Q2 2025 Hilton Worldwide Holdings Inc Earnings Call

Good morning and welcome to the Hilton. Second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.

After today's remarks, there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad to withdraw your question. Please press star then 2 please note this event is being recorded.

Speaker Change: 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.

Jill Chapman: Welcome to Hilton's sec.

Jill Chapman: Quarter 2025 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking statements.

Jill Chapman: 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

Jill Chapman: For discussion of some of the factors that could cause actual results to differ, please see the risk factor section of our most recently filed form 10K. In addition we'll refer to certain non-gaap Financial measures on this call.

Jill Chapman: 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 hilton.com.

Speaker Change: This morning, Christmas Netta our president, and chief executive officer will provide an overview of the current operating environment and the company's Outlook, Kevin Jacobs our Executive Vice, President, and Chief Financial Officer will then review our second quarter results and discuss expectations for the year. Following the remarks, we'll be happy to take your questions with that and please return the call over to Chris. Thank you, Jill, good morning everyone, and thanks for joining us today. Our second quarter results continued to reinforce the power of our business model and the benefits of

Speaker Change: Of Strong net unit growth which drove drove great. Bottom line performance adjusted IBA for the quarter exceeded 1 billion dollars, meaningfully beating expectations, even with modestly negative systemwide revpar adjusted EPS. Also exceeded our expectations, our strong portfolio Brands, powerful commercial engines and discipline execution, continued to drive, meaningful free cash flow year to date. We've returned 1.7 billion dollars to shareholders in the form of BuyBacks and dividends and remain on track to return approximately 3.3 billion dollars for the full year. Turning to results, the quarter turned out to be a bit noisier than expected driving systemwide. Repar down, 50 basis, points year-over-year.

But offset by softer Trends in the US and China, adjusting for holidays, and calendar shifts. Systemwide rev part would have been modestly positive.

Speaker Change: In the quarter, Leisure transient revpar, grew 1% as an elongated, spring break, window and easy year-over-year, comparison supported Leisure demand growth business Transit revpar decreased 2% driven by the elongated holiday schedule. Government spending declines, weaker International inbound business and broader economic uncertainty. While it's early in the third quarter, we have seen a pickup in non-government business demand.

Group revpar was roughly flat with favorable. Trends and Company meetings largely offset by Soft convention, business and social events. We did see positive momentum in lead volumes from corporate with month-over-month sequential growth throughout the quarter and 26 and 27 group position are up in the high single digits.

Speaker Change: as we look ahead to the third quarter,

Speaker Change: we expect red part to be flat to modestly down again with holidays and calendar shifts. Continuing to weigh on reported results, on an adjusted basis. We would expect modest rebar growth

For the full year, we continue to expect red par growth of flat up 2% with improving Trends in the fourth quarter driven by Modest modest, increase in demand and easy easier year-over-year comparisons. As we think about our business over the intermediate term, I'm very optimistic. In our largest market, a more favorable regulatory environment. Certainty a tax reform. Expected settling down on global trade policy. Continuation of very healthy, corporate profits, and significant Investments across a multitude of Industries, including ai, ai related and core infrastructure investment. Should accelerate economic growth and unlock meaningful increases in travel demand.

Speaker Change: This matched with very limited industry, Supply growth should drive stronger rev power growth over the next several years.

Speaker Change: Turning to development during the quarter. We opened 221 hotels, tolling more than 26,000, rooms representing a 52% year-over-year increase, excluding Acquisitions and Partnerships and Achieve net unit. Growth of 7 and a half percent.

Speaker Change: Our luxury and lifestyle portfolios. Continued their extraordinary expansion around the world. During the quarter, we celebrated the opening of our thousandth property in the luxury and lifestyle categories. We also announced our plans to welcome 3, new luxury and lifestyle hotels per week. In 2025, none are more impressive and iconic than the world of story in New York, which reopened its doors. Just last week, marking the beginning of a new era for the spectacular hotel that has been the a quarterstone of New York City culture since 1931.

Speaker Change: The greatest of them all as Conrad Hilton famously described The Landmark property recaptures, the hotel's original Grandeur. Once again, setting The Benchmark for luxury Hospitality globally.

During the quarter, our conversion, friendly Brands, continue to gain traction with guests and owners which helped fuel our growth and key International markets. Lxr debuted in France with the opening of the sax. Paris a landmark 18th century building. Transformed into a refined Gathering Place in the heart of Paris. We welcome our first tapestry hotels in Northern Ireland, and turquia and Hawaii. While Carrillo debuted in Vienna Austria, we also opened our first, all-inclusive Carrillo Resort in the Dominican Republic. Double Tree continued to be an important driver of conversions, reaching 700 hotels worldwide and entering its 60th country. During the second quarter spark opened more than 40 hotels in the quarter bringing its portfolio to more than 170 hotels across 6 countries.

Speaker Change: With roughly 200, more hotels in the pipeline overall, conversions. Spend 10 brands and accounted for over a third of our openings in the quarter.

