Q1 2025 Hilton Worldwide Holdings Inc Earnings Call
Good morning, and welcome to the Hilton first quarter 2025 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's prepared remarks, there will be a question and answer session.
To ask a question you May press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note that this event is being recorded.
I would now like to turn the conference over to Jill Chapman Senior Vice President head of development operations and Investor Relations you may begin.
Speaker Change: And can I welcome to Hilton's first quarter 2025 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 and forward looking statements made today speak only to our expectations.
As of today, we undertake no obligation to update or revise these statements.
Speaker Change: 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.
Speaker Change: 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 on today's call in our earnings press release and on our website at IR Dot Hilton Dot Com. This morning Christmas data, our President and Chief Executive Officer will provide an overview of the.
Christmas data: Current operating environment, and the company's outlook, Kevin Jacobs, our Chief Financial Officer, and President of Global Development will then review our first quarter results and discuss our expectations for the year. Following their remarks, we'll be happy to take your questions and with that I'm pleased to turn the call over to crush. Thank you Jill good morning, everyone and thanks for joining us today.
Speaker Change: We're pleased with the results we delivered in the first quarter with adjusted EBITDA and adjusted EPS, both exceeding our expectations, even with somewhat weaker macroeconomic conditions that drove system wide revpar to the low end of our guidance range. We also continued to deliver on our strong <unk>.
Speaker Change: Relevant story during the quarter, expanding our brands into new parts of the world and further strengthening our pipeline, which now includes more than a half a million rooms, our performance demonstrates the resiliency of our business model and ability to navigate short term choppiness, while driving long term value for our owners.
Speaker Change: Our guests team members and shareholders turning to results for the quarter, we reported system wide revpar growth of two 5% year over year driven by strong momentum from the end of the last year that carried into 2025 and supported solid performance.
Speaker Change: In both January and February.
Speaker Change: However, broader macro uncertainty intensified in March, which pressured demand, particularly across leisure Revpar growth was led by group, which increased more than 6% year over year supported by growth in urban markets and continued strength in company meetings.
Speaker Change: Business transient Revpar increased 2% led by solid performance from small and medium sized businesses, a resilient customer that continues to make up roughly 85% of our business transient mix.
Speaker Change: Leisure transient revpar increased 1% with a robust performance in January followed by softening demand patterns as the quarter progressed mirroring the uncertainty in the broader macro environment.
Speaker Change: Weaker trends have continued into the second quarter with a short term bookings roughly flat year over year. We believe travelers are largely in a wait and see mode. As the rapidly changing macro environment continues to unfold as a result, and with tougher year over year comparisons from.
Speaker Change: The Easter holiday shift, we expect second quarter revpar to be approximately flat versus the prior year quarter for the full year our system wide Revpar ex station expectations are flat to up 2% with the midpoint assuming current trends continue the upside reflects.
Speaker Change: The modest improvement in the second half of the year and the downside suggest modestly deteriorating conditions. We continue to expect group group to outperform transient revpar growth.
Speaker Change: Turning to development.
Speaker Change: Following a record breaking year of growth in 2024, we had a strong start to 2025 during the quarter. We opened 186 hotels totaling more than 20000 rooms, representing a 20% year over year increased and achieved net unit growth of seven 2% conversions accounted for them.
Speaker Change: Proximately, 40% of openings in the quarter, driven largely by double tree in spark. Additionally openings in international markets remained strong representing half of all new additions to our portfolio, including several brand debuts in new markets Hilton Garden Inn debuted.
Speaker Change: In Greece, Hampton and canopy entered Africa.
Speaker Change: And spark expanded its presence across Europe with openings in Germany and Poland for.
Speaker Change: For the EMEA region overall, we're excited to Mark the opening of our 1000th Hotel. This spring.
Speaker Change: Our luxury and lifestyle categories continued to show significant growth accounting for 30% of all hotel openings in the quarter with these portfolios now approaching 1000 hotels around the World. The addition of S. L age properties and continued growth of our conversion friendly curio tapestry brand support.
Speaker Change: Order growth across both categories during the quarter momentum continued into April with several key openings, including the Waldorf Astoria, Osaka, a 252 room property that offers panorama panoramic skyline views and successfully blends the iconic Walt.
Speaker Change: The story of legacy with the dynamic energy of Osaka. Additionally, just last week, we opened the new Waldorf Astoria Costa Rica. The hotel is stunning views of Kosta Regas, Northern Pacific Coast, 10000 square feet of versatile meeting space and six regionally inspired dining.
Speaker Change: Experiences our latest Walter for story, a little pair world class luxury with the nature and vibrant culture of Costa Rica, while further expanding hilton's growing luxury portfolio, which is now one of the largest in the industry.
Speaker Change: In addition to strong openings, we continue to grow our development pipeline, which ended the quarter with more than 503000 rooms, representing an increase of 7% year over year and continued sequential quarterly growth, we approved more than 32000 rooms in the quarter up 10.
Speaker Change: 10% year over year with notable announcements, including new Siggi Cigna hotels in Jaipur, India in Cairo, Egypt, marking the debut of this brand in the Asia Pacific and Africa regions.
Speaker Change: Additionally, we signed our first Waldorf Astoria in Texas and in April we announced the signing of water for story at Turks, and Caicos, which will redefine Caribbean luxury when it opens in 2028. We also approved the first tapestry and curio hotels in Athens, Greece sign canopies for ski.
Speaker Change: Destination in Deer Valley, Utah, and announced plans for Tampa to enter the U K, marking the brand's first hotel outside the U S.
Speaker Change: Capture even more fast growing global middle class demand, we continued to strengthen our focused service pipeline and strategic growth markets. During the quarter, We approved Hilton Garden Inn properties in Vietnam, Malaysia, The Philippines, and Indonesia, and announced that we will triple our focused service.
Speaker Change: Print.
Speaker Change: Southeast Asia in the coming years fueled by the growing demand for mid market accommodations in India, We signed a strategic licensing agreement with Niall hospitality to open 75 Hampton hotels in the market along with our agreement to open 150 spark hotels in India. This reaffirms our.
