Q4 2024 Choice Hotels International Inc Earnings Call
Good morning, and thank you for joining us today before we begin we'd like to remind you that during this conference call certain predictive or forward looking statements will be used to assist you in understanding the company and its results.
Actual results may differ materially from those indicated in forward looking statements and you should consult the companys forms 10-Q, 10-K, and other SEC filings for information about important risk factors affecting the company that you should consider.
These forward looking statements speak as of today's date, and we undertake no obligation to publicly update them to reflect subsequent events or circumstances.
You can find you a conciliation of our non-GAAP financial measures referred to in our remarks as far as of our fourth quarter and full year 'twenty 'twenty four earnings press release, and Investor presentation, which is posted on our website at choice hotels Dot com under the Investor Relations SEC.
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Speaker Change: This morning, Tod patients President and Chief Executive Officer will speak to our first quarter operating results last called Oak Smith, Chief Financial Officer will discuss our financial performance and 2025 outlook.
Speaker Change: Following our prepared remarks, we'll be glad to answer our questions analysts.
Pat: And with that I'll turn the call over to Pat.
Pat: Thank you Allie and good morning, everyone. We appreciate you taking the time to join us.
Pat: Both hotels delivered yet another year of strong results in 2024.
Pat: We exceeded the top end of our guidance with a 12% year over year increase in adjusted EBITDA.
Pat: And a 13% year over year increase in adjusted earnings per share.
Pat: In 2024, we realized a three 3% year over year net increase in global rooms.
Pat: <unk>, a four 3% net increase for our more revenue intense domestic routes.
Pat: We also continued to increase the velocity of moving hotels from our pipeline to open hotels.
Pat: And opened 21% more hotels worldwide in 2024 compared to the prior year.
Pat: And as we look to our future our long term growth is expected to continue to be strong.
Pat: Cause 98% of the rooms in our global pipeline are now within our more revenue intense brands.
Pat: This means that our pipeline is set to generate significantly higher revenue compared to our existing portfolio.
Pat: Driven by a substantial revpar premium.
Pat: Higher average effective royalty rate.
Pat: And a larger room count per hotel.
Pat: These results demonstrate that our strategy.
Pat: Continues to deliver.
Pat: 'twenty 'twenty four it was a year in which we continue to realize the earnings growth from our past investments.
Pat: Both to meaningfully expand the scale of our business and to reposition the company into more revenue intense segments.
Pat: During the past year, we relaunched four brands, adding exciting new brand growth opportunities for our franchisees.
Pat: We opened our 515th extended stay hotel, continuing our leadership position in that sought after sector.
Pat: We meaningfully expanded our partnerships business.
Pat: We significantly increased our international footprint.
Pat: We achieved record organic growth in our rewards program.
Pat: And we unlock new value through our Radisson Americas acquisition.
Pat: All of these important successes have further strengthened our network enhanced both the guest and franchisee experience.
Pat: And created additional ancillary revenue opportunities.
Pat: We are also accelerating at what we do best delivering for our franchisees.
Pat: In the fourth quarter, we outperformed the industry by 90 basis points in domestic Revpar performance and achieved Revpar index share gains versus competitors.
Pat: With Revpar, increasing four 5% year over year.
Pat: We are capturing demand across multiple regions of the country and our robust sales infrastructure and capabilities are allowing us to secure incremental demand generated by the recent natural disasters.
Pat: In addition to the positive trends in leisure travel, we are seeing improving strength in our business travel.
Pat: In 2020 for business travel represented approximately 40% of our overall mix.
Pat: <unk> the success of our revenue intense strategy.
Pat: In fact, our business transient segment grew 14% year over year in the fourth quarter.
Pat: Traction in the technology vertical is particularly encouraging and we believe we have a meaningful long term opportunity to capture growing demand for both the technology and energy related sectors driven in part by the significant infrastructure investments required by Gen AI.
Pat: And we are also driving a year over year acceleration in the growth of our group travel business, where we are capturing demand from small corporate and leisure groups.
Pat: So far in the first quarter of 2025, our business travel is trending up fueled by both group and business transient travel as we are seeing a pickup in locally negotiated business and year over year revenue growth through our digital channel that delivers mid week and corporate managed business.
Pat: At the same time, we launched exciting new rewards program features that provide our choice privileges members with even more options to maximize their rewards and enhance their overall experience <unk>.
Pat: Including an extended booking window for points redemption.
Pat: And the ability to redeem points for upgraded rooms.
Pat: And just one month since the launch these enhancements have already led to a significant year over year increase in reward redemptions and extended booking windows, which drive occupancy for our properties further out.
This positive momentum in both business and leisure travel driven by the significant investments made last year gives us increased confidence in our 2025 outlook.
Pat: It is important to note what is enabling the positive results from these investments and that is our scale.
Pat: Today with 22 hotel brands are scale is significantly larger than it was just three years ago and the benefits of that scale now extend to all of our hotels.
Pat: We have created a step function change in the company's positioning which has not only created additional business development opportunities for franchisees, but also enabled us to generate more value for them.
Pat: Relentlessly enhancing the value we bring to our franchisees is one of the key reasons are existing owners choose to expand their hotel portfolio with choice hotels and.
Pat: And contributes to our industry, leading voluntary franchisee retention rate.
Pat: As we grow we are continuing to invest and enhance our value proposition for our franchisees, which we believe will result in expanding our business and taking additional market share.
Pat: 2024 was the year, we began to realize the benefits of our larger scale.
Pat: Which enabled us to make additional investments given our significantly enhanced growth profile.
Pat: I am pleased to report that we are already starting to see a positive impact from some of those recent investments.
Pat: First we've invested in capturing more group business and business transient demand leveraging our evolution to a more upscale portfolio.
Pat: In 2024, we redesigned and augmented our group sales team, resulting in an impressive year over year revenue increase of over 45% from group accounts in the fourth quarter.
Pat: <unk> driven by meetings and event related travel.
Pat: At the same time, we increased our business transient revenue supported by our strengthened upper mid scale portfolio.
Pat: Our revenues were up by 20% year over year in the fourth quarter.
Pat: The larger scale has also allowed us to invest more in franchisee facing technology specifically.
Pat: Specifically, we are excited about our recently relaunched choice hotels dot com website and mobile apps.
This new digital experience has already led to a year over year increase in booking conversion rates, including a double digit increase for our upscale properties.
Pat: Last quarter, we also successfully deployed a mobile friendly one stop platform for our franchisees to efficiently manage all of their properties from any location, which in turn helps further reduce their operating costs and allows them to focus on providing an outstanding guest experience.
