希爾頓酒店 (HLT) 2026 Q3 法說會逐字稿

Good morning, and welcome to the Hilton third-quarter 2026 earnings conference call. (Operator Instructions)

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 third-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. 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'll 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 fourth 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.

Thank you, Charlie, and good morning, everyone. We're pleased to report a strong third quarter with top and bottom-line results exceeding our expectations. Strength in travel demand supported by favorable macro trends is driving RevPAR outperformance, a trend we expect to continue into 2027.

We continue to lead the industry with net unit growth at scale with the third quarter being our largest quarter of organic openings in our history with very strong momentum heading into the fourth quarter. Our award-winning brands, strong commercial engines, and powerful partnerships continue to further increase industry-leading market share, while a culture of innovation creates additional growth opportunities.

Together, these drivers support meaningful free cash flow generation and shareholder returns, and we remain on track to return $3.5 billion to shareholders for the full year.

For the third quarter, systemwide RevPAR increased 5.8% year over year with rate and occupancy growth both ahead of expectations. RevPAR outperformance reflected strength in business and group demand, continued momentum following the World Cup and favorable calendar and holiday shifts.

Globally, business transient RevPAR was up 8.3%, driven by outperformance in the US, with continued strength in manufacturing, technology, and workforce lodging that all grew more than 10%.

Leisure transient RevPAR was up 1.6% as demand normalized following a strong summer travel period.

Group RevPAR was up 8.2%, driven by sequentially stronger demand from the second quarter, continued rate gains and favorable demand from social events and company meetings.

For the full year, we now expect RevPAR growth of 4% to 4.5% as business transient momentum carries into the fourth quarter, particularly in the US, where supportive policy increased private sector investment, including AI and ongoing public infrastructure spending are supporting demand.

In the US, we are seeing middle-class real wage growth despite higher inflation, contributing to broad-based strength we have described as a C-shaped economy. We believe we are uniquely positioned to benefit from this demand given our exposure to business travel, especially small and medium-sized companies.

Looking beyond 2026, we remain optimistic about the strengthening demand backdrop, particularly given the close correlation between hotel demand in our segments and non-residential fixed investment or NNRFI.

NNRFI growth for the past six and soon to be seven quarters has been growing nearly two times faster than the average rate over the prior 20 years, providing an unusually strong and durable macroeconomic backdrop for our business. We expect continued growth in GDP and NRFI together with historically low industry supply growth to support strong RevPAR growth over the next several years.

Turning to development, we had another robust quarter of openings, adding more than 180 hotels and over 27,000 rooms to our system, our largest quarter ever for rooms added on an organic basis.

Our luxury and lifestyle portfolios continue to grow the most quickly across categories with trailing 12-month net unit growth rates of 11% and 20% respectively. For the quarter, luxury and lifestyle openings comprised approximately 30% of total openings and included Conrad openings in Saudi Arabia and Japan. And the debut of Canopy in Thailand, marking our 50th Canopy globally.

Our collection brands continue to drive growth with the opening of nearly 20 Tapestry and Curio hotels across nearly all regions. Additionally, we surpassed 3,000 LXR rooms with the brand's debut in India, extending LXR's presence to this fast-growing region.

In the third quarter, we delivered conversion openings across 12 of our 28 brands, including the debut of DoubleTree in Singapore, the debut of Spark in Italy, and the conversion of 10 Small Luxury Hotels of the World properties across 4 countries. Over the last 12 months, we've converted hotels from almost 60 different brands into our system. Because our brands drive RevPAR index premiums, we believe there is significant opportunity to continue growing through conversions with Europe being a strong example of that opportunity.

Independent non-branded hotels account for approximately 60% of the region's current supply, while Hilton represents just 2% of the region's supply. Across the system, conversions represented 37% of our opening this quarter, a trend we expect to continue as we execute against this opportunity.

In the quarter, we signed approximately 30,000 rooms and are on pace to deliver mid-single-digit growth in signings for the full year, driven by strong signings in EMEA only nine months into the year. We increased our development pipeline to more than 543,000 rooms growing both year over year and sequentially versus the second quarter, with expansion in strategic markets and across chain scales.

