich Growth to accelerate to the higher end of our 5.5 to 6% guidance range, with the opportunity for further upside of 25 to 50 basis points from our exclusive partnership with Small Luxury Hotels of the World that we announced this morning.
Chris: For the full year starts increased 15% driven by the U S. We continue to have more rooms under construction than any other hotel company with approximately one in every five hotel rooms under construction globally slated to join our system.
Chris: As we look to the year ahead, we expect continued positive momentum in signings starts and conversions to drive even stronger openings boosted by our two newest brands spark and lives Smart studios for the full year. We continue to expect net unit growth to accelerate to the higher end of our 5.5% to 6%.
Chris: Guidance guidance range with the opportunity for further upside of 25 to 50 basis points from our exclusive partnership with small luxury hotels of the world that we announced this morning.
Christopher J. Nassetta: This partnership will meaningfully expand our luxury distribution as we expect to add the majority of their over 500 hotels to our system. Adding this extraordinary portfolio, with a heavy orientation to resort locations, to our already strong and growing luxury portfolio will further enhance a powerful network effect and give our guests even more opportunities to dream, book, earn, and burn points. And we're doing so in a capital-light way. The royalty rate will be in line with our existing brands, but fees will be paid only on the business driven through our channels. We expect, over time, to drive a meaningful portion of system revenues for SLH, and we'll start to integrate hotels into our system later this spring. Last quarter, we announced Hilton for Business, our multifaceted program designed to transform the travel experience for small and medium-sized businesses by providing a new booking website along with targeted benefits designed specifically for SMBs.
Chris: This partnership will meaningfully expand our luxury distribution as we expect to add the majority of their over 500 hotels to our system, adding this extraordinary portfolio with a heavy orientation to resort locations to our already strong and growing luxury portfolio will further enhance.
Chris: A powerful network effect and give our guests even more opportunities to dream book earn and burn points and we're doing so in a capital light way the royalty rate will be in line with our existing brands, but fees will be paid only on the business driven through our channels, we expect over time to <unk>.
Chris: A meaningful portion of system revenues for S. L H and we'll start to integrate hotels into our system later this spring.
Chris: Last quarter, we announced Hilton for business are multifaceted program designed to transform the travel experience for small and medium sized businesses by providing a booking website along with targeted benefits designed specifically for smbs.
Christopher J. Nassetta: Launched in January with thousands of companies registering in just the first few weeks, SMBs account for approximately 85% of our business transient mix and comprise a meaningful and growing percentage of our group mix. Given its greater resiliency and higher rates, we think this important customer base provides significant opportunities to drive further growth. Overall, we remain focused on creating unique experiences in our hotels, including through innovative food and beverage offerings. We recently announced the launch of STIR Creative Collective, an in-house consulting and development arm that gives us the ability to work with our owners, operators, and hotel teams to elevate food and beverage offerings to meet the evolving needs of our guests.
Chris: Program launched in January with thousands of companies registering in just the first few weeks Smbs account for approximately 85% of our business transient mix and comprising meaningful and growing percentage of our group mix, given its greater resiliency and higher rates.
Chris: We think this important customer base provides significant opportunities to drive further growth.
Chris: Overall, we remain focused on creating unique experiences in our hotels, including through innovative food and beverage offerings. We recently announced the launch of Stern creative collective an in house consulting and development arm that gives us the ability to work with our owners operators and hotel teams to elevate food.
Chris: Beverage offerings to meet the evolving needs of our guests several noteworthy stair projects have already launched the Conrad Orlando the canopy by Hilton in Toronto, and the new Sydney in Atlanta.
Christopher J. Nassetta: Several noteworthy STIR projects have already launched at the Conrad Orlando, the Canopy by Hilton in Toronto, and the New Cygnia in Atlanta. In a business of people serving people, our team members are at the heart of absolutely everything we do. We recently celebrated the remarkable achievement of being named the number one world's best workplace by Fortune and Great Place to Work. This recognition follows eight consecutive appearance on the World's Best list and marks the first time a hospitality company has achieved the top honor in this best-in-class program. Additionally, for the seventh consecutive year, we were honored to be included on both the World and North America Dow Jones Sustainability Indices, the most prestigious ranking for corporate sustainability performance.
Chris: In a business of people serving people our team members are at the heart of absolutely everything we do we recently celebrated the remarkable achievement of being named the number one world's best workplace by Fortune and great place to work.
Chris: This recognition follows eight consecutive appearances on.
On the world's best list and marks the first time, a hospitality company has achieved the top honor in this best in class program. Additionally for the seventh consecutive year. We were honored to be included in both the World and North America, Dow Jones sustainability indices, the most prestigious ranking for corporate.
Chris: Sustainability performance.
Kevin J. Jacobs: Overall, we're extremely pleased with our performance. With our world-class brands and powerful commercial engines driving a record pipeline and accelerating net unit growth, we're confident in our ability to continue delivering value for all of our stakeholders in 2024 and beyond. Now, I'm going to turn the call over to Kevin to give a bit more detail on the quarter and our expectations for the year ahead. Thanks Chris and good morning, everyone.
Chris: Overall, we're extremely pleased with our performance.
Chris: With our world class brands and powerful commercial engines, driving our record pipeline and accelerating net unit growth. We're confident in our ability to continue delivering value for all of our stakeholders in 'twenty 'twenty four and beyond now I'm going to turn the call over to Kevin to give a bit more detail on the quarter and our expectations for the year.
Chris: Yep.
Kevin J. Jacobs: Thanks, Chris and good morning, everyone. During the quarter system wide Revpar grew five 7% versus the prior year on a comparable and currency neutral basis growth was driven by strong international performance and continued recovery in group and business transient.
Kevin J. Jacobs: During the quarter, system-wide REF bar grew 5.7% versus the prior year on a comparable and currency-neutral basis. Growth was driven by strong international performance and continued recovery in group and business transactions. Adjusted EBITDA was $803 million in the fourth quarter, up 9% year-over-year and exceeding the high end of our guidance. Outperformance was driven by better-than-expected fee growth, largely due to better-than-expected REVPAR performance and license fee growth. Management and franchise fees grew 12% year over year. For the quarter, diluted earnings per share adjusted for special items was $1.68.
Kevin J. Jacobs: Adjusted EBITDA was $803 million in the fourth quarter up 9% year over year and exceeding the high end of our guidance range.
Kevin J. Jacobs: Outperformance was driven by better than expected fee growth largely due to better than expected Revpar performance and license fee growth management and franchise fees grew 12% year over year.
Kevin J. Jacobs: For the quarter diluted earnings per share adjusted for special items was $1.68.
Kevin J. Jacobs: Turning to our regional performance, fourth quarter comparable U.S. RFPAR grew 2% year-over-year with performance led by both business, transient, and... Leisure transient in the U.S. was flat with difficult year-over-year comparisons. Relative to 2019 peak levels, U.S. RFPAR increased 11% in the fourth quarter, improving 100 basis points versus the third quarter. In the Americas outside the U.S., fourth-quarter REFBAR increased 7% year-over-year, with urban markets delivering REFBAR growth of 17%, boosted by strong group business. In Europe, RASPAR grew 10% year-over-year with solid performance across all segments. Large events, including the Rugby World Cup in Paris, drove strong group performance across several key segments.
Kevin J. Jacobs: Turning to our regional performance fourth quarter comparable U S. Revpar grew 2% year over year.
Kevin J. Jacobs: With performance led by both business transient and group leisure transient in the U S was flat with difficult year over year comparisons.
Kevin J. Jacobs: Relative to 2019 peak levels U S. Revpar increased 11% in the fourth quarter, improving 100 basis points versus the third quarter.
Kevin J. Jacobs: In the Americas outside the U S fourth quarter, Revpar increased 7% year over year with urban markets delivering revpar growth of 17% boosted by strong group business.
Kevin J. Jacobs: In Europe, Revpar grew 10% year over year with solid performance across all segments large events, including the rugby World Cup in Paris drove strong group performance across several key cities.
Kevin J. Jacobs: In the Middle East and Africa region, REFBAR increased 12% year-over-year, led by strong rate growth. The COP28 Climate Change Conference in Dubai, along with solid trends in Egypt, contributed to strong performance in the region. In the Asia-Pacific region, fourth-quarter REF PAR was up 42% year-over-year, led by continued demand recovery across China and Japan and notable strength across all segments. RevPAR in China was up 73% year-over-year in the quarter, with RevPAR in the Asia-Pacific region excluding China up 18% year-over-year.
Kevin J. Jacobs: In the Middle East Africa region, Revpar increased 12% year over year led by strong rate growth. The cop 28 climate change conference in Dubai, along with solid trends in Egypt continued contributed to strong performance in the region.
Kevin J. Jacobs: In the Asia Pacific region fourth quarter, Revpar was up 42% year over year led by continued demand recovery across China, and Japan and notable strength across all segments.
Kevin J. Jacobs: Revpar in China was up 73% year over year in the quarter with Revpar in the Asia Pacific region, Excluding China up 18% year over year.
Kevin J. Jacobs: Turning to development, as Chris mentioned, for the full year, we grew net units 4.9 percent and ended the year with over 462,000 rooms in our pipeline, which was up 11 percent year over year, with approximately 60 percent located outside the U.S. and nearly half under construction. Looking to the year ahead, we are excited about our strong development story and the robust demand for Hilton-branded products in both the U.S. and international markets. Moving to guidance, for the first quarter, we expect system-wide ref par growth of 2% to 4% year-over-year. We expect adjusted EBITDA to be between $690 million and $710 million, and diluted EPS adjusted for special items to be between $1.36 and $1.44. For full year 24, we expect REFPAR growth of 2 to 4 percent.