Speaker Change: Commitment to expanding in this key emerging economy construction.
Speaker Change: Construction starts remained strong in the first quarter up 13% year over year, excluding partnerships with growth across all regions and particular strength in Asia Pacific Our pipeline includes nearly a quarter of million rooms under construction, which is more than any other hotel company.
Speaker Change: <unk> more than 20% of industry share of rooms under construction and nearly four times our existing share of supply looking ahead, we remain confident in our ability to deliver net unit growth of 6% to 7% in 2025 with nearly half of our pipeline.
Speaker Change: Construction and continued growth in conversion opportunities.
Speaker Change: Making all of this possible as our family of Hilton team members, who continue to spread the light and warmth of hospitality in remarkable ways. During the quarter. We were named the number one best company to work for in the United States by Great place to work in fortune, marking our second consecutive year and the number one spot in <unk>.
Speaker Change: Our 10th appearance on this prestigious list.
Speaker Change: Overall, we're pleased with our performance in the first quarter and remain optimistic about our opportunities over the long term supported by our asset light fee based business model and favorable Mega trends in travel. We believe we can continue to drive long term value for our shareholders. Despite current uncertainty in the global macro.
Kevin Jacobs: Economic environment, now I'm going to turn the call over to Kevin for a few more details on our results in the quarter and our expectations for the rest of the year.
Kevin Jacobs: Thanks, Chris and good morning, everyone. During the quarter system wide Revpar grew two 5% versus the prior year on a comparable and currency neutral basis, driven largely by rate growth adjusted EBITDA was $795 million in the first quarter up 6% year over year and exceeding the high end of our guidance range. Our performance was largely driven by better than expected.
Kevin Jacobs: Growth in non Revpar, driven fees and timing items Manley.
Kevin Jacobs: Management and franchise fees grew 5% year over year.
Kevin Jacobs: For the quarter diluted earnings per share adjusted for special items was $1 72.
Kevin Jacobs: Turning to our regional performance first quarter comparable U S. Revpar increased two 1% driven by strong group performance for full year 2025, we expect U S revpar growth to be around the midpoint of our revised system wide Revpar range.
Kevin Jacobs: In the Americas outside the U S first quarter, Revpar increased 7% year over year, driven by key events in Mexico, and Brazil, including Carnival.
Kevin Jacobs: For full year 2025, we expect revpar growth to be in the mid single digits in.
Kevin Jacobs: In Europe, Revpar grew two 6% year over year with strong rate and occupancy growth in continental Europe driving results for the region for full year 2025, we expect low single digit revpar growth.
Kevin Jacobs: In the Middle East and Africa region, Revpar increased eight 5% year over year, driven by strong performance in Saudi Arabia during Ramadan and key regional events, including the Muslim worldly conference for full year 2025, we expect revpar growth in the mid single digit range.
Kevin Jacobs: In the Asia Pacific Region first quarter, Revpar was flat year over year Revpar in APAC ex China increased three 5% led by strong performance in Japan, India and Korea, China.
Kevin Jacobs: China Revpar declined three 1% in the quarter as performance was pressured by strong outbound travel during Chinese new year and tough year over year comparisons.
Kevin Jacobs: For full year 2025, we expect Revpar growth in Asia Pacific to be in the low single digit range, assuming flat revpar in China.
Kevin Jacobs: Turning to development as Chris mentioned for the quarter. We grew net unit seven 2% and have more than 503000 rooms in our pipeline up 7% year over year with more than half located outside the U S and nearly half under construction.
Kevin Jacobs: Looking to the year ahead, we remain optimistic in our development story in both the U S and international markets with continued strength in conversions as well as high growth International markets.
Kevin Jacobs: Moving to guidance for the second quarter, we expect system wide revpar growth to be roughly flat year over year, we expect adjusted EBITDA of between $940 million and $960 million and diluted EPS adjusted for special items to be between $1 97.
Kevin Jacobs: And $2 and two sets.
Kevin Jacobs: For full year 2025, we expect revpar growth of zero to 2%, we forecast adjusted EBITDA of between $3 65 billion and $3 $71 billion and diluted EPS adjusted for special items of between $7 76.
Kevin Jacobs: And $7.94.
Kevin Jacobs: Please note that our guidance ranges do not incorporate future share repurchases.
Kevin Jacobs: Moving on to capital return, we paid a cash dividend of <unk> 15 per share during the first quarter for a total of $37 million in dividends for the year in the second quarter, Our board authorized a quarterly cash dividend of <unk> 15 per share for the full year, we expect to return approximately $3 $3 billion to shareholders in the form of buybacks and dividends.
Kevin Jacobs: Further details on our first 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 Nick.
Kevin Jacobs: Nick can we have our first question. Please.
Speaker Change: Globally and again to ask a question. Please press Star then one if youre using a speakerphone. Please pick up your handset to begin pressing the keys to withdraw your question. Please press Star then two.
Speaker Change: And your first question today will come from Carlo Santarelli with Deutsche Bank. Please go ahead.
Speaker Change: Hey, Chris Kevin. Thank you for taking my question Morningstar. Good morning. So you guys have obviously not to date anyone but you've been through some cycles in the past of your careers in the business and I guess my question is based on on what Youre seeing whether its at the hotel level within the business developers you're speaking to.
Speaker Change: Or kind of in the news in D. C. What is your perception of the setup around that much geared and often talked about recessionary environment.
Speaker Change: What are some of the things you guys are seeing right now specifically outside of kind of near term demand and stuff that gives you. Some pause it reminds me of a prior times.
Speaker Change: Yeah, I think I'll Carlos Thanks for the question and Thats, probably the question on everybody's mind. My guess is we're going to get that question 30 iterations of that question today, but hopefully I'll I'll do a decent job of answering it.
Speaker Change: I have lived through a lot of cycles I've been doing this for a long time I think approaching 40 years. So we've lived through lots of good times lots of not so good times and.
Speaker Change: Seen lots of Black Swan events, you know norm, you know normal recessionary downturns and the like and they're all they're all sort of unique.