The pipeline now includes approximately 250 unique brand-country combinations. In the quarter, we announced the signings of debuts of Outset Collection in Spain and of Motto in Japan. We continue to expand Tempo's global footprint with new signings in Switzerland, Thailand, Saudi Arabia, and additional US markets. We also announced the signing of our first Signia Hilton on the Florida Gulf Coast, increasing the branch pipeline to over 4,000 rooms and further accelerating its momentum.

We are also expanding our presence in the Nordics, where we recently announced the signing of a new Hilton in Copenhagen, the first hotel under a multi-year development agreement with Scandic Hotels Group, the region's largest hotel operator. The agreement creates new opportunities to grow in Sweden, Norway, Denmark, and Finland, high value markets that have historically been very difficult to enter while introducing more travelers to our brands and Hilton honors.

Systemwide new development construction starts -- continue to show incredible momentum, up over 40% year over year in the quarter with all regions independently up more than 20%. Nearly half of our pipeline is under construction, and we continue to have more rooms under construction than any other hotel company, accounting for nearly 20% of industry share and 3.5 times our share of existing supply.

Our disciplined development strategy continues to strengthen Hilton's competitive positions as owners choose to join the system to benefit from the RevPAR premiums our brands deliver in the value of our commercial platform. We expect fourth quarter net unit additions to be above third quarter, delivering around the midpoint of our 6% to 7% range for 2026 and continuing to grow 6% to 7% annually over the next several years. Globally, Hilton is still less than 6% of supply providing a long runway for continued growth.

As technology continues to reshape every part of our lives and business in unprecedented ways, we believe our ability to connect the physical and digital elements of hospitality will create meaningful opportunities to harness the power of our proprietary technology platform across our business.

In the years to come, we believe technology will become an even greater strategic advantage for Hilton, empowering our team members, strengthening performance for our owners and making it easier for guests to experience the very best of Hilton.

As we continue to further differentiate Hilton's technology from the competition, we recently announced the appointment of Jeff Moore as Chief Technology Officer. Jeff brings more than two decades of experience building and scaling consumer logistics and enterprise platform for some of the world's most recognized brands. We're excited for Jeff to help harness our industry-leading technology platform and to add to our existing talented leadership team.

Keeping with this people-led, tech-powered strategy last week, we announced that our listing exchange will move to NASDAQ, providing a platform aligned with our innovation and growth ambitions and positioning Hilton alongside some of the world's most innovative companies.

As we approach the end of 2026, we're pleased to report that we remain on track to deliver against the ranges we laid out for our key metrics at our 2024 Investor Day. Looking ahead, we are more confident than ever in our ability to drive algorithm growth over the next several years. This will be driven by continued net unit growth, new brand growth, RevPAR index gains and incremental non-RevPAR business opportunities.

Making all of this possible is our family of Hilton team members to continue to spread the light and warmth of hospitality in remarkable ways. Their dedication continues to earn global recognition with Hilton named the number one best place workplace by Great Place to Work in 21 countries this year, more than ever before, in addition to recognition as the number one best workplace in several regions, including Latin America, Asia, and Europe.

In fact, just this week, we were named number one on Great Place to Work's inaugural list of best workplaces in the hotel and resorts in the US, another meaningful recognition of the culture our team members create every day across all of our hotels.

We remain highly optimistic about our business and the opportunities ahead globally in the years to come. Our strong leadership team, technology orientation, and brand-led network-driven strategy gives us confidence in our ability to continue meeting the evolving needs of travelers and delivering strong returns to owners and shareholders.

Now I'll turn the call over to Kevin for a few more details on our results for the quarter and our outlook going forward.

Thanks, Chris, and good morning, everyone. During the quarter, systemwide RevPAR increased 5.8% versus the prior year on a comparable and currency-neutral basis. Growth was driven by rate and occupancy, both being ahead of expectations, strength in business and group demand, continued momentum following the World Cup and favorable calendar and holiday shifts.