Kevin J. Jacobs: Turning to development as Chris mentioned for the full year, we grew net units for 9% and ended the year with over 462000 rooms in our pipeline, which was up 11% year over year with approximately 60% located outside the U S and nearly half under construction.
Kevin J. Jacobs: Looking to the year ahead, we are excited about our strong development story and the robust demand for Hilton branded products in both the U S and international markets.
Kevin J. Jacobs: Moving to guidance for the first quarter, we expect system wide revpar growth of 2% to 4% year over year, we expect adjusted EBITDA to be between $690 million and $710 million and diluted EPS adjusted for special items to be between $1 36, and $1 44.
For full year 'twenty, four we expect revpar growth of 2% to 4% we forecast adjusted EBITDA of between 333 billion and $3 $38 billion, we forecast diluted EPS adjusted for special items of between $6 80 and $6.94 per.
Kevin J. Jacobs: We forecast adjusted EBITDA of between $3.33 billion and $3.38 billion. We forecast diluted EPS, adjusted for special items, of between $6.80 and $6.94. Please note that our guidance ranges do not incorporate future share repurchases. Moving to capital return, we paid a cash dividend of $0.15 per share during the fourth quarter for a total of $158 million in dividends for the year. For full year 2023, we will return $2.5 billion to shareholders in the form of buybacks and dividends. In the first quarter, our board authorized a quarterly cash dividend of 15 cents per share.
Kevin J. Jacobs: Please note that our guidance ranges do not incorporate future share repurchases.
Kevin J. Jacobs: Moving to capital return, we paid a cash dividend of <unk> 15 per share during the fourth quarter for a total of $158 million in dividends for the year for.
Kevin J. Jacobs: For full year 2023 we returned $2 $5 billion to shareholders in the form of buybacks and dividends.
Kevin J. Jacobs: In the first quarter, our board authorized a quarterly cash dividend of <unk> 15 per share for the full year, we expect to return approximately $3 billion to shareholders in the form of buybacks and dividends.
Kevin J. Jacobs: For the full year, we expect to return approximately $3 billion to shareholders in the form of five acts of dividends. Further details on our fourth quarter and full year results 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. We would like to speak with as many of you as possible, so we ask that you limit yourself to one question. M.J., can we have our first question? Certainly. Thank you. The first question today comes from Joe Greff with J.P. Morgan. Please go ahead.
Kevin J. Jacobs: Further details on our fourth quarter and full year results 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 we would like to speak with as many of you as possible. So we ask that you limit yourself to one question M. J can we have our first question. Please.
Kevin J. Jacobs: Thank you. The first question today comes from Joe Greff with J P. Morgan. Please go ahead.
Joseph Greff: Good morning, guys. Thanks for taking my question. Chris, I was hoping you could talk about M&A of brands; obviously, there was an article earlier this week suggesting you might be close to the Graduate Hotels brand. If you want to comment specifically on this, but I would just love to get your overall view on opportunities for you to acquire brands. And since it's something that you've been sort of not doing at all, maybe you can revisit some of the criteria for brand emanation. Yeah, I'm happy to do that, Joe. I figured with all the rumors milling around, I'd get asked this question.
Joseph Greff: Good morning, guys. Thanks for taking my question.
Joseph Greff: Chris I was hoping you can talk about M&A of of brands. Obviously, there was an article earlier this week.
Joseph Greff: Suggesting you might be closed with the graduate with health brand.
Joseph Greff: If you want to comment specifically on this.
Joseph Greff: But I would just love to get your overall view on on opportunities.
Joseph Greff: For you to acquire brands and then.
Joseph Greff: Since it's something that you've been sort of not doing at all maybe you can revisit some of the criteria for brand M&A.
Speaker Change: Yeah, I'm happy to do that.
Speaker Change: Figured with the all the rumor mill I'd get asked this question, obviously first and foremost you're right I'm not going to comment on market rumors and speculation on anything specific I would say.
Christopher J. Nassetta: Obviously, first and foremost, you're right. I'm not going to comment on market rumors and speculation about anything. Specific.
Christopher J. Nassetta: You know, I would say my attitude, our attitude on M&A, is really the same as it's always been. If nothing, you know, we've been consistent, and I've been consistent in what I've said. And that is, we, you know, the fact is, as you point out, we haven't done any, but every time I've ever been asked in the last, you know, 10 years of being public, I've said, never say never, but we have a very tough filtration system. And that filtration system, at a high level, number one, does something really, is something additive from the standpoint of the portfolio brands that we have And number two, and importantly, can it be done in a way that's accretive to the value of the company? For the last 16 years, going on 17 years that I've been here, we've looked at pretty much everything. I've said that to everybody, and nothing has passed through that filter.
Speaker Change: My attitude our attitude on M&A is really the same as it's always been.
Speaker Change: If nothing.
Speaker Change: We've been consistent in I've been consistent in what I've said and that is.
The fact is as you point out we haven't done any but every time I've ever been asked for the last 10 years of being public I've said never say never but we have a very tough filtration system and that filtration system at a high level is number one.
Speaker Change: It does something really is something additive from the standpoint of the portfolio brands that we have and from the standpoint of offering our customers a product and experience that would be really additive to the to the family of brands that we have a number one and number two and importantly can it be done in a way that's accretive to the value of the <unk>.
Speaker Change: Yeah.
Speaker Change: For the last 16 years going on 717 years that ive been here we.
Speaker Change: We've looked at pretty much everything I've said that to everybody and nothing is pass through that filter. So thus the reason we haven't done anything.
Christopher J. Nassetta: So that's the reason we haven't done anything. The environment we're in is a little bit different. There is, for a lot of reasons, interest rates and otherwise, more stress in the system than normal that probably presents more opportunity to do things like this, but things that are quite modest in my view and that I view as sort of tuck-in acquisitions. Now, I still think the filtration system is really rigorous, you know, and obviously, we're not sitting here announcing any acquisitions. We announced a strategic, exclusive partnership with SLH that we're very excited about and I'm sure we'll talk about other questions on the call. So, we don't have anything to report, and to the extent that we do, obviously, you guys will be the first to know. And so the summary is, we have no different Attitude.
Speaker Change: The environment. We're in is a little bit different there is for a lot of reasons interest rates and otherwise more stress in the system than normal that probably I think presents more opportunity to do things like this that but things that are quite modest in.
Speaker Change: You know in my view and that are what I view as sort of tuck in.
Speaker Change: Acquisitions now I still think the filtration system is really rigorous.
Speaker Change: And obviously, we're not sitting here announcing any acquisitions, we announced a strategic exclusive partnership with SLA. So we're very excited about and I'm sure. We'll talk about from other questions on the call. So that we don't have anything to report and to the extent that we do obviously you guys will be the first to know.
Speaker Change: And so summary is we have no different.
Speaker Change: Attitude, we continue to look at everything but the stress in the environment, maybe provides a little bit more opportunity than we've seen in quite a long time.
Carlo Santarelli: We continue to look at everything, but the stress in the environment maybe provides a little bit more opportunity than we've seen in quite a long time. Thank you. Thank you. The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead. Hey guys.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Christopher J. Nassetta: Great Thanks for taking my question. Chris, you obviously talked about the strength in business transit and group that you kind of foresee for 2024, given, you know, those mixes respectively are down a couple hundred basis points from pre-pandemic levels. I was kind of wondering where you think they will settle for 2024 and what impact that shift has, obviously, presumably taking away from leisure demand to some degree on ADRs for the year. Yeah, I, you know, I think broadly, if you look at the segments, and I said it at a very high level, and in the prepared comments, we feel really good about all the segments. Business Transient can, you know, continues to recover. I mean, the, you know, the big corporates finish the year still, you know, a bit off, probably 5% off of where they were, but still, but growing. You know, every segment in that world is a little bit different. I mean, most segments were relatively strong and neither back to or beyond prior to the pandemic levels, with the exception of probably banking technology and consulting, which were less so, but when they were blended together, you know, they weren't that far off.
Carlo Santarelli: Hey, guys great. Thanks for taking my question.
Carlo Santarelli: Chris You, obviously, you talked about the strength in business transient and group that you kind of foresee for 2024, given those mixes respectively are down couple of hundred basis points from from pre pandemic levels I was kind of wondering what.
Carlo Santarelli: Where do you think they settled for 2024 and what impact that mix shift has obviously, presumably taken away from leisure demand to some degree on <unk> for the year.
Carlo Santarelli: Yeah.
Carlo Santarelli: Broadly if you look at the segments and I said it at a very high level.
Carlo Santarelli: Repaired comments, we feel really good about all the segments.
Carlo Santarelli: Business transient continues.
Carlo Santarelli: Continues to recover I mean that.
Carlo Santarelli: You know the big Corporates finished the year still you know a bit off you know probably 5% off of where they were but still but growing.
Carlo Santarelli: Every segment in that in that World is a little bit different I mean, most segments, where we're relatively strong in neither back two or beyond.
Carlo Santarelli: Prior to pandemic levels with the exception of probably banking technology, and consulting which were less but blended together you know they weren't that far off SMB.
Christopher J. Nassetta: The SMB segment is at or above; most of those segments are at or above. And when you blend all that together, you know, for the fourth quarter and full year, from a red part point of view, Business Transient was ahead, but from an occupancy point of view, it's still a bit behind. We do think that by the time we finish this year, assuming, you know, sort of the broader consensus view of a reasonably soft landing, that by the time we get to the end of the year, we think you' And we believe given very low supply numbers that are continuing and continued decent economic growth, we're going to continue to have pricing power there and everywhere else. On the group side, I give you a, you know, a snippet of like group group position being up 16%. You know, that's the best leading indicator.