Speaker Change: Launches of exciting new conversion brands.

Speaker Change: In July, we also debuted the first hotel of our game-changing new Extended Stay brand. Lift start Studios.

Grounded in extensive research, and a deep understanding of the evolving needs of long State Travelers and hotel owners alike. Live smart Studio represents the latest chapter in our growth strategy and reinforces our commitment to offering a Hilton experience for every traveler and every stay occasion.

Speaker Change: In addition to strong openings, we signed 36,000 rooms in the quarter, putting us on Pace to deliver high single-digit growth, and sightings for the full year. We also increase our development pipeline to more than 510,000 rooms growing, both year-over-year and sequentially versus the first quarter with expansion in its in strategic markets and across chain scales.

Speaker Change: We announced plans for Walteria to debut in key destinations including Helsinki, Bali in New Delhi in the coming years and we signed Nomad hotels in Singapore and Detroit which marked the Brand's respective debuts in the asia-pacific and America's region. We signed our first canopy hotels in Tokyo and Italy our first Tempo in Canada and in July we signed our first tapestry in Saudi Arabia.

Speaker Change: We also further expanded our Focus service pipeline to meet the growing demand for affordable upscale accommodations during the quarter. We announced that Hampton will soon. Debut in Thailand, true will enter Vietnam and Spark will open. Its first hotels, in Saudi Arabia and Puerto Rico. We also committed to key growth, milestones and emerging economies including expanding our portfolio in India, 10-fold and tripling. Our portfolio in Africa. In the coming years, we continued growth in construction starts, uh, with continued growth and construction starts tremendous International opportunities in a strong conversion story. We feel very confident in our ability to drive net unit growth solidly within our 6 to 7% range for the full year

Speaker Change: As you all know, we have an incredible skill set of identifying white space and developing and launching new brands.

Speaker Change: As I mentioned last quarter, the team is working hard behind the scenes on several new brands in the lifestyle space in addition to a couple of new Concepts in the alternative accommodation space, a number of which are conversion friendly.

Speaker Change: We have done the research with our customers. And I've already received tremendous feedback from our owners on these new brands. A couple of which will be launched by year end.

Speaker Change: Hilton Honors continues to perform extraordinarily. Well, with more than 226 million members up 16% year-over-year with membership now evenly split between the US and international Travelers reflecting the strength of Hilton's Global reach and a further Testament to our success in delivering premium products and experiences for any stay occasion. Anywhere in the world, our guests want to travel

Speaker Change: Everything we do is underpinned by our award-winning culture, and our Incredible family of Hilton. Team members continue to differentiate Our Brands from the competition.

Speaker Change: In July brand Finance name Hilton as the most valuable hotel brand for the 10th consecutive year. Additionally, just last week, our Hampton home, 2 suite, and true Brands were named best in category by JD Power for their respective segments in the US during the quarter. We were also named the number 1. Best workplace in Switzerland Austria.

The Netherlands India and Vietnam, adding to the 660, great place to work Awards and more than 70 number 1 wins around the world since 2016.

Speaker Change: Overall we feel good about where we are and are very optimistic about the business. We have the best brands in the industry with more coming. The biggest development pipeline in our history and the economy in our largest market is set up for better growth.

Speaker Change: All of which should continue to drive strong performance. Now, I'm going to turn the call over to Kevin talk a little bit more detail about the quarter, and our expectations, for the full year.

Thanks, Chris and good morning everyone. During the quarter systemwide rev part decreased, 50 basis points, versus the prior year on a comparable and currency neutral basis, driven by declines, in occupancy and modest rate growth

Speaker Change: And meaningfully exceeding. The high end of our guidance range. Outperformance was predominantly driven by timing of non-rev bar, items, management, franchise fees, grew 8% year-over-year.

Speaker Change: For the quarter diluted earnings per share adjusted for special. Items was $2.20.

Speaker Change: Turning to our regional performance, second quarter comparable us rev part decreased 1.5%, largely driven by pressure across business, transient and group at declines in government spend and softer. International inbound Demand with performance.

Speaker Change: For full year 2025, we expect the US rev Park growth to be at the lower end of our systemwide rev par range.

In the Americas outside. The US second quarter of our increased 3.8% year-over-year, driven by strength in the luxury and lifestyle portfolio, particularly in resort locations for full year 2025. We expect ref Park growth to be in the mid single digits.

Speaker Change: In Europe, breath bar grew 2%, year-over-year driven by growth in Continental Europe, supported by strong group business for full year 2025. We expect low single digit revar growth, given continued weakness in the UK and Ireland.

Speaker Change: In the Middle East and Africa region revpar increased 10.3%, year-over-year driven by record-breaking months of travel around key events and holidays, including Eid Hajj and Catholic and Orthodox Easter for full year 2025. We expect revpar growth in the mid single digit range.