Speaker Change: I think you know what's going on today, if you lift away above it and again I'm not trying to be a pollyanna is you asked me a question I'm, giving you my personal opinion.
Speaker Change: Which may or may not be right in the end you get good news is you'll get to judge me as every quarter plays out, but I think right now there's just so much going on and I live in D. C. It live inside the beltway I'm talking to a lot of people.
Speaker Change: On the Hill and the administration.
Speaker Change: You know as best I can have a sense of what's going on.
Speaker Change: And I think it's fair to say there is a lot going on and as a result, you see it in the market reaction.
Speaker Change: Across both the equity markets, the bond markets and everything else consumer.
Speaker Change: Consumer sentiment, there's just a fair amount of uncertainty.
Speaker Change: I would say based on lots of discussions and and years of experience doing this that I think at the moment.
Speaker Change: The risk in the market places sort of weighted too heavily to the downside.
Speaker Change: You know if I look at what's going on in our business certainly we've seen.
Speaker Change: A modest step back in demand patterns, but at the moment those seem to be relatively stable, which is why we gave the guidance and sort of suggested what we did at the midpoint, which is sort of what the midpoint is an expectation of things that were you know the patterns, we're seeing right now continue.
Speaker Change: Thank you know there's a lot of seismic change that this administration here in the United States is trying to accomplish you can't have moved that much change so to speak without rattling a lot of cages.
Speaker Change: That doesn't mean it necessarily you know that doesn't end up in a good place my own view is in the process of doing it though again I think I think the market is as you sort of asymmetrically risks you are taking the risk of downside I think it's a much more equally weighted risk I'm an.
Speaker Change: I missed by nature. So all fully declare I would actually say I think you know the risk over.
Speaker Change: Intermediate to longer term is probably should be more weighted on the upside, but you know, but let's just say I think you know to be conservative. It's a much more equally weighted risk than what everybody is thinking and talking about today why do I think that again I could be wrong, but I think if you really lift up and look at what's going on you have.
Speaker Change: You know real progress being made its choppy and it's there's a lot of noise, but you know the legislative processes is grinding through and I think there is a.
Speaker Change: Very good probability that sometime this summer you're going to see one big Bill get done that is going to deal with a lot of the regulatory reform energy you know releasing you know sort of the you know the shackles from the energy industry.
Speaker Change: And and for making permanent you know that the 2017 tax cuts and also incrementally adding you know for certain folks you know no tax on tips, social security you know for the elderly.
Speaker Change: And a whole bunch of other things that are gonna be positive I think there's a reasonable probability all that gets done obviously, what's rattled the markets and I'm not an economist so I can pontificate and you guys on the call can judge for yourself you know what.
Speaker Change: You know there's lots of ways of doing things is the way they've chosen to do it I think the desire is to ultimately end up with a fair deal with our with our biggest trading partners around the world.
Speaker Change: My own belief.
Speaker Change: Is that you know as the next you know as you're getting the legislative process done on the on the on the tax and regulatory and energy Youre going to see a bunch of these deals with some of our biggest trading partners come to fruition.
Speaker Change: Which is going to create you know maybe not perfect stability, but a lot more stability a lot more certainty of sort of what the deals look like what the future is and I think that it's not it's not crazy to think that all of that starts to come together. This summer and as a result, you know when you get to the second half of the year you could.
Speaker Change: Be you know in a in a in a very different place. If you look underneath it all in terms of like what's really going on in employment and wage growth and corporate you know Americas balance sheet and profit all of the you know the underlying economy is still really strong what's going on right. Now is this sort of asymmetrical.
Speaker Change: Risk to the downside because of a high degree of uncertainty my unbelief as you will see some of that if not a lot of that uncertainty wane over the next couple of quarters and that will allow the underlying strength of the economy to shine through again and so that's why you know I know a lot of companies have.
Speaker Change: If not you know pull guidance.
Speaker Change: Guidance and I'm not being critical when we talked about it my view is very simple we know more about our business than anybody else I hope, we do and think we do and I feel like we have an obligation even in uncertain times.
Speaker Change: To give you a sense of the various outcomes that we think based on assumptions, which is why we gave you a range of zero to two and gave you the basis of our assumptions.
Speaker Change: I believe you know that we've tried to be a scientific as we can I feel you know.
Speaker Change: So very good about like how we thought that through and the good news is we report every quarter and we will have next time. We report we'll have you know.
Speaker Change: A quarter behind US we will have site a lot much better sightlines into you know how the second half of the year is developing.
Speaker Change: And we'll update you, but that's a long winded way of saying having been around doing this a long time, you know anytime you have like seismic change I don't care, what it is like whether it's black Swan events of like 911, or the great recession or Covid I mean, obviously this is nothing like any of those.
Speaker Change: There's a reaction.
Speaker Change: My own experience says Theres, an overreaction and so right now theres a lot of uncertainty I think there's a bit of a overreaction to it.
Speaker Change: And so I'm again, I would say sort of reasonably conservative, but I think that it should be much more equally weighted than than what we're experiencing today.
Speaker Change: Thanks, Chris I appreciate it.
Moderator: Your next question today will come from Shaun Kelley with Bank of America. Please go ahead.
Shaun Kelley: Hi, good morning, everyone.
Speaker Change: Chris or Kevin I'm wondering if you could just talk about the development environment, a little bit we get a lot of questions about sort of how the uncertainty today is going to filter through the development landscape, particularly around trade and tariffs. So could you just sort of elaborate on sort of the comments that you saw or the trajectory that you saw during the quarter. How specifically is that factoring into the way developers are.
Speaker Change: Proceeding with current projects thinking about possibly delaying things like signings moving into in construction just what's the behavior out there on the development side and what is the risk if any just sort of the way you see it.
Speaker Change: <unk> up for the year.
Speaker Change: Yeah, I mean, we don't give guidance lately as I just tried to suggest in the same you know whether it's on the same store or unit growth, we spend a shot at it.
Speaker Change: I'm sure you know and others on the call no. We don't we don't just make it up.
