Hilton Worldwide Stock

Good morning, and welcome to the Hilton Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruehr, Vice President, Corporate Finance and Investor Relations. You may begin.

Thank you, Chuck. Welcome to Hilton's second quarter 2026 earnings call.

Before we begin, we would like to remind you that our discussion 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. 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. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com.

This morning, Chris Nassetta, 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 our expectations for the third quarter and full year. Following the remarks, we'll be happy to take your questions.

With that, I'm pleased to turn the call over to Chris.

Thanks, Charlie, and good morning, everyone. We're excited to report strong second quarter results with RevPAR, adjusted EBITDA and EPS exceeding our expectations. The continued improvement in travel demand across chain scales and segments supported both our top line and bottom line results. We continue to execute on our disciplined development strategy achieving one of the best quarters in our history for signings, further growing our record pipeline. Our strong portfolio of brands, powerful commercial engines and disciplined execution continues to support meaningful free cash flow generation. We remain on track to return $3.5 billion to shareholders for the full year.

For the second quarter, System-wide RevPAR increased 3.9% year-over-year, driven by underlying demand recovery in the U.S., where business transient and group both exceeded expectations and a strong World Cup. Business transient RevPAR was up 5.7%, a 3-point step-up globally and a 4-point step-up in the U.S. versus the first quarter driven by midweek demand from small- to medium-sized businesses. Leisure transient RevPAR was up 1.6%, supported by World Cup demand exceeding expectations but offset by unfavorable holiday shifts and pressure for the conflict in the Middle East. Group RevPAR was up 3.7%, driven by growth in company meeting demand and favorable event calendar shifts.

As we look to the second half of the year, we expect underlying RevPAR growth to remain strong across chain scales and segments. We expect U.S. RevPAR to continue to benefit from macro tailwinds, including supportive tax and regulatory policy, increased private sector investment in the AI complex and ongoing public infrastructure spending, which should benefit the middle- and lower-income consumer and drive broader demand growth across our system and will be coupled with historically low levels of supply growth at less than 1/2 of 1%. We expect the business transient segment to lead as its recovery continues to strengthen into the third quarter. Given its momentum, we're raising our full year System-wide RevPAR growth expectations to 3% to 3.5%, with third quarter above our full year range, benefiting from the World Cup and holiday shifts and fourth quarter a bit below due to calendar shifts and midterm elections.

Turning to development. We had a strong quarter, opening more than 200 hotels totaling over 24,000 rooms, up 50% from the first quarter more than 20% of total openings were Luxury and Lifestyle hotels, including the opening of Conrad Athens, which marked the debut of our Conrad brand in Greece. We celebrated reaching 500 lifestyle hotels with openings across 12 countries, including the brand debut of Curio in India. Additionally, we surpassed 100,000 rooms globally for Home2 Suites and announced the brand's view in Spain, another key European market for us.

Conversions represented 36% of openings for the quarter across 12 brands in nearly 30 countries, including Spark openings in Saudi Arabia, Germany and the U.K. Across our portfolio, the 20 new brands that we've launched over the last 2 decades have been powerful engines of our unit growth, and we expect them to continue driving more than half of our net unit growth in the years ahead. We believe our ability to identify white space, develop the right brands in partnership with our owners and launch them with discipline remains a real competitive advantage for us.

Building on that strength in the quarter, we Undergraduate by Hilton, a new upper mid-scale brand created to serve a broader range of college and university markets. Undergraduate expands Hilton's collegiate hospitality strategy with a flexible development model that supports both new build and conversion opportunities. Undergraduate complements our existing Graduate brand for a different addressable market with long-term expansion potential of more than 400 hotels.

In the quarter, we signed approximately 43,000 rooms, representing the second largest quarterly signings in our history, increasing 50% from the first quarter and growing year-over-year above our 5-year average historical growth rate. Of total signings 35% were in Luxury and Lifestyle with notable announced signings, including the Waldorf Astoria Miami Beach and our first Curio in the Bahamas. More than 70% of our signings were in international markets, driven by strong momentum across Europe and Asia Pacific outside of China where we currently only have 2% and 1% market share of supply, respectively. In CALA, a fast-growing region where we have only 3% market share of supply, Signings grew 20% year-over-year with growth across all chain scales.

Despite the conflict in the Middle East in the quarter, Middle East signings were up low single digits year-over-year. Our pipeline now stands at a record 541,000 rooms spanning more than 130 countries. Almost half of the pipeline is under construction, positioning Hilton for sustained 6% to 7% net unit growth as we continue to capture a bigger slice of a growing global pie. In the quarter, we saw new development construction starts to continue to grow led by the U.S., which was up over 40% versus the same quarter last year. On conversions, we continue to take well more than our fair share of quality rooms and expect conversion openings to be up in all regions for the year, comprising approximately 40% of total openings.

Both new development and conversion growth is driven by continued developer preference for Hilton brands due to industry-leading RevPAR premiums, which further increased in the second quarter. We know our development success is built on strong partnerships with owners, which is why we evaluate every decision through the lens of owner profitability. Over the past year, we've taken several concrete steps to help owners lower costs, strengthen hotel profitability and improve their returns.

First, on fees, reflecting the continued growth in scale and efficiency of Hilton Honors we reduced loyalty fees for most hotels globally. We also launched Hilton Rise, a program that provides program fee discounts when hotels consistently deliver an excellent guest experience. Second, we are taking a more flexible and tailored approach to renovations, balancing owner investment with guest expectations and hotel performance. Most recently, we initiated an intensive cross-functional review of hotel-level P&Ls to identify where Hiltons' scale, technology and enterprise capabilities can drive incremental owner profitability. Through this work, we are exploring system-wide opportunities across workforce innovation, purchasing power, and brand cost discipline to strengthen hotel-level margins, reduce complexity and create even greater long-term value for our owners as well as all stakeholders. These owner profitability initiatives are enabled and accelerated by the power of our proprietary technology platform which allows us to innovate faster, scale more effectively and deliver greater value across our entire network.

Earlier this month, we announced an industry-first direct connection with Navan, a travel management company. This integration was made possible by Hilton-developed booking and content APIs that provide direct real-time access to Hilton availability, rates, booking and authoritative property and room content. This direct connection bypasses both intermediary connections and other more expensive distribution channels providing meaningful cost savings for our owners. The same flexible AI-ready technology stack is also enabling the Hilton AI Planner, which launched earlier this year, bringing more personalized, intelligent and useful planning tools to all of our customers. We will continue to extend our technology advantage and utilize it to drive superior returns for owners and better experiences for our guests.

Our exceptional Hilton team members continue to bring our award-winning culture to life, helping Hilton achieve 19, No.1 Best Workplace recognitions globally so far this year, the highest number we've ever achieved. This commitment to delivering reliable and friendly stays also strengthens our industry-leading brands with Hampton, Home2 and Tru recognized for best in category by J.D. Power for 2026.

Overall, we're pleased with the quarter and remain confident that our powerful network effect, industry-leading RevPAR premiums and fee-based capital-light business model will continue to drive strong operating performance, net unit growth and meaningful cash flow, enabling us to return an increasing amount of capital to shareholders.

Now I'm going to turn the call over to Kevin with a few more details on the quarter and our expectations for the full year.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR increased 3.9% versus the prior year on a comparable and currency-neutral basis. Growth was driven by underlying demand recovery in the U.S. where Business Transient and Group both exceeded expectations and the strong World Cup. Adjusted EBITDA was $1.054 billion in the second quarter, up 4.6% year-over-year and exceeding the high-end of our guidance range. Growth was affected by onetime and favorable timing items specific to the second quarter of 2025 and significant renovations in the ownership portfolio in 2026. Out-performance was driven by better-than-expected System-wide RevPAR growth and $17 million of non-RevPAR timing items.

Management and Franchise fees grew 6.4% year-over-year. For the quarter, diluted earnings per share adjusted for special items was $2.29.

Turning to our regional performance. Second quarter comparable U.S. RevPAR increased 5.4%, driven by strong demand across all segments with U.S. Business Travel and Group exceeding prior expectations and a strong World Cup. For full year 2026, we expect U.S. RevPAR growth to be in the mid-single digits. In the Americas outside the U.S., second quarter RevPAR increased 4.6% year-over-year driven by strong Group and Business Travel demand with Canada leading regional gains and continued growth across the Caribbean and South America. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits.

In Europe, RevPAR grew 4.3% year-over-year, led by the U.K. and Ireland and continent-wide strong business and leisure performance. For full year 2026, we expect RevPAR growth for the region to be in the mid-single digits. In the Middle East and Africa region, RevPAR decreased approximately 30% year-over-year, which was better than prior expectations, however, uncertainty in the recovery remains. For full year 2026, we now expect RevPAR in the Middle East and Africa to be down in the high-single to low-double-digits, supported by a strong start to the year before the conflict and modest assumptions for a continuing recovery.

In the Asia Pacific region, second quarter RevPAR was up 6.3% in APAC ex China, led by strength in Business and Leisure and overall strength in Japan and Korea. RevPAR in China decreased 2.2% in the quarter, driven by a decline in Group Travel resulting from continued government restrictions. For full year 2026, we expect RevPAR growth in Asia Pacific to be in the low single digits, with RevPAR down low single digits in China.

Turning to development. As Chris mentioned, for the quarter, we grew net units 6.1% and now have more than 541,000 rooms in our pipeline. We continue to have more rooms under construction than any other hotel company with approximately 1 in every 5 hotel rooms under construction globally, slated to join the Hilton portfolio. We expect to deliver between 6% to 7% growth for the full year with the second half of the year stronger than the first half of the year.

Moving to guidance for the third quarter, including the impact from the Middle East conflict, we expect System-wide RevPAR growth to be approximately 4%. We expect adjusted EBITDA to be between $1.035 billion and $1.055 billion and diluted EPS adjusted for special items to be between $2.28 and $2.34 both affected by the ongoing conflict in the Middle East and significant renovations in the ownership portfolio and timing items. For the full year, we expect RevPAR growth of 3% to 3.5%, driven by continued broadening of demand growth across our system and strength in the U.S. As a result, we expect adjusted EBITDA of between $4.04 billion and $4.08 billion and diluted EPS adjusted for special items of between $8.89 and $9.01. Please note that our guidance ranges do not incorporate future share repurchases.

Moving on to capital return. We paid a cash dividend of $0.15 per share during the second quarter for a total of $34 million. Our board also authorized a quarterly dividend of $0.15 per share for the third quarter. For 2026, we expect to return approximately $3.5 billion 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 limit yourself to run question. Chuck, can we have our first question please?

And our first question for today will come from Shaun Kelley with Bank of America.

Thanks for all the prepared remarks, a lot to cover. Chris, I'm going to go down a slightly different path, which is, I think, I feel like your section on owner health and some of the initiatives you've taken there is new. And I'd like to just see if you could elaborate a little bit, specifically, if you could just comment on the reduced royalty fee you mentioned for owners and maybe elaborate a little for those who aren't as familiar with the RISE program and what that may mean? Just some of these initiatives you're taking to help out owners and sort of that point there.

Yes. I'm happy to do it. We put in the script for a reason. We're spending and have been spending a lot of time on this. I mean if you think about it, not to go too far back in time, but if you think about the lead up to COVID, and I hate going back this far, but if you look at '17, '18, '19 you had conditions in the industry that were not great in most of those years in the sense of you had very low top line growth and higher growth in expenses. It wasn't as high as it got post-COVID, but nonetheless, margins were sort of going backwards, and I think it made very challenging.

I'm talking predominantly at this point really in the U.S., which is still 75% of the system. And where these issues are more extreme. And so it was quite a difficult operating environment for owners. Then you get into COVID, and we all know it was difficult for everybody, us and them, but I mean all of the operating costs and all that are -- those burdens are taken on largely by our ownership community. So really, really difficult time. We did, as you know, a ton of different things to provide relief during that time. We worked very quickly and I think in a really thoughtful way to try and help every way we could and also make sure we survive those times which we did and as did they.

And then we get out of COVID and you got into a super high growth period of time, obviously, as a result of getting past the pandemic and you had very high top line growth. And while inflation was high, you did see some pretty nice trajectory because you had really strong rate growth in a higher inflationary environment. But -- and that felt good, particularly after COVID. But then over the last couple of years, what you've been really suffering from is a bit like the pre-COVID times with a little -- even a little bit more extreme, meaning in the U.S., you've had very low or last year, negative top line growth and expenses growing higher than that and stubbornly sort of high inflation and particularly in areas that matter in insurance and energy and in labor costs. And so margins have been going backwards.

And so here's the reality we listen to these things. I'm -- I come out of the owner community. It's been a long time now almost, I guess, 19 years, going on 20 years, but I sort of cut my teeth in the industry on that side of the business, have a lot of relationships and friendships and in that -- in the ownership community. And we're listening to them. And so what we've been trying to do over the last year or 2 is think about on a broad basis, how can we be smarter in that environment to help out. Now I do think things and we'll get to it. You see it in the results year-to-date and what we're guiding to into next year, we'll leave that for another question.

I think things are going in a really good direction where my belief is owners are going to get margin growth, and that we're going to get into a different cycle. But the reality is they've had a more challenging time. And so -- we've been, at the same time, growing scale and utilizing AI and lots of process change to get more efficient in every way, not just that affects our P&L, but that affects the broader P&L and the entire system that we manage for the owner community. And so last year, we launched and it started life in January officially, but we launched last year, reductions in loyalty because we can, because we have been continuing to garner scale and efficiencies in that business. And then we put project what we called RISE and I talked about in place which is basically a reduction in program costs, again, around efficiencies that we're able to find that we can still run the system but do it more efficiently, utilizing better process, AI and a lot of other innovative thinking.

And the combination of those things is somewhere between 75 basis points and 100 basis points in margin for owners. Now in RISE, we did create a gating system, which we think is good for everybody, which means we know during COVID that there was the whole industry, a lack of investment -- and so we're trying to -- we obviously are going through a big investment cycle. Our owners are investing a lot of money, but we basically want -- set it up so that if it's a good experience for the customers, you get through the gate. And if it's not, then you have to work on that. And if you do, you'll get through the gate. And right now, a little -- and those standards move up every year, but roughly half the system right now in the United States is getting the full benefit of both of those things. And I believe that will continue to grow. So I think it's good for the ownership community. It's incenting the right behaviors vis-a-vis delivering the right outcomes for customers, which ultimately is what helps us continue to drive share growth, which is good, not just for us, it's good for the system and good for owners.

And the last thing is we're doing another body of work, which I would sort of describe as RISE II to internally, which is trying to figure out in a very granular way across the entire P&L, as I mentioned in my comments, across our entire cost structure across all brand standards both operating and physical property level standards. Are there things that we can do to continue to push the envelope and that's utilizing sometimes old-fashioned elbow grease and sometimes utilizing the benefits of our technology and AI, where we're making really good progress. And we do think there's more opportunity to come. So that's why I put it in. I mean I put it in because I said that, Charlie, and [indiscernible] we're spending a huge amount of time on this for all the right reasons. We're spending a lot of time as we always do with our ownership community. And we want you and them to know that we recognize that they are extraordinarily important partner and customer of ours, and it needs to work for the customers in the hotels and it needs to work for them for our flywheel to keep flying.

Next question will come from Dan Politzer with JPMorgan.

Chris, you talked about a broad-based momentum and strengthening of demand trends for the remainder of the year and actually into 2027. Can you talk about what underlies that confidence in line of sight over the course of the next 18 months? And how do we kind of reconcile that with the kind of nuances in your cadence for RevPAR up 4% in the third quarter and then I think it implies about up low single digits in the fourth quarter.

Yes. I mean, so at the risk of a lot of data, let me try and like lift up because there's a lot of noise in this year. There's some negative noise, which is largely sort of oriented towards the Middle East, a little bit of Mexico -- and then there's a lot of positive noise, if you will, between easier comps broadly and World Cup. And so we spent -- and hopefully, this is helpful. And we spent a huge amount of time on the science of like getting underneath what's really going on when you sort of cleanse it for all of that. How does it make you feel?

And so what I would say, like let me break down Q2 a little bit, let me talk about both in the U.S. and globally, and then let me talk about the year and the setup for next year. So if we were at 5.4% in the U.S. in Q2, I would say roughly half of that, so a little -- leaving behind 2.7%, a little over 2.5% was -- what we say is real sort of run rate growth. And the other 2.7% was comps and World Cup. I mean they just -- you had meaningful benefits from those two things. If you look at the world, we were at roughly 4%, and there was roughly 2 points of that 4 points that I think was -- were those things. So you would say 2% to 2.5% in both cases when you round it and you take out the noise.

Now remembering this is going to complicate more. The Middle East in the quarter was a full percentage point. So the 4% would have been 5% and above for Middle East. But let's leave that out for the moment. Sort of the run rate, I would say, when you look at the full year in the U.S. sort of implies around 2.5%. We think that's what it's going to be for the second half of the year. Kevin said in his comments. Third quarter is getting a little extra juice from the World Cup and some holiday stuff. The fourth quarter has got some calendar shifts in the midterms. When you look at the year -- the second half of the year, we think it looks a lot like the first half of the year when you take out the noise, of comps and World Cup.

When you look at the full system-wide and do the same thing. We think it ends up at like 2% or 2.5%. So what we would say, like as we get into budget season here in the next few weeks, what we would say is you start off a base, which is -- I mean the big difference is really Business Transient midweek coming back in a very meaningful way, which is where you're seeing the greatest improvement, we think that you're running at 2% or 2.5%. So as I think how that translates -- and I think the second half of the year is just fine. There's just noise with World Cup and calendar shifts going on. We don't think there's anything wrong with the fourth quarter. But that's just noise. That's just like -- that's stuff happening as between the quarters.

As I think about '27, which we're starting to do a lot of thinking on because we are literally getting into budget season. And even though it will be a granular exercise, there is some top-down view of the world that Kevin and I and others will provide I sort of look at it like you're starting out at 2% to 2.5%. And then what do you add to it or take away from it? I would say most of the stuff I see is a tailwind to that. So I think you could debate it, but I would be happy to debate it with you, the U.S. economy is getting stronger. I mean it shows up in our results. The strength is broadening for the reasons that I talked about in my script. You have very favorable tax regulatory policy, huge investment cycle in AI infrastructure to support the AI complex, broad-based spending that's going -- continuing to go on, on infrastructure. Just look at the RFI numbers, the single highest correlation between demand growth and hotel rooms historically and now is -- increases in NRFI, those numbers are going up, not surprisingly when you're spending trillions of dollars on these things, it leads to good things. So I think that is picking up steam.