Carlo Santarelli: Segment is at or above most of those segments are at or above and when you blend all that together you know.
Carlo Santarelli: For the fourth quarter full year from a revpar point of view business transient was ahead, but from a from an occupancy point of view was still a bit behind we do think that by the time. We finish this year, assuming you know sort of the broader consensus view of a reasonably soft landing.
Carlo Santarelli: That by the time, we get to the end of the year, we think you'll be at more normalized levels of demand and we believe given very low supply numbers that are continuing and continued decent economic growth that we're going to continue to have pricing power there and everywhere else.
Carlo Santarelli: On the group side I gave you.
Carlo Santarelli: Snippet of like group group position being up 16%, that's the best leading indicator, but you know anecdotally.
Christopher J. Nassetta: But, you know, anecdotally, sitting around this very table last week with all our teams from around the world and all of our commercial and sales leads, I've said it, you know, the demand is off the hook. I mean, the demand is really strong; every quarter is the next new, you know, the new high watermark in terms of bookings for all future periods. So we are seeing very good strength. We believe group demand is quite sticky in the sense that a lot of it still is pent-up demand, you know, things people haven't done for a long time that they need to do in addition to incremental new demand.
Carlo Santarelli: Sitting around this very table you know last week with all our teams from around the world in all of our commercial and sales leads.
Carlo Santarelli: I've said it you know the demand is off the hook I mean, the demand is really strong but every quarter is the the next new you know the new high watermark in terms of bookings for all future periods. So we are seeing very good strength. We believe the group demand is quite sticky in the sense that a lot.
Carlo Santarelli: It's still as pent up demand.
Carlo Santarelli: Are things people haven't done for a long time that they need to do in addition to incremental new demand.
Christopher J. Nassetta: You're obviously seeing in the group space the big association citywide business start to come back. That's super sticky business because of the timeframes associated with the planning and the cost. So you know, we think group will definitely lead the way.
Carlo Santarelli: You're obviously seeing in the group space, The Big Association citywide business start to come back that Super sticky business because of the timeframes associated with the planning and the cost. So we think group group will definitely lead the lead the system and as a result, you asked about rate.
Christopher J. Nassetta: And as a result, you asked about rates, which I'll, you know, I'll cover on both. We think rates will be very strong. There is so much demand, and there's just a limited amount of space if you think about it. Not only is supply low broadly, but supply of hotels over the last 10 years that have been built that have a lot of meeting space has been anemic.
Carlo Santarelli: You know I'll cover on both we think rates will be very strong. Just there is there is so much demand and there is and there's just a limited amount of space. If you think about it not only has supplied low broadly but supply of hotels over the last 10 years that have been.
Carlo Santarelli: Been built that have a lot of meeting space has been anemic and so you have a lot of demand I mean, we're sitting around this table yesterday, we're planning our own conferences, you know for like sales conferences in general managers can go to you know all these things that we have to start going out three or four years, because we can't get space in our own hotels.
Christopher J. Nassetta: And so you have a lot of demand. I mean, I was sitting around this table yesterday, and we're planning our own conferences, you know, for like sales conferences and general managers can go, you know, all these things that we do if they start going out three and four years ago because we can't get space in our own hotels. So you know, demand is good, and as a result, with very limited supply, prices should be good. And then on leisure, we do think it will grow. We do think, you know, probably more in rate than volume because the consumer, particularly our consumer, which is our median income level, reasonably good, it's in the $140,000 to $150,000, $140,000, $150,000 range, they still have plenty of money, plenty of desire to travel. And again, there's just not a lot of new supplies. So the fundamental economic setup is good, and obviously, it got supercharged coming out of COVID.
Carlo Santarelli: You know demand demand is good as a result, with very limited supply pricing should be good and then.
Carlo Santarelli: On leisure, we do think it will grow we.
Carlo Santarelli: We do thank you know probably more in rate and volume because the consumer, particularly our consumer which as you know our median income levels.
Carlo Santarelli: Reason I believe good that's in the 140 to 150 <unk> hundred 40, 150000 range. They still have plenty of money plenty of desire to travel.
Carlo Santarelli: And again Theres, just not a lot of new supply. So the fundamental economic setup is as good a obviously it got supercharged coming out of Covid. So it will probably.
Christopher J. Nassetta: So it will probably, we think it will grow more rapidly than volume, but it will grow, but it'll be third in line after, you know, continued recovery, starting with group, then business transient, then leisure transient. So we feel really good about, you know, again based on a broad consensus view that we have, you know, a rational sort of reasonably soft landing and will continue to see, you know, decent, slowing broadly, but decent economic growth in 2024. Great
Carlo Santarelli: We think it will grow more rate than than volume, but it will grow but it'll be third in line. After you know continued recovery starting with group than business transient and leisure transient so.
Carlo Santarelli: We feel really good about you know again based on a broad consensus view that we.
Carlo Santarelli: We have a rational sort of reasonably soft landing and continue to see decent.
Carlo Santarelli: Boeing broadly, but decent economic growth in 2024.
Carlo Santarelli: Yeah.
Carlo Santarelli: And then, if I could, just a follow-up on Joe's question from earlier. The NUG guidance for 2024, I'm going to assume that SLH and any kind of tuck-in M&A that you guys do in 2024 would be on top of the guidance that you provided this morning. Okay. That was good. The 5.5 to 6 with a strong indication that the high end of that is pure organic.
Speaker Change: Great and then if I could just a follow up on Joe's question from earlier.
Speaker Change: Now guidance for 2024, I'm going to assume that the SL H in any kind of tuck in M&A that you guys do in 2024 would be on top of the guidance that you correct. You provided right. Okay, well that was a five five to six it was it with a strong indication to the high end of that is pure organic.
Christopher J. Nassetta: I said in my prepared comments that we think SLH depends on how rapidly hotels come in, which is why there's a range, 25 to 50 basis points on top of that. And if we were to do anything else, it's all on top of that. But that is, you know, the 5.5 to 6 or leading towards the high end is pure organic.
Speaker Change: I said in my prepared comments, we think SL H depends on you know how rapidly hotels come in that which is why there's a range 25 to 50 basis points on top of that and if we were to do anything else at all all on top of that but that that as you know the five five to six or leading towards the high end is.
Speaker Change: Pure pure organic great.
Carlo Santarelli: Great. Thank you, Chris. The next question comes from Shaun Kelley with Bank of America. Please go ahead. Hi, good morning, everyone.
Speaker Change: Great. Thank you Chris.
Speaker Change: The next question comes from Shaun Kelly with Bank of America. Please go ahead.
Shaun Clisby Kelley: Hi, good morning, everyone.
Shaun Clisby Kelley: Chris, I was wondering if you could build off of, you know, the last part there about SLH. This is a little bit of new territory, obviously, something that's, you know, pretty selective. But, you know, just, A, can you give us a little bit more about the deal itself? And, you know, I think it sounds economically quite similar to what we see in the normal, you know, kind of in the normal course on the fee side, but any color you can provide there. And then, I think more importantly is just the big picture. Do you think there are other collections and places out there that you could utilize, you know, your distribution capability and, you know, help, you know, other systems that may exist out there but not overlap directly with owners, which I know is going to be a sensitivity point for you?
Shaun Clisby Kelley: Chris I was wondering maybe you could build off of the last part thereabout escalate a little bit of new territory, obviously something thats.
Shaun Clisby Kelley: Selective but just.
Shaun Clisby Kelley: Hey, can you give us a little bit more about the deal itself and I think it sounds economically.
Chris: Quite similar to what we see in the normal kind of in the normal course on the fee side.
Chris: But any color you can provide there and then I think more importantly is just big picture do you think there are other collections in places out there that you could utilize your distribution capability and help.
Chris: Other systems that may exist out there, but not overlap directly with owners, which I know is going to be a sensitivity point for Ya, yeah, well first of all on the SL H as you hopefully could tell from my leave my prepared comments, we're really excited about it we've.
Christopher J. Nassetta: Yeah. Well, first of all, on SLH, as you hopefully can tell from my, even my prepared comments, we're really excited about it. We've had a relationship with it for a while.
Chris: We've had a relationship there for a while we've been I've been working with them to figure this out.
Christopher J. Nassetta: We've been, you know, working with them to figure this out. And we're really excited to be able to get it done. I mean, if you think about it, it's sort of like the moons and the stars align super well for us.
Chris: And we're really excited to be able to get it done I mean, if you think about it it's sort of like the moons and the stars align Super well for US you know, we're going to be able to bring the majority of 500 hotels that are super unique small obviously small luxury of the small luxury but very heavy resort orientation and very high.
Christopher J. Nassetta: You know, we're going to be able to bring the majority of 500 hotels that are super unique, small, obviously, small luxury hotels, small luxury, but very heavy resort orientation, and very heavily oriented to very niche markets that are super hard to get into. And so when you look at it vis-a-vis the overlap of our existing, you know, we have 100 open luxury hotels. We have about another 60, 70 in the pipeline. So, you know, a terrific portfolio and growing super rapidly. When you look at the overlap, there is really none, just because this is a really unique collection of hotels. We did a bunch of focus groups and customer research around this over the last year, and really feel like this offering, from the standpoint of our customers, particularly our higher-end customers, is going to be super well-received in terms of their ability to book it through our channels. But, you know, earn points, burn their points, go on vacation in these places, and the like.
Chris: Heavily oriented to very niche markets that are super hard to get into and so when you look at it vis vis the overlap of our existing you know we have 100 open luxury hotels, we have about another 60 70 and the pipeline so.