Adjusted EBITDA was $1.058 billion in the third quarter, up 8.4% year over year and exceeding the high end of our guidance range. Growth was affected by significant renovations in the ownership portfolio, continued conflict in the Middle East, and performance of timeshare license fees and timing of other license fees.

Management franchise fees grew 9.5% year over year. For the fourth quarter, diluted earnings per share adjusted for special items was $2.45.

Turning to our regional performance, third quarter comparable USW RevPAR increased 7%, driven by a strong World Cup and strong business and group demand that continued throughout the quarter. For full-year 2026, we expect US RevPAR growth to be in the mid-single-digits.

In the Americas outside the US, third-quarter RevPAR increased 6.3% year over year, driven by strong group and business travel demand. Performance was led by Canada, Brazil and Argentina, all driven by rate strength. For full-year 2026, we expect RevPAR growth to be in the mid-single digits.

In Europe, RevPAR grew 6.5% year over year, led by continental Europe with strong performance in the business and group segments. Turkey, Eastern Europe and resort markets also delivered strong performance. For full-year 2026, we expect RevPAR growth to be in the mid-single digits.

In the Middle East and Africa region, RevPAR declined 5.6% year over year as conflict-related pressures in the region intensified during the quarter. We now expect full-year RevPAR in the region to decline by a low-double-digit percentage as the conflict continues to affect the fourth quarter high season and we face challenging year-over-year comparisons.

In the Asia Pacific region, third-quarter RevPAR was up 7.3% in APAC ex-China, led by Southeast Asia, Japan and Korea. Business and group segments drove the strength in the region's performance. RevPAR in China declined 5.4% in the quarter, driven by a decline across all segments as consumer sentiment weighed on leisure and government restraints on business travel spilled into group demand. 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 saw net unit growth of 6.0% with the opening of 27,000 rooms in the quarter, the highest quarter of organic openings in our history. Even in a record quarter of openings, our pipeline grew quarter over quarter and year over year and has now reached a record 543,000 rooms.

We continue to have more rooms under construction than any other hotel company with approximately one in every five hotel rooms under construction globally slated to join the Hilton portfolio. We expect fourth-quarter net unit additions to be above the third quarter, ending the year around the midpoint of our 6% to 7% range for 2026. We also expect to grow 6% to 7% annually over the next several years.

Moving to guidance, for the fourth quarter, we expect system-wide RevPAR growth to be 3% to 3.5%. We expect adjusted EBITDA to be between $1.047 billion and $1.067 billion, and diluted EPS adjusted for special items to be between $2.32 and $2.38, both displaying strong growth despite the effects of ongoing conflict in the Middle East, significant renovations in the ownership portfolio, and lower expectations for timeshare license fees.

For the full year, we expect RevPAR growth between 4% and 4.5%, driven by continued business strength, especially in the US. We expect adjusted EBITDA of between $4.06 billion and $4.08 billion, and diluted EPS adjusted for special items of between $9.07 and $9.13.

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 for a total of $34 million. Our Board also authorized a quarterly dividend of $0.15 per share for the fourth quarter. For 2026, we expect to return approximately $3.5 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 one question.

Chuck, can we have our first question, please?

Daniel Politzer, JPMorgan.

Hey, good morning, everyone, and thanks for the question.

Chris, I think that it would be ideal to check on just some the demand environment and how you're thinking about updated thoughts for 2027. It feels like a lot has changed from a lot of people on this call and their vantage point, but maybe you could opine on how you're thinking about '27, the demand environment and walk through the different buckets as you see across your customer base.

Yeah, happy to do it, obviously one of the most important questions that we could answer. I would say, if you lift up, I mean you heard everything that Kevin and I said about the third quarter, which was quite strong in terms of the fundamentals, demand growing at a great pace and supply continuing to be in our largest market in the US quite muted, which is delivering a great result.

As we go into the fourth quarter, the RevPAR guidance is down, but that just is to do with elections and primarily to do with calendar shifts that benefited Q3 and hurt Q4. If you look at underneath all that, things are getting better. As I said in this very spot every Monday morning with my executive committee, everybody reporting from around the world, pretty much every week that we're talking the demand patterns we feel better about, and I'd say really continuing to be driven business transient, where we're seeing really strong growth, both in large corporates and SMBs, very good strength as you saw in the quarter in the group side and continued strength in Leisure Transient.