Things can happen, good, bad and ugly. I realize, but I'd say I would take the over that the 2.5% that we're sort of baseline in the U.S. it's getting better. You've got more opportunity in recovery of government. On top of that, you've got inbound international in the U.S. I mean, the second quarter was great because the World Cup. But I mean, broadly, next year, through the whole year, you've got opportunities for recovery in inbound international travel. Okay. So that all feels pretty good.

And then you think about the rest of the world, and there's a lot of uncertainty. I mean you have -- I'm optimistic by nature, everybody knows that. I would think the Middle East is going to get resolved one way or another and that we've got tailwinds which are probably the Middle East this year alone is costing us 0.5 point, something like that in overall growth. I don't know what it will be, but I think it will be better than -- so I think we have that tailwind. I think we've got a Mexico tailwind. Again, it's a relatively small part of the business, but impactful. And I just was in China a couple of weeks ago and spent a great week with our teams there. It's hard to know. The China economy is sputtering, I mean it's growing but not consistent with what prior growth rates have been. But it feels like sort of hitting some level of stability. And I think there's an opportunity to not maybe see incredible upside, but a bit of upside there, which has obviously been a bit of a drag for the last few years.

And we thought, well, China would be flat this year. It's not -- it's going to be down another another couple of points, something like that. So again, when I put all that together and I think about our budget off of sort of a 2.5-ish baseline, I would say I think it will be better than that. And I think we'll have another really healthy year of growth, all things being equal.

Your next question will come from Lizzie Dove with Goldman Sachs.

I guess maybe expanding on that a little bit. You talked last quarter about the C-shaped economy and the convergence between the chain scales, particularly in the U.S. Could you maybe expand on that and kind of how you're seeing that now and how that's evolved through the quarter and to the extent you believe that could continue to be a tailwind as we move into '27 as well?

Yes. And then, Lizzie, thank you for the question. I talked about it a bit, so I'll try not to be too redundant. I mean we're definitely seeing it. I mean that doesn't mean, by the way, that the top of the C is -- is coming down. I mean, Luxury is doing -- the high end of the business continues to do quite well. And I told you that my expectation is it will. I think it was particularly [ torqued ] during World Cup because World Cup was very focused on lots of inbound -- high-end inbound international during the quarter and in urban markets. So I think you got extra torque in the quarter. But I think the high end for some extended period of time will be good. But what you're definitely seeing if you look at last year, the mid-scale, upper mid-scale, all that was negative last year, and the biggest sort of flip around, if you will, has been in those segments going from circa like minus 2% to plus 4% to 6% a very, very big turnaround.

I think like it's hard to deny -- again, look at the NRFI numbers, like all of that investment going on in the country, like the people that do it aren't staying in luxury hotels and people that do it are staying in mid-scale, upper mid-scale and that's what we're seeing. As I think I already said, the biggest single change we've seen over the last couple of quarters is midweek Business Transient growth, which is exactly what we've been dying to see and really strong growth in SMB, small, medium-sized businesses within Business Transient that is significantly from a growth rate point of view, outstripping what we're seeing with like big corporates and the like.

And again, I think it's all sort of fundamentally connected to the regulatory tax investment cycle, AI cycle. I don't know how all that ends. I'm not smart enough to know what it looks like 2 or 3 or 4 years from now. I would bet a lot of money. It's awfully hard to stop the spend. And once all those trillions are sort of committed, all these data centers. I mean, they're data centers, one in Kentucky, written about the [indiscernible]. It's $0.5 trillion data center, one data center. Once this stuff is going, it will keep going for a period of time. And so I think -- I do think we are seeing the bottom and the mid -- the middle class is getting back in the game and all these mid-scale, other mid-scale, everything sort of that has been fairly weak over the last couple of years is really strengthening. It's really impossible to deny. We continue to see it, by the way, going into the third quarter. We continue to see it post-World Cup.

Now we don't have a ton of data post-World Cup. But I mean World Cup was winding down. There are fewer and fewer games, and yet into the third quarter, we continue to see really good strength in rate. We continue to see really good strength in midweek business transient, really good strength in SMB, all the things that we're talking about. So I think this C-shape thing is alive and well. And I think it's -- personally, I think it's sustainable just based on the basic laws of economics.

The next question will come from Brandt Montour with Barclays.

I was hoping maybe, Kevin, if you could talk a little bit about the EBITDA guidance that you guys gave. You beat the 2Q guide by a healthy figure and didn't flow through all of that to the full year EBITDA guidance in the midpoint. Just wondering if there's anything to call out there or just general conservatism?

No. I think that, look, we put something in both our prepared remarks and the release about some of the items that were timing items. And those timing items about $17 million was really across the P&L, more smaller things, nothing sort of major that I would even call out in that category, and then the rest of it was driven by RevPAR, right? And if you think about what -- how we outperformed and if you drive it by 4 and our rule of thumb, that all sort of holds together in terms of the beat on RevPAR flowed through the way you would have expected it and the increase in our guidance is flowing through for the full year the way you would have expected it.

What's really going on over the course of the year, if you think about the midpoint of our guidance being close to 9% growth, you've got -- we mentioned it a pretty significant drag in the ownership segment, right? We have 3 hotels, 3 major hotels. And if you think about -- if you take a step back in ownership, not to go on a full ramp about that segment. But if you go back in time, we had about 100 hotels. We're down to about 46 hotels in leasehold or a few JVs today. And among that is about 1/3 of those hotels that drive over 80% of the EBITDA are really important, really great hotels that provide a lot of benefit to the company in terms of serving customers. 3 of those strategic are either fully closed in the case of Munich Park and Amsterdam or under significant renovation in the case of Tokyo, which is our largest EBITDA producer in that portfolio. These are really good long-term decisions that are going to drive great performance in these hotels going forward.

So if you go down the line a few years, you're going to have significant -- a couple of years, you're going to have significant tailwinds. But this year, it's over -- that's $20 million to $25 million just in those 3 hotels alone impact to EBITDA. And then if you take the Middle East, that's over $20 million of impact just there in terms of IMF and base fees. And so if you take a step all the way back, just in those two dynamics, you're adding $40 million plus, maybe even closer to $50 million of EBITDA for the year. So if you adjust for that, the full year is well ahead of algorithm. The algorithm is alive and well. So that's really what's going on if you take a step back from it.

The next question will come from David Katz with Jefferies.

Apologies for focusing on just 1 hotel, but you mentioned it, Chris, and I think it's an important hotel and an important market, and that's the Waldorf Miami Beach. Can you talk a bit more about, number one, presumption is that there probably was some key money involved there. And two, just how you see your presence in that market given some of the other luxury dynamics with other hotels reopening and some other trades and upgrades, et cetera, et cetera.

Yes, you're right. It's 1 hotel, but an important one because for Luxury, Lifestyle, South Beach, Miami, pretty important market. We've been working -- we have another Waldorf in the broader Miami market, but nothing in the South Beach market at the high end. And it's something we've been working on for a very long time. The -- our partner in London and what will be a spectacular hotel that's opening up later this fall, the Waldorf Astoria in London at Admiralty Arch, a real jewel box as the Rubin Brothers out of the U.K. and they ended up buying the hotel in South Beach. I think a couple of years ago, and we've been -- we have a great relationship in the work that we're doing in London, and we ended up having lots of conversations with them. And ultimately, they are big, big believers in the Waldorf brand and we were able to make a deal.

There is -- we don't get into disclosing individual deal economics. There's definitely key money. There's key money in every deal like that, particularly in the United States, that's just what the competitive environment suggests, by the way key money doesn't change our guidance on key money in terms of the broader guidance that we've given. But we're really excited about it. They are going to close the hotel, really reinvent it from a beach club point of view, food and beverage, public space, rooms, they're going to really do a thoughtful job and based on our experience with them in London. But broader experience in seeing the work that they've done. We think it's going to be an exemplary representation of Waldorf in South Beach and will fit the work they're doing will certainly fit that market dynamic. So we're very excited about it.

Next question will come from Steve Pizzella with Deutsche Bank.

On the NUG outlook, I believe you've indicated growth should accelerate in the second half relative to the first half run rate. Can you walk us through the key drivers behind that acceleration? How much visibility you have into those expectations today? And any early thoughts on the 2027 NUG outlook?

Yes, I'll take this one, Steve. Look, I think we have a lot of visibility. The vast majority of our -- of what we expect to open this year as construction and process between new build construction and conversions that are in flight. So if you -- the reality is we did say in our prepared remarks and in the script -- sorry, in the press release that is back in -- that's the math, right? So we think we're going to do 6% to 7% for the year, that means we still feel good about the midpoint or we wouldn't be giving you 6% to 7%. And so that just implies that there is going to be an acceleration.

Historically, we are back-end loaded in terms of deliveries. This year, maybe a little bit more than normal. But again, we have visibility into all that, that is in flight. There's still a lot of year left, so you still have time to do in the year, for the year conversions and things like that. So the range is still the range. But we feel comfortable with the midpoint. And then what we've been saying for a while, and we'll continue to say is we think we can deliver 6% to 7% for the foreseeable future. So as we go -- when we go into next year, we will again have the vast majority of what we expect to deliver will be construction and process. You always have some in the year, for the year conversions. That's why we give you a range. But we feel like 6% to 7% is the right way to think about what we can produce going forward.

Your next question will come from Smedes Rose with Citi.

I just -- I wanted to ask you, you mentioned that in the quarter, small and medium-sized businesses were a big driver of some of that great business transient, you saw at [ 5% to 7%, ] was it a similar small and medium that we're helping to drive group? And could you speak to maybe what you're seeing from your larger kind of corporates on the business transient and group side? Is that maybe a source of incremental strength going forward? Or kind of what does that look like from here?

Yes. I think the answer is yes. We saw SMB growth in business transient sort of 7-plus percent roughly. It also definitely was a driver on the Group side. Corporate the big corporates were growing but at a lower pace in both regards. But not dramatically so. I mean if SMB was growing at 7%, the corporate was growing at like 5%, so 4.5% to 5%. So both were pretty healthy, but the pickup, I noted the pickup in SMB for a reason. That has been a very strong driver of the tailwind on midweek business transient, just that pickup. That segment had not been growing as much. And now it's not only growing, but it is eclipsed from a growth rate point of view. So it's both. It's SMB is helping both, that's leading the charge in business transient recovery and helping on group as well.

The next question will come from Robin Farley with UBS.

Great. And I apologize if you addressed this already, we have three calls going right now at the same time. So -- but a lot of commentary about the strong midweek business in group, but definitely is a pickup from last quarter. Can you give a little color on what's going on on the Leisure side of things?

Yes. Yes, we did not talk about that in great detail. Leisure was strong. I mean it was in third place behind Business Transient and Group in the quarter, that has I think ultimately, more to do with the shift in Easter and other sort of holiday timing going on. But we feel very good about continued growth in Leisure. We think it will be driven by high-end Leisure growth, but it will also -- if you believe what I'm saying about getting the middle class back into the game, that means not only are they going to be traveling more for business purposes, but we think they're going to be traveling more for leisure purposes too. So we think that, that will help in that segment on weekends and otherwise. So continues to grow, I think, on a run rate basis will be relatively strong for the year.

And just as a follow-up, I don't know if you quantified anything about the Leisure RevPAR in the quarter? And then I know you mentioned World Cup and calendar benefits adding about half the RevPAR growth. Could you break out just the World Cup piece of it just separately?

Yes. I would say we did talk about the Leisure in our prepared comments. It was 1.6% up again with impact from shift of holiday, et cetera. So it would have been otherwise when you neutralize for that, it would have been stronger. I would say World Cup in the second quarter, if it's 2.7%, and I think it's like 1.5%, 1.7% was probably World Cup. And the other point, the other 100 basis points was comps, plus or minus.

The next question will come from Duane Pfennigwerth with Evercore ISI.

Just to revisit the owner profitability initiative that you highlighted. Maybe you could speak to what specifically Hilton is doing that you believe differs from your competitors on this front. And is this more relevant for a specific set of chain scales? In other words, are these efficiency initiatives more relevant for full service versus select service hotels?

Well, I really can't speak to what our competitors are doing, but I am not aware that our competitors are doing similar things. What's notable is we're reducing the fee load to our owners across the board on loyalty and then if they get through the gate as I described on system fees broadly. What was the second part of the question?

Just if this is more relevant for specific chain scales? Is this more of a...

I'd say it's across the board. Loyalties across the board, Project RISE, which is system pieces across the board. So it affects it affects program fees across all categories.

And then Duane, I'd just add, we've said this before a bunch of times, but these discounts that we're talking about are in the program fees in loyalty and in the program versus other fees.

The next question will come from Michael Bellisario with Baird.

Just on the signings front, run of your best quarters. Is some of that pickup because RevPAR is better and owners and developers are more confident today? And how much of it is just you continue to capture an outside share of deal flow?

Yes. I think -- listen, I think the second quarter -- I mean, the first quarter was a little bit slower, just people getting their engines going. It took a little longer. So some of that was just calendar in the second quarter. But I believe part of it. I can't scientifically tell you how much of it is, yes, a better environment. People are looking at the broader environment. And I think -- I believe what I am describing to you because they're seeing it in their performance broadly in their hotels across the system. And so deals that they've been trying to get in the ground, they're more interested in getting going on and we're interested in signing deals.

And as you heard, construction starts were up in a very material way in the U.S., too, which I think, again, is reflective of people's, number one, ability to get the deals done, ability to get them financed and then confidence in the forward outlook for the business. Some of it is definitely -- we are getting into a cyclical up cycle and people believe what I believe, which is is sustainable, and we're going into a pretty good part of the cycle for performance.

The next question will come from Trey Bowers with Wells Fargo.

A lot of my questions have been answered, so maybe I'll just do more of a modeling question. Kevin, you might have addressed this in the $17 million of kind of puts and takes. But just looking at Franchise and License fees up 8.5% year-over-year. If I look at 7% NUG and 4% RevPAR just anything to call out on comparisons of kind of non-RevPAR fee growth that we're in the quarter last year, not in the quarter this year that would cause that discrepancy?

No. I mean -- well, if you're talking about the full year, it's really everything except for ownership, right? So you do have the Middle East impact, a little bit of Mexico on IMF and you do -- and in the quarter, you do have the [indiscernible] onetime items. So if you know about the second quarter, as we mentioned, there was a big onetime item last year that everybody knew about. And then if you're talking about the full year, it's really just the IMF and the impact of the Middle East. And if you adjust for that and a little bit of FX, you get the algorithm or better.

Sorry. I was just talking specific Franchise and License, not total fees.

On franchise and license fees?

Yes.

That's -- if you look at that for the year, that's algorithm or better as well.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Chris Nassetta for any additional or closing remarks.

Thanks, Chuck, and great to have everybody. We always appreciate you spending time, particularly if we have three other calls going on hopefully, everybody got a chance to listen in. Obviously, a lot going on in the world, a lot of complexity in terms of Q2, mostly good complexity in the sense of things that were helping it. But as I said, I think when you distill it down, I think there are very good things going on. We feel really very good about the setup for the rest of this year, more importantly, the setup for the next year or 2. We think we're in a good -- a good cycle of same-store growth, and we obviously continue to pick up some great momentum on the development side. So we feel great about the business. We feel great about where we're going. I appreciate the time, and we'll look forward to talking to you after the third quarter.

This concludes our conference call for today. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to the Hilton First Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruehr, Vice President, Corporate Finance and Investor Relations. You may begin.

Thank you, Chuck. Welcome to Hilton's First Quarter 2026 Earnings Call.

Before we begin, we would like to remind you that our discussion 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 [Audio Gap] financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com.

This morning, Chris Nassetta, 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 first quarter results and discuss our expectations for the year. Following the remarks, we will be happy to take your questions.

With that, I'm pleased to turn the call over to Chris.

Thanks, Charlie, and good morning, everyone. We certainly appreciate you joining us today. Before we begin, I'd like to acknowledge all those impacted by the Middle East conflict, and I'd like to thank our team members who adapted very quickly and continue to provide extraordinary hospitality during this difficult time. We remain hopeful for a swift resolution.

Turning to results. We're pleased to report a great first quarter during which strong RevPAR and net unit growth drove top and bottom line results above the high end of our guidance. Performance was driven by strengthening underlying demand trends along with ongoing System-wide share gains. Our industry-leading brands, strong commercial engines and powerful partnerships continue to differentiate us from the competition, while a culture of innovation fuels additional growth opportunities. All of this, coupled with our asset-light fee-based business model, positions us to continue producing significant free cash flow and driving meaningful shareholder returns.

In the quarter, we returned more than $860 million to shareholders and we remain on track to return approximately $3.5 billion for the full year. For the first quarter, System-wide RevPAR increased 3.6% year-over-year, driven by broad growth across all chain scales, brands and segments, as well as sequential monthly improvement throughout the quarter in the U.S.

In the quarter, business transient RevPAR was up 2.7%, representing a 4-point step-up in demand from the fourth quarter when adjusting for day of week and holiday shifts driven by improving midweek demand across all chain scales. Leisure transient RevPAR was up 3.5%, driven by concentrated spring brake demand that enabled strong rate growth. [indiscernible] was up 4.3%, driven by growth in company meeting and convention demand. We continue to see healthy underlying momentum for group supported by strong growth in corporate lead volumes.

As we look ahead to the second quarter, we remain encouraged by a continuation of demand trends that we've been observing since late 2025 and now through April, but we do expect some headwinds related to the Middle East. For the full year, we expect improving performance in the lower and mid chain scales with RevPAR strength continuing to move downstream from luxury and upper upscale toward a more balanced convergence demand shape or what I have been calling a C-shaped economy. This trend should be most evident in the U.S., where supportive tax and regulatory policy, expected lower interest rates, increased private sector investment in AI and the AI complex and ongoing public infrastructure spending are benefiting the middle and lower income consumer and driving broader demand growth. As a result, for the full year, our System-wide RevPAR growth expectations are now 2% to 3%, factoring in a range of scenarios for the Middle East conflict and recovery. For the year, we continue to expect group to lead, followed by business and leisure transient.