Speaker Change: Super granular analysis, and when we give guidance because we feel really good about it I mean, the fact is for this year, while we still have a lot of work to do as always to our development teams. Thank you for that work and we still are in the year for the year conversions you can see in the first quarter, we have huge amount of momentum on conversions the things that are under new.
Speaker Change: Redevelopment and new construction those are and those are in process, if they're going to deliver this year there they're not.
Speaker Change: Largely getting close to being done you know so you know we feel very good about our ability to deliver.
Speaker Change: Within those ranges by the way you know starting to look at next year again, we have a pipeline of over a half a million rooms in the half of that under construction.
Speaker Change: No.
Speaker Change: A lot of momentum on conversions and we feel good about being able to do it again next year I know you didn't ask that in terms of what's going on real time sort of relates to my first answer a little bit I mean, not much I mean, if you look at the quarter.
Speaker Change: Okay.
Speaker Change: The data suggests everything looks great I mean, your signings are up your starts are up deliveries are up on a year over year basis. You know all that is I think all of that is fine I think all of those things even as we forecast. The full year are going to are going to remain positive I think you know being.
Speaker Change: Objective you know we talked to owners all the time, there's a lot of you know we.
Speaker Change: No all of our owners and many of them are very close friends I mean, not unlike we've seen a little bit with customers everybody is kind of like.
Speaker Change: Stepping back a little bit and saying like I just want to you know like understand where the world is going but.
Speaker Change: You know so far we haven't seen any real any real impact and remember I mean, it's not that we couldn't and if this persists if I'm wrong and then on the uncertainty at this level persists for a longer period of time, yes, I think it will have its just logical rationale to think it would have some impact now.
Speaker Change: That doesn't really mean much for this year or a bunch of next year, because a lot of that stuff's in production. It's further out however, if I'm right and things do start in the second half of the year to sort of settle down I don't think you have to believe that this has a lot of impact and let's remember and I grew up you know on that.
Speaker Change: Out of the business our development community.
Speaker Change: And I was we're optimists by nature you know the.
Speaker Change: You know the development community.
Speaker Change: Oh, there you know, mostly a bunch of you know a bunch of small and medium sized players and this is their business and they're they have a they have you know they've been doing it a long time they have a very long view.
Speaker Change: Of of the business and so yeah, I mean, when things rattle their cage, they may slow down and take a deep breath, but underneath it all.
Speaker Change: As they've been committing the land and you know trying to get things into production and their desire is really to get them into production short something really.
Speaker Change: Meaningful happy and and that is not what were you know this is not like COVID-19 or the great recession or any of the this is this is not that okay and so again I think the world is sort of asymmetrically sort of risk to the downside I'm much more equally weighted and I.
Speaker Change: I would say again, if I amalgamate all the conversations I'm, having with our development community I'd say, they're more akin to to my level of thinking so I think part of it you know like I think this year next year, we got to work hard I think we'll be able to deliver what we want to deliver as you get out of the 27 28 you know.
Speaker Change: There there is the possibility if you end up in a very long period of time of very high uncertainty that people slow down some of the things we're doing.
Speaker Change: That's not what's happening now okay to be clear and the reality is in more challenging times. There we get we pick up the slack like we've done this year very heavily in conversions people you know in good times, they want to do conversions with us and you know more uncertain times, they really wanted to do conversions.
Speaker Change: With us because they want their safety and their comfort.
Speaker Change: Being in a system like ours that has you know hundreds of millions of loyalty members and drive such strong commercial performance. So you know there is sort of a counter counter veiling are counterbalancing impact there. So I think that answered it I mean.
Speaker Change: Not not see I mean, the truth is just haven't there's no there there yet.
Speaker Change: And again I think if I'm hopefully right about what starts to happen in the second half of the year I think not to be a pollyanna I think you know I think we can you know I don't think we have to see.
Speaker Change: Meaningful impact.
Speaker Change: Thank you.
Speaker Change: Your next question today will come from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen Grambling: Alright. Thanks.
Speaker Change: Our focus on maybe the downside case, but with the mindset of preparing for the worst and hoping for the best I guess at the market or economy does take a turn lower where would you generally expect to see that deterioration first in this environment, then what levers or actions would you take.
Stephen Grambling: Pivot the business not only to weather that storm, but to improve the competitive positioning in the long term.
Speaker Change: Well listen.
Speaker Change: It's hard to prognosticate as I said I gave you my view of what of what of what I think is happening if the economy and there is always some risk that it goes the risks the risk is to the downside in that and that's where the world heads I think and Kevin may want to.
Kevin Jacobs: Jump on top of this too.
Speaker Change: I feel really good about where we are I mean, the fact of matter is.
Kevin Jacobs: The business model as you know is super resilient.
Kevin Jacobs: Just you know the basic model of capital light business Super High margin 70, plus percent EBITDA margin business, where at some of the lowest levels of leverage.
Kevin Jacobs: That we've had no no big maturities Super significant access to liquidity, we've been hyper efficient I think everybody would have to see versus competition and everything else on the G&A side.
Speaker Change: So I mean listen we were I would say a lot of those similar things we went into Covid and the reality is Kobe was hard, but we sort of sail through COVID-19 and what what I would say Steven is like.
Speaker Change: Those I don't want that I don't wish that of potash and I don't think that's where we're going but we are fully prepared for whatever eventuality. There is and the reality is I think every time that we have seen I would say that our teams all the time.
Speaker Change: Every time, we have seen these really disrupted environment significant downdrafts in the macro.
Speaker Change: Macro economic conditions, because of that strength and resiliency and because this team has been together a long time and has battled tested we have been able to really I think out maneuver our competition and put ourselves in an even better position than we were before I mean, COVID-19 being sort of exhibit I mean are you know we're over.
Speaker Change: 1000 basis point higher margin business from the peaks of pre Covid to now.
Speaker Change: There are a lot of reasons for that but some of that is we did a whole bunch of things during COVID-19.
Speaker Change: Generate incremental margin in efficiency as well as the pivot in a bunch of interesting ways, you know with different segments of business Smbs in an otherwise so I'm not going to be <unk>.