And so, on the last call, I talked about like there's been a lot of noise this year with World Cup and like year-over-year sort of comps. And so, what I try to do is lift up and say like if you cleanse it all. What we're basically -- on a run rate basis seeing was in the second half of the year, we thought like 2.5x, 2x, 2.5x. That obviously, well, maybe not obviously, we feel a lot better about it today.

If you look at the run rate that we see in the second-half of the year now versus a quarter ago, just given basic strength. In the business, particularly led by the US. I think the US run rate is more like 4% and the global run rate is like 3.5%. So a lot better and I think it's as a result of all the things I talked about like basic macro setup is quite good. So the way -- and that's the basis for our 4% to 4.5% for this year.

As I would think about next year, I mean, we're not we're in the early stages of budgets we've been talking, we obviously see the current trends. So I'll give you a directional sense of it.

I think the way to think about it is on a global basis, if the run rate is about 3.5%, you have things that are going back and forth. The benefits, I think, are clearly we see the US continuing to pick up. I would hope and think that Mexico and the Middle East, which have been challenged this year, are going to normalize to a large degree with the case of Mexico and I am hopeful to a large degree in the Middle East.

We have seen stabilization in China, and I do think there's an opportunity to see some not huge improvements, but some basic improvement from where we are. So I think all of those things are helping.

And then you have the mathematical World Cup thing that you got to deal with just basically quarter over quarter and largely in the second quarter. But to a degree in the third quarter. When we do the math and we lift up and look at all of those things, the good things and then the headwinds on comparability, I would say, next year we feel pretty darn good that the global RevPAR numbers are going to be in the 3% to 4% range.

Lizzie Dove, Goldman Sachs.

Hey, good morning. Thanks for taking the question.

I just wanted to ask on, I guess, flow through and the algo, particularly as it looks to, I think you called out some license fee impacts in HGV. I'm wondering if you could quantify that.

And then I suppose as we look to next year, this year I think you've had some headwinds, maybe on my math, $60 million or so from Middle East, owned and leased renovations, HGV. And then as you look to next year, I think you could get, hopefully as you said a chunk of these back. And so, I'm wondering how you think about that and whether that kind of sets up for more of an above algo year?

Yeah. I mean, I made the comment in my prepared comments that we feel really good about delivering algo in the next few years. I wouldn't say that lightly. We generally deliver on what we say we're going to deliver on. I think you embedded in the question, I think you captured what's going on in the beat and the flow through to the raise, and it really is as simple as what we put in the press release and what Kevin said in his comments.

You have the Middle East is a little more beaten up than we thought and license fees in the timeshare segment are not performing at the level that we had expected and pretty much the difference. If you look at the flow through, the 10% would have been 30%, it's pretty equally split between those two things. I think if you lift up, which again, I like to do and you talked about a $60 million number and the reason we feel confident in delivering algorithm is that. It's actually at a minimum probably $60 million.

This year, we have some unique, not structural, just one-time related events that are impeding algorithm growth. Those are the Middle East and Mexico. Those are ultimately ownership, which you talked about and HGV.

If you add those three things together, and I'll come back to each of those, sort of talked about it, it's probably $60 million to $70 million, maybe even a little bit more. And so, the way I think about it is, obviously, those things aren't producing this year, so I can't add them back in. But in my own mind, they're unique things that are not like structural impediments to the business, they're just happening, we can't control certain world events. And so, I look at it as algorithms alive and well.

And as you think about the four years, the reason we feel comfortable is the business is performing well, unit growth we feel really good about. The basic fundamentals on same-store growth we feel really good about. And as I said, I'm pretty confident Mexico is going to normalize. I think the Middle East will be a heck of a lot better next year than this year. I mean, that's my view.