Turning to development. During the first quarter, we opened 131 hotels totaling over 16,000 rooms representing our second strongest, first quarter for hotel openings in our history. Our Luxury and Lifestyle brands continue to expand around the world, comprising 20% of total openings in the quarter. Earlier this month, in Morocco, we proudly opened the Waldorf Astoria Rabat Sale kicking off 2026 with another key addition to the Waldorf Astoria portfolio, which now includes 40 trading hotels worldwide with more than 30 in the pipeline. Additional Marquee Waldorf openings in 2026 will include the Waldorf Astoria Admiralty Arch in London and the Waldorf Astoria Kualalampur in Malaysia.

Within Lifestyle, our Curio Collection recently surpassed 200 trading hotels with notable openings in the quarter, including the newly built Monarch San Antonio and the converted hotel here on Alexandria, Old Town Virginia. We also expanded our Lifestyle footprint globally with the debut of Motto in Brazil. In Europe, this week, we will open a Home2 Suites in Dublin, Ireland, which marked the European debut our Home2 Suites brand, one of our strongest performing brands in the portfolio with more than 800 hotels open and over 750 in development. This positions this brand for extended rapid growth and allows us to capture even more demand from this important region.

Conversions represented 36% of openings for the quarter across 10 brands and dozens of countries, ranging from flagship Hilton openings in Malaysia, Vietnam and Thailand, The Spark openings in France, Canada and the U.S. Following our Apartment Collection by Hilton brand announcement earlier this year, we now have our first 2 converted properties in Atlanta and Salt Lake City, accepting bookings for this summer. Conversions overall are expected to be up on a nominal basis in 2026 across every region, demonstrating the performance our system delivers to owners.

Despite the current macro uncertainty, signings and starts continue to have momentum. During the quarter, we announced multiple new signings across geographies including 4 new brand signings in Turkey, 2 LXR signings in Japan, the debut of Motto in Australia and France and the debut of Tapestry in Germany. In India, we signed a strategic agreement with Royal Orchard Hotel to open 125 Hampton Hotels in the market, which puts us on track to exceed 400 hotels in the market in the coming years and reaffirms our commitment to expanding in this key emerging economy. We continue to build out our presence in the fast-growing and expansive region of APAC ex China, where approvals, openings and new development construction starts were all up double-digits in the first quarter.

Globally, we now expect new development construction starts to be up over 20% for the year with the strongest growth in the U.S. and EMEA, signaling continued developer confidence and a strong desire to have hotels open in conjunction with a rebounding RevPAR environment. Our pipeline now stands at a record 527,000 rooms and includes brand [indiscernible] in more than 25 new countries with Hilton representing only 5.5% of global hotel supply and over 20% of rooms under construction, we have tremendous opportunity to grow our market share from here.

As we look ahead, we expect that our robust global pipeline strength in conversions, construction start momentum and industry-leading brand premiums will support sustained net unit growth of between 6% to 7% for the full year even with the current geopolitical uncertainty. Innovation across our entire business is a core competency, and when deploying new technology, we're focused on broad impactful use cases to enhance the guest experience, deliver value to owners and empower team members. As we advance our strategy, we're leveraging AI to embrace, the new ways customers are discovering and engaging with our brands, working with leading partners, including Google, ChatGPT and Anthropic, all while remaining focused on strengthening direct loyalty-driven relationships and maintaining discipline in how we manage distribution.

Building on this, earlier this quarter, we deployed an Anthropic-powered platform for customers to dream and shop called the Hilton AI Planner, this LLM powered tool combines our incredibly rich property content with vast information about local venues and activities to allow customers to search for and tailor an experience that is unique to their interest. The AI Planner enables guests to spend more time dreaming within our native environment which should drive incremental demand across our portfolio as customers book with us more often and more quickly. We're just getting started on how technology can customize the customer experience, and the Hilton AI Planner is one great example of how we are delivering our signature Hilton Hospitality and enhancing the Dream Shop Book and stay guest journey.

During the quarter, we were proud to once again be recognized as the top-rated hospitality company by -- on the Fortune and Great Place to Work list of the 100 best companies to work for in the United States, marking our 11th consecutive year earning this distinction. We also continue to be recognized for our world-class culture globally, receiving Great Place to Work honors in 17 countries, including 7, #1 ranking.

Overall, we are very encouraged by the strength of the demand environment across all our brands. We remain confident that our powerful network effect, industry-leading RevPAR premiums and fee-based capital-light business model will continue to drive strong operating performance, net unit growth and meaningful cash flow, enabling us to return an increasing amount of capital to shareholders.

Now I'll turn the call over to Kevin to give you a few more details on the quarter and expectations for the full year.

Thanks, Chris, and good morning, everyone. During the quarter, System-wide RevPAR increased 3.6% versus the prior year on a comparable and currency-neutral basis. Growth was driven by broad growth across all chain scales, brands and segments as well as sequential improvement throughout the quarter in the U.S. Adjusted EBITDA was $901 million in the first quarter, up 13% year-over-year and exceeding the high end of our guidance range. Out-performance was predominantly driven by better-than-expected System-wide RevPAR growth. Management and franchise fees grew 10.4% year-over-year. For the quarter, diluted earnings per share adjusted for special items was $2.01.

Turning to our regional performance. First quarter comparable U.S. RevPAR increased 3.4% driven by group growth trends continuing from the prior quarter, broad business travel strength and leisure demand from a concentrated spring break. For full year 2026, we expect U.S. RevPAR growth to be at the high end or above System-wide guidance.

The Americas outside the U.S., first quarter RevPAR increased 4.4% year-over-year, driven by strong demand across all segments and continued strength across the Caribbean and South America. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits. Europe, RevPAR grew 6.9% year-over-year led by growth across all segments. Continental Europe's strength related to the Winter Olympics and other regional event-driven demand. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits.

In the Middle East and Africa region, RevPAR decreased 1.7% year-over-year as strong early quarter performance was offset by weakness following travel disruptions from the conflict across the Middle East. For full year 2026, we expect RevPAR to be down in the mid- to high teens as a result of the ongoing conflict in the region, and we expect the biggest impact to be on second quarter performance.

In the Asia Pacific region, first quarter RevPAR was up 9.1% in APAC ex China, led by Australasia RevPAR growth and extended Chinese New Year and other regional events. RevPAR in China increased 1.3% in the quarter, driven by business segment recovery, but offset by continued pressure in group from softer convention and company meetings activity and leisure due to weaker inbound travel. For full year 2026, we expect RevPAR growth in Asia Pacific to be low single digits, with RevPAR flat in China.

Turning to Development. As Chris mentioned, for the quarter, we grew [indiscernible] 6.3% and now have more than 527,000 rooms in our pipeline. We continue to have more rooms under construction than any other hotel company with approximately 1 in every 5 hotel rooms under construction globally slated to join the Hilton portfolio. We expect to deliver between 6% to 7% net unit growth for the full year.

Moving to guidance for the second quarter, including the impact from the Middle East conflict, we expect System-wide RevPAR growth to be between 2% and 3%. We expect adjusted EBITDA to be between $1.015 billion and $1.035 billion and diluted EPS adjusted for special items to be between $2.18 and $2.24, both impacted by the significant Middle East RevPAR decline and several onetime and timing items that are unique to the second quarter year-over-year comparison. For the full year, we expect RevPAR growth of 2% to 3%, driven by strengthening underlying fundamentals across chain scales and segments and factoring for a range of scenarios for the Middle East. As a result, we expect adjusted EBITDA of between $4.02 billion and $4.06 billion and diluted EPS adjusted for special items of between $8.79 and $8.91. Please note that our guidance ranges do not incorporate future share repurchases.

Moving on to capital return. We paid a cash dividend of $0.15 per share during the first quarter for a total of $35 million. Our Board also authorized a quarterly dividend of $0.15 per share for the second quarter. For 2026, we expect to return approximately $3.5 billion to shareholders in the form of buybacks and dividends. Further details on our first 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 limit yourself to one question. Chuck, can we have our first question, please?

Our first question will come from Shaun Kelley with Bank of America.

Chris, obviously, a big notable change in the U.S. demand dynamics. So hoping you could just unpack that a little bit for us. Our math gets us to probably nearly a 200 basis point increase in your outlook from where you were at the beginning of the year. So could you just walk us through that and maybe elaborate a little bit on your comment around C-shaped economy? Are you actually seeing some evidence of that convergence as we get here into April? Or what gives you that confidence to kind of make that statement? What are you seeing that's getting you excited about the business?

Thanks, Shaun. I think that's a great way to start with the Q&A because it's the biggest question out there. If you go back, I can have team fact check me, but if you go back to like midyear last year, I was very much of the mind that I saw, if you lifted up above a lot of noise that there were some really good fundamental things happening from a macro point of view in the U.S. economy that, to my mind, sort of had to eventually translate into higher growth rates. Now I will admit that certainly in the third quarter, as we reported, while I said that, I also said we're not seeing the green shoots or a whole lot of evidence of that yet.

But then again, Mike (sic) [ Shaun ], if nothing I've been consistent, in the fourth quarter, I repeated in my view that we were -- that we had to start to see what I sort of made up on my own instead of a K, a C economy where you see convergence of the lower end, the middle class, mid-price segments in our industry moving up. And in the fourth quarter, we started to see a little bit of evidence of that. Now I would say that were in the first quarter and looking into Q2, where we have part of the quarter behind us, obviously, in the sense of April, we have very good sight lines into May, we're seeing it, right? And we're seeing what to me was inevitably on its way, but it takes time for these things to sort of deep into the economy.

So I said it in my prepared comments and at the risk of taking too much time here, but I do think it's the most important question and answer, what's driving it? Well, I think what's driving it is a number of very big picture things that are going on. One, forget for the moment the spike in energy prices and oil because of the War in Iran and, I mean, broadly, structurally, particularly in housing, you have inflation coming down. And as a result, broadly, again, not in this exact amount, broadly, rates have come down. And I think there -- next you can debate how fast when second half of this year, first half of next year. But I think there's a broad understanding that particularly if we get the Middle East stuff sort of settled down, you're going to be in a lower inflationary environment, and it will allow the Fed to continue to bring rates down to stimulate the real economy, which is what they're trying to do.

Here in, obviously, one of the most deregulatory environments in, what I can remember in modern history. And that means financial services, energy, you name it across the spectrum that you have a broad regulatory deregulatory regime. And that -- in addition to that, in the backdrop, because of the bill that was passed last year, you are in a multiyear position where you have very, very business-friendly tax attributes, right? And that's very hard to get done. It's certainly not going to get undone during this administration. And let's be honest, when you look at it historically it takes a lot even with change of administration to get that kind of sweeping tax policy change. So I think you have a number of years in running room and favorable tax policy.

And then like I'll state the obvious. You have a lot of investing going on in America. Where is that investing? Obviously, AI, all the AI companies, the whole AI complex around it, data centers, energy, it's like one of the -- it's like great race. People are spending money like crazy in and around that. You have infrastructure, which I've talked about for a number of quarters, buying your infrastructure bill, $1.6 trillion, very little of which percentage wise has been spent. The CHIPS Act to reshore critical manufacturing. Again, $800 billion, very little of that is spent. Why? Because it takes time to get these things like land, permits, build. So these things, they take a number of years to sort of seep into the system. But I think you're starting to see it.

The best evidence of that, if you go back and there's -- the correlation sort of got obtuse or broken apart during COVID like a lot of things. But for a long spans of time, the highest correlation, 95%-plus over a very long span of time. The correlation and demand growth of the hotel rooms has been growth in RFI, nonresidential fixed investment. Sort of like we've lived in crazy ville, post-COVID where you have all the swirling stuff going on, hard to understand. But to me, over the long term, that is exactly what is going to drive the business. And that's exactly what's going to drive the mid-market of the business, all that investing in nonresidential fixed investment that takes the middle class getting in the game. And if you look at those numbers, they've been moving up and they're perennially bad at forecasting an RFI from my experience. But the actual numbers being reported are moving up. And my guess is the next several years, they're going to keep moving up. And as they do, you're going to see this convergence. With all of those things going on, you're going to see this convergence.

By the way, if that's not enough, I mean I know it's a whole different topic of displacement and everything that goes with AI, but AI is also going to provide one of the greatest productivity booms. I mean, it's going to be equal to or bigger than the Internet productivity boom, and yes, there are people, there's winners, there's looser's, need to retrain and shift and re-skill people, all of that stuff, we won't get into today with the limits of time, but there is no world where economically, it's not advantageous to have productivity gains. Like there is no world, there is no time in American history where big productivity gains weren't matched with big economic growth. So I sort of put all that together, and I feel like, okay, it's happening, like I want it to keep happening. We don't -- I want to be thoughtful about like we're talking about a little bit of fourth quarter and the first quarter and now looking into the second quarter. And I don't want to overcook it, but all of those things I've been thinking, I think, are happening, and I think it's now showing up in our business, and it makes me feel good that we could be in a time frame, honestly, where -- I love it when we're sitting around at this very table every week talking about performance.

And every time we talk, it's getting better, right? And that's what's been happening for a while, for weeks and weeks. It's getting better. Like -- so as we look further out in the year with the visibility we have here in the U.S., it feels better. So reality is we gave guidance to the Middle East. I'll leave that to somebody else to ask, creates some uncertainty, but I think you can make an argument that we are being reasonably conservative with our full year guidance.

Next question will come from Dan Politzer with JPMorgan.

I suppose I'll take the bait on the Middle East there. Can you just remind us what the exposure in terms of EBITDA or fees across your businesses there? And how do you think about the Middle East dynamic and disruption there flowing through to the other regions of your business throughout the course of the year and impacts the U.S. outbound travel?

Sure. Middle East is about 3% of the business. So you'd say, "All right, it was not that bigger part of the business." But like Q2, you see that is impacted by a few things, some onetime stuff that Kevin mentioned from last year, but it's also impacted by the Middle East. I mean the Middle East for Q2, which is when we think it will probably be most dramatically impacted. If it's 3%, it could be down 50% or something like that. You guys could do the math. That could be 1.5 points on System-wide. So whatever guidance we gave you, if the Middle East we're doing what it normally does. It wouldn't be -- which had been running in the high single digits, low double digits now for a quarter minus 50% you flipped that around it in Q2, you would be above where you were in Q1.

So even though it is a small percentage of 3%, when you get in very large numbers, small percentage of a large number becomes a decent-sized number. Having said that, we are already -- I mean I don't know where this is all going to play out. I'm looking down outside my window to Washington. We'll see. I don't know. I suspect there will be an off-ramp eventually just given a lot of things, politically and otherwise in the not-too-distant future. Things have already settled down a bit. I mean we are already starting to see, again, in my weekly around this table, when I'm getting reports, certain markets within the Middle East that are some of our bigger markets are starting to sort of stabilize and move up. I mean, they're still quite impacted, but they're getting better. And so what we tried to do in our guidance was, again, on the margin, be a bit conservative and thinking about a range, like in the first quarter, we think it was probably 30 or 40 bps something like that. And in Q2, I just gave you the metric, it's probably 1.5 points. For the full year, it's probably 0.5 point to 1 point impact depending on what you think the trajectory will be.

And at the lower end of that range and thus at the lower end of our overall guidance range, I think what we've assumed is it stays pretty bad and that there is, in fact, some knock-on impact to your question. There's some knock-on impact on other markets. We've seen a little bit of that, a little bit in India, particularly Bangalore, a little bit in the Seychelles and Maldives because of transit through Dubai, but not a lot of knock-on impact, but we've assumed if it stays really bad, there'll be a little bit more. And then obviously, on the upside that you continue to things stabilize and you continue to have recovery but not necessarily a super v-shaped recovery just sort of grinding back up through the rest of the year.

So again, my experience, I'm sad to say I've been doing this long enough. I've had to live through stuff like wars and pandemics and like whatever else it feels like. And so I feel like in this moment, we're trying to be responsible with you all in telling you we're giving you a range of outcomes that we think are rational, if anything, probably on the conservative side as they should be. In terms of -- I mentioned it on the development side, only about 2% of our deliveries for the year are coming out of the Middle East. But those are important deliveries. We do think things will slow down a little bit there. It's so early in the year. We don't know. And so again, that's why we I think -- but for that, we probably would have been telling you we're in the upper half of our 6% to 7% range. But because of the Middle East and potential for supply chain knock-on in other parts of the world, we feel like keeping the range where it was, was more appropriate. Again, I mean, you could say we're being too conservative, whatever, but I mean war is war. There's a lot of possible outcomes. We've tried to frame it around those and be thoughtful about it.

Your next question will come from Stephen Grambling with Morgan Stanley.

I appreciate all the color on the macro. As we look at some of the actions outside of RevPAR, particularly the launch of the Select brands. Can you elaborate on how this compares to a typical brand agreement? And what are some of the guardrails for what brands you'd be willing to include going forward? And if I can just sneak one more that's related on, does this launch change the way you think about either the marketing or system funds allocations or even M&A?

No, to the last part of that. Let me -- but so I'll answer that. That doesn't change any of that. I mean the way to think about Select is like anything we bring into the system, the first step is quality, does it add to our network effect? Is it is it a swim lane or a brand that we think our customers want, that has the quality that we have promised to give our customers and then we think it will create a benefit strengthening to our network effect. That's always the first filter.

So we -- if it doesn't meet the criteria of like we already have something on top of it or we don't like the quality. We're not doing it. And by the way, we've had dozens of opportunities in Select that you don't know about because we haven't done them. This is -- we've done one. I suspect there will be others. I don't know how many they'll be because we're super stringent on what we would do. And so the way to think about it, and the hotels a great example is like. It's a great smaller brand. They've struggled to really -- customers love it. The quality is good, and they have a real following, but they've had a real problem without having global scale and all the network effect that we have and the ability to invest in technology and all those things at the level we do to sort of make it work the way they wanted to work. And so -- that was a unique opportunity for us to say, we love it. Our customers, we did a lot of work. We think our customers like it, will resonate well. The quality is good. And importantly, we're entering the agreement with, that is consistent with the way we would approach any franchise agreement. This is a franchise relationship with them.