Speaker Change: In the Asia Pacific region second quarter ref. Par was up 0.3% year-over-year revpar and APAC X China increased 5.2% led by strong group Trends in Japan and Korea revpar in China declined. 3.4% in the quarter. Largely driven by continued weakness in corporate travel demand particularly in tier 2 and tier 3 cities and changes in government travel policies.

Speaker Change: For full year 2025, we expect revpar growth in asia-pacific to be roughly flat. Assuming modest rev part declines in China.

Speaker Change: Turning to development is Chris mentioned for the quarter. We grew net units, 7.5% and have more than 510,000 rooms in our pipeline of which nearly half are under construction. Looking to the year ahead, we expect to deliver 6% to 7% net unit growth for the full year

Speaker Change: Moving to our guidance. For the third quarter, we expect systemwide ref bar growth to be flat to modestly down. We expect adjusted ebit da of between 935 million and 9555 million and diluted EPS adjusted for special items to be between a dollar and 98 cents and $24

Speaker Change: For the full year, we expect ref par growth of 0 to 2%, adjusted ebit da of between 3.65 billion and 3.71 billion dollars and diluted, EPS adjusted for special items of between 7 and 83 cents and 8 dollars.

Speaker Change: Please note that our guidance ranges do not incorporate future share repurchases.

Speaker Change: Moving on to Capital return, we paid a cash dividend of 15 cents per share. During the second quarter for a total of 73 million in dividends for the year. Our board also authorized a quarterly dividend of 15 cents per share in the third quarter.

Speaker Change: For the full year, we expect to return approximately 3.3 billion dollars to shareholders in the form of BuyBacks and dividends.

Further details on our second quarter 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 look at yourself to 1 question, Michael, can we have our first question, please?

Speaker Change: Absolutely. The first question comes from Sean Kelly with Bank of America. Please go ahead.

Speaker Change: Hi, good morning everyone. Thanks for taking my question. Um, Chris you mentioned in your prepared remarks, a little bit about some green shoots you're seeing, I think that's consistent with what we've heard from some of the Airlines and other travel providers, but hoping you could elaborate a little bit, uh, what you're seeing across the, the maybe the 3, different segments, uh, you know, Leisure business and group and then specifically, what's it going to take, uh, organically to get a little bit better? In the fork, you there there is some concern in the fourth quarter about tougher. Comps just lapping some of the, uh, pent up demand after the election last year. Thank you. Yeah, good question. And, you know, I tried to cover some of it. Sean and prepared comments, so I'll try.

Speaker Change: You know, it's sort of not surprising that you would have seen strength in Leisure and weakness on the other segments of the business, which is what we saw. Um, you know, it was probably, you know, a touch different than we expected. I mean, obviously we said that, you know, relatively flat, which means it could be a little up, a little down, it was a little down. So, it was pretty much in line with what we thought with maybe a little bit more impact from the Rolling holiday shift. Uh, and it'll, you know, but but generally in line as you get into third quarter, you know, the say you have a similar sort of situation given Jewish holiday shifts, uh and the like that are I think in a from a segment point of view.

Speaker Change: Distort things, again. A little bit where you're going, to probably see, um, third quarter, Leisure be strongest in business and business, transient and group, being relatively weaker, which is not obviously up until, you know, the second quarter, what we've been seeing, I think when you get, when you get to the fourth quarter, um, that will reverse itself because you're going to get finally to a quarter that is a little bit more normalized. It will the for, you know, the fourth quarter has a bit of a benefit from the Jewish Jewish holiday Jewish holiday shift into the third quarter. But I think it's a little bit more normal quarter and I think as a result what you're going to see is pretty decent, we think.

Speaker Change: Leisure growth but you know, comparable business, transient growth and then group, you know, sort of leading the way, which is what, you know, more recently we have been seeing, um, you know, that, you know, our view on the fourth quarter, which we spent a lot of time on. Um, and I mentioned, in my prepared, comments is based on sort of a few green shoots that we're seeing which I'll talk about, um, you know, particularly in the group space. As you look at the corporate group, you're starting to see uptick, as you look out in the 26th and 27, you see, really strong position. Well, you've seen in group this year, you know, sort of post Liberation day was just like a lot of the segments, everybody got rattled and everything kind of froze up. As I said on the last call is a little bit of a wait and see attitude. Well that affect all segments.

Speaker Change: Um, it even affect Leisure affected Leisure but in second quarter, that was distorted by, you know, spring break and Fourth of July, as you get in the fourth quarter, you know, we're starting to see the early signs that, you know, that that that is unfreezing that people are getting out of the wait and see. Um, certainly as you look at 26 and 27, you're seeing at the other thing that's going on in the fourth quarter is the comps are just easier. I mean, if you think about last year, we had a lot going on. We had major strikes in many of our major markets around the country that you

You know, that had a pretty, uh, significant impact and we had a US presidential election, nobody will forget that. Um, and that's not good for, you know, maybe good for Washington on occasion, but it's it's really broadly, not good because people are, you know, are traveling, uh, a bit less around that. So again, we're in a, you know, there's a lot of moving Parts. Um, broadly. And so, like last time we're doing our, you know, you know, as as you know, a lot of people pulled guidance, we didn't we, we tried to do our best. I think we were pretty, pretty darn close. I mean we said plus or minus flat and I think we ended up there. I think we're, you know, we we have decent sight lines in the queue through feel good about that.