Pat: With a strong foundation and a clear direction for a repositioned company. We are focused on continuing to invest in key areas that offer the greatest opportunity to further enhance our value proposition and accelerate our growth in the coming years.
Pat: In 2025, we will concentrate our investments on improving franchisees' profitability.
Pat: <unk> better tools for small and medium sized business customers.
Pat: And strengthening our rewards program.
Pat: We are confident that these investments will significantly increase our future growth opportunities.
Pat: In addition to our traditional strength in the upper Midscale and Midscale segments. The company has well established brands with significant growth potential in the two segments with the highest developer and guest demand.
Extended stay and upscale limited service.
Pat: These segments are more accretive to our earnings and they have been and will continue to be a key driver of our earnings algorithm and future growth.
Pat: We are pleased to be expanding our lead in the cycle resilient extended stay segment by adding more than 4500 extended stay rooms in 2024.
Pat: For six consecutive quarters, we have grown our domestic extended stay rooms system size by 10% year over year and.
Pat: And we expect the higher than industry average growth to continue.
Pat: With over 70% of all domestic economy extended stay rooms under construction being choice hotels brands.
Pat: And nearly 43000 extended stay rooms in our pipeline, we are well positioned for future growth.
Pat: In the upscale segment, we continued to expand our presence increasing the global room system size by 44% year over year to over 110000, upscale and above rooms, representing 17% of our overall system.
Pat: Most two times our economy portfolio.
Pat: Importantly, our rewards program members now enjoy access to over 180000, upscale upper upscale and luxury hotel rooms worldwide.
Pat: With 17% of our CPE members annual household income exceeding $200000.
And with nearly 25000 more upscale and above global rooms in the pipeline, we will be providing them, even more aspirational locations to visit well into the future.
Pat: Fueling that growth is the momentum we are seeing in the upscale segment in 2024, we achieved strong development growth with a 36% year over year increase in the number of domestic upscale franchise agreements awarded.
Pat: We also continued to strengthen our core brand portfolio in.
Pat: In addition to the success, we are seeing with our newest brand <unk> by Radisson.
Pat: Our country and in suites by Radisson brand outperformed Str's upper mid scale segment by nearly three percentage points in the fourth quarter.
Pat: At the same time, we expanded the iconic quality Inn brand portfolio to nearly 150000 global rooms highlighted by 49 Global hotel openings, a 29% year over year increase in a year when the brand celebrated its 85th.
Pat: Anniversary.
Pat: A key addition to our growth story is the performance of the Radisson America's brands.
Pat: The significant improvements in digital traffic and booking conversion rates since the integration have driven those brands Revpar index gains.
Pat: Which has led to new hotel development commitments.
Pat: Notably in 2024, we executed twice as many domestic franchise agreements for the Radisson America's brands as we did in 2023.
Pat: We expect the positive momentum for the Radisson America's brands to continue and as of year end, we had 13% more rooms in the pipeline across the domestic radisson Americas portfolio compared to the prior year.
Pat: A key differentiator for winning new franchise agreements continues to be our best in class hotel conversion capability, which moves projects rapidly through the pipeline in.
Pat: In fact of the domestic franchise agreements, we executed for conversion hotels in 2024, we opened 164 within that timeframe.
Pat: 22% increase compared to 2023.
Pat: Over the past two years, we have accelerated our opening speed by nearly 25%.
Pat: We are encouraged by the continued traction for our conversion brands in the fourth quarter, we increased the number of domestic franchise agreements executed for conversion hotels by 7% year over year, and we expect our hotel conversion core competency to be a key growth driver this year.
Pat: I would now like to turn to our international business, where in the fourth quarter, we increased our adjusted EBITDA by 50% and.
Pat: And expanded our rooms portfolio by four 4% year over year highlighted by a 58% increase in hotel openings.
Pat: And with a new construction rooms pipeline that has increased by 14% compared to the prior year. We continue to see a significant opportunity to further gain international market share in the coming years.
Pat: And our key strategic region of EMEA, we delivered a 5% increase in Revpar performance year over year and are attracting strong franchisee interest.
Pat: Last quarter, our EMEA team executed our first direct franchising agreement in Spain, adding more than 700 rooms.
Pat: We are already on boarded over 500 rooms to our portfolio and expect the remainder to be opened in 2025.
Pat: In France under our direct franchising agreement with <unk> residential hotels, we've already on boarded more than 2600 rooms, and anticipate the remaining 1600 plus rooms to join the system throughout 2025.
Pat: Turning now to our customer base in 2024, we expanded our rewards program to 69 million members.
Pat: An 8% increase compared to the prior year, which marks the highest number of organic enrollment in a single year.
This growth is the direct result of us, creating a more compelling program, including adding exciting new experiences such as music racing and college sports event redemption options.
Pat: And introducing new aspirational hotels.
Pat: Another exciting development benefiting our customers as the new strategic partnership with Westgate resorts, the industry's premier resort operator.
Pat: This arrangement added more than 14000 rooms to our domestic portfolio in 2024.
And further enhance choice hotels rewards program by allowing our members to <unk>.
Pat: And redeem points at these resort properties.
Pat: In closing by successfully executing our strategy, we've repositioned the company and established a strong foundation for future growth.
Pat: Our proactive investments and more versatile model have meaningfully enhanced our company's growth profile and.
Pat: And we believe we are positioned choice to deliver a sustained earnings growth and create long term value.
Pat: We continue to grow our significant free cash flow annually and our priority use of this capital we remain focused on enhancing our value proposition and driving organic growth.
Pat: Returning excess cash to shareholders.
Speaker Change: I will now turn the call over to our CFO.
Pat: Scott.
Scott: Thanks, Pat and good morning, everyone today, I will discuss our fourth quarter and full year results update you on our balance sheet and capital allocation and share our outlook for the full year 2025.
Scott: For full year 2020 for a combination of global rooms growth strong effective royalty rate growth and the robust performance of our non revpar dependent programs drove adjusted EBITDA to $604 $1 million, representing a 12% year over year increase and exceeding the top end of our guidance.
Scott: Our full year 2024 adjusted earnings per share also exceeded our guidance, reaching $6 88 per share a 13% increase year over year.
Scott: For fourth quarter 2024, compared to the same period in 2023 revenues, excluding reimbursable revenue from franchised and managed properties increased 7% to $229 million.
Scott: Our adjusted EBITDA grew 12% to $140 million and our adjusted earnings per share were $1 55 per share an 8% increase.
Scott: Let me first discuss our key drivers of franchise fee growth, which include unit growth Revpar performance and our royalty rate.