We are getting -- and if you look at the -- I know there's been a lot of noise out there, but if you -- there's a ramp involved like a lot of our larger multiunit franchise deals. But if you look at a run rate basis, this is very consistent in how we charge for license fees, system fees, all of that, and it is on a fee per room basis, very consistent with the product in that category. And so the difference is it's just a little unique brand. And so like -- could you do it somewhere else? Yes, you could say like what's [indiscernible] that and like doing it as a tap or whatever. Well, Hotel is a good example. It's unique. It doesn't fit in TAP for Curio. It's its own thing. And so we didn't want to try and like we want to have we don't want to have cognitive dissidence with our customers as we bring things into the system, and we like the brand. We wanted it to stand on its own, but we want to do it in the right way. We want to get paid paid for the effort and we want it to be something our customers really think enhances the broader system. And so there'll be others. I'm sure we're working on a bunch of others, but I said like turndown ratio is very, very high.

Obviously, the appetite for folks that have small brands, I think, is quite high in an environment where we have this much scale and the ability how we work with all the intermediaries, the dollars we can invest in our commercial engines and technology. It's -- I think we have a real competitive advantage. That's why the average market share of our brands is so high and much higher than our competitors. And so increasingly, little micro brands around the world, I think not all of them, but some are figuring that out. And we've been talking to a bunch of them. Do I suspect some others will come into the fold over time, but we'll be hyper disciplined about it. Again, quality the brand works, fits in our ecosystem, and we get the fees per room are good. And we get paid for the efforts.

The next question will come from Lizzie Dove with Goldman Sachs.

I wanted to go back to the AI and kind of technology side of things. Obviously, things are moving very, very quickly. You mentioned you launched the Hilton AI Planner. But I guess just now another quarter into things, how do you think about what the kind of real opportunity set here is, long term, both obviously on the OpEx side of things internally, but then as you think kind of bigger picture externally from the distribution side of things also?

Yes. I mean we talked about this, I think, at fairly good length on the last call and it's obviously an important question. And given the amount of time we're spending on it and everybody is, it would be fair to say it's worth addressing. I would say you're right, a lot of effort going into it by everybody certainly by us. Things are moving very quickly. I would say as every day goes by, we're learning and iterating and thinking and doing different things and working with different partners in different ways. And I think the opportunity gets more not less interesting I know that's what you'd expect me to say, but I believe it to be true. I think the three buckets of how we think about it, haven't really changed.

I think we think about this as a means to create -- to use our scale as a weapon and creating efficiency, which we think can translate into being more efficient at how we go to market and how we deliver for our owner community and more effective. And yes, that could benefit our P&L, too, but really, the largest part of our system cost really relates to the part of the system we manage on behalf of owners. So every time we can be more effective and more efficient in the world, it can translate into benefits for our owner community who need it and want it and deserve it. Our project Rise this year was in part enabled by work that we're doing in this bucket, if you will. And so I'd say we're early days, and I think you have huge opportunities to think about systems and processes across what is a very big global company, to continue to garner efficiencies but most importantly, to be much more effective, be able to move quicker, add hotels, ramp them quicker just because we take great systems but antiquated systems, and we hyper modernize those.

In the second bucket, you heard me mention, we're working with a bunch of the folks out there, Gemini and OpenAI, we're going to be opening our app within their environment in the next couple of weeks, talked about our AI Planner in our environment that we did with Anthropic and Claude. We're working with everybody, and while it's moving fast, there's a long way to go. And so I do increasingly feel really good about what the opportunities for us are. I mean if you think about it at a high level, if you look at the quality using the U.S. market as an example, if you look at the quality hotel market in the United States, we're over 25% of the market. I think that puts us in -- and we are the only ones with that 25% of the market that can control rate inventory availability, period, end of story, nobody can get it, unless we give it to them. In a world where you have a more competitive environment, there are a bunch of debates who's going to win, who's going to lose. That's not for us to judge.

I think they're probably going to be more -- there's going to be more than one winner. That's why we're working with everybody. But we realize the asset we have in the system and the control of the system, given our scale is really valuable that effectively, people really do need us if you're going to have -- you can't be missing 25% or 30% of the quality inventory in the U.S. and have something that's a real full offering. And so I like where we sit. It's complicated. It's fast moving, there's risks, but we're approaching it very much in the form of a partnership with all of the counterparties that are developing these technologies. We want to show up with all of them. And in the end, I do believe as a result of the great work they're doing and a result of discipline on our side, that there's real opportunities to create more efficient, more effective distribution. They sort of just has to be if we're smart about it, and we intend to be.

And then the last bucket AI Planner is, in fact, part of it. And if you think about when we have a stay experience people are with us, your customers, we have all sorts of opportunities to like equip our team members now with all the information we have with technology in the palm of their hands to deal with problems to customize the experience. And we're testing and learning in the stay experience with really cool things that really revolutionize the stay. But we also, a lot of the engagement we have with our customers is digital. Think about when they're dreaming, booking, planning, post-day. And so -- and they're not with us. And so that's about trying to make sure that the approach we have digitally with folks is utilizing all the best thinking and technology to create a very engaging experience so that, yes, when they're with us, they have the best day experience in the business, and that's why they want to come back -- but when they're not with us and these other steps of the customer journey, they feel equally good about our ability to give -- to satisfy their needs and to customize at mass scale.

And so again, all this stuff, I mean, we're doing things. We talked about it, you can go play with the AI, the Hilton AI Planner or Stay Planner, it's early days, but we're doing super important foundational work. And the last thing I'd say is our tech stack and it's not by happenstance is very advanced. So many years ago, COVID, like turned it to a time war, but pre-COVID, so probably 8 or 9 years ago, we made the decision to really completely blow up all our legacy architecture and make sure that our core systems and otherwise were cloud-based open source, micro services driven, which means totally modern tech stack that has like incredible agility and agility and the ability to have control. So it's a system built on certain elements of table stake sort of technology, it might build off an existing platform. But where we customize and modify it, it's things we own and control. And so it gives us, we think, a really unique ability to be agile and do things for customers that are going to be unique that others that are going to be with monolithic providers can't do.

And so that was a very purposeful decision to my tech team. They're extraordinary and leading that effort over a bunch of years. And I would say it just puts us in a really good position in the world we live in, where AI is coming and you have all this opportunity. But if you don't have the flexibility and agility of a tech stack, it doesn't really matter because sort of like the machine stops. So that I'll leave it at that. We could talk AI all day, and we do around here, talk about it a heck of a lot, but that's probably enough for today.

Your next question will come from Steve Pizzella with Deutsche Bank.

Just wanted to follow up on the expectation for conversion to be up in 2026 across every region. Do you think this is a new normal for conversions moving forward? Or will we revert back to a more normalized conversion level versus new construction mix? And is there anything to think about from a fee perspective, longer term, if conversions continue to be a greater portion of the fee mix moving forward?

I don't think there's any material impact on the fee side of it. So answering that first. I -- this year, we're going to tick up, as I said, last year, we were like 36%. Current forecasts are we're trending a bit above that, probably 38% to 40% in the latest numbers. I mean there's a lot of moving parts under the year, for the year. But we think we think it's going to be up modestly. I actually -- I think the math of it is such that on an absolute basis, I don't think you're going to see a big drop off, in conversions. As a percentage of [ nug ], I do think you will see it moderate over time, but that's because you've been in a world where construction starts haven't really gotten back to pre-COVID levels. And that will happen and is happening. It probably happens this year. And as you start to have that happen over the next 2 or 3 years, and new construction grows in an absolute sense, I think the percentage will decline.

I don't think it will ever go back down. I mean, we peaked during the -- great recession in the low 40s. We're sort of back there now. It went as low as the high teens. I don't think we're going to be in a world where it's high teens. I mean when it was high teens, let's be honest, we had 1 brand, 1.5 brands sort of like Hilton and DoubleTree when it went. Now we've got a dozen brands that are really a dozen or more brands that are really good candidates for conversion. So I think you're probably sort of permanently in the 30% to 40% range. I'm making that up. But I mean, directionally, if you did the math on new starts, I think you're sort of permanently in that range.

The next question will come from David Katz with Jefferies.

Thanks for taking my question. I know you said you'd like to sort of leave the AI discussion right where it is. But I wanted to ask something just a little more industry level, if that's okay, which is -- it's obvious that you're making great progress in working at terrific speed. Outside the industry, not talking about competitors or peers, right, there is sort of an independent track that's going on, and there's also an OTA environment that's also, I assume, moving as fast as they can. How do you envision those dynamics sort of playing out? And do we evolve into kind of a different industry landscape in that regard? Or are you just running your race and luckily not paying a ton of attention to what they're doing?

No, no. We, of course, are paying a lot of attention to what everybody is doing. I I do think on the margin, it will look a lot like it does over the next 5 years from now, it will look like -- a lot like it does today or it has looked. I think on the margin, though, if we do our job, I think AI allows us, as I said, that be more efficient and more effective. What we did that is, code for continuing to build more direct lines to our customers. I mean that's where we have a terrific relationship with the OTAs, and we do a certain segment of our business with them. And I suspect we will for a very, very long time.

But I think our ability -- our control of our inventory, our ability to customize the experience in unique ways, it being a more competitive environment where there isn't just one winner in search probably when it's all said and done. I think that puts us in a position where we -- it gives us an advantage relative to what we've had to continuing to build more direct business. Now 80% plus of our business is already direct. So we've had a fair amount of success in doing that. But I think on the margin, it helps in that regard. But I go back to where I started. I don't see that the whole system changes in a material way anytime soon.

Your next question will come from Robin Farley with UBS.

My question is not about AI. Just looking at results, fantastic results, and I think that full year RevPAR rates higher than the market was expecting. I am curious, last quarter, you had a slide that showed that 100 basis point raise in RevPAR would be 100 basis point raise in EBITDA. And it looks like it's maybe sort of more like a 50 basis points raise in EBITDA. Your G&A didn't change. Just anything else you would call out in that sort of flow through to EBITDA from the race?

No, Robin, I think -- look, I think the rule of thumb we would use and maybe the 100 basis points was a little bit of rounding and I think we've actually updated that more recently. The rule of thumb we do is about $25 million or $30 million of EBITDA per point. And so we raised our guidance -- our RevPAR guidance by 1 full point. So if you think about that as being typically $25 million to $30 million, the things that are going on there is you just have the impact of the Middle East with a little bit of IMF and a little bit of FX, which caused us to raise the midpoint by [ 20 ] instead of, call it, [ 25 ] at the low end of the range. So that's the way to think about it, and it's not more [indiscernible] than that.

The next question from Brandt Montour with Barclays.

So back to demand, you sound really good on group business. That was that was sort of the downside surprise for the industry last year, obviously, with tariffs. And just sort of curious, when you think -- when you look out and expect group to total lead, are you actually seeing in the year, for the year group bookings materialize better than planned? Or is it really just sort of easy comps that give you that confidence?

No. I mean we're seeing real lead volumes and bookings in line with the forecasting we have. And atmospherically in the discussions that our sales folks are having broadly about sentiment in that space and the corporate space, for that matter, are much better, quite good. So they get -- I think, listen, people are feeling better when they're spending more -- they need to move more, they need to aggregate people more, and we're seeing it show up. The booking position supports it, the leads more than support it.

Next question will come from Trey Bowers with Wells Fargo.

Just getting back to [ NUG ], to the extent that the disruption in the Middle East might might cause some impact on 6% to 7% growth this year. Is that just some of the either conversions or new builds kind of fall out of the system or the expectation of you were not at the high end of that range for this year. Would most of that fall into 2027?

It's just timing. We don't -- we're not concerned that anything is falling out of the pipeline, or conversion opportunities are drying up. It's just like there's a lot going on over there and some people have slowed construction, they've slowed decision-making on conversion deals that we're working on. So I don't think we feel like any of it really ultimately falls away. I think it's a question of when it gets done. And it's early to say. By the way my team says -- our team says it's picking up by the day, like Saudi Arabia, sort of isn't missing a beat, UAE, a little bit more disrupted, Kuwait, Qatar, much more so because the issues there have been more dramatic. So really, -- it's not like one monolithic area. It's country by country. And so we're watching it carefully. But I think it's -- I don't think these are things that like disappear. I think it's just a function of -- it may push a quarter or 2.

The next question will come from Duane Pfennigwerth with Evercore ISI.

Just to stick on that theme. As you think about your share of rooms versus much larger share of rooms under construction. What markets do you feel like that disconnect opportunity is biggest? Basically, what geographies offer the best share gain opportunity as you look out maybe over the next 5 years?

Well, there are a lot of them, I would say -- I mean, where we have what we call inside the company's springboard work, which is where we see sort of the disconnect in terms of demand for our products and what is a relatively low existing base of hotels. So I would say India being first and foremost, I mean we think easily, it's a 10x or 20x sort of opportunity. We have whatever, 40 hotels in India. I mean with the deals like when we announced today, we sort of have 400 in and around the pipeline or under development. So India is definitely one.

Southeast Asia is another where we have a big presence, but we think the opportunity is to be 3x or 4x the size that we have. [ Cala ], the broader [ Cala ] environment. We've got a big presence of 300 hotels, but we think we could be easily 2x or 3x that size. KSA, we have 25, 30 hotels. We think we can easily be 4x to 5x that, probably even more as well as other parts of the Middle East. Obviously, the Middle East, we just talked about, there's some challenges, but in part because I'm always an optimist, but I do think one way or another, this will settle down, and there's a lot of momentum underlying travel and tourism in the Middle East that I think will pick up pretty quickly when you get to the other side of this conflict.

So I mean -- and I shouldn't forget Africa, where a huge population, what is -- we've been there for many, many decades, but have a relatively small base and a huge opportunity. And so yes, the reality is we've got 27 brands. And if you look at the average number of brands that's deployed in any market, I think it's like 4 brands with 27. So even where we have more density, there's a tremendous amount of network yet to build and thus growth and then the markets I just covered, I would argue and almost all of them other than maybe [ Cala ] where we have 300 hotels. The others were in sort of our nascent stages. The brand is well known. We performed really well. We've had a presence in a long time. But relative to the populations and the demand base, we're just getting started. So that's why we get really excited when we think about -- I get the question, well, how long can you grow 6% or 7%?

And my view is a long, long time, simply because the world is a big place, populations all over the world need to be served. They're all -- in most of the markets I just described, there way underserved relative to any of the other more mature markets. And yet our brands do well there. Customers recognize us, and it's an opportunity to really build a powerful network effect, in many of those places.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Chris Nassetta for any additional or closing remarks. Please go ahead.

Thanks, everybody. As always, we appreciate the time. As you can tell, there's a lot going on in the world. There's no question about, the Middle East is not helpful. But 75% of our business is still driven out of the U.S., and we have seen really nice uptick in performance driven by a really nice uptick in demand across all segments. We think that is sustainable as we look out for the rest of the year and beyond. And so notwithstanding everything going on in the world, we feel really good about our ability to drive top line, drive unit growth, obviously, the free cash flow that we need to drive and keep returning capital as a serial compounder. So we feel great about the business. Look forward to catching up with you after the second quarter to give you the update on everything going on.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Hilton Fourth Quarter 2024 (sic) [ 2025 ] Earnings Conference Call. [Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruehr, Vice President, Corporate Finance and Investor Relations. You may begin.

Thank you, Chuck. Welcome to Hilton's Fourth Quarter and Full Year 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. 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.

In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com.

This morning, Chris Nassetta, 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 fourth quarter and full year results and discuss our expectations for the year. Following their remarks, we will be happy to take your questions.

With that, I'm pleased to turn the call over to Chris.

Thank you, Charlie, and good morning, everyone. We appreciate you joining us today. We're pleased to report a solid end to what was another strong year for Hilton. In 2025, we expanded our portfolio of brands, grew our pipeline to a new record and strengthened our nearly 0.25 billion member loyalty system with new partnerships and loyalty tiers, all of which we believe sets us up for continued growth in 2026 and beyond.

Together with our team members and owners, we've delivered a solid year on both top line and bottom line performance. For the full year, system-wide RevPAR growth was up 40 basis points year-over-year, driven by strong performance in EMEA and growth in group and leisure transient. Industry-leading net unit growth, outperformance in non-RevPAR business lines and cost discipline drove record adjusted EBITDA of $3.7 billion, up 9% year-over-year.

In 2025, we returned $3.3 billion to our shareholders, the highest total capital return in our history, even with the softer than originally anticipated RevPAR, demonstrating the power of our capital-light business model. Turning to results for the fourth quarter. System-wide RevPAR increased 50 basis points year-over-year as strong international performance and solid group demand were offset by softer U.S. government demand and weaker international inbound into the U.S.

In the quarter, leisure transient RevPAR was up 2.3%, driven by international strength, especially in EMEA. Business transient RevPAR was down 2.1%, driven primarily by headwinds from the U.S. government shutdown. Group RevPAR was up 2.6%, driven by strong international group growth and company meeting demand. System-wide RevPAR for the quarter was strongest in December, up 1.7%, with strength in leisure and group and a meaningful pickup in business transient. Positive trends continued into early 2026 with group leading, including strong in-month group bookings, solid leisure demand and continued business transient improvement.

For the first quarter, we expect RevPAR growth of between 1% and 2% year-over-year, including the impact from the recent storms in the U.S. As we look to the year ahead, we feel optimistic that 2026 will be stronger than 2025. We believe this will be driven by continued strength in EMEA improvement in APAC and an improvement in the U.S. driven by stronger economic conditions, major events, easier comps and continued limited supply. For the full year, we expect system-wide top line growth of 1% to 2% with international performance stronger than in the U.S.

Turning to development. During the fourth quarter, we opened nearly 200 hotels totaling nearly 26,000 rooms. For the full year, we added nearly 100,000 new rooms to our global portfolio, representing full year net unit growth of 6.7% and our biggest year of organic openings. We achieved several milestones in the year, including reaching 9,000 hotels globally, celebrating 44 brand country debuts, opening our first property in 4 new markets, including Tanzania, Rwanda, Pakistan and the U.S. Virgin Islands and opening our 1,000th luxury and lifestyle hotel globally.

Our luxury and lifestyle brands continue to expand around the world, comprising nearly 30% of our total openings in the quarter. Lifestyle had a strong year with all 8 brands reaching record room counts and nearly all expanding their presence into new markets. Within our collection brands for the full year, we opened over 11,000 rooms across 18 countries, including 9 country debuts. It was a record year for Tapestry growth, opening over 40 properties in the year, including most recently the debut of Tapestry in Japan.