And uh, and for Q4, again, I gave you the underpinning of why we feel better. We feel we feel pretty good about it. I mean, there's a lot of moving Parts I think, you know, the green shoots, you know, I talked about them are what we're seeing in Booking behavior on the group side. And what we're seeing, you know, very recently on the, you know, on the corporate, you know, business transient side, which is saying that the wait and see that the the, it's thawing, you know, the freeze of, you know, April May into a degree June, we're starting to see a thaw, um, but it, but it's really early, which is why my comments and I know this is quite a filibuster I have going here and so there'll be no more questions. Probably but, you know, I wanted to lift up because there's

Speaker Change: Condition where we're going to have incremental economic growth and a lot of that is going to be coming in the form.

Speaker Change: In my opinion of, um, of the air in the area that has the highest correlation to growth in room nights for Hospitality, which is nrfi non-residential fixed investment. So, you have the regulatory environment that's that is and going to continue to be much easier tax environment where you have certainty, uh, you know, corporate profits that remain, quite strong and resilient, um, huge amounts of Investments, still to come in the core infrastructure. They got done in the last Administration, very little of which has still been spent. That is going to continue to be a gift that keeps giving on top of that. You know, investment, that's going on in terms of AI and related areas, uh, data, centers energy around it. Um, and the reassuring not of everything that, you know, that that our our population consumes, but some of the critical elements, again the chips bill. That's just, you know.

Getting rolling and and uh, there are other critical elements from a National Defense point of view where we are going to reassure some of these things. And all of those things require over the next 2, 3 4, probably, you know, next 5 plus years,

But I think it's hard to look 5 years over the next 2 or 3 years huge amounts of activity and investment what we have found. Um, again a very high r squared for, uh, on a slight lag on non-residential, fixed investment. My belief is you're going to start. I mean, whether it's in the fourth quarter, I yeah, I don't know. I gave you the reasons why we feel better about the fourth quarter and we've been pretty good at forecasting. So I'd say we feel pretty good about that. But as I think about 26, 27 28, I think lifting up above all this crazy noise. I actually, I am an optimist self-declared, but I think there are legitimate reasons to feel really, really good about demand. And then, at the same time, while we outperform from a from the standpoint of our growth and our development story, which I'm sure we'll get to. So I won't get into that on my on my current filibuster. I'll wait um Supply growth in the industry is at the lowest levels that we've

Speaker Change: really ever seen because all the noise in the system coming out of Co meant, there wasn't a lot of money available and now all the noise in the system around what's been going on, you know, in the, in the last 6 or 12 months

Speaker Change: Between an election and tariff issues and um, tax uncertainty, these things are getting nailed down, but it, you know, there's a lag effect. And so, you're going to, you're going to be in a super cycle continued. Super cycle of very, very low over the next. Several years increases in in new Supply. So, again, we can talk about quarters. I know you have to, I know our investors, many of them care, some care more than others. Um, but my job I think is to like, lift up above the noise and try and give you a sense of sort of the, the real, what I see, the real type, the title shifts and I think the title shifts,

Speaker Change: You know, are hard to see when you have this much noise, but I think if you lift up the title, shifts feel awfully, good to me.

Speaker Change: Thank you very much.

Stephen Graham: And your next question comes from Stephen Graham with Morgan Stanley. Please go ahead.

Stephen Graham: Hey, thank you. Speaking of title shifts. Um, you did mention that you're still expecting modest declines in China for revpar. Um, maybe pivoting to the development side in that market. What, what? Development Trends are you seeing there? And if we continue to see weakness in that market or other factors, maybe impacting development, where do you see the biggest opportunities to back Bill? Any any pockets of weakness that could come up in that market? Maybe looking around the world.

Stephen Graham: You know, we are sort of as 2 countries to a degree. Inexorably linked to 1 another, I I think our treasury secretary said this morning on on Bloomberg or I I thought I saw somewhere like the idea isn't to decouple, it's just to have a, you know, a different kind of, you know, agreement with 1 another. You can sort of see that, you know, we already have some of the trade deal done, you know. I think you can see a path to a, you know, a rational outcome, you know, with China from a, from a us, trying to trying to trade point of view, which I think then, you know, makes their dealings with the rest of the world much much much easier. And so, you know, part of what's going on there. Again, is austerity related to being braced, for whatever might come as those things, sort of, you know, hopefully work themselves out, you know, I think, I think China's, you know, same store business will pick up steam China's big population. We talked about it a thousand times. They love to travel.