Chris: Terrific portfolio and growing super rapidly, but when you look at the overlap. It's there's really none just because this is a really unique collection of hotels, we did a bunch of focus groups and customer research around this over the last year and really feel like this offering from the standpoint of.
Chris: Our customers, particularly our higher end customers is going to be super well received in terms of their ability to book it through our channels, but you know earn points burn their points go on their vacations in these places and the like and so we.
Christopher J. Nassetta: And so we think it is literally the perfect combination and an unbelievable way for us to take, you know, what is currently 100, you know, with pipeline 150, 160 hotels in Luxury Portfolio and turn it into six or seven hundred, you know, and all the best and most unique and hard to duplicate places around the world. So we think this is great. Customers, we think, based on all the work we did, are going to really love it, and we're excited to start ramping it up and including it in all our channels. In terms of the economics, we feel really good about it. As I said, you know, we want to be really straightforward.
Chris: We think it is literally the perfect combination and an unbelievable way for us to take what is currently a 100 with pipeline of 150, <unk> hundred 60, <unk> hotel luxury.
Chris: Portfolio and turn it into six or 700 scattered and all the best and most.
Chris: Unique and hard to duplicate places around the world. So we think this is great.
Chris: Customers, we think based on all the work we did are going to really love it and we're excited to start ramping up and including them in all our channels in terms of the economics, we feel really good about it as I said you know what.
Chris: We wanted to be really straightforward I mean, the license fees that we're getting are very similar sort of in the zone of what we would typically get in all of our all of our other than you know with our with our direct brands.
Christopher J. Nassetta: I mean, the license fees that we're getting are very similar, you know, sort of in the zone of what we would typically get for all of our, you know, all of our, you know, with our direct brands. One difference is that, in this case, we, as I said in my comments, will get paid on the business we generate, which we think will be significant. I mean, it'll take time to ramp that up, but it'll be significant. And there's real economics in this for us as well. So we think, you know, sort of like, as I said, moons and stars, fabulous for the network effect, fabulous for our customers, and we think really good for shareholders in the sense that we'll be generating meaningful fees, and we are investing nothing, completely capital. Thank you. Sorry, just as a follow-up there, Chris, just any thoughts on, again, future opportunities that could look like this to sort of leverage the platform? Sorry, yeah, you asked me a three- or four-part question. Sorry about that.
Chris: One difference in this case, we as I said in my comments, we'll get paid on the business we generate.
Chris: Which we think will be significant I mean, it will take time to ramp that up but it'll be significant and that theres real economics in this.
Chris: For us as well. So we think you know sort of like as I said moons and stars Fabulous for the network effect Fabulous for our customers and we think really good for shareholders.
Chris: In the sense that we will be generating meaningful fees and we are investing nothing fully capitalized.
Thank you.
Speaker Change: Just as a follow up there Chris just any thoughts on again sort of future opportunities that could let looked like sort of a later date.
Speaker Change: Three or four part question.
Christopher J. Nassetta: We've got to move on. That's all right. We've got time. I think there is always – I mean, we're looking at lots of different things all the time. I mean, since, you know, the IPO roadshow, we have talked a lot about the network effect. I mean, you know, very consistently trying to build that out to create an ecosystem that brings customers in and builds loyalty. And so we're always looking at other opportunities. And so I think there are possibilities in that regard, but nothing, you know, I would say, you know, right now we're focused on this. This is a lot of effort and work to get there. You know, built into the system, and we'll see.
Speaker Change: Alright, well that's.
Speaker Change: That's all right we got time.
Chris: I think there are always I mean, we're looking at lots of different things all the time I mean since since.
Chris: <unk> Road show, we talked a lot about network effect.
Chris: I mean, you know very consistently tried to build that out to create an ecosystem that you know that.
Chris: That brings customers in and builds loyalty and so we're always looking at.
Chris: At other opportunities.
Chris: And so I think there are possibilities in that regard but.
Chris: But nothing you know I would say right now we're focused on this this is this is a lot of a lot of effort and work to get these.
Chris: <unk> built.
Chris: Built into the system.
Christopher J. Nassetta: Anything that we think we can do to keep building, bringing in, you know, new customers and giving them and our existing customers more products that resonate with them, that build more loyalty, and that we, you know, can commercialize in the sense of, you know, being paid for the effort that we're interested in. But nothing, nothing more to report at this point beyond SLA. Thank you very much.
Chris: We will see we will see where anything that we think we can do to keep building, bringing new customers in and giving them in our existing customers more products that resonate with them that builds more loyalty and that we can commercialize in the sense of.
Chris: Now being paid for the effort.
Chris: We're interested in but nothing nothing more to report at this point beyond the SL H.
Speaker Change: Thank you very much.
Speaker Change: Thank you. The next question is from David Katz with Jefferies. Please go ahead.
Christopher J. Nassetta: Thank you. The next question is from David Katz with Jeffries. Please go ahead. Hi. Good morning, everyone.
David Katz: Hi, Good morning, everyone. Thanks for taking my question.
David Katz: Thanks for taking my question. Just to follow on the same theme, is there a case or strategy or thought around whether SLH could either naturally or strategically transition into a business? I admit I've not stayed in one.
David Katz: Just to follow on the same theme is there a <unk>.
David Katz: Case, or a strategy or thought around whether SL H could either naturally or strategically transition into a business.
Use as well I I admit I'm not stayed in one is there any particular barrier to that.
Christopher J. Nassetta: Is there any particular barrier to that, you know, as business people tend to choose smaller and smaller hotels, more unique properties over time? Listen, I, absolutely no barrier. I mean, I emphasize the resort because if you look at it as a percentage of their rooms and number of hotels, a lot of them are in resort locations. By the way, there are over 500 hotels, and growing, by the way. It's not like it's static.
David Katz: Business people tend to choose smaller and smaller hotels more unique properties overtime.
David Katz: <unk>.
Speaker Change: Absolutely no barrier I mean, I I emphasize the resort because if you look at it as a percentage of their rooms and number of hotels a lot of them are in resort locations by the way, there's over 500 hotels and growing by the way its not like its static its growing and we think we're going to help them grow at a much faster pace by being in our system. So we think this will continue to be $5.
Christopher J. Nassetta: It's growing, and we think we're going to help them grow at a much faster pace by being in our system. So we think this will continue to be five, six, seven, you know, and continue to grow. There are plenty that are in urban locations around the world that are small, luxury boutique hotels.
Speaker Change: <unk> seven.
Speaker Change: And continue to grow there are plenty that are in urban locations around the world that are small luxury boutique hotels, just percentage wise, it's more resource, but there are there's a very good representation.
Christopher J. Nassetta: Just percentage-wise, it's more resourced. But there's a very good representation in urban environments around the world, and some really interesting urban environments that we don't have luxury exposure to. And so we absolutely believe that this also crosses over into business transient. It will also drive some group business, but prototypically, these hotels have very, very limited meeting space, just by the very nature of what they are. I mean, they have some boardrooms and, you know, small meeting spaces.
Speaker Change: In urban environments around the world and some really interesting urban environments that we don't have the luxury of exposure to.
Speaker Change: So we absolutely believe that this is also <unk>.
Speaker Change: This over into business transient.
Speaker Change: We'll also drive some group business, but prototypical. These hotels have very very limited meeting space just by the very nature of what they are I mean, they have some boardrooms and small meeting spaces. So it will be it'll drive some some meetings and events business, but I think it'll be a lot of a lot of <unk>.
Christopher J. Nassetta: So, you know, it will drive some meetings and events business, but I think it will be a lot of leisure and, then, you know, first and foremost, and then business. But I think Business Transient will be a meaningful component of it, particularly in those hotels and in the right locations. If I can just ask about the locations geographically, you know, what kinds of cities are in it now and, you know, where would they like to be, please?
Speaker Change: Leisure and then you know.
Speaker Change: First and foremost and then business transient, but I think business transient will be a meaningful component of it particularly in those hotels and in the right locations.
Speaker Change: If I can just ask about the locations geographically.
Speaker Change: But what what kinds of cities are in it now and where would they like to be please.
Christopher J. Nassetta: I think if you looked at the map, you can go on, rather than me describing it, you can go on their website. I mean, right now, it's sort of like 60% of it is in Europe, 20% in the US, and 20% in APAC. The, you know, the major cities in those markets, they have – pretty much all of them have some representation. What you'll find if you went and then double-clicked on that is that locations within those cities are pretty unique just because of what they are and where they are.
Speaker Change: If you looked at the map I mean, you can go on and.
Speaker Change: Rather than me describe it you can go on their website.
Speaker Change: Right now, it's sort of like 60% of it is in Europe, 20% in the U S 20% in APAC.
Speaker Change: The major cities in the in those markets they have pretty much all of them have some representation.
Speaker Change: You'll find if you went and then double clicked on that is that the locations within those cities are pretty unique just because of what they are and where they are so there are niche super hard to duplicate locations within most of those major cities.
Speaker Change: Okay. Thank you very much I appreciate it.
Speaker Change: Thank you. The next question comes from Smedes Rose with Citi. Please go ahead.
Smedes Rose: So they're in niche, super hard to duplicate locations within most of those. Okay, thank you very much. Appreciate it. Thank you. The next question comes from Smedes Rose with Citi. Please go ahead.
Smedes Rose: Hi, Thanks, I just had a quick question on the again on the escalation to reach the higher.
Smedes Rose: The 6% unit growth that you said, you're comfortable with what sort of penetration, but you need to reach them.