Ownership will take a couple of years, but the reality is ownership is probably in and of itself a $20 million plus drag this year. When you look forward a few years, these are really good decisions. We're going to more than double the EBITDA contribution from those same assets because we're completely repositioning them.

And we feel really good about obviously in a constant dialogue with HGV, they have some integration that they've been dealing with the two big acquisitions and some comparability year-over-year issues, but we feel quite good about their ability to be on algorithm growth as we think about the world going forward.

So again, these are -- this is why we feel good about next year. It's why I'm giving you a -- we're effectively giving you a range in same-store and unit growth. And bottom line, without being specific in the sense that we believe that we will be able to deliver algorithm growth.

And some of it will be because these things are normalizing. The only one that I think takes a little bit more time, it will certainly be better next year, but to get to the doubling of prior EBITDA will take two or three years on the ownership side.

Shaun Kelley, Bank of America.

Hi, good morning, everyone, and thanks for taking my question.

Chris, maybe to switch gears, multiple comments in there about the development environment and the net unit growth side and obviously the organic additions are a huge accomplishment in this environment. So can we just talk a little bit more about what's underlying the confidence there and maybe just put on the hat from the developer perspective a little bit.

We're in a world where I'm starting to get that question again about higher interest rates potentially weighing on development, but the flip side is now we've got this really strong RevPAR environment which should effectively attract some new. In the space. So if you could put all that together for us, we would appreciate your thoughts.

Yeah, I mean, there's a lot of swirl out there, obviously, Shaun, on the development side and competitors have said different things.

All I can tell you is what we're saying. And what we're seeing is real and we gave you a few of the data points, very strong growth. Our brands on the conversion side continue to perform really,really well. We're taking a disproportionate share within the industry of opportunities there. It will represent circa 40% of the growth this year. We feel like we have a lot of momentum going into next year. And new construction starts -- I gave you some of the quarterly data.

But for the full year, we think new construction starts will be up well over 20% in the US. And well in the sort of mid- to high-10s globally. Yes, interest rates are -- actually, in the last week, interest rates have come down a little bit, but interest rates are higher. My own bet would be a year from now, the 10-year will be lower. I said that a few weeks ago, I think, on stage with you and so far it's moving in a little bit the right direction.

But in any event, what is -- I think underpinning it is implied in the question you asked, which is the performance is getting so much better. I mean, you're talking about a year, think about like last year, like system in the US was like down 1.5% or 2%. This year, you're going to have a 600 or 700 basis point flip around, margins are growing. And yes, interest rates are higher, cost to build is higher, but it hasn't been going up at a crazy rate.

People are still able to get things financed, probably not as much as they'd like, but they're obviously getting financed if our starts are up. And this is self-serving, but true, we're more financeable. So in a world where not much is getting done, we just continue to take, I think, more and more share of the lesser amount that is getting done. And so, it's not easy.

My development team, everybody listening to these calls, they're probably saying, why does he make our job seem so easy? It's not in the trenches fighting and clawing and doing the great work that our development teams do, but we feel good about our where we're going to end up this year, we feel good about our 6% to 7%for the next years.

I mean, you don't like -- I mean, one stat which I love is that and we talked about it is like we're 5.6% of the industry in the world. We're 20% of the rooms under construction. Like to have 6% or 7% growth over the next 15% or 20 years, you really only need to get like a high-single digit, 10% when. You do it mathematically of what's available. It's not like it's crazy.

I know like 6% to 7%f, how can you keep doing it? It's a big world. We've got 28 brands. On average, we have 4 brands in all our major markets out of our 28. And in most markets, we're very low, much lower than the 5.6 in a lot of the major markets around the world.

Honestly, I've never been more excited about our growth opportunities than I am today. I think we have the right brands. We're doing a few more things, and we're deploying those in the right markets. We continue to build extraordinary relationships with owners around the world, including, importantly, our owner community here in the US. And it's our job, and we're going to do it.

Brandt Montour, Barclays.

Good morning, everybody. Thanks for taking my question.