Stephen Graham: You know, they want to travel, it's just right now, there's sort of like clamping, clamping down on consumption in in a bunch of different ways. I suspect that is a relatively short-lived experience on the development side. We still see

Stephen Graham: Um, terrific activity. Again you have to sort of again lifting way up. I mean China will have ups and downs. By the way, the US economy has ups and downs. You know, recessions like there are bigger complicated economy, they're going to have, you know, they're going to, you know, they're going to, they're going to have the same thing. Um, but underneath it is that it is the capacity, you know, meaning the number of hotel rooms per, you know, per capita in China, is like crazy lower than, you know, other large economies, including our economy like a fraction of it. So they are under supplied in what we do in other forms of real estate. You know some of the resi some of the commercial retail, they may be oversupplied certainly in certain markets but in our business, they are broadly under supplied. So you have people large population. Want to travel eventually will travel. They will also travel outside the United States with or outside of China, which is a big deal. You have a, you know, very, you know,

Much more limited, um, supply of hotels in that market and and and and importantly, you have a real estate market, which has been part of their problem that needs to be reformatted. And we are becoming a really important part of the solution of taking as we've talked about on prior calls, you know, some of these ghost cities and buildings and turning them into active productive uses. And so the net, the net impact of all that is in the development world and kept

Stephen Graham: Could add whatever he sees, you know, wants to add. I mean, we're going to see all our metrics up year-over-year, we're going to sign more deals. We're going to start more under construction. Um, this year in China, then we did last year, so, you know, we are, you know, continuing to be, you know, see, quite favorable conditions. And eventually, I do believe the same store will come back and support it. And you know what, we're hearing from owners in that market is the economic supported and why would that be in a slower economy? Because it's under Supply

Stephen Graham: Great. Thank you.

Speaker Change: In your next question comes from Dan pollitzer with JP Morgan. Please go ahead.

Hey, good morning everyone. Thanks for taking my question. I just wanted to follow up on on net yunic growth. You know, it sounds like Chris. You're kind of reading reinforcing that 6 to 7%, which is, you know, I think you're you're the term used with solidly in that range. Um you know this has been an area. We've done a very I did very intentionally uh yeah it seems emphatic so I wanted to kind of go back to that I guess what's driving the reinforced confidence there. Um you know is is that has there been a pivot in the in the conversations that you've had in the development Community or is this more of a reflection of some of those Brands coming online or just you know, elevated conversions. If you can kind of parse that I think it's a yeah I think it's a little bit of everything. Obviously we're we're continuing to have really good success on conversions with a bunch of great conversion Brands. We're going to add a, at least a couple more.

Speaker Change: Conversion Brands probably by the end of the year um that we think are going to add to that the brands continue to perform really really well. So the feedback from the owner Community is strong, um you know

Speaker Change: Starts. I mean our starts are going to be up 16 17% this year and once they start almost 99 100% of the time they finish and so we've had we've seen those numbers even in a very you know challenging environment, check up so that you know that makes us feel really good. I mean we have the biggest pipeline in our history half of it's under construction. You know we continue to see you know more and more going under constructions. The brands are performing well and when we model it out,

We feel like we're solidly in that zone and feel good about it.

Thanks so much.

In your next question. Comes from David Katz with Jeff. Please go ahead.

Uh, morning everybody. Thanks for, uh, thanks for taking my questions. Um,

Look, I what I, what I wanted to really get at is it? There's some building momentum on the luxury side of things?

Speaker Change: Um, and if you could just give us some general commentary about what that implies about the economic intensity, um, of the long term potential, you know, or, uh, volatility and and ref par that that brings your system. Uh, I'd love just some perspective on that. Thank you.

Speaker Change: Not sure, I fully understand the question, but, but I'll answer what I think it is, uh, David. And you can, of course, I can rephrase if you like, no, you can, of course, correct me. Listen, we're we are super focused in luxury and lifestyle. Obviously, luxury is a relatively small smaller component. You know, lifestyle, we have a whole bunch of existing Brands. We have a whole bunch of new brands, um, and the reason we're doing it, you know, luxury? You know, while I've said many times, we're never going to that's not where the bulk of the profitability of the company is ever going to come from. It becomes an important part of the whole halo effect of our, you know, our broader Network effect and Hilton Honors and loyalty and giving people the choices they want. When when they when they want those and we feel super good about you know what we have going on in luxury. The slh steel is working really really well in terms of what the metrics that.