Christopher J. Nassetta: Hi, thanks. I just had a quick question again on the SLH. To reach higher, above the 6% unit growth that you said you're comfortable with, what sort of penetration would you need to reach within the SLH portfolio, I guess in year one, to get to the 6.25 or 6.5% growth that you mentioned with this potential and this partnership? Yeah, we ultimately think the majority of SLH hotels are going to join our system, and we feel confident in that. The question is just going to be, you know, with all the technology and, I mean, all of which is being worked on because we've been, you know, we signed it recently. We've been working with them for quite some time. So the range of 25 to 50, which we feel comfortable with, just has to do with how quickly we can, you know, get all of the technology requirements and the like.
Smedes Rose: Within the absolutely each portfolio.
Speaker Change: Once you get to that.
Smedes Rose: Two five or six 5% growth that you mentioned.
Smedes Rose: With its potential with this partnership yeah. We ultimately think the majority of S. L. A hotels are going to are going to.
Smedes Rose: Join our system and feel confident in that.
The question is just going to be you know with all the technology and I mean, all of which is being worked on because we've been you know we signed it recently, we were working with them for quite some time. So the range of 25% to 50, which we feel comfortable just has to do with how quickly we can get all of execute against all of the technology requirement.
Smedes Rose: And the like.
Smedes Rose: So again as I said, we feel good about the high end of five and a half the six without any of those.
Smedes Rose: The quarter to a half will depend on just the speed of execution.
Smedes Rose: So next call, we'll try and give you. We just signed the deal teams are working you know hot and heavy on it you know in the next call. We can probably give we can probably try and refine it a bit we'll have we'll have a better sense.
Christopher J. Nassetta: So again, as I said, we feel good about the high end of 5.5 to 6, without any of those, you know, the quarter to a half will depend on just the speed of execution. And so, next call, we'll try and give you, we just signed the deal, teams are working, you know, hot and heavy on it, you know, on the next call, we can probably give, we can probably try and refine it a bit, we'll have, we'll have a better. Thanks.
Speaker Change: Thanks, Kevin could you just share with us what the year end share count was.
Kevin J. Jacobs: I actually don't have the actual share count in front of me right now Smedes will fall.
Speaker Change: Go up with it.
Speaker Change: Thank you.
Speaker Change: The next question comes from Brent <unk> with Barclays. Please go ahead.
Brent: Great. Thanks for taking my question, just sorry, one more on <unk>.
Speaker Change: <unk>.
Brent: We're excited about it too so we're happy to answer them.
Brent: Exactly.
Brandt Montour: And I just, Kevin, could you just share with us what the year-end share count was? I actually don't have the actual share count in front of me right now, Smedes; we'll follow up with you. Thank you. The next question comes from Brandt Montour with Barclays. Please go ahead.
Brent: I guess the question is when we when you think about those hotels come into the system.
Brent: And it sounds like they're all they're all you think they might all come at some point.
Brent: But do they have to opt in and sort of what is that.
Brent: Individual hotel owners, what is the mechanism looked like I guess, I guess I would've thought is that right.
Christopher J. Nassetta: Great, thanks for taking my question. Just, sorry, one more on SLH. Exactly. No, I mean, I guess the question is, when you think about those hotels coming into the system, and it sounds like they're all, you think that they might all come at some point, but do they have to opt in? And sort of what is the mechanism, those individual hotel owners, what does it look like? I guess I would have thought of them all.
Brent: Has to opt in and we and the team at S. L. H have already started the process of communicating.
Brent: With them in that process, but they have they have the option to opt it now we think.
Brent: As I said so H.
Brent: At least.
Brent: The owners that are that we've discussed it with it its a compelling value proposition for them to be opting in which is why we have confidence that the majority of the system ultimately will come in but they have they they have the option to opt in or not.
Christopher J. Nassetta: Yeah, they have to opt in, and we and the team at SLH have already started a process of communicating with them through that process, but they have the option to opt out. Now, we think, as does SLH, and at least the owners that we've discussed it with, that it's a compelling value proposition for them to be opting in, which is why we have confidence that the majority of the system is going to opt in. But they have the option to opt in or not.
Speaker Change: Okay, great and so just to quickly follow up on that so these are hotels that went to escalate originally because they wanted to keep their sort of pool specific.
Speaker Change: Brand their own their own name and deep very independent and Youre basically, allowing them to do that same thing going on there.
Christopher J. Nassetta: Okay, great. And so, just to quickly follow up on that. These are hotels that went to SLH originally because they wanted to keep their sort of whole specific brand, their own name, and be very independent. And you're basically allowing them to do that same thing by going through your distribution system.
Speaker Change: All of that Theyre, not theyre not branding with us the SL H brand is maintained so the same breathing they've had we're just giving them access to hundreds of millions of customers you know our loyalty program.
Christopher J. Nassetta: You're allowing them to keep all of that. They're not branding, you know, with us. The SLH brand is maintained, so it's the same branding they've had. We're just giving them access to hundreds of millions of customers, you know, a loyalty program. You know, all of our commercial booking channels and the like, which obviously have proven to be, given the market share we drive in our system, quite a compelling value proposition. So we feel good about it for the same reasons we feel good about all of our developments. Congratulations!
Speaker Change: All of our sort of commercial booking channels and the like which obviously has proven to be.
Given the market share we drive in our system are quite a compelling value proposition. So we feel good about it for the same reasons, we feel good about all of our development progress.
Speaker Change: Congratulations.
Speaker Change: Thanks.
Speaker Change: The next question comes from Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Thanks.
Robin Farley: Looking at your pipeline your rooms under construction looks like it's back almost to pre pandemic levels pretty much. So I guess I'm just wondering what.
Robin Farley: Sure.
Robin Farley: Thanks. The next question comes from Robin Farley with UBS. Please go ahead.
Robin Farley: Slide 24 unit growth are you expecting to come from conversions.
Kevin J. Jacobs: Great, thanks. So looking at your pipeline, your rooms under construction look like it's back almost to pre-pandemic levels, pretty much. So I guess I'm just wondering what percent of your 2024 unit growth are you expecting to come from conversions? Thanks.
Robin Farley: Yes, we think we did 30% as Chris mentioned in his prepared remarks. This year, we think it'll be a little bit higher than that sort of in the mid <unk> for the year.
Robin Farley: Here this year.
Robin Farley: And I know youre not guiding to anything next year, yet, but it's absolutely do you expect to accelerate as a percent of your unit growth over time or do you think that we're seeing.
Kevin J. Jacobs: Yeah, we think we did 30%, as Chris mentioned in his prepared remarks this year. We think it'll be a little bit higher than that, sort of in the mid-30s for the year this year. And I know you're not guiding to anything next year yet, but is that something you expect to accelerate as a percent of your unit growth over time, or do you think that we're seeing if that sort of mid-30% range this year will be kind of the highest, and then it'll return to more normal, you know, additional supply under construction? I mean, over time, it'll depend on market cycles, of course, but I think as we, particularly with Spark, which is a 100% conversion brand, I think it'll drift upwards over time and become an important part of, it's always been an important part, but it'll be a little bit higher over time, and then again, it'll vary with market cycles over a longer period. Okay, great. Thank you. Most of my other questions have already been asked, so thanks.
Robin Farley: Is that sort of mid 30% range. This year will be kind of the lowest and then it will return to more normal additional supply under construction timing over time, it'll depend on market cycles of course, but I think as we particularly with spark as we which is 100% conversion brand I think it'll drift upwards over time and become an important part of.
Robin Farley: It's always been an important part, but it'll be a little bit higher over time, and then again it'll vary with market cycles over a longer period of time.
Speaker Change: Okay, great. Thank you most of my other questions have already been asked.
Speaker Change: Thank you. The next question is from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Good morning, Thanks for taking my question.
Chad Beynon: With respect to the 2% to 4% Revpar Guide, Chris I know you walked through this from a segment standpoint, and it's obviously early in the year in.
Chad Beynon: In 2023, you guys exceeded star.
Chad Beynon: Results in each quarter and for 'twenty for I think star has slightly more positive outlook than you guys. So could you kind of.
Chad Beynon: Thank you. The next question is from Chad Beynon with Macquarie. Please go ahead.
Christopher J. Nassetta: Morning. Thanks for taking my question. With respect to the 2% to 4% RevPAR guide, Chris, I know you walked through this from a segment standpoint, and it's obviously early in the year. In 2023, you guys exceeded STAR results in each quarter, and for 2024, I think STAR has a slightly more positive outlook than you guys. So, could you kind of, you know, maybe kind of square that circle in terms of your process versus maybe how STAR would do it, and then, I guess, more importantly, should we expect the international RevPAR, I know it's FX neutral, to be more positive for you guys than domestically? Thanks.
Chad Beynon: Maybe kind of square that circle in terms of your.
Chad Beynon: Your process versus maybe how starwood do it and then I guess more importantly should we expect the international Revpar I know its FX.
Chad Beynon: FX neutral to be more positive for you guys than domestically.
Chad Beynon: Yeah, I mean as you would guess, we look at what all dependent and sad to say, including including Smith travel.
Chad Beynon: And.
Chad Beynon: That's interesting, but we do a ground up process. I mean this is done by every individual hotel in the world. All 7500 plus of them that then aggregates into us having a budget and then we create a range around it. So that's the process. We go through obviously, there's lots of uncertainty still on.
Christopher J. Nassetta: Yeah, I mean, as you would guess, we look at what all the pundits have to say, including Smith Travel. That's interesting. But we do a ground-up process. I mean, this is done by every individual hotel in the world, all 7,500-plus of them, that then aggregates into us having a budget, and then we create a range around it.
Chad Beynon: As we've talked about we sort of 10 always to take the consensus view, which right now is a soft landing. So there are a lot of different paths that the broader economy can take but it feels there's certainly with what we're seeing in our business that you know that that is the most likely outcome and so this is you know.