Speaker Change: Specific other than to say I think we're ready for whatever comes our way I think we're really seasoned team that knows how to address issues. Our attitude will be we're in great shape, we steady hand on the wheel and take advantage of whatever comes our way to make the company better to deliver better performance for our owners.
Speaker Change: And ultimately you know.
Speaker Change: Deliver better growth so that translates into.
Speaker Change: Better opportunities for our shareholder base.
Speaker Change: Makes sense. Thank you.
Speaker Change: Your next question today will come from David Katz with Jefferies. Please go ahead.
David Katz: Good morning, everybody. Thanks for taking my question.
Speaker Change: Wanted to I appreciate all of the Big picture commentary I wanted to just focus on Chris something you indicated about.
David Katz: APAC and China in particular.
David Katz: Gaining some share can you provide us with a little bit of color on the economic intensity of those deals relative to the totality.
Some of the same question you just answered, but more specifically to that area of the world and what Youre seeing on the on the ground development wise. Thank you.
David Katz: Yeah, I think David I'll take this one I think we've talked about I mean look we gave you some through Chris talked about earlier, you know our business in China is large and still keeps going strong part of that business in China as I think maybe what you're getting at is in a joint venture format for Hampton and Hilton Garden Inn, where we share the economics, but the reality is as we're not investing cap.
David Katz: <unk> and every one of those deals is like a lot of our franchise deals you know no capital infinite yield and we're growing a huge presence in building a big brand name in China on the backs of those deals. So we've been very transparent about the economics on those deals. The rest of it is we continue to grow outside of those joint ventures, both in China and in other parts of the word.
David Katz: Our economics are at market right and so our economics in terms of the way you think about fees per room growing over time, we've talked about that we think that for a bunch of reasons as we continue to do the bulk of our new deals at our current distribution level as Revpar continues to grow as we continue to raise royalty rates as deals rollover, we're gonna grow our fees.
David Katz: Per room over time, and again, we're not investing capital in these regions. So big demand for our homes and then one more thing I'd add about China. As we are now starting to grow in a big way a lot of our brands outside of China. So Hilton Garden Inn remains a great story in China, we have over 100 hotels open over 100 Hilton Garden Inns opening.
David Katz: China and nearly 200 more coming in the pipeline right. So that those those deals are at market rates full fees higher higher revpar than the Hamptons and Hilton Garden Inns and on it goes across those regions through Southeast Asia Middle East remains a good story, we talked about luxury lifestyle, it being up to 1000 hotels.
Right as we gained momentum in these brands across the spectrum, there's really nothing that I would call out that should change the trajectory of our economics over time.
David Katz: Thank you I appreciate it sure.
David Katz: Sure.
Speaker Change: Your next question today will come from Smedes Rose with Citi. Please go ahead.
Hi, Thank you.
Speaker Change: You mentioned, Chris this strengthened group in the first quarter I think you said up 6% and I was just wondering if you could provide a little more commentary around maybe what you're seeing through the balance of the year, especially from the kind of the larger kind of corporate group side, because that can sometimes be a proxy I think for how businesses are thinking about sending people on the road et cetera. So just any.
Speaker Change: Updated.
Speaker Change: Color you have there would be of interest yeah, I mean, we still feel good about it for the full year. If you think about our <unk>.
Speaker Change: <unk> zero to two you know I think EBIT, even at the low end of that group is sort of at the higher end of that range and as you get up into the mid and higher. It's a you know it's above above the high end of the range. So we feel we feel good about it that's not you know.
Speaker Change: And you know that is trust trust, but verify I think Ronald Reagan said that.
Speaker Change: We have a great group position on the books.
Speaker Change: Group position is up in the mid single digits across the across the system. So it sort of supports that.
Speaker Change: That group position is a little bit lower than it had been for a couple of important reasons. One as you get into the year. It always comes down to there's no question that sort of some of the uncertainty in the environment has affected booking patterns across all segments. I mean, that's the one thing I.
Speaker Change: Say as rate you know when you have this kind of uncertainty everybody you know I sort of said in my comments, a little bit of the great wait and see lets see where it goes so what do they do they don't stop traveling.
Speaker Change: They don't stop running their businesses. They don't stop taking vacations, they may do a little bit less of it or they wait a little bit more to the last minute.
Speaker Change: And so you know as you look as you look at like you know short term group bookings that I think I said in my comments, there is sort of flat year over year, which is which is not bad but if you. You know if you want you know further out there a little bit down because I think people are thinking well I don't want to play and further in the future.
Speaker Change: You're at this exact moment, but I know I got to do it and so in fact in the short to intermediate numbers, they're there, but they're still showing up if you look at in the next year.
Speaker Change: We're in we're in the teens you know were up you know our group position back to group is up.
Speaker Change: Is is up for 26 in the teens so.
Speaker Change: That sort of defies a little bit, but a lot of that has been on the books. So.
Speaker Change: We feel good that group will definitely lead the pack in terms of segments people you know are showing up they're consuming the group room nights.
Speaker Change: The pace of booking in the last six weeks or so is less than it had been just because of what's going on again my belief is as we get.
Speaker Change: Hopefully to a little bit more.
Speaker Change: Well, a little more certainty in the environment. There's no reason sort of underneath it all why I think we wouldn't wouldn't see it tick up but again, we're still in the midst. We're in the mid single digits and you know.
Speaker Change: I think we've been reasonably conservative in sort of the guidance the group component of the guidance we've given.
Speaker Change: Thank you.
Speaker Change: And your next question today will come from Robin Farley with UBS. Please go ahead.
Speaker Change: Great. Thanks.
Speaker Change: I wanted to clarify I'm Kevin mentioned.
Speaker Change: Some of the outperformance in the non Revpar related was with timing related or or maybe it was something in G&A, but just if there was something timing related so just wanted to get some color.
Speaker Change: Already on that in a minute.
Speaker Change: I could also just sort of ask for clarification on the comments about.
Speaker Change: The revenue per room, because I do think that's been a big question that a lot of investors have asked and I think your commentary about expecting that to continue to grow is is it's better than the unexpected. So I just want to make sure I understood I think it was kevins comments about.