So I wanted to ask about AI and maybe just get your thoughts, Chris, on the rapid proliferation of Mews and consumer agents. How well are you set up today to accept direct bookings from these AI agents, what can you tell us about how fast this channel has grown for you so far and put us in the position of the consumer, do you think that from what you can see so far these agents are set up to perhaps shift some share from OTAs to yourself?

Listen, I am very excited by what I see vis-a-vis Mews and instances and a whole bunch of other activities we're in the middle of -- I think it is really I will say this probably for a long time. I think we're in the very early days of this opportunity with AI, particularly in the distribution space, but I love what I see. You should assume we're working with each and every one of them. You can find them iur products pretty much everywhere, even in the newer plays where we're deep in the middle of that.

And I think in the end, what's really important to us is that we continue to build great and direct relationships with our customers. And I think all of these tools, while it's early and it's insignificant to be honest right now in the industry in terms of what you see in terms of flow of traffic and dollars of bookings and all that, this is the future, just like the Internet was the future.

I mean, when humans like things to be done fast and easy particularly when they're done well and all of these products while they're early and they're developing, I suspect they're going to be many more of them. They're going to be fast, they're going to be easy, they're going to be very effective and humans like that and they're going to trend to that.

What I like about our setup is we have a really big platform. We believe we have the best products in the industry. We drive the highest market share, which I think is pretty good evidence that customers really like what we do. And we're a very large -- we use the US as a surrogate, like we think we're about 25% of the quality inventory in the United States of America, which we think gives us an extraordinary seat at the table as all of the ones that you're talking about and I'm talking about and probably 20 others come into the market. And so, we're there early with everybody working with them to make sure that we're present, we have extraordinary teams that are working on content strategies.

And last but not least, I do believe our tech stack is a huge competitive advantage. We have modernized our tech stack ahead of most, if not all. And I consistently hear from many of our counterparties that it's a lot easier for us to create direct connectivity. That's why we're able to do it and do it faster.

So I think in the end, this will be -- we will continue to have a big relationship with our OTA partners for a certain segment of our business. I don't think that's going away anytime soon, but I do think these tools are ultimately going to lead to a path of our being able to drive much more direct business at lower cost structures. But benefit our owner community, which is the most important element of it.

Perfect.

Thanks, Chris.

Steve Pizzella, Deutsche Bank.

Hey, good morning and thank you for taking our question. Chris, recognizing it's only one week of data, but we saw Select Service RevPAR outperform luxury last week. Are you seeing any early signs that the C-Shape recovery is beginning to broaden, and can you remind us of Hilton's exposure and potential benefit from a recovery in Select Service?

Yeah, I mean, I've talked about it a lot publicly and for a long time. I think I was talking about it during the summer of 2025, to be honest. Not that it was happening, but that it was going to happen simply because, again, I like to lift up. If you lift up and you looked at what was coming from a macro point of view, limited supply additions and huge growth rates in NNRFI as a result of the massive investment cycle of AI infrastructure, core infrastructure, all these things, it seemed undeniable to be just rationally that that wouldn't happen. And so, okay, it's happening.

And so, we have been seeing the lower and the mid-section of the industry continue to pick up, luxury has done well too, slightly less well on a growth rate as it had been, but still quite strong and so thus. The seat, the mid and the bottom, particularly the mid, continues to come up, really driven by business transient, which has just been on a tear.

I mean, interestingly, business transient, when you really dig deep into the segmentation, is approaching pre-COVID levels, which I know a lot of people said, oh, it never will, people aren't going to travel for business. Well, we said they would and they are and it's not quite there, but my guess is in the next couple of quarters you're going to see it you're going to see it back to you're going to see segmentation generally back.

I think you'll continue to see this because like the whole thing on NNRFI is and why it's been such a high correlation is when people are investing, people have to run around the country and do it and that is generally the middle class of our country that is making all of that happen. They're building the data centers, the energy complex, the bridges, the highways. They're the ones that are making all this happen.

And so, as long as you're seeing NNRFI at these elevated levels, which I think - my own view is pretty unstoppable in the next at least couple of years, you're going to see this C-shaped thing keep going. I mean, I think it's not because of politics at the moment being toxic with a midterm next Tuesday. That's why I put the comment. I mean, we're actually -- I mean, it would be much higher if you didn't have the energy price increases related to the war in the Middle East.