Speaker Change: The owners are, you know, the benefits that the owners at slh are getting and the benefit that our Hilton honors members are getting that we anticipated, um, you know, our core luxury Brands, particularly Waldorf I talked about New York, by the way. If you haven't been to New York, go and go and see it, it's spectacular. Um, I'm sure everybody that's in New York. Will eventually get through it. You'll be at some event there, but we're making tremendous progress, you know, and you know, with with all our luxury Brands, but particularly Waldorf, we have 30

Speaker Change: 6. Open 33 in the pipeline, we're going to open 6 Walters this year. Um, you know, and and some of the most, you know, well New York, I would say probably the most important luxury hotel. Not just for us, but probably for anybody in the world. So, you know, we're making really good progress, our customers like it, you know, and, and we'll continue to grind and those are complicated. And, as I said, they're part of the, you know, the they, they help prime the pump of loyalty and other things. Um, but I think, you know, they are never going to be a disproportionate, you know, piece of the puzzle in terms of, you know, bottom line profitability. But but they're important. And that's why we focus on lifestyle is a little bit different. I mean, lifestyle can span, you know, a collection brand that's upscale, you know, a micro Urban brand like motto, you know, all all the way up to Nomad and luxury lifestyle and everything in between and in the end when you add it all up,

Speaker Change: Lifestyle is a mega category, you know, it can be thousands of hotels. Um, you know, that we have found like everybody else that, you know, there are customers particularly younger customers that love our core products and they stay in them, but they, they really want these, you know, sometimes for some of their needs, you know, but you know, uh, in certain for certain trip occasions and so we've obviously been super focused on it. As I mentioned, we're going to have 2 or 3 more Brands you know that I mentioned.

Speaker Change: We can drive market, share, you know, the more loyalty members, we get the, the lower our distribution costs become. And so it goes and so lifestyle, you know, we did a thousand with luxury and lifestyle, you know, I think that the the addressable Market is Into The Many of thousands, not necessarily the luxury piece of it is for the reasons I described but, you know, with the broad range of lifestyle and at different price points. And so we're super focused on it, super excited about it. And I think making making terrific progress.

Speaker Change: Thank you.

Speaker Change: And your next question comes from Steve pezzella with Deutsche Bank. Please go ahead.

Steve Pezzella: Good morning everyone and thank you for your questions.

Speaker Change: Good morning, just wanted to try and expand on convergence a little more if we can, can you talk about what you're seeing in the, in the turn environment, both domestically and internationally how much key money is being used. In addition, what do you view as the addressable market for conversions including some of the more bulkier 500 to 1,000 plus unit deals?

Speaker Change: Yeah, I think it's a good question Steve. I'll just give you some of the you know just some of the conversion stats, you know, with 30 33% of our deals in the quarter were conversions. That's up 50%. We expect it's going to be 40% for the year that you know addressable Market. There's look if you think about, if you think about parts of the world like your

Speaker Change: Europe in particular where there's where there's a lot more unbranded hotels um than there are branded hotels and then you think about you think about we take I mean I think I think at the end of the day you have to come back to. We take share I mean Chris implied this in his early answer but how do you have confidence in 6 to 7? How do you have confidence that you can fill in conversions when when the new construction environment is a little bit slower? Well part of it is that you know you fish where the fish are right, developers want to do deals and when new construction gets a little bit harder, by the way, our new construction is fine and our brands are more financeable than our competitors Brands. And so we take share in new construction, so that's a good story. I don't want to, I don't want to Discount that but but then you talk about brands that are you know perform less well particularly in a softer demand environment where people are seeking in better performance and better rep per index. Driven by our Network effect, the addressable Market. I mean we could do the math is huge, right? Because you have all the independent hotels and then you have all the hotels where you have an exist.

Existing brand where either the contracts coming due or, you know, or the contracts coming due and it can perform better, right? And so we have a lot of confidence in our conversion strategy, bigger hotels. You're starting to see, you'll see, you'll see a couple, um, between now and the end of the year that we can't talk about yet. Where they're larger hotels, right. You know, 7 800 room hotels that are independent and sort of in this environment don't want to go it alone. So we're, we're coming in and converting to our brand, so it's sort of all the above

Speaker Change: Of, um, and we really believe that the strength of Our Brands um, you know, gives us a leg up in conversions and then key money, I'd say not really that much that it really hasn't changed all that much. It is a slightly more competitive environment. Um, we we, um,

Speaker Change: We have been very disciplined, right? We, we still have of of our rooms under construction. We only use key money on 8% of the deals. And, and so that's sort of consistent with long-term trends. Even in an environment where, you know, our competitors are using a little bit more to try to claw back some of the share that we're taking from them. And so it it's not, you know, in the higher end when you get into luxury luxury and and convert conversions of larger hotels, it does get competitive because you just have more Brands chasing it. But I think overall our ranges of use in terms of dollars and percentage of deals is going to remain very consistent.

In your next question comes from Robin. Farley with UBS, please. Go ahead.

Great. Um, I trying to figure out which of my 2 questions to use for my 1. Um I guess I'll I'll go with that. Uh, Kevin you're um, comments.

Speaker Change: GPS. Thanks.