Scott: In the fourth quarter, our domestic rooms growth rate improved sequentially and increased by four 3% year over year.
Scott: Cros are more revenue intense upscale extended stay and mid scale portfolio.
Scott: This growth represented a one 5% year over year increase in the number of units.
Scott: We opened 305, new domestic hotels in 2024% to 16% year over year increase our highest number since before the pandemic.
Scott: We are particularly pleased to see our new hotel construction starts in the fourth quarter exceed our expectations and we saw an 8% year over year increase in the number of new construction hotels opened.
Scott: Even as we faced a challenging hotel development environment.
Scott: We believe this illustrates our commitment to franchisee profitability and providing brands that deliver compelling returns on investment even during times of elevated costs.
Scott: The growth in our year over year openings was fueled by our robust pipeline, which included over 20 hotels and 14000 rooms from our partnership with Westgate that moved from our pipeline to open hotels in the fourth quarter.
Scott: We continue to focus on building a strong pipeline of hotels and are pleased with our ongoing progress.
Scott: In fact, when excluding the impact of opening the Westgate hotels under our ascend hotel collection in the fourth quarter, our domestic pipeline increased sequentially by 3% quarter over quarter.
Scott: Our deliberate decisions and strategic investments in our franchisee tools brand portfolio and platform capabilities are delivering results across all our brand segments.
Scott: First we are continuing to strengthen our presence in the upscale segment with a 12% increase in global openings and an 8% increase in domestic franchise agreements awarded compared to the fourth quarter of 2023 and.
Scott: In fact, our ascend hotel collection, a leading global soft brand reported a 43% year over year increase in openings worldwide.
Scott: Second we grew our domestic extended stay rooms system size by 10% year over year.
Scott: Led by record openings for both our <unk> suites, and <unk> suites brands.
Scott: Do you have room suites brand is gaining strong traction with seven hotels now open and 64 domestic projects in the pipeline, including 22 under construction as of today.
Scott: And third we expanded our global Midscale roof portfolio to approximately 422000 rooms highlighted by a 51% increase in global hotel openings compared to the prior year.
Scott: At the same time, we saw a 10% increase in midscale domestic franchise agreements executed year over year.
Scott: Turning now to our Revpar performance.
Scott: Our fourth quarter domestic revpar outperformed our chain scales by 30 basis points, increasing four 5% year over year.
Scott: This was driven by 80 basis point improvement in occupancy levels and a three 1% year over year increase in average daily rates.
Scott: Our performance exceeded our forecasted expectations and we continue this positive momentum into the first quarter of 2025.
Scott: Our domestic extended stay segment performed exceptionally well achieving fourth quarter revpar growth of five 9% over the prior year.
Scott: Impressively for the full year 2024 hour Radisson upscale brand outperformed str's upscale segment by over four percentage points and achieved Revpar index share gains of nearly three percentage points.
Scott: Turning to our third revenue lever our effective royalty rate also continues to be a significant source of revenue growth.
Scott: Our domestic system effective royalty rate for full year increased seven basis points year over year, representing approximately $7 million of incremental royalties.
Scott: This performance demonstrates the positive impact of our strategy to drive the growth of our revenue intense brand portfolio and our enhanced value proposition to franchise owners.
Scott: We are optimistic about the ongoing upward trajectory of our effective royalty rate for years to come as the contracts in our domestic pipeline has significantly higher effective royalty rate than those in our current portfolio of open hotels.
Scott: We continue to build on the strong momentum of our platform business.
Scott: Our ancillary fees benefit from expanded offerings to our franchisees and guests increased transaction volume with our qualified vendors and the broader reach of our initiatives.
Scott: These fees increased 8% year over year in the fourth quarter and increased by more than 50% for full year 2024 compared to 2023, particularly.
Scott: Particularly our co branded credit card program has been yielding impressive results delivering 20% year over year growth in credit card revenues over last year.
Scott: Continue to expand our platform business and increase the products and services, we offer as one of our key initiatives and we believe that we can drive strong revenue growth in the years ahead.
Scott: Last year, we generated over $390 million and adjusted free cash flows a 13% year over year increase.
Scott: And our operating cash flows net of franchise agreement acquisition costs increased 8% to $319 million. Our business continues to produce strong cash flow, which coupled with our well positioned balance sheet allows us to execute our capital allocation priorities, including investing in the growth initiatives Pat highlighted while also returning significant cash.
To shareholders.
Scott: In 2024, we've returned over $435 million to shareholders, including approximately $56 million in cash dividends and over $380 million in share repurchases.
Scott: We repurchased over 3 million shares representing over 6% of our outstanding share count and we had $3 8 million shares remaining in authorization as of the end of December.
Scott: I'm also pleased to report that we made progress executing on our capital recycling strategy.
Scott: Cycling over $45 million in 2024.
Scott: With a strong cash position leverage levels at the low end of our targeted range and total available liquidity of approximately $700 million at the end of 2024.
Our capital allocation priorities remain unchanged we.
Scott: We intend to build on our long record of delivering outsized value buy accretively investing to further expand our business.
Scott: Before opening up for questions I'd like to discuss our expectations for 2025.
Scott: As we look ahead to this year, we expect to generate adjusted EBITDA in the range of $625 million and $640 million.
Scott: We anticipate this growth to be driven by organic growth across more revenue intense hotels and markets.
Scott: Robust effective royalty rate growth.
Scott: Continued growth from our ancillary revenue streams strong international business and incremental revenue generating opportunities from our expanded scale.
Scott: We expect our full year 2025, adjusted diluted earnings per share to range between $6 98 and.
Scott: And $7 24 per share.
Scott: This outlook does not account for any additional M&A repurchase of the company's stock or other capital markets activity.
Scott: Underlying our outlook are the following assumptions for full year 2025.
Scott: We expect our net global unit and room system size to grow approximately 1% year over year.
Scott: We project, our domestic revpar to range between 1% to 2% year over year.
Scott: And we anticipate our full year 2025 effective royalty rate to grow in the mid single digits year over year.
Scott: Finally, we expect adjusted SG&A to grow in the low to mid single digits from the 2024 base of $276 million.
Scott: I would also like to highlight that we are providing additional detail of our ancillary programs, including our reimbursable revenue and expenses when page seven of our investor deck, which can be found under the Investor Relations section of our website.
Scott: For full year 2025, we expect our platform procurement ancillary revenues, which include all of the revenues outside of our royalty and licensing fees system fees.
Scott: And hotels and certain other revenues to grow in the mid single digits from the 2024 base of $231 million.
Scott: Today's results are a testament that our strategy is working and that we are benefiting from our expanded scale and versatile business model we.