Speaker Change: What's the idea that that's C revenue per room.
Speaker Change: Asia ex China was growing faster and that's why you.
Speaker Change: The sea.
Speaker Change: But I think it was coming from China.
Speaker Change: With this sort of more shared economics wasn't a concern for you in terms of that AR, that's slowing or just wanted to make sure. He.
Kevin Jacobs: Well for China, We can talk Kevin I'll talk about fees in China, you know the fee per room growth from the point of where we are is going up simply because we really did these MLA to build a broad sort of network effect, which has been incredibly successful I think we've out maneuver to everybody, but now what we're doing.
Kevin Jacobs: Going is franchising, we built the team and were franchising, particularly with Garden Inn and other brands our own brands and so if you look at the sort of fees per room that we're generating now and you look forward.
Kevin Jacobs: Disproportionate piece of it is going to come from full fee.
Speaker Change: Full fee franchise deals that we're doing with our other brands. So that's why that's growing on piece for them I'll, let Kevin take the first one on fees per room, I think Kevin already said it. It's just math I mean, I say this to investors all the time like it isn't that complicated we have you know our pipeline is pretty consistent with our exist.
<unk> supply, we talked about China individually.
Speaker Change: We continue to have rising revpar and we continue to drive share gains.
Speaker Change: You know a large part of our growth is from our highest.
Speaker Change: Paying.
Speaker Change: Royalty fee brands and we continue to move the royalties over time on our brands systematically hire and when you just do the math, which we do obviously in long range models fees per room are going to go up.
Speaker Change: As long as as long as we look at we do 10 year models and these program are going to go up every year.
Speaker Change: And those models, there's really it's just it's so as I said sort of structural and math based on those inputs.
Speaker Change: Okay.
Speaker Change: Yeah, and then so then yeah and that's that that covers that Robin I was I was speaking to the broader fees per room, but yeah, I mean coming out of China are fee per room growth from where we are today, we will be actually at a higher rate of growth than the rest of the business, but I think it's important to focus on the entire business because you're right. We do get that question a lot and then back to the non revpar driven fee.
Speaker Change: <unk> and timing there are somewhat connected and theres somewhat separate so a large part of addressing the beat and then in terms of what we're carrying through for the rest of the year. We wanted people to understand that is that a decent chunk actually sort of the vast majority of the beat for the first quarter was timing some of that was timing and non revpar driven fees and some of that was timing and other parts of the biz.
Speaker Change: MS separately, non revpar driven fees across the board I wouldn't point to any one component, whether that's purchasing or credit cards or H D V or other things did outperform meaningfully in the first quarter and we will continue to outperform over the course of the year and we expect those non revpar driven fees to be above algorithm both for the year.
Speaker Change: And going forward, we don't give a lot more specific guidance than that but that's how I would characterize that.
Speaker Change: Great. Thank you.
Speaker Change: Your next question today will come from branch them on tour with Barclays. Please go ahead.
Speaker Change: Good morning, everybody and thanks for taking my question.
Speaker Change: Chris Kevin.
Speaker Change: Could you guys could you guys unpack the <unk> guidance, the revpar guidance, a little bit more specifically looking at you know what you're expecting for domestic revpar versus international and then within domestic if you could just unpack that comment about group being better than transient on the transient side, which of the transient segments are growing.
Speaker Change: Better or worse in sort of real time here. Thanks.
Speaker Change: Yeah, I think for the second quarter. It's the same story, just with a little bit of I don't know.
Speaker Change: I don't know idiosyncratic, it's the right way to say it some timing issues in the second quarter, largely driven by the impact of the Easter shift right. So I think the way to think about the segment. This group will continue to lead business transient will be next and then we expect leisure conditions in the near term given the uncertainty to remain softer I think as you think about domestic person.
Speaker Change: International I would think about domestic which is still the largest driver of the outcome being about the same as the guidance being roughly flat and then the international parts of the business in line with what we've set right. So Europe, a little bit better middle east better than Europe.
Speaker Change: APAC ex China positive in China, a little bit negative I think it's just the same story, just a little bit more muted because of the calendar shift.
Speaker Change: Very helpful. Thanks, Kevin.
Speaker Change: And your next question today will come from Lizzie Dove with Goldman Sachs. Please go ahead hi.
Speaker Change: Thanks for taking the question I just wanted to zoom in a little bit on what the drivers of what was assumed in that kind of lowering of the EBITDA outlook I guess, specifically in terms of you know any pressure friend IMF participation, especially in the U S or any kind of slowdown on the non revpar side I know Kevin you said there is still strong I think.
Speaker Change: Yeah, it looks like 12% to 14% in the past at the Investor Day, I'm curious if that still holds true today.
Speaker Change: Yeah, I think obviously your I'll take the second part first you are factually correct about our Investor day guidance I think again, what we're saying about non revpar driven fees as is still ahead of algorithm and Theres nothing Thats really changed about our investor day guidance in the in terms of the structure of the model or the drivers that I would change obviously, our revpar growth is our <unk>.
Speaker Change: Our outlook for this year has changed and that is largely what is driving the EBIT impact for the full year. So if you think about our normal sort of our normal sort of distribution of kind of roughly $25 million to $30 million per point, if you put that into the calculator ex the timing items that I've talked about in Q1 that all holds together for the balance of the year. So theres nothing Theres no.
Speaker Change: Drivers in terms of in IMF growth, a little bit lighter when Revpar gets gets later right I mean IMF flows through at about one five times typically will be positive for the year I should I should state even on zero to two where we'll run mid single digits IMF growth for the year, but it all it all sort of tracks with.
Speaker Change: The model, it's really the primary driver if not the entire driver of the balance of the year coming down as revpar coming down in <unk>.
Speaker Change: <unk> Oh, that's right if you take the full year, where we're delivering algorithm I mean were just the same store new unit growth Nugget is staying the same and same stores coming down, but when you add.
Speaker Change: One plus one together, it's getting you to what you should get to.
Speaker Change: Okay.