Within luxury, we continue to build strong momentum after the Waldorf Astoria New York opening. And in the fourth quarter, we opened our second Waldorf Astoria in Shanghai and celebrated the brand's debut in Helsinki. Strong interest in Waldorf Astoria continued into the fourth quarter as we announced agreements to expand Waldorf Astoria into several iconic cities across Greece, Spain, Oman and Malaysia.

In 2025, we also expanded our LXR footprint with new openings in France and Greece and announced plans to debut the LXR in the Turks and Caicos in the next few years. Conversions remain integral to our growth and accounted for roughly 40% of room openings in 2025, demonstrating the strong value proposition our system continues to deliver for owners. Against this backdrop of continued owner demand for conversion-friendly brands, we have been evolving our brand portfolio and creating opportunities to build the next chapter in Hilton's growth.

We recently launched Apartment Collection by Hilton, which marks Hilton's entry into the fast-growing apartment style lodging segment that represents a clear white space in the market. As a collection brand, it provides owners with flexibility to preserve a property's unique character while benefiting from Hilton's powerful commercial engine, global distribution and award-winning Hilton Honors loyalty program.

Apartment Collection by Hilton alongside our other newly minted brand Outset Collection will be incremental drivers of our conversion momentum in the years to come as will new brands, several of which we expect to launch later this year. Even with robust openings in the fourth quarter, our pipeline reached the highest level in our history, surpassing 520,000 rooms, reflecting both year-over-year and sequential growth, driven by expansion across strategic markets and brand categories.

New development construction starts in the U.S. were up over 25% in 2025, a trend that we expect to accelerate even further into 2026. Globally, for 2026, we expect new development construction starts to be up over 20%, bringing us back close to 2019 levels, signaling healthy developer appetite. As we look ahead, we expect that our robust global pipeline, strength in conversions, construction start momentum and industry-leading brand premiums will support sustained net unit growth of between 6% to 7% for 2026 and beyond. We also remain focused on initiatives to drive increased loyalty, engagement and guest satisfaction.

In 2025, we strengthened our Hilton Honors program by making loyalty both more accessible and more rewarding by introducing a faster path to elite status and a new premium tier in our program. We also launched Hilton Honors Adventures, an extension of Hilton Honors that invites travelers to immerse themselves in bucket-list-worthy travel, elevating loyalty benefits across land and at sea. Hilton Honors Adventures partnerships now include Explora Journeys and AutoCamp, and we expect more to come as we continue to prioritize ways. Honors members can earn and redeem points.

Overall, we continue to see extraordinary performance of Hilton Honors in 2025 with the program now approaching 0.25 billion members. During the quarter, Hilton was again named the #1 World's Best Workplace by Fortune and Great Place to Work for 2025, becoming the first and only hospitality company to top both the global and the U.S. list twice. Our brands continue to receive recognition as well. And in 2025, Entrepreneurs Franchise 500 extended our 17th consecutive year run with Hampton by Hilton ranking #1 hotel franchise in the lodging category.

In total, 12 brands were recognized in the 2025 rankings for their performance and franchise value. Overall, we're proud of our performance in 2025 and believe our results continue to reinforce the power of our business model. Our brand-led network-driven and platform-enabled strategy will continue to help us achieve our robust growth trajectory and meet the evolving needs of travelers around the world while delivering great returns to owners and shareholders. We're confident that we're well positioned to continue driving strong performance in 2026 and beyond.

Now I'm going to turn the call over to Kevin, who will give you a few more details on the quarter and expectations for the full year.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR increased 50 basis points versus the prior year on a comparable and currency-neutral basis. Growth was driven by strong international performance and solid group demand. Adjusted EBITDA was $946 million in the fourth quarter, up 10% year-over-year and exceeding the high end of our guidance range. Our performance was predominantly driven by strong performance in EMEA, non-RevPAR-driven fees and continued disciplined cost control. Management and franchise fees grew 7.4% year-over-year.

For the quarter, diluted earnings per share adjusted for special items was $2.08. Turning to our regional performance. Fourth quarter comparable U.S. RevPAR decreased 1.6%, largely driven by pressure across business transient and group, which underperformed expectations due to the prolonged government shutdown. For full year 2026, we expect U.S. RevPAR growth towards the low end of our 2026 system-wide guidance. In the Americas outside the U.S., fourth quarter RevPAR increased 3.8% year-over-year, driven by strong demand in both leisure and group segments.

For full year 2026, we expect RevPAR growth to be in the low single digits. In Europe, RevPAR grew 5.3% year-over-year, led by strong leisure activity in Continental Europe due to events and holiday-driven demand. For full year 2026, we expect low single-digit RevPAR growth in the region. In the Middle East and Africa region, RevPAR increased 15.9% year-over-year, driven by strength in leisure and group demand due to major events. For full year 2026, we expect RevPAR growth in the mid-single-digit range.

In the Asia Pacific region, fourth quarter RevPAR was up 9.2% in APAC ex China, led by growth in Australasia from major events and strength in Japan and South Korea. RevPAR in China declined 1.4% in the quarter, an improvement to prior quarters, but remained constrained by weaker group demand due to the government travel policy. For full year 2026, we expect RevPAR growth in Asia Pacific to be in the low single digits with RevPAR roughly flat in China.

Turning to development. As Chris mentioned, for the quarter, we grew net units 6.7% and now have more than 520,000 rooms in our pipeline. We continue to have more rooms under construction than any other hotel company with approximately 1 in every 5 hotel rooms under construction globally slated to join the Hilton portfolio. We expect to deliver 6% to 7% net unit growth for the full year.

Moving to guidance. For the first quarter, we expect system-wide RevPAR growth to be between 1% and 2%. We expect adjusted EBITDA to be between $875 million and $895 million and diluted EPS adjusted for special items to be between $1.91 and $1.97. For the full year, we expect RevPAR growth of 1% to 2%, adjusted EBITDA of between $4 billion and $4.04 billion and a diluted EPS adjusted for special items of between $8.65 and $8.77. Please note that our guidance ranges do not incorporate future share repurchases.

Moving on to capital return. We paid a cash dividend of $0.15 per share during the fourth quarter, bringing dividends to a total of $143 million for 2025. Our Board also authorized a quarterly dividend of $0.15 per share. For 2026, we expect to return approximately $3.5 billion to shareholders in the form of buybacks and dividends. Further details on our fourth quarter and full year results can be found in the earnings release we issued earlier this morning. This completes our prepared remarks. We would now like to open the line for any questions you may have. We would like to speak with as many of you as possible so we ask that you limit yourself to one question.

Chuck, can we have our first question, please?

The first question will come from Shaun Kelley with Bank of America.

Chris, I would love to start with you, both in the prepared remarks and overall sound a bit more optimistic. So we always value your kind of overview of where we kind of sit with the broader economy and the lodging industry. If you could just kind of give us your kind of latest thinking there? And maybe specifically a few thoughts around the business transient environment, particularly large versus small corporate. I think on the smaller or medium size, we've seen some weakness. Wondering what you think about that as we kind of turn the page into 2026.

Yes. Great question. And obviously, probably what's the #1 thing on everybody's mind. So a lot of this I covered on our last call and as I've talked to individual investors have shared these thoughts. But if you think back about what I said on the third quarter call, I was reasonably optimistic about '25 being a decent year, but '26 and frankly, beyond, at least for the next couple of years, being better. And my underpinning of that, which I still believe is that you have some macro forces and some micro forces that are converging in a really positive way.

Number one being inflation does structurally continue to come down. If you really factored for the lag effect of the housing input, which is over 30% of the contribution to the inflation numbers and you factor what it is real time, I would argue it's actually lower than is being reported. So that's a good trend. What does that mean? That means expectation, which I believe that rates will continue to come down, which will be stimulative and positive in a bunch of ways. You see it this week and broadly, you're in a very big deregulatory environment under -- in the United States under this administration, which is obviously, I think, a real positive in a bunch of different ways, whether that's financial services, energy, AI, the basic infrastructure reshoring.

There is a massive amount that is going on. You have fixed tax policy that got done last year that is just -- that is super business favorable and investment favorable, and you expect to see that start to benefit. And then a massive investment cycle, the obvious being like the AI complex. I mean just the major tech companies in the last 2 weeks alone, I think when I finished adding it up, they are going to spend this year $700 billion. So let's just say there's going to be a lot more than $1 trillion spent on that by that complex, all of the energy that goes along with it, everything around the AI complex, I think, is huge.

But then the other things going on more quietly are reshoring, whether that's in rare earth minerals and pharma, CHIPS, all of that stuff is going on. I mean the CHIPS Act that got passed during the Biden administration, very little of that money has been spent. And then you have core infrastructure where we approved -- Congress approved $1.6 trillion when you add up all the pieces. Again, a very small part of which has been invested at this point. And so like when I talked in the third quarter, I said like intellectually, it's really hard for me not to be -- when I lift up above the noise of day-to-day politics to not feel like those things are going to be really good for the economy, and it's undeniable.

But at the same time, I said, I don't know exactly when it's going to come. And at that point, we were not seeing a whole lot of evidence that, that was sort of seeping into the economy, although I was very confident, as you remember, that it would. By the way, the other thing going on is we're at the beginning of like one of the greatest productivity booms in American history with the whole AI complex, once those investments get done and over the next several years of adoption, you have massive opportunities on productivity. My belief then and now was that we will have economic growth picking up and most importantly, because it impacts our business, that it would be broader-based economic growth.

It would not be as much this K-economy where the very high end, the very wealthy keep doing well and the middle class and below continue to struggle to pay for groceries and gas and their utilities, but that you would start to ultimately -- because the middle class has to be involved to make all this happen, particularly the investment side that you would start to enter a world where you would see middle class real wage growth. By the way, I think right now, you're starting to see the first prints of middle class real wage growth that means people have more disposable income and they will be spending more money, including on our products.

And when you really get down to it, the bulk of our system, I think everybody's system is more concentrated because the middle class is the biggest percentage of the population in the mid-market. And so that's what I thought last quarter. That's what I think now. The only difference I would say is that we're starting to see it. Now I'm going to be really honest that -- and it's obvious. So I should be honest, which is we don't -- the data sets that I'm looking at are not months and months, quarters and quarters. What I'm really looking at, as I said a little bit when we talked about December is the end of the year got a lot better than we thought.

And even with the storms, the beginning of this year has been better and it's been better in the ways we'd want to see it. So what does that mean? That means mid-scale, upper mid-scale, it means midweek, it means business transient to your question, Shaun, we're seeing a meaningful change from what we were seeing earlier in the fourth quarter and certainly in the third quarter.

Whether that's sustainable or not, I don't know, but it feels to me if all of the other macro conditions that I was talking about, if those continue to develop, it sort of has to be the beginning of a trend. By the way, the other thing, it's not macro, it's micro, but I said micro is we have a bunch of like benefits this year, which you guys are aware of. Number one, the comps, as I said, are easier because, I mean, you could have other things happen, but Liberation Day was a pretty big deal and the biggest government shutdown in American history was a pretty big deal. You hopefully don't repeat those at that scale. And we have a bunch of unique events, which you're well aware of with the World Cup, America's 250 that are really stimulative to travel. At the same time, all these other things are going on.

And so I -- yes, we're at the beginning, I think, of a trend. We have to get more data and like see it really sort of continue. But I like what I'm seeing right now. And as a result, you saw in our guidance that we think that '26, as I had thought last quarter, will be a lot better than '25. And I think we have very solid underpinnings to back that up. And in the first quarter, by the way, in the guidance we're giving, super solid. I mean at this point, we're halfway through the quarter. We have very good sight lines into the rest of February and even into March, and it feels good in all the ways I just described. So yes, that's the reason for my increased optimism is data that I'm actually able to see data that says what I hoped and thought would happen is starting to happen and hopefully is sustainable.

The next question will come from Dan Politzer with JPMorgan.

You touched on this a bit, but maybe in a different lens. The AI and technology front, I mean, this continues to obviously evolve at a very rapid pace. So I guess the question is, how close are you to maybe announcing some partnerships there if that's on the horizon? And then how do you think about the opportunity set here, both from the OpEx side internally and then externally from a revenue side in terms of distribution?

Yes. I mean I -- we talked a lot about this, I think, on the last call, too, and I suspect we'll be talking about this on every single call because obviously, it's important. And as you can imagine, we're spending a huge amount of time on AI throughout our whole organization. And one of the things that I believe gives us a meaningful competitive advantage is that we have a modern tech stack. And relative to our competitive environment, I don't think anybody can claim what we can claim. And what is that -- it's not me just pounding my chest. It just affords us much greater flexibility and agility to adopt AI in a bunch of really interesting ways.

And so you can imagine we're exploring all those. As I said last time, there's sort of 3 big buckets of things. The first is just like creating efficiencies in the system. Some of that could benefit G&A. By the way, you've seen some of the benefits. I mean our G&A is lower than it was 6, 7 years ago, and that's not all AI, but part of it is process reimagination, making ourselves better, applying the use of technology in ways. We've been doing that forever. And AI is just another amazing tool that allows us to speed -- speed some of that up. And so we're looking at tons of things like hotel openings is one that our teams are deep in the middle of like so many people touch the process of opening a hotel, dozens and dozens like creating massive efficiency around connecting all those dots.

And we have dozens of other use cases in that area. And then there's the whole distribution space, which is sort of the crux of your question. We tend not to make big announcements until we've done things. And so we're working with many of all the -- of the big players out there, the OpenAI, Google, we're working with all of them. We're part -- not but the big ones that are big in the travel or trying to -- either are or trying to be. We're involved in all of their tests, and we're developing the connectivity with those platforms, and I'm super optimistic about that.

We're also -- because we have a very modern tech stack, doing some really interesting things in sort of natural search connected to booking and the experience within our own platforms, some of which you'll start to see probably at some point in the second quarter, which I think are really cool. My own view on the distribution space is quite -- I said -- probably said this last time is simple, like we believe we have the best products, deliver the best service with the best culture, our loyalty that continues to be super relevant and that customers want what we do because we're good at it. We do a good job.

Like if you look at the hard data, market share, review site index, we perform really well. Customers want to find us. We believe that what's going on with AI is spectacular. There's always risk, by the way. Like I'm not -- I don't have my head in the sand nor does anybody here. But I think in our space, which is very hard to disintermediate because it's a physical business, the opportunities are far greater, both in distribution and otherwise than the risks are. And why? Because if we keep doing a really good job the way we do it and customers want our stuff, they're going to be able to find our stuff in what will be, frankly, a more competitive environment that we've seen here tofore, and they'll be able to find it in a way that's easier with less friction and it's more efficient.

And so my belief is this is a pathway to lower distribution cost broadly for our owner community if we're smart. Never forgetting that the one thing at our scale, I mean, look at the U.S. alone, we're 13-plus percent of the market. If you look at the quality market, no offense to the whole market, we're probably -- we're well over 20% of the market. We have complete control over rate, inventory, pricing, availability. And if we don't want to share it, nobody can get it and we have products that people want. I view that as super valuable. So as we think about how we engage with everybody in this space, and we are, as I said, already engaged in all the ways you would think with the big players.

I think it's a very symbiotic relationship. I think customers for them to have platforms that are in travel, they sort of need our product. And for us to show up, we want to work with them. I think it's quite a balanced equation, as I said. I think the net result is generally good on distribution cost. The last bucket I talked about, which is super exciting, and we're doing a bunch of stuff is just the whole customer experience.

I mean, so I talked a little bit about like the dreaming function in our own systems of being able to not just dream and sort of natural search and AI enabled, but then have it be seamless to booking, have it then be seamless to prearrival and planning your stay on property experience, problem resolution, post stay, you think about with the use of AI, the data, the tools that we already have and that we're building out in a much more fulsome way with a fully modern tech stack that we can put so much where we have an experience with our customers that is digital with AI and with our platform, we can really revolutionize how customers interact with us.

And then we're at the physical side of it, we have the ability to create tools, and we are doing it that enable our teams to have so much more information for people to plan their stay, on property, problem resolution, et cetera, that I think it's really, really game changing. And we've been -- I'm not going to get into everything we're doing. Obviously, it's competitively sensitive, but we're doing a whole bunch of stuff. We have, I don't know, 40 use cases plus and growing in all of those buckets around AI, working with a bunch of great partners, many of the names that you read about in the news every single day and have super close engagement. And I feel really -- listen, we're in the early days of AI like for sure. But I feel like we're in a really good position based on the platform, the efforts we're making and progress we're making as this evolves.

The next question will come from David Katz with Jefferies.

Noting in the press release and what you talked about with the outsized amount of investments going toward lifestyle and luxury and some of the commentary this morning, I'm wondering whether the -- both the duration and the economic intensity of those contracts continues to grow over time. And whether there is kind of an acceleration in trajectory as more and more of those rooms come online. We're obviously looking at fees and cash flow, et cetera, the output of the NUG, but I'd love some further insight there.

Yes. I think I understand the question. I'm not 100% sure I do. But I think the basic question is, as you now have 1,000 hotels and it's becoming a real business and each of the individual brands within the category, which is 8 brands start to get scale and momentum, they sort of feed on themselves in the sense of delivering -- as they build out a network, they build market share even higher, as they build market share even higher, they get adopted by more and more owners and ultimately, the economic model starts -- the flywheel starts spinning.

I think you're right, yes. So many of these brands, while we have 1,000 hotels in luxury and lifestyle, it's a lot of hotels. I mean -- but still we have 9,400 and change. We're open 2 or 3 a day. So I always lose track. It's still a relatively smaller percentage. And many of the brands, you can think of like Tempo and Motto and even Canopy that are doing really well, they're very -- they're still graduate for that matter. They're still relatively small brands, even though they're performing well.

And so yes, I do believe, like we've seen in every other brand, and it won't be different, particularly in lifestyle. Luxury is a little bit different game, but in the lifestyle categories, as you start to build these out and create real network effect, you hear me say network effect a lot in a broader context, but in a more micro context within individual brands, that customers ascribe meaning to, if you don't have enough locations, it's hard to sort of serve their needs. And the more you build that network effect, it does have sort of an effect of creating -- of spinning the flywheel faster.

So I think a bunch of those brands are early days and getting ready to really explode. Certainly, some of the ones that have larger footprint potential like Tempo and Motto. And that's why we're looking in that space at a brand between, which I've talked about in between Motto and Canopy because we think it has a TAM that is very large. Luxury, listen, we're doing -- I mean, we've got -- in terms of dots on the map at this point, we've got like 600 dots on the map, 650, I think, close to that as of today. We've got another 100 plus in the pipeline. I mean the Waldorf Astoria New York opening was magical. I know some of you were there and hopefully, you enjoyed it.