Scott: We intend to keep investing in those areas of our business that will generate the highest return on our capital.
Scott: At this time, Pat and I would be happy to answer any of your questions operator.
Scott: Yes.
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Scott: Should you have a question. Please press star followed by the number one on your Touchtone phone.
Speaker Change: You'll hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number two.
Speaker Change: If you are using a speaker phone please make sure to lift the handset before pressing any keys.
Speaker Change: Your first question comes from the line of David Katz from Jefferies. Please go ahead.
Speaker Change: Yeah.
David Katz: Hi, good morning. Thanks.
Speaker Change: Thanks for taking my question David.
Speaker Change: Good morning, I was hoping we could just spend just a little more time on.
Speaker Change: One of the line items that we've been getting some questions on and kind of going through ourselves.
Speaker Change: It's really within.
Speaker Change: The.
Speaker Change: The other revenues from franchised and managed properties right, which sort of moving around there. My understanding is a piece, which is entirely reimbursable and then there are some other items in there Scott can you help us just unpack those line items.
Speaker Change: Backward looking at forward looking at okay. Thanks.
Speaker Change: Hey, Dave Thanks for the question, we actually did posted our investor presentation today.
Speaker Change: A reconciliation of that line item to help help investors understand that so I will refer you to that.
Speaker Change: Well hopefully give you some clarity but during the quarter. We did recognize in that line item. There was about $161 million of Reimbursable revenues and just under $40 million in non reimbursable, which the non reimbursable is when you apply the.
Speaker Change: The expenses against two it generated about $14 $5 million, which is up was up about 16% year over year. If you remember.
Speaker Change: We realigned our franchise agreements starting in the fourth quarter of 2023. So the quarter is now an apples to apples and that reflects that 16% the growth of those programs in.
Speaker Change: In terms of the overall full year it added about $63 million of EBITDA for us for the full year on those non Reimbursable line items and on the Reimbursable side, we ran a deficit of about $18 million, which was favorable to the $35 million that we had originally guided to and Thats.
Speaker Change: Really a timing element and you will see some of that shift into 2025.
Speaker Change: Alright.
Speaker Change: No.
Speaker Change: I got most of that but.
Speaker Change: You know what is driving the earnings.
Speaker Change: Just having a good understanding of sort of what makes those continue to grow or or or not you know not grow in the future. I think is part of what we'd like a little more insight on.
Speaker Change: Sure those revenues are ancillary revenues of fees that we collect from our franchisees. So one example, I'll give you is our property management system, which is choice advantage.
Speaker Change: We have a.
Speaker Change: A proprietary property management system that is our connectivity to our central reservation systems and allows the inventory management. So our hotels use that during the year. We did see some nice growth in those revenues as we roll that system out to the Radisson properties that we acquired as well as we have recently enhanced our capabilities to.
Speaker Change: To be able to handle our extended stay brands, so that rolled out during the year and contributed to the increase in revenues going forward Theres. Other services like that that we can continue to deliver to our franchisees that are more of a fee for service.
Speaker Change: And they should also grow in line with our rooms growth domestically and internationally.
Speaker Change: Okay helpful. Congrats on the quarter. Thank you.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Danielle <unk> from Bank of America. Please go ahead.
Speaker Change: Thank you good morning patents Scott.
Speaker Change: Are we able to quantify the benefit to Q4 that we got from hurricane in that four 5% Revpar that you posted in the quarter.
Speaker Change: Yeah. So we certainly saw some benefit from the hurricane in the fourth quarter.
Speaker Change: When we think about just the fourth quarter, we talked about to you in Q3, we did see an inflection point in our Revpar performance back in August when we started to see trends improve with increasing demand in multiple regions of the country.
Speaker Change: Did see those trends continued into Q4, which you saw on our overall results of an increase in four and a half it was really a multitude of reasons.
Speaker Change: Our strength in our business transient revenue, which was up 14% in the quarter and particularly saw our verticals of technology energy transportation and construction all up we all.
Speaker Change: Also saw our groups, which are really remains strong reflecting some of the investments we've made in those capabilities earlier in the year and we saw a 45% increase in business from our managed accounts primarily for meetings and events and.
Speaker Change: And we also saw some good.
Speaker Change: Government spending up 5%.
Speaker Change: In terms of other other things, including the Hurricane we saw pickup in some of our oil markets.
Speaker Change: As we've seen increased activity on that and then when you look at kind of the specifically the business that was delivered from our FEMA accounts of Red Cross business as well as that is related to increased spending from the restoration crews. We estimate that that was about 125 basis points of lift in the in the fourth quarter, which translates to roughly about 30 basis points for the full year.
Speaker Change: Sure.
Speaker Change: Understood. Thank you Scott and.
Speaker Change: For my follow up unrelated, but how should we be thinking about <unk>.
Speaker Change: Investment spending levels in 2025, compared to 24, and what buckets condos could that look like.
Speaker Change: Well I guess, Dan just when we look at the continued investments when you look at kind of our capital allocation strategy and how we think about the business. The first item that we invest in is our value prop. So we've talked a lot about investments. We made in 2024, that's now resulting in the increase we're seeing in the <unk>.
Speaker Change: Group and transient sector.
Speaker Change: Investments, we've made in the website mobile apps.
Speaker Change: We have a significant amount of investment this year in 2025, so it's really designed to help our franchisees.
Speaker Change: Manage their rate.
Speaker Change: Inventory in our rate structure, so really leaning into the dynamic pricing capabilities that are becoming more and more.
Speaker Change: Commonplace in the industry. So a lot of the key investment in the core enterprise is really around the value prop and it's really three things, it's driving topline revenue, reducing costs and making it easier for our franchisees to do business with us those are the three hallmarks for all the investments that we're making on that front.
Speaker Change: As you are aware most of that comes from the system Fund.
Speaker Change: Our efforts.
Efforts that we're doing.
Speaker Change: But all of those all of those are really designed to really take advantage of those trends that Scott talked about that are really going to drive the revpar performance that we expect to see in 2025.
Speaker Change: Got it thank you.
Speaker Change: How much.
Speaker Change: Okay.
Speaker Change: Your next question is from the line of Michael Bellisario from Baird. Please go ahead.
Michael Bellisario: Thanks, Good morning, guys.
Michael Bellisario: Just on <unk>.
Speaker Change: My question is going to focus on net unit growth. So the 1% died or maybe feels low given all the momentum that you just highlighted I guess couple of parts. There what are you assuming for U S and that global guide what are you assuming for international growth.