Speaker Change: Your next question today will come from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Good morning, Thanks for taking my question.
Speaker Change: Chris I was wondering if you could touch on the impact from Canadian travel how that has changed since you know liberation day, and particularly the last couple.
Speaker Change: Weeks and more more importantly, when you speak to executives that have businesses up there or multinational executives that could.
Speaker Change: Could potentially bring.
Speaker Change: Corporate or leisure travelers down there how they are thinking about you know the feeling in sentiment with with their employees.
Speaker Change: Yeah really really good question I would have been shocked if we didn't get that question given everything going on so interesting in the quarter inbound international represent circa 4%.
Speaker Change: The business something like that so it's not huge but it's.
Speaker Change: It's meaningful.
In the quarter.
Speaker Change: It was up even with all this going on and it was up in the mid single digits on a on a revenue basis and so but what you saw there was a progression where it was up a lot in January a little bit less in February and it was sort of flat in March.
Speaker Change: Which I mean, we could debate and I don't know the answer whether that's the full force of.
Speaker Change: Of the impact.
Some of whats going on vis vis, particularly Canada, and Mexico, but what you saw was clearly through the quarter you know a flattening out of leveling off.
Speaker Change: And with Canada, and Mexico, you saw those both deteriorate to the point, where they're they're down for us I would say like high single digits. Each of them is down high single digits at the same time. The reason it's flat in March and what we were sort of seeing in April is other markets weaker dollar and a whole lot.
Speaker Change: Other things going on other markets are up.
Speaker Change: So up from the Asian markets up from the UK.
Speaker Change: Up from other parts of Europe, and so at the moment I would say in March and so far in April it's sort of balanced out and it's been neutral.
Speaker Change: And we will see again, if if we can you know settle some create more certainty trade deals with some of these partners.
Hopefully we can settle some of these things down interestingly.
Speaker Change: As you know our development team.
Speaker Change: It was up.
Speaker Change: Canada doing a bunch of work because we obviously have a big business and.
Speaker Change: Kevin and I were with them and asking them. What are you hearing a lot of noise people don't want to don't want to do deals with us and their answer was quite to the contrary that they didn't sense any sort of resentment or sentiment vis vis our brands. It doesn't have a U S based company that that was affecting.
Speaker Change: You know sort of the trajectory of our development opportunities in the market at the moment and certainly we haven't felt any of that on the development side in Mexico either.
Speaker Change: And you've got it worth pointing out as well that Mexico, and Canada combined are about one 5% of our total revenue. So it's not to say that if you are part of our system and you own a hotel in Detroit or Buffalo that you. You know you are closer to the Mexican border that you're not feeling it I don't want I'm not I don't mean to be flippant about it vis vis our ownership.
Speaker Change: Community, but in terms of the Grand scheme of our business, it's only one 5% of revenue.
Speaker Change: Thanks, Kevin.
Speaker Change: Sure.
Speaker Change: And your next question today will come from Patrick Scholes with Truest. Please go ahead.
Patrick Scholes: Hi, great. Good morning, Thank you everyone.
Speaker Change: When we talk to.
Speaker Change: Franchisee large franchisees of some of your competitors, we hear that construction costs are up.
Speaker Change: At a minimum of 20% and in some cases up 40%.
Speaker Change: Is that consistent with what Youre hearing from your franchisees. Thank you.
Speaker Change: No I think.
Speaker Change: Patrick I think what I'd say is you you may have I mean, I'm, not saying, you're not having valid conversations because I know you talked to developers all the time that is not being realized I think that is that particularly when these things first got announced that was the fear right is if you. If you think about your sourcing and overall.
Speaker Change: What could happen to development costs and some uncertainty I think I think a lot of that has settled down we came into the year in the U S with <unk>.
Speaker Change: Construction costs kind of trending up you know kind of <unk>.
Speaker Change: Mid single digits, and it hasnt really realize kind of call. It three to five it kind of had that hasnt realized yet.
Speaker Change: I think you have to take a little bit of a wait and see approach depending on how this all plays out as Chris was talking about earlier.
Speaker Change: Okay.
Speaker Change: Thank you for Colorado.
Thank you.
Speaker Change: And your next question today will come from Michael Bellisario with Baird. Please go ahead.
Speaker Change: Okay.
Michael Bellisario: Thanks, Good morning, everyone.
Speaker Change: I just want to go back to your comments on April and the weakness there maybe just digging in a little deeper within leisure can you maybe give us some color on high end versus low end, how each of those tracking in stainless and BT any differentiation you see between.
Speaker Change: While medium size accounts and then the larger corporate accounts. Thanks.
Speaker Change: I mean, here's the thing so April will be a bit odd April the leisure business, because the Easter movement will be a bit better.
Speaker Change: Business transient will be worse, so I think you've got to be careful.
Speaker Change: Sort of trending in April given the shift in the holiday I think I think more broadly.
Speaker Change: What we have seen is sort of.
Speaker Change: I'll leave a bit.
Speaker Change: Bit of a pullback in demand across all categories of leisure, both at the high end and and and and and in the middle and and on business transient which I.
Speaker Change: Made the comment on it.
Speaker Change: In the prepared comments, we've seen not so very little impact on the SMB business, because these folks gotta get out and run their business and they're not going to be you know, they're not going to be as quick to make decisions in a little bit more on the big corporates, having said that there's been sort of a you know.
Speaker Change: A bright spot, which has been in banking and finance, where we've seen a pretty a pretty nice uptick.
Speaker Change: But broadly I would say big business, there's always going to be a little bit more cautious theyre going to be a little bit more waiting.
Speaker Change: Waiting to see where all this goes where smbs are going to you know in the moment they've got to run their business and thankfully Smbs 85, plus percent of our business transient book So.
Speaker Change: So so far so good again, you know we Havent you know everybody's worried the mark.
Speaker Change: <unk> or sort of asymmetric risk to the downside and you've heard what we you know what we where we are for the quarter, but also sort of March April.
Speaker Change: You know, we're still seeing positive growth.
Speaker Change: Not you know it isn't it isn't as though.