But even with it, you have real wage growth in the middle class rate now. Imagine what it would be if the Middle East sort of gets resolved at some level. But with or without that, you have enough investment, enough activity by the trillions in this country that I think you're going to continue to see an acceleration in those trends.

Stephen Grambling, Morgan Stanley.

Hey, thank you. I wanted to touch on franchisee relationships, just given some of the noise around franchisee-franchise relationships. Chris, could you talk to how you would frame your conversations with owners, including any feedback from the lower charge-out rates that were started last year, if there's any opportunity to take those lower and just maybe framing where owner margins or EBITDA are key are now perhaps versus history across the platform?

I would say broadly, and I've talked about this on a number of prior calls, it's been a rough extended period of time for owners. I mean, there's just no two ways to other way to say it. You had pretty anemic growth and reasonably high expense growth pre-COVID. COVID was obviously terrible for everybody, but particularly the owners given the operating costs that they bear. You came out of COVID, you had this sugar high where it's like the government pushed out trillions of dollars, so nobody had to go to work. So it felt pretty good.

And then inflation spikes, demand was sort of tepid. And you had a couple -- two or three years where you were basically going backwards off of COVID, off the back of pre-COVID that wasn't particularly rosy. And so, it's been a -- listen, there's no other way of saying it. It's been a tough run.

Having said that, my conversations with our franchise community and we had our big owners conference this summer in Vegas, so we had thousands of them and I'm talking to owners all the time, they're quite constructive, and generally, I think they appreciate everything that we're doing. I mean, one, you have a backdrop, which is getting a lot better, right? Like all this -- we're a pretty good index for the country.

So when we're starting to produce these kinds of numbers and you're seeing really reasonable margin growth, I think the owner community, like anybody, when things are going better, I think people are happier.

I think the things that we did with what we call RISE and the reduction in system fees that we launched in June of 2025, so we started working on that in 2024, I think it's been really well received. We reduced loyalty costs for everybody by 30 basis points, we gave basis points to those that got through. Customer satisfaction, quality gate, about half the system is getting through it.

And honestly, I've heard nothing but really good feedback. I haven't heard, yeah, I mean, by the way, people that aren't getting it want it, but that's the behavior set we want. Every hotel I walk into, if they're not in it, they're telling me what they're going to do to get it. So it's creating the right sort of outcomes, I think, for everybody.

We're not done there. We have what we've told our owners we're working on RISE 2. I'm not going to get into it in detail, but probably, in the first quarter of next year, we'll be looking again at the system side, loyalty to figure out, all right, where can we, by utilization of (technical difficulty) AI, process change, the benefits of leveraging our scale, where do we think there are some ways that we can be even more efficient that can translate in a positive way to our owners. So I would expect that we'll be out in the first quarter with that.

And we'll never stop, meaning our job like our - of course, the customers that sleep in the hotels are critically important, but our owners are equally critically important. There is no Hilton without our owners. And there is no growth and there is no net unit growth unless they are doing well, feeling good. And making the profits that are commensurate with what they need to continue to invest in the hotel and to continue to invest potentially new hotels and grow their business.

So I think the summary of that is in my conversations with our broad owner community, they're quite constructive and people are starting to feel a lot better as you would think and hope they would as a result of the macro conditions that we see as a backdrop.

Smedes Rose, Citi.

Hi. Thank you. I appreciate your commentary around how 2027 could shape up from a RevPAR perspective. And I was wondering maybe if you could talk specifically about what you're seeing in the US on the group side, either with larger corporate bookings or some of the strength in the smaller enterprises that you talked about before.

It continues to be quite strong if you look at the big group made its hotels. At this point, we're up in the mid-single-digits going into next year, something like that. So strong.

Again, if you were to -- somebody asked, I didn't really do this, but if you were to rank performance by segment to get to that three to four next year, I think it would be business strategy and group and leisure, all of which we believe will be positive, but in that order, and we think we've got quite a good backdrop on the group side.