Speaker Change: And then also what's embedded in there for the Blue Green rooms, how should we be thinking about that now that the Westgate portfolio is now part of your system.
Speaker Change: Yeah, Mike I think one thing that's important to remember is we're effectively in a world now where about 80% of the openings are coming from conversion hotels.
Speaker Change: It's why in our remarks, we keep referencing the focus we've had on moving hotels rapidly through our pipeline and.
Speaker Change: And over the past two years, we've seen a 25% improvement for that so what does that mean for the pipeline. It means that we may have a hotel that enters and opens within three months.
Speaker Change: So you don't even see it in the pipeline during a quarter.
Speaker Change: And because we've been able to increase the velocity and the pace of that.
Speaker Change: We're not really just focused on the aggregate amount in the pipeline, we're actually focused on how do we get these conversion hotels that are looking to join our system.
From an application to a cash flowing hotel on our system more rapidly and we've had a lot of success on that front. So that's that's kind of the first thing is a lot of what's in our pipeline today.
Speaker Change: Reflects that conversion and it really shows up in the openings. When you look I think about 80% of our openings in 2024, where conversion hotels.
So that's a key piece of that I think when Youre question regarding Blue Green.
Speaker Change: We expect that unit count to remain the same.
Speaker Change: Kind of going forward and that's a reflection of the agreement that was in place prior to the transitioning control.
Speaker Change: So that is going to continue to sort of be of.
Speaker Change: A similar.
Speaker Change: Royalty contribution to us going forward Westgate is a complementary.
Speaker Change: Component to that.
Speaker Change: Both of those partnerships, we expect to grow over time and they are going to coexist together and it's really a nice opportunity for us to provide a lot more.
Speaker Change: Rewards redemption points and earning a places for our <unk>.
Speaker Change: <unk> members, who are really.
Speaker Change: Excited to sort of go in and stay at those aspirational locations.
Yes, Michael in terms of just the breakdown, we're expecting to grow our international rooms slightly above 3%.
Speaker Change: Domestic will be slightly positive.
Speaker Change: Stop the guidance in terms of our revenue intense strategy just as to try to give a bigger picture of what the global room growth is as we as we penetrate more internationally, but you should expect kind of the revenue intense units to be similar to what they were in 2024. So given that international is still a relatively smaller part of our business. The overall unit room.
Speaker Change: Growth will be around 1%, but it's a mix of a little over 3% internationally.
Speaker Change: And slightly above par.
Speaker Change: Positive in domestic.
Speaker Change: That's helpful. And then just two follow ups there how many blue-green rooms do you have today within the ascend collection and then for the Westgate deal is it fair to assume that sort of a pay to play agreement, where you're getting fees for choice direct contribution.
Speaker Change: Trying to think about the fee program contribution given how many rooms came on.
Speaker Change: The system in the fourth quarter and that's all for me. Thank you.
Speaker Change: Yes, blueberry, we have roughly around about 3000.
Speaker Change: Rooms in the system as ascend Hotel collection is obviously, we have a much larger partnership with them in terms of the timeshare business. They have you know we're really excited about the Westgate opportunity.
Speaker Change: Really it gives an opportunity to bring an exciting array of properties to our guests in terms of the locations. They have the travel experiences. They can give their accommodation types, which typically have larger rooms, which can be great for families. When they can stay in more of a.
Speaker Change: Two rooms suite versus maybe a one room.
Speaker Change: Hotel.
Speaker Change: Opens up or upscale experiences to our 68 million loyalty program members as well as the other choice guest.
Speaker Change: There is a distribution agreement, where we are paid for the reservations delivered.
Speaker Change: Because it's a distribution agreement has much higher fees for reservations delivered than a typical franchise agreement.
Speaker Change: So we're excited about that partnership and already seeing the engagement with our our loyal guests those opportunities to stay on the Westgate partnerships.
Speaker Change: Very helpful. Thank you.
Speaker Change: Your next question is from the line of Robin Farley from UBS. Please go ahead.
Robin Farley: Great I, just wanted to clarify a little bit more about the economics from the Westgate deal.
Speaker Change: They are not typical.
Speaker Change: Franchise fees, how should we think about sort of the equivalent is it equal then it was kind of a 1% franchise fee versus the 5% senior kind of how should we think about that equivalent and then.
Speaker Change: Quick follow up question on that as well.
Speaker Change: It's hard to do a direct correlation there Robyn so think about it more as much.
Speaker Change: Higher fee, our average royalty fees or 5%. So these are significantly ahead of that but it'll be based on the reservations, we deliver into those rooms. So.
Speaker Change: The blended rate.
Speaker Change: What will be somewhere in that.
Speaker Change: Probably a little south of the royalty rate, but we don't have an exact number to give you at this time.
Speaker Change: Sure.
Speaker Change: Guidance for 25.
Speaker Change: Our full year effective royalty rate is that.
Speaker Change: Kind of a same store in other words does that does that include the impact of the.
Speaker Change: We're actually you would be counting the royalty fee being higher than 5%.
Speaker Change: Contractually, even if the effective rate that you get is lower is that included in your guidance kind of stuff.
Speaker Change: Nominal north of 5% not the effective rate.
Speaker Change: The effective rate includes all of our franchise agreement. So it isn't so our growth is not being muted by the Westgate.
Speaker Change: Partnership that we have and we certainly are seeing growth across all of our franchise agreements as we've talked about our pipeline is a much more revenue intense today, giving a higher revpar higher room, count and higher effective royalty rates as we continue to improve our value proposition.
Speaker Change: Over the last decade.
Speaker Change: And then just one final question.
Speaker Change: And if I can is it is there any pushback from owners in your system that are kind of paying you the soul.
Speaker Change: Yes, all of the lines of franchisees that there may be sort of competing within your.
Speaker Change: Program with owners that aren't paying you.
Speaker Change: <unk> has as many levels of fee revenues.
Robert: I'm not sure I understand your question, Robert but everything the way we look at the effective royalty rate I mean.
Robert: That is commensurate with the value that we're continuing to drive to our franchisees in those fees or something.
Robert: Talk to them about consistently throughout the year as we meet with them and our owners counsels.
Robert: When you look at a year like we just had where we're delivering a lot more direct business. The investments we've made and the website the business travel that group travel.
Robert: All of that is.
Robert: Improving the business delivery capabilities of the company.
Robert: And that is then reflected in their willingness to stay with us when you have a 90, 798% voluntary retention rates when they renew their contracts. They are seeing the value and as a result of that the ability for us to.
Robert: Achieve a higher effective royalty rates with them as is consistent with that continued.