Speaker Change: So the growth rates have gone negative if you look at the midpoint of our guidance probably to be fair leisure is kind of flat at the midpoint, but it's not really negative, but we would expect.
Speaker Change: Already talked about.
Speaker Change: Group to be up in a pretty decent way and even business transient to be up in that scenario and in fact, that's what we're seeing right now now we got to get through this Easter shift.
Speaker Change: But if you look at you know if you sort of try as best we can to sort of neutralize for the Easter effect, we're still seeing growth just growth that a little bit lower level than what we would've hoped for or expected coming into the year.
Speaker Change: Helpful. Thank you.
Speaker Change: And your next question today will come from Meredith Jensen with HSBC. Please go ahead.
Meredith Jensen: Yes. Thanks, I was hoping you might speak a little bit Q further into the development and how the conversion.
Meredith Jensen: Prospects are looking now versus a year ago with potentially with the changes in construction costs and the like spoken about and how.
Meredith Jensen: This may or may not okay, yes.
Meredith Jensen: Ongoing discussions of M&A in the sector, maybe not for Hilton.
Meredith Jensen: Biased towards organic growth, but maybe I'm just curious if there's a few topics to speak a little bit more would be great. Thank you.
Kevin Jacobs: Yeah. So thanks Meredith on the conversion front I mean, we gave a little bit of the color. We think conversions will be about 40% of our deliveries. This year, that's a little bit higher than last year.
Kevin Jacobs: Do you think about the stuff we did last year on the partnership side those.
Kevin Jacobs: Those are larger conversion, so, but if you neutralized conversions are up year over year, we tend to take share I mean, I think Chris touched on this earlier in an environment, where it gets if it gets a little bit harder to do new builds developers lean into conversions and then when the environment gets a little bit softer we tend to take share. So we already in the U S do nearer.
Kevin Jacobs: Half of the conversions that got signed in the U S last year pretty close to half or with us and pretty close to half where with all of our competitors combined right. So we so in a softening environment, we take even more share those deals they're all different right spark is driving a fair amount of that but only call. It 30% ish of our conversions this year.
Kevin Jacobs: There will be spark, we did a bunch of double trees in the first quarter and in our first quarter signings. We did conversions across 10 of our brands. So it really is mixed across the portfolio and if someone can buy a trading asset or owns a trading asset today. That's independent it's a lot easier to finance a lot of these conversions happen around transactions and these transactions are just a lot easier.
Kevin Jacobs: To finance with in place cash flows and our brands become very attractive to both the equity and the debt financing for those deals. So we would continue we feel really good about the environment.
Kevin Jacobs: And then we're doing a lot of conversions outside the U S. Right. Our conversion deliveries. This year will be about 50, 50 U S and outside the U S. So when we get sort of really focused on these conditions in the U S. You have to remember that conditions remain a little bit different around the world. So we feel in short we feel really good and then I'll, let Chris take the eminent yeah on the M&A I think implied in your question.
Speaker Change: I think you were headed in the right direction. I mean, we are much more focused on organic growth. We obviously did a couple of things last year, but we thought those were very unique in the sense of you know fit very nicely into the portfolio of brands that we had in spaces that we wanted to fill with really great.
Speaker Change: Brands, and we really feel like the value proposition for us was.
Speaker Change: Spectacular and so we really are excited with those and they're going really well we'd look at as we always have everything that you read about that anybody's doing you should assume we've looked at it.
Speaker Change: And that given our size and scale and all of these things for the most part are broadly marketed.
Speaker Change: You know that we have chosen not to pursue it.
Speaker Change: And you know certainly to any any type of conclusion and that's because the truth is you know we like organic growth other than a couple of things last year. That's what we've done for almost 20 years. We've had great success in building. What we think are the industry, leading brands certainly the industry, leading performing brands.
Speaker Change: We have 24 brands that you know that gives us huge amount of opportunity in every market, including where we have the biggest distribution in the United States, where we still have huge growth opportunities and we are to a degree I would say in most parts of the world is still very early in gestation in terms of propagating.
Speaker Change: The full family of brands that we have at the same time, we're always looking at within the segments at opportunities and there are there are two or three things.
Speaker Change: That we are working on in terms of new brands.
Speaker Change: That would be done organically a couple of those in the lifestyle space you know potentially a lifestyle collection that would be under tapestry to take unique hotels that we think would be very additive to the system from a customer point of view real demand in the owner marketplace and we really don't haven't had a place to.
Speaker Change: Those and then you know.
Speaker Change: A hard brand in between motto and canopy, where again, we see a big segment of demand that we're not really serving in AR.
Speaker Change: And owner community that is looking to do around the world a lot more of that and then I've talked about a number of times.
Speaker Change: The old accommodations, we called her furnished apartment space, where we've done a huge amount of work there.
Speaker Change: And my expectation is you will you will see us do something there and so yeah. We look at everything and you know I always have to say never say never but we have made I think.
Speaker Change: Great progress over 20 years of doing it the old fashion way I think we've built.
Speaker Change: A skill set and a team that is really really good at this and as I said, we got 24 brands. My guess is in the next year or two we're going to have 27 at least that.
Speaker Change: We think we will continue to fill niches within the family of brands that will provide customers some great opportunities and better serve our owner community on things that they want to do so I think that's that's the likely path you will highly likely path, you'll see us follow.
Speaker Change: If a clear and helpful. Thank you.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session I would now like to turn the call back to Christmas setup for any additional or closing remarks.
Speaker Change: Thank you everybody as always we appreciate the time lots of great questions. There's obviously a lot going on in the world a lot of which we talked about but as I've said a few times, we feel really good about the position the business to them, we love our model.
Speaker Change: In a really good position from a balance sheet liquidity point of view.
Speaker Change: Driving incredibly high margins and even though there's some choppiness out there we're really confident in our ability to.
Speaker Change: <unk> delivering for you also we will look forward. After the next quarter to give you an update and let you know exactly what we're thinking at that time. Thanks again for the for the time.
Speaker Change: And have a great day.
Speaker Change: Prince has now concluded. Thank you for attending today's presentation you may now disconnect.