Speaker Change: Yeah, that's all fair. I'll take the second half first because it's second part first because it's easier. Yes, we we the there were some termination fees that um, you know, some some some of which has been highly publicized because it was part of a public transaction. That was timing from third Court. We expected in third quarter, came in the second quarter was all built into our guidance. Um, you know, the reason we said predominantly timing is it was almost all built into our guns, right? You get a little bit of movement here and there on FX and a couple of other things on revpar. But largely it was timing of, you know, you get termination fees. Some of the other ancillary lines of business that are non-rev part driven and a little bit of corporate expense that we view as almost entirely timing. And that's why you saw us keep our guidance consistent for the year.

Speaker Change: okay, great, thanks and any, I don't know if you can um, break out like the dollar amount that sort of shifted maybe into Q2 from Q3 and then I'll I'll hop back in line for my other know, I was going to keep it to what I said Robin was which is you know,

Speaker Change: Largely timing, yeah.

Speaker Change: Totally, totally fair. Thank you. Sure.

Speaker Change: And your next question comes from Brant Montour with Barclays. Please go ahead.

Brant Montour: Um, good morning. Um, thanks for taking my question. Uh, so, um, I just wanted to drill in, on, on spark, uh, the prepared commentary. I was pretty clear, right? You have 170 open 200 in the pipeline.

Brant Montour: Uh a concern floating around out there that that the first sort of wave of spark are quote, you know, lower hanging fruit. Uh and then the you know the next wave would would sort of take a little bit longer to get done. Um and perhaps contribute less to net unit growth over sort of maybe the same period of time it

Brant Montour: Is there any sort of um you know? Um is there any truth to that and and and if so you know, maybe you just help us understand which conversion brands are going to would make up for that.

Brant Montour: Yeah, well, the second part first, there's all our other conversion brands are are performing well. And, as I mentioned, we're going to have a couple more, um, by the end of the year that we think will add meaningfully to growth, but that doesn't take anything away from spark. I don't know what the noise out there is probably most, you know, likely coming from our competitors. Um, you know, and I'll leave it at that but Spark's doing great. You know, we, as I said, we have 170 open 200 in the pipeline. Our, my goal is by the end of next year to have 400 of those plus open. I think we will y400 because I think we can generally prove sort of semi-scientific that when you get a system size if it's distributed you know, the the right way.

Brant Montour: Particularly here is it's largely starting out in the US. It starts to take on a life of its own. Um you know, the key to being able to get there and keep the momentum is obviously performance. Always and market share spark is now the highest. If you look at our comparable hotels, which now is gone from a very small set of hotels to a growing and decent sized set, it's the highest market share brand that we have, so it is performing exceptionally. Well, I've also heard noise out from others in the market that Sparks. Not all. It's cracked up to be performance-wise. It's, that's a bunch of who we. It's literally, the highest market share brand and we have some very high market share Brands. Um, so I feel very good about that and as I mentioned in the prepared comments, we got a, it's a big world out there, right? So you know, we've got, you know, we've got India that, you know, we've done a deal. We've got, we mentioned Saudi Arabia, we mentioned, you know,

Brant Montour: Puerto Rico, Europe is just getting cranked up, you know, they're Latin America. You know, we're just getting cranked up. So, um, no, I'm not. I'm I, I believe we are on course to deliver a spectacular continue to deliver a spectacular brand. That will continue adding to our growth through conversions by driving extraordinary performance, for those owners that that sign up with us. Um,

Brant Montour: Again, I'll go back to reinforce that doesn't mean it's the only engine of growth. I think we have a bunch of others that you know that continue to to add, you know, significantly double trees obviously.

Brant Montour: We'll talk more about it when we have when we have a name and a little bit more substance but that gives you a sense of how excited ownership Community is that we don't even have a name. We have the concept and, uh, and they're willing to sign up. So it's a, you know, a multifaceted approach. It's not in any way overd dependent on spark, but Spark's doing great. And we'll, we'll continue to be a great contributor for many many, many years to come

Speaker Change: Excellent. Thanks for

Speaker Change: And your next question comes from Lizzie dove with Goldman Sachs, please go ahead.

Lizzie Dove: Morning. Thanks for taking the question, I guess. Also, last year, you did a couple, you know, Partnerships like with slh and some inorganic things with Nomad and graduate. I'm curious what your appetite is today and on the go forward and to doing uh, more of these and whether that kind of 6 to 7% unit growth that you're kind of talking about if that's all organic or if it includes any kind of other Partnerships or small deals that you might do.

Lizzie Dove: No I think the way you should think about that is it's organic um and that you know like we're very happy with all 3 of those slh.

Lizzie Dove: You know, now I view as an organic. Um although the bulk of that came into the system last year, there'll be a little bit that comes in this year um with Nomad and graduate. We're super excited about how those are going. We even have some things to continue to offshoots in The Graduate world and all the accommodations and other approaches to being able to monetize in our Core Business that acquisition. And so we're super excited about, you know, the how those are going and the returns that we'll get on them. But you listen for, I've been here, 18 years, and other than those, you know, 2 things really, with slh being a partnership noad and, and graduate, we've not acquired anything. Um, you know, so it's not to say, you know, that I say this and I'm, I'm required to, uh, Never Say Never we could, but that's not what our focus is. Our Focus, which is why I put it in my comments is on.