Robert: Improvement in our value proposition. So we don't have I'm not sure I understand your question about competition between those not paying the royalties versus those that are everybody's sort of paying them, it's really a reflection of.
Robert: Different royalty rates really dependent on what segment you're in.
Robert: You may have entered the system within a year and you're ramping up to a royalty rates. So all of those are just things that are more consistent with how the industry operates but we don't get.
Robert: Pushback from franchisees on that front and the other thing I'll add to that is just I think we're very deliberate in thinking about these partnerships that we have and that they are additive to our portfolio. So typically they're either type of stay occasion or in markets, where we don't have a lot of product and where guests are looking for a different experience. So we feel like when we bring these partnerships on they are added into our ports.
Robert: Polio, bringing new guests.
Robert: The choice ecosystem versus taking guests from those who might have been staying at say a comfort inn or a.
Robert: Our quality and our one of our other properties. So if you look at kind of what we've done on those partnerships with Blue Green Westgate Penn gaming, there really around stay occasions, where we don't have.
Robert: The ability to deliver product for our guests to stay in and we know theyre looking for those type of stay occasions.
Speaker Change: Okay, great. Thank you.
Speaker Change: Your next question is from the line of Stephen Grambling from Morgan Stanley. Please go ahead.
Stephen Grambling: Hey, Thanks, I was hoping to dig into the recyclable capital and key money a little bit do you anticipate that the recyclable cash will be a source.
Stephen Grambling: Or a use in 2025 and can you just remind us perhaps of the.
Stephen Grambling: The book value of the recyclable capital deployed so far and perhaps with a total EBITDA associated with those investments would look like in 2025.
Stephen Grambling: Yes.
Stephen Grambling: As we've talked out in the past, we use recyclable capital really to launched brands, we primarily use that in our cambria and ever home brands.
Stephen Grambling: We've been very very excited for what it's done for the Cambria brand. It's over 75 units now, reaching reaching critical scale and really becoming a great contributor to our overall portfolio.
Stephen Grambling: And the Halo effect that that gives the rest of our portfolio.
Stephen Grambling: I would say we're at towards the tail end of our investments in the Cambria brand and we should be kind of reaching a peak investment on that and starting to see recycling starting in 'twenty six 'twenty seven for that brand.
Stephen Grambling: With ever home mom, we've had some similar successes with getting that brand off the ground.
Stephen Grambling: We already have seven open another 20, plus under construction. So those capital programs have really helped.
Stephen Grambling: Jumpstart brand brand launches that have been that we think are going to be really big.
Speaker Change: Contributors to our growth in the future.
Speaker Change: In 2024, our net outlays around those programs were about $150 million.
Speaker Change: We would expect that to be slightly lower than that this year, probably more in that $115 million to $120 million in 2025 within seeing more of a recycling opportunities starting in 2026 and beyond.
Speaker Change: On the balance sheet today around those programs, we've got about $600 million outstanding So.
Speaker Change: That's the pool of investments that we should see.
Peaking here in the next year or two and then starting to get into a a net recycler position.
Speaker Change: And in terms of.
Speaker Change: The owned hotels and the growth we will have a couple of new hotels opening in 2025 more towards the later half of the year, but we would.
Speaker Change: The growth of kind of same store sales to be in that mid single digits on the EBITDA contribution from those.
Speaker Change: And that that EBITDA contribution from the <unk>.
Speaker Change: Owned I mean that.
Speaker Change: I imagine some of the recyclable capital is maybe in JV or other so is that contribution on the P&L. The total or is there other kind of EBITDA that's off the P&L within some sort of.
Speaker Change: J D line or something like that that we should think about when you try to when you go to sell that.
Speaker Change: $600 million on the balance sheet.
Speaker Change: Yes, when you look at the components of it it's owned hotels, it's joint ventures in lending.
Speaker Change: Both the joint venture and lending are not included in our EBITDA. So they are below the line so they would not.
Speaker Change: Key contributors to EBITDA.
Speaker Change: Just the owned assets.
Speaker Change: Got it and can you give us a sense for what that the EBITDA from those assets would be just as we think about kind of the multiple you get filled.
Speaker Change: So that down.
Speaker Change: Yes, if you take a look at the face of our income statement you can see we actually do break out the owned hotels. So it was about $113 million of revenue and during the year, which generated an EBITDA of roughly around $30 million.
Got it I'll follow up with the other ones. Thank you.
Patrick Scholes: Your next question comes from the line of Patrick Scholes from <unk> Securities. Please go ahead.
Patrick Scholes: Great. Thank you operator, good morning, everyone.
I have a question that many.
Patrick Scholes: So a follow up question on that first question is.
Patrick Scholes: For the past year you had.
Patrick Scholes: <unk> talked about our telegraphed.
Speaker Change: High single digit EBITDA growth is sort of the way to think about the long term trajectory as I look at the guide it's closer to mid single digits.
Patrick Scholes: Should we think about mid single digits going forward as that long term growth rate.
Speaker Change: And what would you attribute.
Patrick Scholes: The mid single digit guide this year.
Patrick Scholes: Versus sort of what you had telegraphed.
In the high single digit previously thank you.
Patrick Scholes: Yeah, Patrick I mean, I think it's really a function of well really two things one.
Patrick Scholes: Interest rates are.
Patrick Scholes: With interest rates as high as they are new construction across the industry as.
Patrick Scholes: Is muted.
Patrick Scholes: If you just look at it.
Patrick Scholes:
Patrick Scholes: Total supply growth for the whole industry in the U S has been less than 1% is expected to be less than 1% again.
This year end.
Patrick Scholes: A lot of what.
Patrick Scholes: That additional growth that would get you back into the high single digits could be helped by is the new construction environment picking back up we have a significant amount of.
Patrick Scholes: New construction projects that are ready to go with owners I think just sort of waiting for interest rates to come down slightly more.
Patrick Scholes: For that to really be an added an added element to it.
Patrick Scholes: I think on the Revpar side of the House I mean, if you look at our guide.
Patrick Scholes: We just guide to sort of domestic revpar, but the international Revpar is likely going to be higher its just a its a more difficult.
Patrick Scholes: Area for us to provide a forecast around but when we look at.
Patrick Scholes: The comments, we made in our in our in our remarks, and we look at how the year is setting itself up we're pretty confident that what we're seeing in the early days here.
Patrick Scholes: It's going to probably.
Patrick Scholes: Push us towards the higher end, but it's early days and we were sort of six weeks into the year here.
Patrick Scholes: But if you look at the macro backdrop GDP three.