Christopher J. Nassetta: So that's the process we go through. Obviously, there's lots of uncertainty still, as we've talked about. We sort of tend to always take the consensus view, which right now is a soft landing. So there are a lot of different paths that the broader economy can take, but it feels, certainly with what we're seeing in our business, that that is the most likely outcome. And so this is how we gathered it together on a property-by-property basis.
Chad Beynon: How we aggregated it together on a property by property basis, I would like to believe and certainly.
Chad Beynon: Every year I believe that I've been here in 16 years, we have grown market share, including last year, where we grew market share pretty nicely and we are currently at the highest levels of market share we've ever had in our history. If we do our job again. This year, we will grow market share again, which should mean that we would outperform whatever the market gives us that.
Christopher J. Nassetta: I would like to believe, and certainly every year I've been here in 16 years, we have grown market share, including last year, where we grew market share pretty nicely, and we are currently at the highest levels of market share we've ever had in our history. If we do our job again this year, we will grow market share again, which should mean that we will outperform whatever the market gives us. That is what we are trying to do. In terms of international relations, I think I said it in my comments. Internationally, it is going to be a bit above the U.S., in part because you still have parts of Asia. Well, one, EMEA is really strong; just basically strong.
Chad Beynon: That is that is what we are trying to do.
Chad Beynon: In terms of internationally I think I said it in my comments.
Chad Beynon: International is going to be a bit above the U S and in part because you still have parts of Asia.
Chad Beynon: One you know EMEA was really strong.
Chad Beynon: Just basically strong it's recovered and strong and then you have parts of Asia Pacific that are still sort of recovering notably the China.
Christopher J. Nassetta: It's recovered and is strong. And then you have parts of Asia-Pacific that are still sort of recovering, notably the Chinese market and comparability benefits, and that's really causing a slight overperformance in international versus U.S. markets. Thanks, looking forward to more of that at the Investor Diary. I look forward to seeing everybody. The next question comes from Patrick Scholes with Truist Securities. Please go ahead. Great. Good morning, everyone. Morning. This question is for Kevin.
Chad Beynon: The China market and comparability benefits.
Chad Beynon: And that's really causing a slight over performance in international versus U S.
Chad Beynon: Looking forward to more of that at the Investor day.
Speaker Change: Look forward to seeing everybody.
Speaker Change: Okay.
Speaker Change: The next question comes from Patrick <unk> with <unk> Securities. Please go ahead.
Patrick: Great Good morning, everyone.
Patrick: Morning.
Patrick: This question is for Kevin.
Patrick Scholes: Just give us an update on how SPARC is progressing. And then, related to that, you know, given the uncertainty surrounding what's happening with Choice and Wyndham, do you think that is helping with your conversion activity? Thank you. Yeah, look, Spark's going great.
Patrick: Can you just give us an update on how spark is progressing and then related to that.
Patrick: Given the uncertainty surrounding what's happening with choice in Wyndham do you think that is helping with your conversion activity.
Kevin J. Jacobs: Thank you Yeah look sparks going great. We I mean, we've had we've got nearly 150 of them in the pipeline already and we just we just launched it last year. We've got another 250 working deal or something like that so 400 working deals that we have eight or 10 of them open now that are performing really well. So we're picking up a lot of momentum.
Kevin J. Jacobs: We've got nearly 150 of them in the pipeline already, and we just launched it last year. We've got another 250 working deals, something like that, so 400 working deals. We have 8 or 10 of them open now.
Kevin J. Jacobs: They're performing really well, so we're picking up a lot of momentum. So we feel really good about the future of Spark and its value proposition, and I think I'm probably not going to comment on what our competitors might or might not be doing together. We believe strongly in the value proposition for Spark. That's why we launched it, and we don't think that anything that goes on in the environment around us will change that trajectory or our ability to be successful.
Kevin J. Jacobs: So we feel we feel really good about the future of spark and its value proposition and I think I, probably not going to not going to comment on what our competitors might or might not be doing together, we believe strongly in the value proposition for spark. That's why we launched it and we're not we don't think that anything that goes on in the environment around us will change that trajectory or our ability to be successful.
Kevin J. Jacobs: That segment.
Speaker Change: Okay. Thank you.
Speaker Change: Sure.
Speaker Change: The next question is from Duane <unk> with Evercore ISI. Please go ahead.
Kevin J. Jacobs: Okay, fair enough. Thank you, Chairperson.
Dwayne Fennegwerth: The next question is from Dwayne Fennegwerth with Evercore ISI. Please go ahead. Hey, thanks. Appreciate it. Good morning.
Duane: Hey, Thanks, I appreciate it good morning.
Duane: I Wonder if you could offer some thoughts on the trajectory you see from here on mid scale and below chain scales still up meaningfully versus pre pandemic, but a bit softer year over year.
Kevin J. Jacobs: I wonder if you could offer some thoughts on the trajectory you see from here on mid-scale and below chain scales. You know, still up meaningfully versus pre-pandemic, but a bit softer year over year. How do you interpret that? And is there anything you see on the horizon that could drive some acceleration this year on the lower end? Yeah, look, I think some of it is comps, right? Those segments recovered really well and a lot more quickly from COVID.
Duane: How do you interpret that and is there anything you see on the horizon that could drive some acceleration this year on the lower end.
Duane: Yeah look I think some of it is comps right those segments for recovered really well and a lot more quickly from COVID-19. So some of its year over year comps. So I think that you know you'll always have those as cycles play out you'll have those effects and we really believe in the demand for mid scale. So you could have differences in year over year.
Kevin J. Jacobs: So some of it's year over year comparisons. So I think that, you know, you'll always have those as cycles play out; you'll have those effects. And we really believe in the demand for mid-scale. So you could have differences in year over year rev par growth relative to other chain scales. But in terms of serving, you know, tons of customers, we think there are 70 million customers out there in that chain scale or below. And then if you think about Spark for mid-scale transient, and LiveSmart for more extended, sort of, 30, 60, 90 day extended stay business, we feel really good about the demand profile over the long term and the ability to serve, as Chris said earlier in one of his answers, more customers, and bring new customers into the system.
Duane: Revpar growth relative to other chain scales, but in terms of serving you know tons of customers. We think there are 70 million customers out there and in that chain scale or below.
Duane: And then if you think about so for spark for mid scale transient. If you think about lives smart for more extended sort of 30 60, 90 day extended stay business, we feel really good about the demand profile over the long term and the ability to serve as Chris said earlier in one of his answers served more customers bring new customers into the system.
Duane: More importantly, deliver great returns for owners and earn more fees. It's we don't do this we don't do these things because of how year over year Revpar growth will perform that we like in these chain scales, we expect to generate premium market share and outperform the competition.
Kevin J. Jacobs: More importantly, deliver great returns for owners and earn more fees. But we don't do this; we don't do these things because of how year over year rev par growth will perform. Now we, at these chain scales, expect to generate premium market share and outperform the competition. But you're going to have, you know, you're going to continue to have freeze year over year and rev par growth. And that's not why we, The Ultimate Parody Site! Appreciate the thoughts. Chair.
Duane: But youre going to have you know you're going to continue to have <unk>.
Duane: <unk> year over year in Revpar growth and that's not why we do these things.
Speaker Change: I appreciate the thoughts.
Speaker Change: Sure. Thank you.
Speaker Change: The next question comes from Michael Bellisario with Baird. Please go ahead.
Thanks, Good morning, everyone.
Speaker Change: Morning.
A two parter just first on development and signings, maybe where you're seeing the wins by brand by region.
Michael Joseph Bellisario: Thank you. The next question comes from Michael Bellisario with Baird. Please go ahead.
Michael Joseph Bellisario: And kind of outside of the spark momentum that you just mentioned and then I guess, just specifically on on spark for the eight or 10 hotels.
Kevin J. Jacobs: Thanks, good morning everyone. It's sort of a two-parter, just first on development and signings, maybe where are you seeing the wins by brand, by region, and kind of outside of the Spark momentum that you just mentioned, and I guess just specifically on Spark for the eight or ten hotels. Still early days there, but what are you seeing in terms of loyalty contribution and some sort of earn and burn patterns from honors members so far? Thanks.
Still early days there, but what are you seeing in terms of loyalty contribution and sort of earn and burn patterns from honors members. So far thanks.
Speaker Change: Yes, so at the beginning I'd say for the first part of it Michael that the success has been pretty broad based I mean, 45% up in signings and you know.
Speaker Change: Which was up 30, 31% in the U S. And then obviously a little bit better than that outside of the U S and.
Speaker Change: And we expect another record year in 2024, and that's just because of the you know our brands are performing industry fundamentals remain good. So despite what people think about economic growth youre going to be in a supply constrained environment here for a while and then in those environments. We take more share right. We mentioned, we've got one in five rooms under construction more than any other.
Kevin J. Jacobs: Yeah, so at the beginning, I'd say, look, for the first part of it, Michael, the success has been pretty broad-based. I mean, 45% up in signings, and which was up 31% in the U.S. and then, obviously, a little bit better than that outside of the U.S. And we expect another record year in 2024. And that's just because our brands are performing, and industry fundamentals remain good So despite what people think about economic growth, you're gonna be in a supply-constrained environment here for a while. And in those environments, we take more share, right?
Speaker Change: <unk> company. So we have a lot of momentum and owners want to affiliate with US and then when you get into an environment, where capital where lending is more constrained rate lenders want to see.
Speaker Change: Want to lend to projects that are affiliated with our brands and that's not just a U S phenomenon, that's around the world because lenders feel like theyre more likely to get paid back and so a lot of its momentum its across all the brands and chain scales and across all the regions.