And that's the GrandDom that started the whole brand. And so while it's one hotel, it makes a big difference. If you look at the openings, I noted a few of them that we had over the last year. If you think about the openings we're going to have this year and you look at the pipeline, like Waldorf is on the move, like Waldorf is -- it takes time. Luxury is a hard space. It takes time. It was one of the first things I got here 18 years ago, and I remember saying to John Gray, we got to really get luxury, right. And we had like basically one Waldorf Astoria. And here we are today with open and in the pipeline close to 100 of them.

So we have good things going on with Conrad, LXR. I mentioned that in the prepared comments. So I feel super good about what's going -- I mean, I think from a loyalty point of view, we have as many dots on the map as anybody in the products that if I look at redemption behavior, our customers are really loving, particularly with the SLH relationship. And then I look at our core -- the core 3 brands we have in luxury, they're performing well. Their pipeline is spectacular. Growth rate looks really, really good over the next few years.

So we're getting momentum across all of them, where when you wake up in 10 years, I think it's like by volume and numbers and economics, it will be the upper mid-market, lower, upper upscale market where you're going to have the most action just because that's where the largest segment of customers is. And then the others, we'll do great, but the volume ends up where you would think it would end up. It ends up where the population demographically is.

The next question will come from Stephen Grambling with Morgan Stanley.

Maybe another angle on NUG. You've been able to build, as you said, a best-in-class pipeline while just as importantly, keeping CapEx and key money effectively flat in the guidance. So I'd love to get your latest thoughts on how the overall development environment is changing, both in terms of competition and then also the use of key money as rates and liquidity are improving. And any thoughts on the balance of new development versus conversions from here?

Yes, I'll start and maybe Kevin will finish whatever I miss. Listen, we have been really disciplined. I say it every time about key money. I mean if you look at the broader market, key money is definitely edged up. But if you look at our numbers, like rooms under construction, the percentage of deals that have key money is like 9%, hasn't really changed a lot. If you look at the average, we're saying a couple of hundred million this year. Our average over the last bunch of years. It goes up, it goes down a couple of years ago, we were $100 million last year, we were a little high.

I mean it sort of has averaged plus or minus a couple of hundred million. And if you look at the types of deals that we're doing, like last, I look at the data, I think it's 85% or 90% are in the upper upscale or above in terms of where we utilize key money. So we are -- and that's where it's sort of always been the more complicated, bigger full-service convention and luxury. That's where historically, there's been more demand for key money to get deals done. It's much more competitive, and that's still where we see it. I mean, is there -- has it creeped in a little bit? Yes. But listen, when it comes down to it, like we think our brands perform better.

And a little bit of key money versus a lot of market share, we think, is a bad trade for most owners. And we do -- we -- our teams are well equipped to sort of discuss that trade-off. But in the end, owners as you are as buyers of the stock are trying to make money and they're ultimately going to, I think, evaluate -- most owners are going to evaluate that trade-off in a rational way. So we feel good about our ability to keep doing what we're doing. It's not without some pressures and market dynamics. But if we keep delivering profitability the way we are, I feel good about it.

In terms of conversions, I think maybe the only thing I missed, obviously, last year was a big number of 40%. We tend to see in more challenging environments, those numbers -- the numbers go up. That's sort of a standard thing, which wouldn't be surprising. Now at the same time, we have a lot more shots on goal. We've been adding brands. I talked about a couple of apartments and Outset. So we do think conversions are going to be a bigger part of our future than they might have been on average over the last 10 years.

I do not believe they will stabilize at 40%. I think they will be in the range of 30% to 40%, and it will depend on sort of what's going on in the world. But I don't think anytime soon, we'll go back down into the 20s. If you look back on average over an extended period of time, it's been more in the mid- to upper 20s. I do think we're sort of more permanently above that, both because the performance of the brands, just more shots on goal with very conversion-friendly brands. So what did I miss, Kevin?

I just on the financing environment, I'd just add, I think it's good and getting better. And I think that supports conversions because the cash flow producing assets is easier to finance than ground up, although we did -- we referenced the ground-up improvement stats in our prepared remarks for a reason that our brands -- the other thing in addition to conversions with them being cash flow producing assets, our brands are more financeable, right?

So just in the same way that owners think they're going to make more money with us and they do, lenders have more confidence that they're going to get repaid if our brands associated with it. And so it's just -- it becomes that much easier to finance. That's the only thing I'd add.

The next question will come from Steve Pizzella with Deutsche Bank.

Just thinking about the 1% to 2% RevPAR guide for the full year in the first quarter, can you talk about how you expect RevPAR to play out from a quarterly cadence perspective throughout the year, knowing the comps do get easier, you get the World Cup in the middle of the year. And then it sounds like increased optimism in select service RevPAR accelerating. Could the RevPAR outlook be conservative?

I would give Kevin the first part and I'll take the second.

I mean I'd say it always can be, right? I mean I think we -- Chris talked a lot about the underpinnings that we see in the economy. And look, it's -- we're halfway through the first quarter, right? So there's a lot of year left. But I think I would say they always can be if the things that we're seeing in the data persist, of course, it could be better. And then in terms of the quarter, there's a lot -- this is -- we've been doing this a long time. I think this is probably the year with the most complicated puts and takes on calendar that I can remember in a while.

But yes, the World Cup is second going into third. The government shutdown was fourth. So I think it's pretty well balanced over the course of the year in terms of the way it's going to play out. And you could always surprise to the upside. I mean the World Cup is a good example, right? It depends on who makes it through into the final rounds and which countries are those and it will generate more demand. It can always vary. But I think it's pretty well balanced over the course of the year.

That's well said. I mean when you look at everything that I covered answering Shaun's question about the macro, and I applied and Kevin just reiterated some of the micro things and then you apply the comp issues that you had last year. Again, that's not to say we won't have other new things this year. It's hard not to feel pretty good about that range of guidance. I mean I'm not going to go so far as to say I take the over versus the under, but I probably would.

The next question will come from Robin Farley with UBS.

I have a small question for Kevin and maybe a medium-sized question for Chris, if that kind of adds up to one question. Kevin, the...

It sounds like 2, but give it a shot.

Yes. Your EPS guide, typically, your EPS grows at a higher rate than your EBITDA growth. And -- just kind of wondering what -- it's not obvious, like your share count is down. It looks like your tax rate is going to be down. So what's the EPS growth rate sort of not being higher than EBITDA growth? Is there just something obvious that I'm not seeing?

And then the medium-sized question for Chris. Chris, you mentioned in your remarks that you'll have more brands later this year. And I know last year, you talked about some things that you were going to launch that you have. And it sounded like maybe that would sort of have filled out your portfolio. So just wondering what is it? Is it like white space things like apartment by Hilton or like -- because it had seemed like maybe your portfolio would be pretty filled out with the brand launches you had talked about for last year. So just kind of your thoughts on that.

Kevin, will answer the first part of your one question.

Yes. Robin, I don't know if it's a small question because EPS growth is pretty important to us and to investors, but it's a relatively small answer. It's easy. I mean you mentioned share count. We don't guide to share count. And then you got a couple of onetime items, primarily related to interest expense associated with not just releveraging as EBITDA grows, but also implied in our guidance is moving closer to or actually at the midpoint of our range of -- our guided range for leverage is close to 3.25%. So it's just those 2 factors, and that's all the risk to it. If you adjusted for those 2 things, EPS growth is in the low double digits.

The first is always going to happen just because we're always going to be buying back shares. And the second, at some point, we're not going to keep increasing leverage. So that's having the effect. So it's...

Those two things, and that's it.

It's just transitional. And second, I mentioned one. I mean, we have -- we're always in the skunkworks looking at lots of things. The things that I think are most imminent are another lifestyle brand in between Motto and Canopy. So sort of say, upper mid-scale, lower upper upscale segment. We think there's a huge TAM for that as we've been thinking about both Motto and Canopy, which are doing great. We just think there's a big white space as we talk to customers and do the research. And as we talk to owners around the world, we think there's a lot of demand. And we think, as I said before, there's a big TAM.

Undergraduate, which has, I guess, been written about because I have talked about it, I think I talked about it on the last call. We're really excited about that. That's imminent in the next 60 days. Again, graduates, fabulous performing super well. Pipeline is building really well. But there are a whole bunch of markets, hundreds and hundreds just in the U.S. alone, probably 400 that really can't afford to build the full graduate, which is an upper upscale brand and need something more in the mid-scale space. But they like the theme and the idea of what graduate the ethos of the brand.

And so we're going to -- we want to give all those college towns the same opportunity to have a really great graduate approach. And undergraduate, we think, is a fabulous way to do that. We have a couple of other things we're working on that are -- will be -- we'll talk more about as we get a little further along. Student housing associated with graduate, something we're working on. I wouldn't say it's imminent, but we think the TAM is reasonable and worth doing. And so we're doing the work and a couple of other ideas, but I'll leave it. The 2 that are coming soon are the lifestyle and -- or they're both in lifestyle category, lifestyle, upper mid-scale and undergraduate.

The next question will come from Lizzie Dove with Goldman Sachs.

I wanted to touch on the non-RevPAR fee side of things. I think back at your Investor Day a few years ago now, you'd called out that algo in the kind of low double-digit range back then. You mentioned this morning, it was kind of an outperformer last year. Anything you'd share on how this evolves and the outlook for that over time, I guess, especially on the credit card side of things?

Yes, Lizzie, I think we probably will stick to generally -- you referenced the Investor Day, generally what we said. And what we said has sort of played out that we think that our non-RevPAR-driven fees will continue to grow at above algorithm. Some of that's a credit card, some of that's timeshare. Some of that's our purchasing business. We've got some other ideas that we're working on in terms of commercializing our customer base to continue to grow the business. I think we've done a pretty good job of that over time.

And then our credit card program, I'm sure Chris may want to add something to this. Look, we have a fantastic credit card program that continues to be among the best and most popular cards in our industry and with Amex, drives a lot of customer engagement, drives great economics, both for our system and for us. And beyond that, we don't -- we tend to not talk all that much about it in terms of some of the details are competitively sensitive, but we think that, that will continue to grow above algorithm as well for a long time.

The next question will come from Brandt Montour with Barclays.

I wanted to ask about group business. I don't think you guys gave a pace number, but a pace for '26 would be helpful. And then the real question though is really about how we came into last year, right, with really good group pace. And then -- and of course, group in the U.S. specifically did not -- it wasn't realized to that level because -- obviously, because of tariffs. Would you say sitting here today, knowing what you know about how that business works, we would need a shock to the demand side kind of like something we saw last March for group not to be an acceleration this year versus last year?

Yes, you would. I mean right now, we feel really good. I'd say, coming into the year relative to our expectation for the year, we feel great. We're sort of like mid-single digits system-wide group position up for the year. And that's against obviously, with a 1% to 2% RevPAR guidance, something -- an expectation that when we finished the year, it would be somewhat lower than that. We'll see. But we feel -- yes, we feel like we've got the solid base on the books. We think group will be the outperformer this year. We would have thought that last year, but for the reasons you described, it didn't end up being the case.

But if you look at the categories, I'd say we believe all 3 of the major categories, group leisure and business transient are going to grow for the reasons I've spent too much time talking about, driven by the macro tailwinds, we do think it will be in that order. We do think it will be group at the top, short any sort of unforeseen events, leisure and then business transient. But we think we'll see healthy growth across all segments with group leading the way.

The next question will come from Michael Bellisario with Baird.

Just sort of along those same lines, just in terms of the booking window, maybe what changes have you seen recently? How has that evolved or improved? And then any more confidence from meeting planners, maybe what are you hearing from them recently?

Yes. The booking window has been stable. It actually extended technically by 1 day since last quarter. So not -- it went from 26 days to 27 days. So I mean, not -- I would say that's relatively stable. But -- and what we're hearing from, frankly, across the board, what we're hearing from -- in all segments feels pretty good. If you think about the business transient, we're talking to those customers all the time. I think the general theme is they all believe they're going to travel more this year for all the reasons that everybody's got to get out and what they think is going to be a little bit stronger economy, and they know they're going to have to pay a little bit more because that's life in the environment we're in.

And I'd say same on the group side, we talk -- I'm talking to our Head of Sales all the time. And I think his view is the trajectory again, short unforeseen circumstances that rattle people in terms of broader macro stuff. The sentiment is quite good, and people have a healthy attitude about continuing to book business. So it all feels pretty good.

The next question will come from Patrick Scholes with Truist Securities.

Great. We certainly missed your polyannaism at the ALIS conference 2 weeks ago.

I don't want to take any offense of that. How about optimism instead of pollyannaish. My vocabulary...

No, I mean that in a positive way. It wasn't the most upbeat conference. We certainly could have used -- I mean we could have used your enthusiasm there that you spoke about.

I was otherwise occupied during my day job.

Understood. Understood. A credit -- excuse me, a question on your credit card contract. Is there anything in your existing credit card contract that would allow for a step-up in the royalty rate? And if so, how likely might that be that it would get triggered?

After yesterday, I suspect that we might get this question. Kevin gave the answer. We're not going to get into like and can't legally get into all the terms of contractually. We redid our -- suffice to say, we redid our deals and then many years ago and then redid them again a couple of years ago. We feel really good about the contractual relationship we have with all of them, Amex obviously being the most dominant.

We feel really good about the growth rate that's built into the contract as well as the natural growth that's coming because the cards and acquisition of customers and the spend on the cards given customers love the cards is very favorable. So I would not set an expectation that there's some big announcement coming from us. We're doing great. It's growing above algorithm, and we are highly confident it will continue to grow above algorithm for many years to come.

Okay. And I'll also take the over on the RevPAR as well.

I like it. Why are you being such a pollyanna?

Well, no, I mean that in a positive way. No, the perfect storm of holiday shifts and World Cup and...

The next question will come from Trey Bowers with Wells Fargo.

A lot of what I was going to ask has been asked already. But I guess it's been pretty quiet from you guys on an inorganic basis for the last year, and you haven't really needed it. Organic growth has been best-in-class. But just curious what you're seeing out there in terms of opportunities? Do you expect that, that should pick up over time? Just anything around the M&A environment as we go forward?

Yes. I get asked a lot, obviously. If you look at the history of the time I and we have been here 18 going on 19 years, other than 2 years ago with 2, what I would describe, one, micro transaction and one relatively small transaction, we have not done any M&A. So all of our growth where we're, what, I don't know, 2 or 3x system size in that time frame has been organic. Where we've gone from 8 brands to 26 brands. You heard me talk about another couple of babies we're getting ready to birth. So we think that we have built a very, very good skill set, I would argue, industry-leading skill set to drive organic growth, which is not just development teams doing a great job, which, of course, they are. It's about our commercial teams doing a great job delivering performance.

It's about our brand teams doing a great job delivering great products that customers want. We think it is our alpha. That is what we've done, I think, with all respect to a bunch of great competitors. We've done more of and better than our competition. And as you know, that is a heck of a lot better way to drive overall returns because every time we do it, the returns on that are infinite versus going out and buying things. So we found unique circumstances in the 2 we did a couple of years ago that were really driven by the times like interest rates spiking, the environment slowing down and things got a bit rattled and we found some like unique themes that -- on things that we really liked.

But that is not the core of what we do. I would say we look at everything that's out there. I don't see anything -- I would not -- I would say I don't see anything on the horizon. I always have to say, because in this seat, you do, never say never, but don't misinterpret that. We're not working on anything that I think is real. I think you should think about us as an organic growth story. We love what we have. We love the skill set we've built, and we think it is the best way to drive the best returns. And we are equally focused on capital allocation to running the business.

And obviously, the more we can do this organically, the more free cash flow spits out, the more shares we buy, the more we become an even better serial compounder, and that's our strategy. So I grew up long ago as a [ cap. ] It's like we got to run the business well. We've got to drive share, drive growth, have great brands, do a great job for customers, have a great culture, all that. But when it comes out, when we spin it out the other end, we got to allocate capital really intelligently. And again, we think we're pretty good at that. We think we can keep growing at this level that we're talking about in the 6% to 7% range for an extended period of time without having to buy growth. And we think that's going to drive a better outcome in terms of how we perform over the next 1, 2, 3, 5, 10, 15 years as it has over the last 10 years.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the call back over to Chris Nassetta for any additional or closing remarks. Please go ahead.

As always, we appreciate you guys spending the time with us. It's been a dynamic environment. Obviously, over the last year, you can sense my and our optimism about seeing sort of things turning the corner. We'll look forward to hopefully describing how we continue to see things improve along the lines that I described after we finished the first quarter. I hope everybody has a great day and a great week. Take care. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Hilton Third Quarter 2025 Earnings Conference Call. [Operator Instructions].

Please note this event is being recorded.

I would now like to turn the conference over to Charlie Reuwer, Vice President, Corporate Finance and Investor Relations. You may begin.

Thank you, Chuck. Welcome to Hilton's Third 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.

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. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com.

This morning, Chris Nassetta, 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 third quarter results and discuss our expectations for the year. Following their remarks, we will be happy to take your questions.

With that, I'm pleased to turn the call over to Chris.

Thank you, Charlie, and good morning, everyone. We certainly appreciate you joining us for our call today.

Our third quarter results continue to demonstrate the resilience of our business as strong net unit growth discipline and cost control and our capital-light business model delivered solid bottom line performance. Adjusted EBITDA and adjusted EPS both meaningfully exceeded the high end of our expectations despite softer-than-expected industry RevPAR performance. Our strong portfolio of brands, powerful commercial engines and disciplined execution continue to drive meaningful free cash flow conversion which we expect to be greater than 50% of adjusted EBITDA for the full year. We remain on track to return $3.3 billion to our shareholders in the form of buybacks and dividends for the full year.

Turning to results for the quarter. Systemwide RevPAR was down approximately 1% year-over-year as unfavorable holidays and events, softer international inbound to the U.S. declines in U.S. government-related travel, and portfolio renovations weighed on results. In the quarter, leisure transient RevPAR was roughly flat, driven by strong demand in Europe and the Middle East, offset by unfavorable holiday shifts in the U.S. Business transient RevPAR decreased approximately 1%, driven by continued economic uncertainty.