Patrick Scholes: And 3% in the fourth quarter consumer spending up over 4% Labor force participation rate remains strong and as I mentioned supply growth being muted that's really setting itself up for a nice healthy environment domestically a favorable backdrop for the industry and then if you look at the areas that we are.
Patrick Scholes: Making our investments and they're showing up in business and group travel that's adding to the top end of that.
Patrick Scholes: Talked about the impressive results, we're seeing in the oil and gas markets. The tech sector. The energy sector really feeding into those corporate accounts that are participating in the hyper scaler growth around AI, there's a ton of data centers and EV battery plants getting built around the country and our product is in it.
Patrick Scholes: In the right places for those so those are all possible upsides for us, but it's just at this 0.6 weeks into the year an area that we're kind of waiting to see if the traction sort of continues to pick up but we're just as I said, we're seeing some positive signs on that so if you get interest rates back down where new construction ads and the.
Patrick Scholes: The revpar environment improves more you could see more of the top end of our range that we provided this morning.
Patrick Scholes: Okay. Thank.
Patrick Scholes: Thank you for the clarity on that and then a.
Speaker Change: Second question here have you heard anything from your franchisees your owners.
Have you seen any impact from.
Speaker Change: The immigration deportations and ice and everything that's going on around that any impact on their ability to maintain employees are hiring or labor situation et cetera. Thank you.
Speaker Change: Yes, we have not and we've had meetings already this year with our franchisees that.
Speaker Change: That has not been a topic that's been brought up.
Speaker Change: Okay. Thank you I'm all set.
Speaker Change: Your next question comes from the line of Brian mature from Barclays. Please go ahead.
Brian Mature: Hi, good morning, everybody. Thanks for taking my question.
Speaker Change: I'm curious.
David Katz: David first question about the.
David Katz: The marketing fund you know when we look into the bottom of your release Youre, adding back $50 million net reimbursable deficit right.
David Katz: In the EBITDA, the adjusted EBITDA walk and I'm, just curious I mean, I remember Scott you, telling us that you were going to move the services fund EBITDA from the services fund to the P&L.
David Katz: This year and I'm not sure if that happened and this is a marketing fund adjustment because youre going to overspend on the marketing program or if you didn't move it elsewhere in the accounting and Youre keeping it down here and Youre, essentially saying 60 million go into $50 million. This year on the services side can you kind of clarify that for us.
Speaker Change: Sure Brett.
Speaker Change: We talked about we will recast our financial statements to make this clear starting in the first quarter. What we did do is provide a reconciliation in our investor presentation that really breaks out the amounts that are in our corporate EBITDA.
Speaker Change: When you see the.
Speaker Change: Page seven of the Investor deck, Youll see a column called non reimbursable that that's the EBITDA generating portion of that line item.
Speaker Change: I think what youre, referring to is of the port a portion that is reimbursable. So that's our historic marketing and reservation system activities, which we operate over the long term at a breakeven basis, which youll see for full year 2024, we operated that around at $18 million deficit.
Speaker Change: You recall I think I've mentioned on previous calls we came into the year of 2024 with about a little over $60 million a lifetime surplus where we had under spent collections and we had a multi year plan to spend that down back to the breakeven with some investments that we're doing to continue to improve the value proposition to our franchisees our 2024.
Speaker Change: Expectations was the spend deficit of around $35 million due to timing that was only $18 million and we are now pushing some of that into 2025. So the $50 million will be when you see the statements going forward that historical line item that we have that's just going to be.
Speaker Change: The system fund activities for franchised managed properties that over time will breakeven so real.
Speaker Change: We think about an $18 million deficit that goes to 50 million that we add back the.
Speaker Change: Non reimbursable revenues will show up probably most likely in that platform procurement and ancillary revenue line item going forward.
Speaker Change: Okay. Okay, I think I get that that's helpful. And then just a bigger picture longer term question and when we look back to 2019.
Speaker Change: Your businesses has grown adjusted EBITDA substantially I have it up.
Speaker Change: 65%.
Speaker Change: From 19 to 24, but you didn't get the same lift in the operating cash flow line something like a total of 20%, but I know that that includes key money and I know key money can move around from Ocs two below the ocs lung in the investment section. So can you kind of try and cleanse it for us and give US a bridge of why like the <unk>.
Speaker Change: <unk> hasn't grown and how you look at it unlike our free cash flow adjusted free cash flow basis, and what that would look like versus EBITDA index to 19.
Speaker Change: Yeah.
Speaker Change: Yes, so in terms of key money and we have seen an increase in key money, but when you look at the 23 to 24 increase it really was commensurate with opening so key money increase from about $98 million to $112 million, but our openings.
Speaker Change: We're up over 21%.
Speaker Change: And so you can see that.
Speaker Change: Key money is not growing as quickly as the openings and when you look at how we look at it on a free cash flow basis.
Speaker Change: We're about 65% free cash flow conversion ratio and that's been fairly steady 23 to 24, and even 2022 and.
Speaker Change: And we expect that free cash flow conversion to remain around that mid 60 65 ish in 2025.
Speaker Change: Okay, great I'm, assuming that was consistent.
Speaker Change: Back to 2019 as well on your on your.
Speaker Change: Algorithm.
Speaker Change: Yes, I would say there has been an increase in the use of key money across the industry. Since 2019, so that has been a little bit of a.
Speaker Change: Use of cash that wasn't as prevalent back in 2019, I think that's really a reflection of a couple of different things. One is we've been relaunching brands, which typically use a little bit more key money, particularly our cambria and ever home brands to get those launched to scale and then we are in a little bit more competitive environment in a tougher interest rate and construction cost.
Speaker Change: <unk>.
Speaker Change: I think of those as kind of temporary you tend to see in times when construction cost rise <unk> interest rates are up our it puts a little bit of pressure on developer returns.
Speaker Change: And at Times Hotel companies will use key money to bridge that gap to make sure that the development is moving through the pipeline. When we look at that it's a pretty accretive use of capital for us to get a long term franchise agreement, but that.
Speaker Change: It will ebb and flow in terms of the supply environment.
Speaker Change: Great. Thanks, everybody.
Speaker Change: Your next question comes from the line of Meredith Jensen from HSBC. Please go ahead.
Speaker Change: Yeah. Thank you two quick questions. One I just wanted to follow up quickly on the on Steven's question on the owned hotels and I think in the past you mentioned you had something like 12 and I heard you were just going to open some more.
Speaker Change: Wondering if you might.
Speaker Change: Let us know, which.
Speaker Change: Foreign match, the new openings will be will those be all in the ever home.
Speaker Change: Our Cambria.
Speaker Change: And.