Lizzie Dove: You know, getting back to Brand building the way we do it, where we see legitimate white spaces that are opportunities uh to continue to build our Network effect and add add to our growth. So the entire organizational focus is is there. Um, we're not we're not out sort of bounty hunting to to do Acquisitions. So the way you should think about the 6 to 7 is that that does not imply. We're going to go out and buy anything that that implies our existing and

Lizzie Dove: New brands are going to deliver that kind of growth.

Lizzie Dove: Super clear. Thank you.

Michael Bellisario: And your next question comes from Michael Bellisario with beard. Please go ahead.

Michael Bellisario: Thanks. Good morning. I just want to go back. Go back to the fundamentals, in your positive. Momentum comment. And are you seeing group leads actually convert? The more signed contracts or is there still a gap there and then, similarly on BT. Are you seeing any momentum recently in terms of a, a pickup in in demand or looking? Thanks. Yeah. I, you know, I sort of said, it's a really good question, Michael. Um, and I tried to address it in various comments. I made and I'll say it again. Yes, we are. But very early days. I mean, you know, we were coming out of this very noisy period And I think there's sort of a recovery, you know, we're in a recovery zone where things have definitely stabilized you can, you know, go look at what all the airlines said and you can sort of get that same thing. Things have sort of stabilized. And if you look at very recent, you know, data Trends, I think you could start to say, what I, what I said earlier that the the great you're

Michael Bellisario: Advance and they are booking to a point where, you know, we have High single-digit group position into 26 and 27. I think that's a super strong leading indicator of the psychology out there. But we're early in the early in this reporting season. We're early in the third quarter and we still have all this noise in the third quarter. I think it takes to the fourth quarter to get past some of the calendar shifts and and holiday shifts.

Speaker Change: In your next question comes from speeds rose with City. Please go ahead.

Speaker Change: Hi, thanks. Um, I just wanted to ask you um, if you provide any kind of updated thoughts on your presence in the all-inclusive space, you noted, a handful of properties uh, were transitioned out due to the m&a. Is that still a big kind of uh, focal area for your, for your leisure guests? Are you kind of more focused on getting kind of near-term conversion opportunities there? Just kind of how do you think about, I guess, maybe back filling some of those rooms

Speaker Change: Yeah we we feel listen. I I we've been focused in the AI space as as everybody else. I think it's a you know a a good growth business. I don't you know it's obviously only applicable and limited markets so it's not the biggest growth opportunity that we see in the world but it's an important 1 which is why we focused on it, you know, the player thing obviously worked out in a way that every

Everybody knows um which you know set up you know reduced the size by rooms of the portfolio that we opened some other things. So we're not really particularly far off. We're at 5 or 6 thousand rooms that we have open. You know, if you look at the pipeline and other things that we have sort of under discussion, you know, a similar, similar level of of active discussions and we have found again for certain markets. It's um, it's it's a good outlet for um, redemptions for, you know, for some of our most little honors members so we will much like we've done in luxury and other areas we will continue. Uh, we will continue to, to move forward and continue to grow there. And we feel, you know, great about our performance and great about the growth opportunities. We just opened in the Dominican Republic or you know, last week, a beautiful, big new Carrillo and we have a bunch of other, a bunch of other

Speaker Change: Of those coming. So again, I you know, it's important. It's not relative to the, you know, a big Global business. It's a, you know, it's a relatively small part of our business. And I think when we wake up in 5 or 10 Years, it'll be a lot bigger than it is today, but it's not, it's not going to be a super large percentage of the overall business.

Speaker Change: Yeah. And I think smees will do both new builds and conversions. I mean Chris referenced the the the curio and the Dominican that's that's a new build but we also converted a a Hilton on the beach in the hotel Zone in Cancun there was a big conversion and so we'll do both and I think you know as Chris said that space is important to us and important to our Network effect, but you're also getting some you know, some pretty good concentration out there in that space, which should yield some conversion opportunities over time.

Speaker Change: Great. Thank you.

Speaker Change: Sure.

Speaker Change: Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the call back to Chris neeta for any additional or closing remarks.

Speaker Change: Thanks everybody. As always, we appreciate you spending an hour of your life with us to talk about it, as you can see. Um, in the dialogue today obviously coming out of, you know, Liberation day and other things, there's been a decent amount of noise in the system but I'm, I and we are very optimistic. I mean, even in the middle of all that noise, we were able to give guidance sort of plus or minus you know Media or beat it even with declining rev modestly. Declining rev par is able to sort of deliver great bottom line results. I think it's a testament to the strength and resiliency of our model um you know the development side you were hitting on all cylinders we we were feeling incrementally better on the development and not not worse. Um about

Thanks again and enjoy the rest of the summer.

Speaker Change: Thank you for attending today's presentation. This now, concludes our 2025 second quarter investor conference call. You may now disconnect