Group RevPAR decreased approximately 4% and driven by tougher comparables as we lap major international events, renovation impacts and holiday shifts. We did see group demand strengthen which is reflected in our stronger fourth quarter group position and our 2026 position, which is up in the mid-single digits.

As we look to the fourth quarter, we expect RevPAR to be up approximately 1% and driven by holiday shifts, easier year-over-year comps and relative group strength. We now expect RevPAR for the full year to be flat to up 1%. And -- as I lift up and think about the opportunity ahead, I remain optimistic about the next few years.

We continue to believe that in the U.S., lower interest rates, a more favorable regulatory environment certainty on tax policy and a significant investment cycle will result in accelerated economic growth and meaningful increases in travel demand. This, when paired with limited industry supply growth should drive stronger RevPAR growth over the next several years.

Turning to development. During the third quarter, we opened 199 hotels totaling over 24,000 rooms and achieved net unit growth of 6.5%, openings increased more than 35% year-over-year on an organic basis. Our luxury and lifestyle brands continue to expand around the world, comprising approximately 20% of total openings in the third quarter.

In Asia Pacific, we announced our plans to exceed 250 luxury and lifestyle hotels in the coming years, representing portfolio growth of over 50%. In Europe, we opened the Conrad Hamberg to expand our award-winning luxury brand into one of Europe's most iconic destinations. Conversions remain integral to our growth story. We expect nearly 40% of openings in 2025 to be conversions across 12 of our brands, sourced from a mix of independent hotels and competitor brands.

We recently celebrated Hilton's 9,000th hotel following the conversion of the Signia by Hilton Lock Antero Resort and Spa a landmark property set a top 550 acres overlooking the rolling hills of Texas Hill Country.

We also added the 1,000-room Sunseeker Resort as part of our Curio collection. After eclipsing 8,000 hotels just a year ago, we opened nearly 3 hotels per day to reach this latest milestone, further underscoring our incredible growth momentum.

In the years to come, we continue to believe the conversion opportunity is immense globally to help capture this opportunity and leverage our skill set in identifying white space and developing new brands. Earlier this month, we launched our newest brand, outset collection by Hilton, the company's 25th brand and eighth in our growing lifestyle portfolio.

Outset collection by Hilton is defined by so full story-led properties featuring a diverse range of hotels across urban destinations, small towns, adventure outpost and offbeat hubs. Grounded in deep research, we determined that the upper mid-scale to upscale collection space represents an enormous opportunity for unbranded or independent hotels that currently comprise more than 50% of the global hotel supply.

To date, we have more than 60 hotels in development with a long-term growth potential of more than 500 hotels across North America alone, and we'll open our first several in the fourth quarter. Hilton has consistently delivered an industry-leading share of conversions in the United States, and we expect that to strengthen with the addition of [ Alta ] collection.

More broadly, we continue to deploy our brands into new markets around the world, driven by industry-leading premiums they deliver for owners. In the quarter, we marked brand us in 12 new countries and territories, including DoubleTree in Pakistan, Hampton in the U.S. Virgin Islands, and Motto in Hong Kong, which also represented the brand's debut in Asia Pacific.

Globally, Hilton operates properties in 141 countries and territories with an average of only 4 of our 25 brands per country, demonstrating the huge runway of growth ahead.

In addition to strong openings, we signed 33,000 rooms in the quarter, up over 25% year-over-year on an organic basis. We increased our development pipeline to more than 515,000 rooms growing both year-over-year and sequentially versus the second quarter with expansion in key strategic markets and across chain scales.

In Japan, we announced several agreements to further bolster our luxury and lifestyle portfolio, including Waldorf Astoria Residences in Tokyo, marking the region's first residences under the iconic Waller Astoria brand. We approved LXR, Curio and Tapestry properties at the foot of Mount Anapure Japan, offering guests easy access to [ Naseko's ] exceptional ski slopes when the hotels open later this year.

In Vietnam, we approved nearly 1,800 rooms across 5 hotels to debut our Conrad, LXR and DoubleTree brands and to expand the Hilton brand in 1 of Asia's most dynamic markets. We also signed our first LXR hotel in Phuket, Thailand, our first Canopy and Manila Philippines and announced 3 Curio hotels in key Italian destinations, including Geneva, Milan and Sorento.

New development construction starts in the U.S. were strong during the quarter, and for the full year, we expect global new development starts to finish up nearly 20% and and up over 25% in the U.S. year-over-year. Even with this year-over-year growth, new development construction starts remain below 2019 levels implying strong continued runway for growth.

Our record-setting pipeline, combined with conversion momentum and acceleration in construction starts will continue to fuel our growth in the coming years. We expect to achieve net unit growth of between 6.5% and 7% in 2025 and 6% to 7% annually over the next several years.

Our development success is incumbent on us being the premier partner for our owner community. Thus, we're always innovating to continue delivering industry-leading RevPAR premiums and profitability for owners while exceeding guest expectations. During the quarter, we communicated a first of its kind program that offers owners system fee reductions, many of which are tied to hotel-specific product and service quality scores.

The fee reductions will share the efficiencies we have gained through scale and technology with our owners, while reinforcing the need to continue maximizing the customer experience. We think we are well positioned to continue finding new efficiencies and strengthening our value proposition for guest owners, team members and shareholders.

Our proprietary tech platform, which was envisioned a decade ago was built for agility, with 90% of our enterprise solutions in the cloud today, up from 20% in 2020 when we started deployment. This modern platform is established Hilton as a pioneering leader in hospitality technology and is allowing us to rapidly introduce new innovations that elevate guest experiences and drive greater value for our entire network.

Because of where we are in our technology platform road map, we feel uniquely positioned in the industry to embrace AI and drive greater differentiation for our Hilton network. During the quarter, we continued to drive our award-winning workplace culture, including being named #1 Best Workplace in Australia, New Zealand and Srilanka, marking a total of 18 #1 wins in the past year, the most since we began participating in the Great Place to Work survey. We're more confident than ever that our team is poised to deliver for our shareholders in the years ahead.

Overall, we're very optimistic about our business and what is on the horizon globally. Our brand-led network-driven and platform-enabled strategy will continue to help us achieve our dramatic growth trajectory and meet the evolving needs of our travelers around the world while delivering great returns to owners and shareholders.

Now I'm going to turn the call over to Kevin for a few more details on the quarter and expectations for the full year.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR decreased 1.1% versus the prior year on a comparable and currency-neutral basis, driven by modest declines in both occupancy and rate. Adjusted EBITDA was $976 million in the third quarter, up 8% year-over-year and exceeding the high end of our guidance range.

Outperformance was predominantly driven by better-than-expected growth in non-RevPAR-driven fees disciplined cost control, ownership and some timing items outweighing RevPAR softness. Management franchise fees grew 5.3% year-over-year. For the quarter, diluted earnings per share adjusted for special items was $2.11.

Turning to our regional performance. Third quarter comparable U.S. RevPAR decreased 2.3%, largely driven by pressure across business transient and group as holiday shifts declines in government spend, portfolio renovations and softer international inbound demand weighed on performance. For full year 2025, we expect U.S. RevPAR to be roughly flat versus 2024.

In the Americas outside the U.S., third quarter RevPAR increased 4.3% year-over-year, driven by strong demand in both leisure and group segments. For full year 2025, we expect RevPAR growth to be in the mid-single digits.

In Europe, RevPAR grew 1% year-over-year, driven by a rebound in the U.K. and Ireland and offset by a tough year-over-year comparison from major events last year. For full year 2025, we expect low single-digit RevPAR growth.

In the Middle East and Africa region, RevPAR increased 9.9% year-over-year, driven by robust intra-regional travel growth for both business and leisure segments. For full year 2025, we expect RevPAR growth in the high single-digit range.

In the Asia Pacific region, third quarter RevPAR was up 3.8% in APAC, excluding China, led by strong group trends in Japan, Korea and South Asia. RevPAR in China declined 3.1% in the quarter largely driven by the impact of the government travel policy on business transient and group travel, particularly in Tier 2 and Tier 3 cities.

For full year 2025, we expect RevPAR growth in the Asia Pacific region to be roughly flat assuming modest RevPAR growth -- assuming modest RevPAR declines in China.

Turning to development. As Chris mentioned, for the quarter, we grew net units 6.5% and have more than 515,000 rooms in our pipeline, of which nearly half are under construction. We expect to deliver 6.5% to 7% net unit growth for the full year.

Moving to guidance. For the fourth quarter, we expect system-wide RevPAR growth to be approximately 1%. We expect adjusted EBITDA of between $906 million and $936 million and diluted EPS adjusted for special items to be between $1.94 and $2.03. For the full year, we expect RevPAR growth of 0% to 1%. Adjusted EBITDA of between $3.685 billion and $3.715 billion, and diluted EPS adjusted for special items of between $7.97 and $8.06. Please note that our guidance ranges do not incorporate future share repurchases.

Moving on to capital return. We paid a cash dividend of $0.15 per share during the third quarter, bringing dividends to a total of $108 million for the year-to-date. Our Board also authorized a quarterly dividend of $0.15 per share in the fourth quarter. For the full year, we expect to return approximately $3.3 billion to shareholders in the form of buybacks and dividends.

Further details on our third 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 limit yourself to 1 question.

Chuck, can we have our first question, please?

Your first question will come from Shaun Kelley with Bank of America.

Chris, like usually around this time of the year, we start to think about the setup for next year. And I know it's hard to put you on the spot without guidance out there, but what kind of talk around it anyways a little bit. Could you just give us your thoughts about kind of the time line for the improvement you're hoping to see on the top line and operating environment.

And then just we're getting a lot of feedback this morning about how well you've done on the cost side. So let's play the counterfactual if the top line -- and we're talking really RevPAR here, but if that environment doesn't get a little bit better -- could you just talk about what you can do in your comfort to kind of continuing to execute so well on the bottom line on the side of the business and drive some operating leverage across the Hilton enterprise worldwide.

Yes. Thanks, Shaun. Happy to cover both. So Obviously, yes, we're not giving -- we gave you a form of guidance on unit growth. For next year, we're not -- at this time, we're going to -- we're just starting to budget season. And so we don't we're not going to give guidance on RevPAR. But here's what I'd say. I said it at your conference, I said on the last call, I believe, we feel incrementally a lot better about the setup for 2026.

I sort of said it briefly in my prepared comments. I mean, I think while there's certainly a lot of noise in the world, and you saw in Q3, industry numbers were lower than everybody expected. I still think if you sort of lift up and you get away from the noise that structurally in the U.S. at the moment since that's still 75% of our business.

There's a lot of really good things going on. I mean inflation is definitely coming down. Rates are coming down with an expectation that rates will continue to come down. You have certainty on tax policy, which is unusual and probably last for at least 3 to 5 years, you have some meaningful benefits in that tax policy like bonus depreciation and things that stimulate investment. You have a regulatory regime that is going to be much more friendly.

And you have an investment cycle that is coming and sort of happening, but it takes time to get embedded in the economy. And what is that investment cycle? I mean, I hate being redundant, but it's worth noting. I mean you have the core infrastructure, Bill, that was done approved by Congress, by President Biden, if you add up all the pieces of it, roughly $1.6 trillion, Mike, less than 20% of that's been spent.

You had $800 billion from the CHIPS Act less than 5% of that's been spent because it takes time to get the money in the system. And then on top of that, you have the whole AI investment thesis that's going on, not just the tech companies that are obviously investing into the trillions when you put it all together, but all of the infrastructure that goes behind that. So all the data center development that's going on.

All the energy development that has to go because without energy, you don't have data centers without data centers, you don't have -- and so while it takes time to get all of that embedded and I can't -- I cannot tell you, like, I think it's like January '18, that -- I think it's like a benefit that we are going to be getting for several years. I do believe you will start to see it in the first half of next year. I almost think you have to.

And then another couple of reasons for optimism on next year is one obvious one is comps get a lot easier, right? I hate to rely on that. I mean obviously just gave you a pretty good set up for much better fundamentals. But the comps get easier. You've got some event-driven benefits next year. You have midterm elections, which means a lot of activity. These are big midterms. People are -- in every state in the union, people are going to be running around raising money campaigning, that's good for business.

You have Americas 250, which is going to be a year around celebration. There's a lot of energy going into that from a lot of different places, including the administration. You have World Cup, which isn't like Super Bowl, where it's a weekend or whatever. It's it's a fairly extended sort of experience.

And so all of those things are going to be good. And then, of course, on the other side of it, while we're benefiting from what I think is a pretty darn good development story and getting much greater than our fair share, you're still in a super cycle of under development in the industry where you're adding capacity at less than 1% against the 2.5%, 30-year average. So like, again, you can all get caught up in the noise and tariffs and like there's a lot geopolitically, listen, I'm not -- I don't have my head in the sand, but I like to try and lift up above noise.

That's sort of what I do in my personal and professional life. And when I do that, it makes me feel pretty good about the next year. So I would bet a lot of money, that '26 is going to be better than '25, and I bet a lot of money '27 is going to be better than '26. The exact slope of that is difficult to determine. We'll obviously try and do a little bit more precise job through the rest of this year in doing a very granular analysis market by market as we as we go through the budget season, but I feel really good about it.

On the cost discipline side, listen, I think -- I would hope everybody would agree, we've been super disciplined forever on costs. Like since we went public, if you look at us versus core competitors relative to our size and scale, we've always been pretty efficient. And I believe we will continue to be, as I said, very briefly in my prepared comments that there are a lot of tools available to us to continue to drive efficiencies, and we're going to use those. I mean in the world of AI by redefining a lot of processes, there are opportunities to continue to do things more efficiently and be able to accomplish more with less.

And that, by the way, holds true for our G&A, but also importantly, very importantly because our job is ultimately deliver profitability for our owner community I think it affords us opportunities to continue to find efficiencies that can translate into higher margins by reducing incrementally system costs more.

I noted very quickly -- and it's reasonably broadly known because we've communicated to our owner community. But we did a first-of-its-kind reduction in system fees, to be clear, not our royalty rates and not our license fees, but the fees that owners pay us to operate the system. And that's been done because we've just found ways to be more efficient, whether that -- lots of different use cases in AI where we're redoing processes and getting efficiency and we think we're doing things better but more efficiently. And that's translating to benefit us, but it's also translating because the bulk of the cost structure of this whole enterprise really is running the system.

It's benefiting our owners. And we want to do more of that. Like we want to -- this has been a difficult time for the owner community in this sort of air pocket where I think really good things are coming.

But at the moment, you're sort of in the U.S. seeing modestly negative top line and while inflation has come down, it's still a little bit elevated. That's not good for our owner community. And so that's why we put this program in place. But it's also why we want to continue as we're in this transition period to a faster growth period of time, utilize every weapon in our arsenal, and we have a lot to to continue to drive efficiency.

So that's a long-winded way of saying, I think we've always been, frankly, on the tip of the spear and driving very efficient cost structures, and we will continue to do so. And that's sort of a mentality I have and we have that will never change. And now we just have more ways to do it.

The next question will come from Stephen Grambling with Morgan Stanley.

Chris, I appreciate the comments you made about the tech stack and also some of the opportunities in AI, but just to dig in a bit on that. On the back of partnerships being formed by some retailers and e-commerce companies with large language models, -- how do you think about potentially partnering with some of these companies as another source of distribution? And maybe also remind us of some of the internal efforts on AI as we think about both direct and indirect opportunities.

Yes. We can spend the whole call plus we could spend the days together talking about this, and we're obviously like most spending a huge amount of time understanding where AI is the art of the possible. I mean we have to be exact, I think 41 use cases that are being utilized inside the company at this moment as we test and learn. I'm not going to torture everybody going through it and competitively, I'm not going to get into a great deal of detail for obvious reasons.

But I'd say broadly, I look at it as AI for us at the moment, and I think it will evolve and change and like you just have to be really agile with the speed at which this is moving. But I think for the foreseeable future meeting the next year in AI world, there's probably 3 buckets. I talked about one, which is reinventing processes to garner efficiencies. And that can be -- wherever we have a lot of process and historically, you have antiquated ways of doing things that require a lot of people.

There are different ways to do it and repurpose people to do higher value things. And so again, I think that can benefit our G&A, which you've seen like some of the use cases are -- you're seeing a benefit. But again, we're at the tip of the spear and you've seen a little bit of it vis-a-vis the system relative to our owners, but there's more of that. That's one big bucket.

The second big bucket is go-to-market like basically how you market distribution, the whole distribution landscape and that's what you started with, Stephen, and I agree wholeheartedly. I think there are all sorts of risks with AI like -- but in the end, here's the thing, we're in the business of fulfillment. We're not -- yes, we have a platform and a network, but in the end, we have all -- we have 9,000 and growing hotels that we control rate, inventory and availability. And the only way you get it is through us, okay? No other way. You either get it from us or you don't get it. And we are in charge and control of fulfillment, the actual experience for the customer.

In the world we're going into, having multiple LLMs and really, what I would argue much more competitive environment for how people get information I view that, again, I'm on my head in the sand. There's all sorts of risks. I view that as a very good thing, right? If we do our job, we have control of our inventory if we do a really good job in delivering product service, loyalty to our customers and we are viewed, which we are as the best of the best at fulfillment then we're going to -- we have all sorts of new ways to think about how we distribute our products. So you can assume, yes, we're talking to all these people. And they're early days.

They're in a a bit of an arms race trying to figure out who the winners and losers are. And it is organized, but it's a little bit like the Wild West at the moment. But I think where it's going is super good for us and how we go to market and how we distribute our products if we are intelligent about how we control our inventory and how -- and making sure we always deliver on the fulfillment side.

The third bucket is CX, customer experience. We're already not just testing. We're doing like we -- because, as I said in my prepared comments, we've evolved our tech stack, and we're basically micro services, open source, cloud-based. We have massive flexibility in how -- what we do with our tech stack, and we are already utilizing that in ways to deliver a much better customer experience, meaning mass customization, understanding your customer, being able to take all this data that we've had, manage the data, get outputs that actually allow people, enable people on property to do things, to customize the experience, to resolve a problem real-time in a way that we've never been able to do because you just -- you always had massive amounts of information.