Speaker Change: One adjacent question, if you might speak to sort of the management strategy managed hotels.
Speaker Change: Hotels versus contracting Alec ICU.
Speaker Change: I have a delay until you potentially recycle some of these hotels I'm just kind of curious I know you contract out and when you decide potentially too.
Speaker Change: To manage this yourself thank you.
Speaker Change: Yeah, Meredith, let me start with the.
Speaker Change: Management and Scott can follow up on the the owned hotel openings piece of it.
Speaker Change: We.
Speaker Change: We actually entered the management company business as a result of the Radisson acquisition. So.
Speaker Change: Secondly, 14 management contracts, where part of that.
Speaker Change: And we actually have benefited significantly from.
Speaker Change: Actually being on both the franchise and managed side and a very small way.
Speaker Change: But management.
Speaker Change: A line of business for US is not an area that we are looking to grow.
Speaker Change: As we have taken some of the.
Speaker Change: <unk> owned assets, we have not been managing our self owned assets to any significant degree I think we have one one hotel that we took on similar because it was in the same market, where we were already managing for a for a third party. So the owned and the managed are usually two separate groupings of hotels.
Speaker Change: Our strategy over the long run has always been to use third party management companies.
Speaker Change: Particularly for our upscale brands and for extended stay.
Speaker Change: The importance of having the right management company is critical to the performance of the hotel and also to be using the tools that choice hotels provides the franchisees. So that's not an area that we would expect to grow organically.
Speaker Change: As we over time recycle the owned hotels out it's likely going to stay the same because most of the hotels that we're managing our for a single third party operator.
Speaker Change: In terms of the owned portfolio today, we have 12 owned assets we have three.
Speaker Change: Three radisson that we acquire that we got during the acquisition of Radisson, we own eight cameras that are open and whenever home for the year and as I mentioned earlier most of these will open kind of towards the latter half of the year, we would expect to open.
Speaker Change: Two two additional ever homes and two additional Cambria is this year.
Speaker Change: Great. Thank you one additional very quick one.
Speaker Change: I know you had mentioned in the past Scott about cyclicality and seasonality in that business, you know sort of having that.
Speaker Change: The first and fourth quarter different from other quarters.
Speaker Change: Since you've spoken about the business growing corporate.
Speaker Change: And groups that are expanding and taking a bigger part.
Speaker Change: Overall.
Speaker Change: Room nights, where do you see any change in that or is there anything we should watch out for and.
So how we look at the quarter sequentially. Thank you.
Speaker Change: It's a great question Meredith I would say over time as we do get more business travel you will see that even out I mean typically the.
Speaker Change: The second and third quarters have been our largest given R. R.
Speaker Change: Predominance of leisure travel.
Speaker Change: So Q1, and Q4 have a little bit more business travel, but even I would say probably Q4 has been a little bit more of a heavier business travel quarter than Q1, Q1 tends to be rather slow. So I would not expect any different modeling assumptions for 2025 over time as that mix continues to move.
Speaker Change: You could see a shift of a little bit more business in Q1, and Q4 than historical and as that happens, we'll certainly update update you. If there's any major changes in the modeling assumptions.
Great. Thanks, a lot appreciate it.
Speaker Change: Your last question comes from the line of Alex <unk> from Redburn Atlantic. Please go ahead.
Speaker Change: Alright, Thank you very much.
Speaker Change: Just back to the growth question, obviously, the Westgate rooms, Tim.
Speaker Change: Very late in the year.
Speaker Change: Think of them in the notes this year, so if I if I add that.
Speaker Change: The Revpar guide.
Speaker Change: Your comments that you've given on the royalty rate I got a meaningfully higher number than the EBITDA growth that <unk> guided in the middle So I wonder if you could give us.
Speaker Change: Reconcile that with one of the answers that you gave.
Speaker Change: Yeah around.
Speaker Change: Underlying royalty rate progression because it doesn't really seem that there's any financial contribution would then that's up so let's get on that side.
Speaker Change: And then could you just talk a little bit about your retention rates.
Speaker Change: I'd like to turn before that can then.
Speaker Change: Relative to <unk>.
Speaker Change: And what you think that might be going forward. Thank you.
Speaker Change: Yes, I'll start with the retention rate.
Speaker Change: It's effectively been consistent.
Speaker Change: We look at the overall churn of the business has been usually around 3% to 4%.
Speaker Change: Our voluntary retention rate.
Speaker Change: Which is those hotels that we want the owner to stay.
Speaker Change: It's consistently been around sort of 97% to 98%. So that's effectively an owner it comes up on a window in their contract to leave.
Speaker Change: They are generally if that 90, 798% rate sticking with us.
But we have also been continuing to move underperforming product or owners that are not willing to stay with the brand standards out of the brand or out of the system altogether. So.
Speaker Change: We haven't.
Speaker Change: Sort of had to do these sort of large cleanups or where those types of things are brands, because we've been fairly diligent in moving underperforming product our owners, who are no longer willing to make investments out of the system.
Speaker Change: But I think as you look forward.
Speaker Change: When you look at what's in our pipeline growth in the areas, where our retention is even higher our retention is even higher than those upscale and extended stay segments, which are a significant component of our core business today, but also what's coming in the pipeline. So I would expect that that voluntary retention rate actually could actually increase even further.
Speaker Change: As we continue to deliver for those those two particular segments.
Speaker Change: In terms of the building blocks for our 2025 guidance the way I would think about it is if you look at our domestic we have levers in the in the guidance. We gave gave her revpar that unit net room growth and effective royalty rate that'll that'll add about roughly two 5%.
Speaker Change: Two our EBITDA or.
Speaker Change: Our owned and international business should add another 1% or platform and ancillary revenues continued growth, including the co brand credit card should add about 2% and then our guiding to SG&A in the low single digits. So that will that will reduce that growth by about 1%. So that gets you to roughly the midpoint of our guidance as Pat mentioned earlier, if were better on the rep.
Speaker Change: Par and then net unit growth as we're optimistic about that would be where it would push us closer to the top end of our range.
Speaker Change: Thank you.
Speaker Change: On the retention rate so in the last couple of years has it been within that guidance.
Speaker Change: 7% retention rate.
Speaker Change: Overall basis.
Speaker Change: Yes.
Speaker Change: Thank you very much Dave.
Speaker Change: There are no further questions at this time I'd like to turn the call over to Patrick patients for closing remarks, Sir. Please go ahead.
Speaker Change: Thank you operator, thanks again, everyone for your time. This morning, we will talk to you again in May when we will announce our first quarter 2025 results have a great day.
Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.
Speaker Change: Goodbye.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.