Speaker Change: And then the second part of your question I think look it is early days, it's only a handful of hotels, but I think so far.
Kevin J. Jacobs: We mentioned we've got one in five rooms under construction more than any other hotel company. So we have a lot of momentum, and owners want to partner with us. And then when you get into an environment where capital, where lending is more constrained, right? Lenders wanna see, you know, they want to lend to projects that are affiliated with our brands. And that's not just a U.S. phenomenon; that's around the world because lenders feel like they're more likely to get paid back.
Speaker Change: What we're seeing from the performance of the Sparks is in line you know market share premiums reasonable to strong loyalty contribution. We do think we're going to sign up a lot more a lot more new members with these hotels, because we will bring new customers into the system. So it's not just a matter of where they are remember before they book, but sometimes they book and they become a member while they're there so.
Kevin J. Jacobs: And so a lot of its momentum is across all the brands and chain scales and across all. And then the second part of your question, I think, look, it is early days, it's only a handful of hotels, but I think so far, you know, what we're seeing from the performance of the Sparks is in line, you know, with the market share premium. Reasonable to strong loyalty contribution. We do think we're gonna sign up a lot more new members with these hotels because we will bring new customers into the system. So it's not just a matter of, you know, whether they were a member before they booked, but sometimes they book, and they become a member while they're there.
Speaker Change: It is early days, but pretty consistent performance across the board there.
Speaker Change: Thank you.
Speaker Change: The next question comes from Richard Clarke with Bernstein. Please go ahead.
Richard J. Clarke: Good morning, Thanks for taking my question I'm, just going back to escalate.
Richard J. Clarke: Is this the luxury lifestyle that once you've teased recently or is that still to come in and then related.
Richard J. Clarke: When other companies have done these kind of partnerships that seeing some criticism hotels are joining the loyalty program, but at a lower percentage of their revenues being handed over to Hilton. So how are you going to stop hotels from choosing the escalate to routine to Hilton honors Rob them, maybe joining alec saw or kind of appeal one of the other brands, where they would pay.
Richard J. Clarke: Across all of their revenues.
Richard J. Clarke: Centers.
Speaker Change: Yeah. Good questions. The first luxury lifestyle no. This is not in lieu of that we are still hard at work.
Speaker Change: I've made I think pretty clear for a long time, but much clearer lately that we intend this year to enter that space, one way or another and we're hard at work and I think you should expect sometime this year.
Kevin J. Jacobs: So I think it is early days, but, you know, pretty consistent performance across. Thank you. The next question comes from Richard Clarke with Bernstein. Please go ahead.
Speaker Change: Hopefully sooner than later to see us enter that space and we think that something that is.
Richard J. Clarke: Good morning, thanks for taking my question. Just going back to SLH, is this the luxury lifestyle launch you've teased recently, or is that still to come? And then related, I guess when other companies have done these kinds of partnerships, there's been some criticism that hotels are joining the loyalty program, but at a lower percentage of their revenues being handed over to Hilton. So how are you going to stop hotels from doing that?
Speaker Change: Totally different than what we're trying to do with <unk> in terms of the value proposition of existing brands versus the escalators as I said in my earlier comments I mean, SLA, just something very different than Alex are very different than canopy different than waldorf different than kind of a different than everything we have in the sense that these are.
Christopher J. Nassetta: SLH should go down the route into Hilton Honours rather than maybe joining LXR or Canopy or one of the other brands where they would pay across all of their revenue. Yeah, good questions. The first on luxury lifestyle, no, this is not in lieu of that. We are still hard at work. I've made, I think, pretty clear for a long time, but much clearer lately, that we intend to enter that space one way or another, and we're hard at work. And I think you should expect to see us enter that space sometime this year, hopefully sooner than later. And we think that's something totally different than what we're trying to do with SLH. In terms of the value proposition of existing brands versus SLH, as I said in my earlier comments, SLH is something very different than LXR, very different than Canopy, different than Waldorf, different than Conrad, different than everything we have in the sense that these are really very small luxury hotels in very niche markets, in a lot of cases, but even within non-niche markets, very niche locations.
Speaker Change: Really very small luxury hotels in very niche markets and a lot of cases, but even within non niche markets very niche locations.
Speaker Change: And as a result.
Speaker Change: We do not believe that they are in conflict with or cannibalize anything else. We're doing just because I mean I suggest anybody just go on the website.
Speaker Change: 500, plus you can sort of get a feel for it.
Speaker Change: Thank God, we did huge amounts of work in terms of overlap analysis to make sure. We understood that I think you could very quickly understand that like this isn't you know consistent with anything else. We're doing there'll be very little what we do in luxury lifestyle will be very different what we are already doing with Alex our luxury.
Speaker Change: <unk> brand is very different those hotels tend to be bigger you know hotels more meeting space and in all of those things. So that's why I said, we're excited it's very you know as big as we are as you know 7500 hotels across all of these chain scales.
Christopher J. Nassetta: And as a result, we do not believe that they are in conflict with or cannibalize anything else we're doing, just because, I mean, I suggest to anybody, just go on the website. If they have 500 plus, you can sort of get a feel for it. And I think we did huge amounts of work in terms of overlap analysis to make sure we understood that.
Speaker Change: Really hard to find something that you would view as this complementary but we worked really hard to find that in we think SL H is that so.
Speaker Change: We do not believe.
That we believe it will bring in lots of new customers serve our existing customers as I said.
Speaker Change: Really well make them happier as they earn in and particularly they they burn points and will not be in conflict either with our existing owners, but more importantly, not being conflict with our existing growth opportunities and the brands that we already have on the brand bar.
Christopher J. Nassetta: I think you can very quickly understand that this isn't consistent with anything else we're doing. What we do in the luxury lifestyle segment will be very different. What we are already doing with LXR, our luxury soft brand, is very different. Those hotels tend to be bigger hotels, more meeting space, and all of those things.
Speaker Change: That's very clear maybe if I could just ask one very quick follow up just the gap between the 15% Revpar growth at least in the 8% revenue decline, what's leading to that gap in that segment.
Christopher J. Nassetta: So that's why I said we're excited. It's very, you know, as big as we are at, you know, 7,500 hotels across all of these chain scales, it's really hard to find something that you would view as this complementary, but we worked really hard to find that, and we think SLH is that. So we do not believe that it will bring in lots of new customers, serve our existing customers, as I said, really well, make them happier as they earn, and particularly burn points, and will not be in conflict either with our existing owners, but more importantly, not be in conflict with our existing growth opportunities in the brands that we already have on the brand board. That's very clear.
Speaker Change: You're talking about the clock yeah. It's.
Speaker Change: It's almost entirely the impact of government subsidies last year in the fourth quarter I assume I assume if youre looking at year over year Revpar relative to Revpar growth, which is same store and the subsidies come in below the revenue line.
Speaker Change: Okay that makes sense. Thank you.
Speaker Change: Sure. Thank you. The next question is from Bill Crow with Raymond James. Please go ahead.
Bill Crow: Thanks, Good morning all.
Chris.
Bill Crow: I'm curious theres quite a debate out there about inbound versus outbound, especially on the leisure side. You said you expect leisure to be up this year I'm wondering if what you're seeing in your system.
Bill Crow: Tells you the outbound travel is going to be as strong as last year or or if we're going to see more.
Bill Crow: More balanced playing field here in the United States.
Richard J. Clarke: Maybe if I can just ask one very quick follow-up. Just the gap between the 15% REVPAR growth in owned and leased and the 8% revenue decline, what's leading to that gap? You're talking about the client?
Bill Crow: I think we're going to see a very strong much stronger inbound here that doesn't mean, the outbound is gonna be bad, but I think with that you know.
Bill Crow: What happened with the value of the dollar last year.
Bill Crow: And you had the strength there drove a lot of international travel, particularly the Europe, I don't think and people hadn't been in a while so you put those things together.
Kevin J. Jacobs: Yeah, it's almost entirely the impact of government subsidies last year in the fourth quarter. I assume if you're looking at year-over-year REVPAR relative to REVPAR growth, which store and the sub, you know, below the revenue line. OK. Thank you. The next question is from Bill Crow with Raymond James. Please go ahead. Thanks. Good morning, all. Good morning, Bill. Chris, I'm curious.
Bill Crow: Created a real groundswell for outbound business I think there'll be plenty of outbound, but I think the trend. This year will be sort of recovering not maybe fully but getting much closer to a full recovery by the end of the year and inbound International you know the Chinese inbound is the big variable, which is still a small.
Bill Crow: There's quite a debate out there about inbound versus outbound, especially on the leisure side. You said you expected leisure to be up this year. I'm wondering what you're seeing in your system that tells you that outbound travel is going to be as strong as last year or if we're going to see a more balanced playing field here in the United States. I think we're going to see a very strong, much stronger inbound here. That doesn't mean outbound is going to be bad. But I think with the value, you know, what happened with the value of the dollar last year, you know, you had The strength there drove a lot of international travel, particularly to Europe.
Bill Crow: A fraction of what of what it was I still think that takes a more protracted period of time, just given everything going on in China, but other countries around the world are compensating for that so we may not get all the way back this year I think you know TBD.
Bill Crow: TBD, but I do think part of the story part of the strength. This year is going to be about inbound international and I think part of that will obviously indexed very heavily towards the bigger urban markets and that combined.
Bill Crow: With the what I already talked about on the group side you know with.
Bill Crow: The resurgence of all the Big City Wides in association as well as.