The question is, did you have the right information, could you manage the information -- could you translate the information in ways that could spit out a command to get somebody to take an action. And now we have that. And so this isn't like a pipe dream that we -- like I'm thinking about this is like in action. We're doing it, we're testing, we're learning and we think there's a huge opportunity. I think the winners in fulfillment and back to my fulfillment, comment, are the winners in across all industries in a world where everybody wants what they want, right? And they get it now more and more is mass customization. I mean, I've been thinking this for 20 years. It just hasn't been quite as possible as it is with how technology has evolved, particularly with AI.

And so the most -- I mean they're all very exciting to me, but the customer experience side of it, as you can probably tell, really excites me. The other 2 buckets are super important, and I think will ultimately all of them will allow us to differentiate ourselves in terms of how we serve customers and ultimately drive greater profitability into the network.

Next question will come from Daniel Politzer with JPMorgan.

Thanks for all the great detail thus far. The net unit growth, obviously, it's a bit of an acceleration organically here from that 5% that you've been running at [ XLH and graduate.]

Can you maybe parse it out as we think about going forward between your expectations for conversions next year versus some of the newer brands that you've launched? And maybe if there's any element of that accelerating, albeit off a low base construction starts that you mentioned?

Yes. Thanks, Dan. I think, look, the composition for the acceleration, I think, is just -- if you think about it, if you go -- as you said, if you go partnerships and look at it as just an acceleration still coming out of COVID, right? Because the development cycle picks back up and delivers on a lag. So what you're seeing here, we raised our $6.5 million from 6% to 7% to 6.5% to 7% for this year. That's really broad-based. There's really no one area we said we think nearly 40% of that is going to come from conversion. So we keep winning well more than our fair share conversions.

But if you look at new development, and Chris mentioned, we think new development starts this year are going to be up 20% and then the U.S., over 25%. That bodes well for the set for new development going forward. And really is the underpinning of the 6% to 7% for the next couple of years and then you layer in with conversions. And so look, new brands is going to be part of it, just like Spark's been an important part of it the last couple of years, the new brands that are oriented towards conversions will be part of the conversion story.

But then -- a big part of the story is taking our core brands and exporting them around the world in emerging markets, right? So it really is pretty broad-based across the board, and we would expect something on the order of magnitude of in the 30 percentage points, 35, mid-30s, call it, to be from conversions versus new builds for the next couple of years.

Next question will come from David Katz with Jefferies.

I wanted to just talk about -- frankly, I asked us a lot about the higher end of the luxury end of the scale. You've commented in the past how it provides somewhat of [indiscernible] as well as the financial benefit. We certainly hear and see this getting to be a more expensive arena to play in. Talk, please, about how you sort of balance that tangible and intangible return opportunity and sort of where you're at.

Yes, I'm happy to. And good question. The luxury is very important, not -- I mean, we do make money in the luxury space. But if you look at the -- you looked at our our EBITDA driven by segment. It's not a huge contributor as a size of the slice of the pie. But it's important because it does help create halo effect that helps the whole system and network effect work, it's aspirational product that our customers want.

And so we have been very focused on it. You are right that if you looked at where our ultimately, where the bulk of our key money goes in any particular year. It is disproportionately at the high end of the business. It's not all luxury, but a big convention, resort convention and luxury hotels. And so by so doing those investments, we're saying it's important. And we'll continue to do that. But we're not going to go crazy doing that, meaning right now, if you look at where we are in luxury, I would I think we can prove scientifically, it's really working.

We have as many dots on the map as anybody. As a result of the SLH deal, which was 100% capital-light deal, we have 600 dots on the map. We have 100-plus more in our core brands coming in terms of pipeline -- we have, we think, all the most important destinations covered. I mean there are always a couple I'd like to see Waldorf in Paris. And there are a few places that are hard that we're focused on. But if you look at the whole world, where we think we're in all the right places.

And the reality is, with all respect to the competition, our loyalty program is the best-performing loyalty program in the space. I mean we're we're approaching against the target, a multiyear target of 75% Honors occupancy, we're approaching 70% at a faster rate than we thought. We're growing the program 15% to 20% a year, active members are increasing are crazy, healthy. People are really engaged with the program, the patterns that we've seen in redemption with luxury, including SLH have proven that what we were trying to do, we've accomplished that. And so we're going to continue to focus on luxury. You're going to see us do things to continue. I mean SLH will continue to grow, not at a really not the way it has grown 0 to 500, but it will grow incrementally because we are helping them, and they are they are working on growing that business. So that will continue to grow.

But you'll see most of the growth come in our core brands, and we're going to be sensible about it. We only -- even when we're making these investments, we don't make these investments to lose money. I mean we're always investing against market, a deal opportunity where we think that whatever we're giving is a lot less than the value of what we're getting, and we'll continue to do those. But I don't -- we do not, I do not, and we do not feel particularly post SLH that we have to do anything unnatural.

And obviously, the luxury business has been performing really well, and we like that, my own belief is it will continue to perform well. But what you're going to see over the next 2 or 3 years on the basis of what I think is going to happen. You can disagree with me you're going to see broader economic growth in the U.S. pickup and it's also going to be much broader based, and you're going to see all of the mid-market start to converge with the high end. It almost -- I mean, eventually, it has to because it always does.

And makeup of what's going on, which is really -- what's really driving it as an investment cycle, that's a middle-class game, like the investment cycle of building data centers, bridges, highways, power plants, that's getting everybody in the game. And so again, luxury is great performing really well. We're focused on it. It's a good halo effect.

We think we have what we need, and we'll keep grinding it out with these deals, but I do believe that the relative performance gap will close in a meaningful way over the next couple of years.

Next question will come from Steve Pizzella with Deutsche Bank.

Chris, just wanted to follow up on the offer to provide owners system-wide fee reductions tied to product and quality scores. If I heard you correct, can you elaborate on what the genesis of that was how we should think about any impact from our franchise and royalty fee perspective moving forward, if any at all? And does this incentivize more conversions from owners moving forward?

The answer to the last part is yes. I think it does. But the genesis of this was sort of what what I implied. It started with the fact that, listen, in the end, our job is to deliver not just top line, we got to deliver bottom line owners or this wonderful virtuous cycle of getting them to reinvest and build us more hotels does not work as well. And so we know that they are having a difficult time, they had a great run in initial years coming out of COVID, but it's gotten much more challenging. And so we want to help.

And we think we should be able to meeting same comments I won't repeat them about, we can garner efficiency. We can use AI. We can think about all of our processes where it's a big system in ways that will benefit them. So that was really the genesis.

And the other thing we're trying to accomplish, and it was -- I said it very quickly, but it's an important note is that -- and this isn't unique to help the whole industry during COVID had a cycle of underinvestment in assets. That's because everybody -- the owner community rightfully had to survive, they were having to pay interest and like they didn't have the money that they would normally have to invest.

So you went through a unique cycle in my 40 years of doing this of underinvestment. Again, not just across the board. Thankfully, we went into it in a very good place. So we feel pretty good about where we are, but we want more investment in the system. And so we have been encouraging and by the way, I sort of mentioned, we have -- in the U.S., we have over 20% of the system is in renovation right now, so that we've been encouraging it and it's been happening, but we thought if we're going to do this, we want to help provide another incentive to accelerate it to go even faster.

And so we did create, I think, a pretty unique setup where we have stay scores, et cetera, think about customer satisfaction scores and it's a complex equation, but one that they understand because it's the way we manage the system. The franchise system already where we provided gates essentially that people need to get through by brand with its stairstep. It's a very complex system. But again, sort of the way we've managed the business, they understand it. And so that's the secondary. The first was we want to help our owners. The second was we want to help our owners also in the long term, which is to make sure that the product quality is where it needs to be.

And even without it hitting it doesn't start until January, the relief doesn't start till Jan. We've seen a pretty meaningful uptick in activity. So I mean people get it, they want to get through the gate. And a large part of the system will. I think when we did it, it was like 50. I think it's -- last I looked at maybe approaching 60 without even having rolled out.

To be clear, it doesn't -- I do think it will -- the more -- the higher our margins, the more people want to build this hotel. So I think it's helpful in that regard. And it doesn't have any impact on our royalty management rates and license fees, management fees, it's all in the other part -- the part of the system we manage on by half of owners for the whole system. So there's no impact on our P&L.

Your next question will come from Robin Farley with UBS.

Looking at your fee revenue for the year kind of fee revenue per room -- it's growing even with more economy rooms and more rooms in China that I think a lot of investors might worry would hurt that number. What's driving the economics there?

And I guess, is there anything that you'll be comping next year for us to think about anything unusual in those numbers for this year that you'd be comping next year? Or do you feel good about those economics continuing next year?

You're talking about comps that would drive fee per room year-over-year, no/.

Things like the non-revs, sorry. Go ahead. yes.

Well, non-RevPAR is different. But fees per room, no, there's nothing that would comp year-over-year. And yes, you are seeing a little bit of our mix shift over time in terms of what we're delivering shift to emerging markets, including China, which is normal as we continue to grow outside the U.S. But I think as we've said before, and I know -- we all know why you're asking because you get this question a lot from your clients and from investors and we get it a lot. So we get that it's on investors' mind. We've talked about this a lot in the sense that -- even if you take the mix of what we're delivering, which is slightly different. If you combine that with the existing mix, we're really not shifting the overall mix of contribution over time from higher fee paying things to lower fee paying things. the rooms were opening largely around the world, if you exclude China, are at the same fee per room rates or higher than our existing in-place fee for room rates.

And then you think about other factors like RevPAR continuing to grow, our take rate continuing to increase as we regrow license fees. The bulk of our deliveries being in our strong mid-market brands, where we charge our highest fees per room. If you put all of that in the model -- and sorry, I should add that even in the case of emerging markets, we're starting to grow our higher-end brands. And in China, we're moving more towards our own brands versus in the MLAs. The MLAs are going to continue but we're growing our own brands that are 100% up at higher rates. So you put all that in the model, and we believe and we know that fees per room will continue to grow over time.

Yes. We -- I know Kevin's right, it comes up often until right or wrong, it does. We've modeled it in the most granular way, which, by definition, is more granular than anybody else can model it in our 5- and 10-year models and it keeps going up for the reasons Kevin described.

A little bit more visibility on the China thing, we did 2 MLAs. We're not planning to do any more. Those have been highly productive. They've helped us build an incredible network effect in China. Our market share in China is incredible. I'm not going to -- but it's off the charts. It's is the highest market share that we have anywhere in the world. So it has worked. But we're not doing any more MLAs. We -- those are productive. We learn from those and now we're taking our mid-market brands like Garden Inn and others and doing it ourselves.

So if you look at even in China, with those continuing to grow just based on the velocity of growth that we have and the ones we're doing ourselves, the fees per room are going up in China, they're not going down. So you put all that together and when we do it bit by bit, fees per room are going up.

Your next question will come from Brandt Montour with Barclays.

So apologies for more of a near-term question, Chris or Kevin. I am just curious in terms of the corporate travel trends into the fourth quarter. I mean you do have tougher comps on that side of the the ledger. But I think more of the question is, you guys talk to a lot of companies, you see a lot of data from your strength within your system. Does it tell a bit of a story in terms of which corporates are putting their people on the road, large companies or small companies region by region. And when you speak to those companies, what are they sort of -- if they agree with your view of the sort of future economic tailwinds, what do you think that they're waiting for?

Yes. I mean, listen, it's a lot of -- yes, we talk to our customers. We do customer events all the time. We did a big one recently where I had tons of our customers and talk to our sales teams.

And I'd say broadly, people are pretty constructive. I mean, it's anecdotal, but I don't really talk to any of our major customers that say like they're not going to be traveling more next year. I don't talk to any of our customers that don't understand they're going to be paying a little bit more for the product. next year. I think they, like everybody think inflation should come down. So maybe they don't want to see the big increases that they have been seeing. But they understand they're going to have an increase. I think what's been holding them up is the obvious, just noise in the system.

I mean, I think the big guys, the tariff stuff has sort of affected them. They were way behind. So I'd say, in a relative sense, maybe they have performed in the very short term a little bit better because they were so far behind. But they're rattled and then the SMB are always more resilient, but they're a little bit related.

So I just think there's been a lot of noise in the system. The reason I'm more optimistic about next year, again, I can't prove it is just anecdotal. I'm talking to a lot of them. I think you're going to see these if I'm right about when you lift up, you see some of these broader macroeconomic trends start to take hold and people feel more confident and you get -- as you get closer to midterm, some of the tariff stuff sort of goes a little bit more in the back seat I believe people will settle down and get back to their patterns.

And again, anecdotally, they're not telling us they're not telling me when I talk to the folks that run travel departments, anything, but we think we're going to travel more and we're going to have to pay more for it next year.

Your next question will come from Lizzie Dove with Goldman Sachs.

You're clearly seeing amazing traction on the development side and with the conversion side of things, speaks to the strength of the brand and everything else. But maybe it would be helpful just to get like a pulse check on the key money side of things, like what you're seeing in terms of key money per room, the competitive environment? Any kind of shift there over the last few months?

I wouldn't say there's been a shift, Lizzie, over the last few months. I think you've had a shift over the last few years in the sense that it is a more competitive environment. I mean, with unit growth being an important part of all of our stories in the industry, it's really important. And then when some of us sort of take a little bit of a lead in that regard.

Our competitors are sort of anxious to catch up and get out there and sort of deals get a little bit more expensive. But with that said, I would say, Chris mentioned it, something like 85% or 90% of the key mine we deploy is on full service and above. It tends to be on luxury. It tends to be on the big convention center type hotels. It tends to be -- the bigger projects, you garner the bigger checks, every once in a while, you have -- part of it depends on which brands are available for a certain deal, right, if you have a conversion and it's an independent hotel and all the brands are available, and that owner is fortunate enough to be able to create some that can make it a little bit more expensive.

But that said, if you look back, we're still broadly in terms of what is under construction, we're still under 10%, high single digits of our deals overall are using any form of key money. So you're still sort of 90% plus in terms of what's under construction has no key money associated with at all. with it at all.

And if you look back in the last few years, we've had some years that are a little bit higher. We've had some years that are a little bit lower, but that tends to be more some of the big chunky deals that the timing of when they happen changes that answer. If you had asked us 6 months ago, a year ago, we even back to our most recent Investor Day, we would have set a good run rate for key money is $150 million to $200 million a year, and we would still say that's a good run rate. So it hasn't really changed dramatically. It is a more competitive world, a slightly more competitive world, but it isn't changing dramatically.

And part of that is, and Kevin alluded to it, I mean we're training -- listen, our brands perform better than everybody else's. So like we have trained our development teams to have the dialogue with our partners, our owner partners to make sure, as they're thinking about key money that they're not being penny wise and [ pound fuller. ] So they get a little bit more key money or they get some versus none, but they get 500 to 1,000 basis point lower RPI or market share, obviously, that's a losing trade, and so we've worked really hard with our development teams.

We make it hard on them. I mean we basically don't believe we should have to do it. To Kevin's point, we think it should be consistent with where we've been. And we've been able to do it because I think we've got a really good story with really good performing brands. And I think our development teams are understanding how to make that argument. And it doesn't always win, but it's winning a lot more than it's not.

The next question will come from Mike Bellisario with Baird.

Just a question for you, just a question on pricing sort of broadly. Maybe help us understand what are you seeing in terms of how and where customers are booking, especially on the leisure side? And then how much more are you running promotions and discounts? And is that weighing on ADR and all looking at?

We are running -- when it's weaker, we're always going to do honor specials and use a little bit more OTA business and access other distribution channels. And in third quarter, it was weaker. So we did those things. I mean if you look at the numbers, you'll see it was pretty -- we're not -- you haven't seen any sort of collapsing in rate integrity. I mean our declines were pretty much balanced between rate and occupancy, which is what you'd see.

You definitely had in categories you had a lower in third quarter, lower group base. So that means you have more rooms to sell. You got to do more transient business transient was a bit weaker for the reasons I just described, everybody's rattled about everything going on in the world.

Leisure was pretty strong, but then leisure isn't the highest rated business. So what does that mean? it has impact on rate. What I would say is when you dissect so far, and you know my view now because I've said it 3 or 4 times that the world is coming our way, so far, if you dissect it, it's really been a mix shift that has affected rate. You're just taking lower-rated customers and they're substituting for higher-rated customers, meaning you're taking leisure customers that pay less, not necessarily that the leisure rates dumping.

It's just it's a lower rate than you're substituting in for business streams, which is a higher rate. So I think when you deconstruct it scientifically, I think you feel pretty good that rate integrity has been reasonably good, and not that shouldn't be surprising sort of intellectually to any of us in the sense that inflation is alive and well. And while it's come down, it's still somewhat stubbornly high. And so we will be a beneficiary of that broader trend.

So technically, it's pretty evenly split things -- occupancies are off, so we replace it with lower-rated business. As a result, rate will come down a bit. Just the weighted average will bring it down.

Your next question will come from Smedes Rose with Citi.

I know I covered a lot of territory here. I just wanted to ask you, I think the full year sort of trending on RevPAR and a slightly more modest outlook doesn't really come as a surprise. But as you think about the fourth quarter and kind of the implied guidance, is the government shutdown impacting your forecast at all? Or is that -- is everything just going on it's business as usual?

No. I mean, look, we're sort of almost a month into 22 days, I guess, into the government shutdown with them, so almost a month of that in the forecast. So we have factored for that into the forecast in the fourth quarter. And our full year scenarios, which is a range really encompass if the government -- even if the government shutdown keeps going, we think we'll be within that range. So it is affecting the numbers. I think that who knows if our forecast would have come down anyway, probably given what came in the third quarter, we might have been a little bit lower for the fourth quarter anyway, but we are factoring forward and it is affecting the numbers somewhat.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Chris Nassetta for any additional or closing remarks. Please go ahead.

Thanks, Chuck. Thank you, everybody. As always, we appreciate the time. As you can see, I remain pretty darn optimistic about what the next several years are going to look like. And even I think if you look at all the numbers and everything we talked about today, even in the midst of what's been a bit of an air pocket as we sort of get through this time to a little bit higher growth time the resilience of our model, business model and our execution, I think, has been really, really good, and we're continuing to deliver and outperform on unit growth, deliver and outperform on the bottom line with taking what the world gives us and doing everything we can to make it better.

So we're feeling good about the business. feeling good about where we are feeling good about where the future is going, and we'll look forward on the next call to giving you a fulsome update once again. Thanks again, and talk soon.

The conference has now concluded. Thank you for your participation. You may now disconnect.