Christopher J. Nassetta: And people hadn't been in a while, so you put those things together, and it created a real groundswell for outbound business. I think there'll be plenty of outbound, but I think the trend this year will be sort of recovering, not maybe fully, but getting much closer to full recovery by the end of the year on inbound international. The Chinese inbound is the big variable, which is still a small fraction of what it was. I still think that it takes a protracted period of time, just given everything going on in China, but other countries around the world are compensating for that. So we might not get all the way back this year, I think, TBD, but I do think part of the strength this year is going to be about inbound international, and I think that will obviously index very heavily towards the big urban markets, and that, combined with what I already talked about on the group side, with the resurgence of all the big city-wides and association, as well as SMB group business, that's everywhere, but that' Thank you.
Bill Crow: SMB group business, you know that's everywhere, but you know that that's nice for the big cities as well. So I think youre going to see I think that will when we finish the year, we're going to we're going to feel a lot better about inbound and not bad about outbound, but I think I think inbound will be the story.
Speaker Change: Thank you.
Speaker Change: Follow up question to make it quicker but.
Speaker Change: A couple of times kind of emphasizes low supply growth environment.
Speaker Change: The pipeline continues to build its essentially I think an all time high levels.
Speaker Change: Pipelines are Great example, I'm wondering if you're seeing any change in the pace of new construction starts.
Speaker Change: Occasion that the period between signed deals and groundbreaking starting to shorten it feels like we got kind of a.
Speaker Change: Sneak up here at some point, we're going to see some supply.
Speaker Change: Supply growth take off I think you will I mean first of all I mean, our numbers are really good and not to Patterson in the back where we take an unfair share of what is getting signed in and even.
Speaker Change: Even less fair share of what's getting financed so our numbers are not indicative of what's going on in the in the broader market I think if you look at the broader market the supply numbers are sort of circa 1%.
Bill Crow: I do have a follow-up question. I'll make it quick here, but you a couple of times have kind of emphasized this low supply growth environment. The development pipeline continues to build. It's actually, I think, at all-time high levels. Your pipeline is a great example.
Speaker Change: And in my own view, you're right eventually that will go back up I mean, the 30 year average is two and a half. So it suggests you know if you look at long term trends. It will go up particularly as strong as the business has been and we think will continue to be end of this year, but there are natural limitations in place, which as you know.
Christopher J. Nassetta: I'm wondering if you're seeing any change in the pace of new construction starts or any indication that the period between signed deals and groundbreaking is starting to shorten. It feels like we've got kind of a coiled snake out there. At some point, we're going to see some supply growth take off. I think you will.
Speaker Change: Which is why you see it at 1% I mean, the 1% to sort out the you know an output of <unk>.
Speaker Change: No very high cost to build and higher cost of labor and higher interest rates no financing availability that occurred over the last couple of years and so you see you see that sort of hitting.
Christopher J. Nassetta: First of all, our numbers are really good, and not to pat ourselves on the back, but we take an unfair share of what's getting signed and an even less fair share of what's getting financed. So our numbers are not indicative of what's going on in the broader market. I think if you look in the broader market, the supply numbers are circa 1 percent. In my own view, you're right. Eventually, that will go back up. The 30-year average is 2.5.
Speaker Change: Hitting the numbers now, but the reality is while some of those things have stabilized. So that's why our starts were up double digit in the U S last year, it's still very hard while financing and interest rates have come down a little bit cost to build has not but it's stabilized obviously rates have gone up I mean the.
Christopher J. Nassetta: So it suggests that if you look at long-term trends, it will go up, particularly as strong as the business has been and we think it will continue to be into this year. But there are natural limitations in place, which is why you see it at 1 percent. The 1 percent is sort of an output of a very high cost to build and higher cost of labor, higher interest rates, and no financing availability that occurred over the last couple of years.
Speaker Change: <unk>.
Speaker Change: Setup works pretty well, but it really works.
Speaker Change: Really really well for us because we drive very high market share and very high rates and higher than almost all of our competitors. So it works better for us and the financing market, while it's better Okay. That's why we were able to get.
Christopher J. Nassetta: And so you see that sort of hitting the numbers now. But the reality is, while some of those things have stabilized, that's why our starts were up double digits in the U.S. last year, it's still very hard, even while financing interest rates have come down a little bit. The cost to build has not gone up, but it's stabilized. Obviously, rates have gone up. I mean, the economic setup works pretty well, but it really works selfishly really well for us because we drive a very high market share and very high rates, higher than almost all of our competitors. So it works better for us. And the financing market, while it's better, OK, that's why we're able to get, you know, we got a lot more done last year and I think we'll get a lot more done this year. But it's not robust.
Speaker Change: And we got a lot more done last year and I think we'll get a lot more done this year its not robust and so there's a natural.
Speaker Change: Sort of gate.
Speaker Change: That exists and you know, while it's getting better I think will exist for a while and it takes time to build these things right. So you know the reality is I think this year will still be a not as constrained, but more constrained financing environment that will weight heavily to our benefit and then I think it will continue to ease but I think.
Speaker Change: Before youre going to see a lot of this stuff convert for.
Christopher J. Nassetta: And so, you know, there's a natural, sort of gate, that exist, and I, you know, while it's getting better, I think will exist for a while, and it takes time to build these things, right? So, you know, the reality is I think this year will still be a not as constrained, but more constrained financing environment that will weight heavily to our benefit, and then I think it'll continue to ease, but I think, you know, before you're going to see a lot of this stuff convert for, you know, en masse from a pipeline to under construction, particularly here in the U.S., I think it takes a couple of years, and then, you know, and then it takes a year or two to build the stuff, so I think, you know, I feel pretty darn good about, like, 24, 25, and probably most of 26 for being pretty meaningfully below the 30-year averages on supply, and that's why I made the comments that I made. I think it's just, I think it's just math, you know?
Speaker Change: And mass from a pipeline two under construction, particularly here in the U S. I think it takes a couple of years and then you know and then it takes a year or two to build this stuff. So I think I feel pretty darn good about like 'twenty four 'twenty, five and probably most of 'twenty six for being.
Speaker Change: <unk>.
Speaker Change: Pretty meaningfully below that.
Speaker Change: The 30 year averages on supply and that's why I made the comments that I made I think it's just I think it's just math you know at some point they got to start to finish.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. The next question comes from Kevin Kopelman with Cowen. Please go ahead.
Kevin J. Jacobs: Great. Thanks, a lot.
Kevin J. Jacobs: Can you give us an update on how youre thinking about fee growth for the year.
Kevin J. Jacobs: Do you still expect it to exceed nug, plus revpar in any kind of puts and takes there yeah.
Kevin J. Jacobs: Yes, we still think we think fee growth will be a little bit above algorithm as as it normally is a couple of a couple of headwinds a little bit of headwind from FX, but even with that we think will be above algorithm for fee growth. This year.
Kevin J. Jacobs: At some point, they have got to start to finish. Great, thank you. Thank you. The next question comes from Kevin Kopelman with TD Cohen. Please go ahead.
Speaker Change: Okay, Great and then and then one other quick one could you talk about.
Kevin J. Jacobs: Great, thanks a lot. Could you give us an update on how you're thinking about fee growth for the year? If you still expect it to exceed NUG plus REVPAR and any kind of puts and takes there, thanks. Yeah, we still think we think fee growth will be a little bit above algorithm as it normally is a couple of headwinds, a little bit of a headwind from FX. But even with that, we think it will be above the algorithm. Okay, great. And then there was one other quick one.
Speaker Change: Any plans or your plans to get back into the kind of three to three five times leverage range that you talked about.
Speaker Change: Yeah. Our guidance. This year implies you know, where we will be approaching the bottom end of that range. We still think it's the appropriate range for us obviously, the borrowing environment has been a little bit challenged we haven't liked.
Speaker Change: Rates have been we're still obviously our capital return is still moving up and we've given guidance for this year, but the guidance for this year implies that we will be approaching the bottom end of that range by the end of the year.
Kevin J. Jacobs: Could you talk about any plans or your plans to get back into the kind of three to three and a half times leverage range that you talked about? Yeah, our guidance this year implies that we'll be approaching the bottom end of that range. We still think it's the appropriate range for us. Obviously, the borrowing environment has been a little bit challenged.
Speaker Change: Great. Thanks, so much.
Speaker Change: Sure.
Moderator: Thank you ladies and gentlemen, this concludes our question and answer session I would now like to turn the call back to Christmas for any additional closing remarks.
Christmas Ida: Thank you everybody again for taking the time.
Christmas Ida: A really good year for us last year, some exciting things going on with S. L H, but you know.
Kevin J. Jacobs: We haven't liked, you know, where rates have been. We're still, obviously, our capital return is still moving up, and we've given guidance for this year. But the guidance for this year implies that we'll be approaching the bottom end of that range. Great, thanks so much.
Christmas Ida: Even the organic.
Christmas Ida: Growth and increases in unit growth that we see.
Christmas Ida: Given the momentum we're taking from last year into this year.
Christopher J. Nassetta: Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the call back to Chris Nassetta for any additional closing remarks. Thank you, everybody, again for taking the time. Obviously, a really good year for us last year, some exciting things going on with SLH, but even the organic growth and increases in unit growth that we see, given the momentum we're taking from last year into this year, we feel really good about the progress of the company, and feel really good about where things are and the outlook for the full year. And we'll look forward to catching up with you after the first quarter to give you an update.
Christmas Ida: Feel really good about the progress the company feel really good about where where things are and outlook for the full year and we will look forward to catching up with you. After the first quarter to give you an update thanks again and have a great day.
Christmas Ida: Yeah.
Speaker Change: The conference has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: [music].
Operator: Thanks again, and have a great day. The conference has now concluded. Thank you for your participation. You may now disconnect your line.
Speaker Change: Okay.