I mean, group demand has generally been very good, and if you think about it, with supply having been really low for a long time, there just have not been a lot of group hotels that have been built in the United States of America and that's the practical truth. High demand, not a lot of supply, generally laws of economics are alive and well. And so, we feel quite good about it.

But I do think business transient will lead the way again just because you're seeing a real surge there and you're going to get the benefit, we think for a full year next year where this year, you're really getting the real growth. There has been a half a year phenomenon.

David Katz, Jefferies.

Hi, good morning. Thanks for taking my question.

From your public side advertising and reading through the release, and obviously, our conversations, there seems to be some building momentum around luxury. And I wanted, one, for you to just talk about that strategy a little bit. And two, conventional thinking is that that sometimes requires increased investment.

And just some color to that side of it also. And it's a topic I've been asking about for a long time and needed for completing Hilton's portfolio, et cetera.

I mean, at the risk of a filibuster because it could take a while. I'll try to be succinct. Luxury and lifestyle, we have been talking about for lots of years. You're right, David, you and others have asked about it. And we have continued to invest and spend a lot of energy on it for all the right reasons. We think it does help create a halo effect for honors generally.

And we feel like we have made really, you heard some of the data on recent performance, we think we've made really good performance. I mean Waldorf is flying and doing extraordinarily well. We're going to open five or six of the best hotels in the world in the next 12, 15 months within Waldorf, but Conrad equally, LXR picking up a lot of momentum and then all our lifestyle brands with more to come.

We have another, which I've mentioned publicly in the Skunkworks right now that I would hope we would get out probably or early next year in the lifestyle space. So that has been not a new focus, it's been a continued focus. I think with we're just picking up momentum. I mean, one of the interesting data points is this year between upper upscale and above, 45% of our deliveries this year will be represented in those categories. It is working and we are we certainly this year and I think generally are tilted that way.

In terms of like the cost and key money, we did incrementally move our key money up just to be clear on that, I don't think -- I think key money has obviously always been more oriented to the high-end stuff and key money generally has gone up a smidgen. I mean, if I look at it like over the last five or six years, the percentage where we have any key money in our room center construction has moved one or 200 basis points, still unbelievably low. It's gone from 9 or 10 to 11. But the bigger deals are -- so it's very low. The bigger deals are where it gets spent.

This year, the CapEx, we have a bunch of things going on. We have the ownership stuff, which we've talked about, which is going to pay, we think, huge dividends, and there's a little bit more waiting. We just are finishing, as we sit here, a reboot of our world headquarters, and so, there's a little bit more spending that goes on there. And a bit of a key money, and if you read the recent press releases, as you can see, oriented towards a couple of specific deals.

If I look at where I think we'll end up relative to the averages, I don't think it'll be a whole lot different than what we've spent over the last five or 10 years. I mean, there'll be years where we spend more, where we have big unique opportunities like we've had and described many times before. There will be years when it's slower where we don't have to have those opportunities.

But I don't think it requires -- in order for us to continue to push the envelope of luxury and lifestyle, I don't think it requires a step change relative to historical norms.

Robin Farley, UBS.

Great. Thank you. Just going back to the unit growth question, you answered part of it already, which is that your use of key money hasn't really changed. Just wanted to ask about unit growth, given most other C-Corps have lower unit either last quarter or this quarter.

And just thinking about your confidence with that 6% to 7% for next year, can you give us a sense of how much of that is already on the books in terms of it's under construction and so almost perfect visibility versus what percent are conversions that you're relying on, like will it accelerate or decelerate from this year's conversions?

I think that number, like what's on the books is a little over 80%. So we would need to do a similar amount, maybe not quite as much on conversions given what's on the books, because over last year and this year, you've started to see new construction -- new development construction starts to go up. As that happens, I don't think we will have less success in conversions, but the mathematics will change as you have more new development, you'll see that ratio come down. I mean, 40% is very high. Historically, it's been around 30% if you look at long-term averages.

My guess is, given we have a lot we're better at it and we have a lot more brands, we can do conversions. With that will end up probably in the mid-30s. But 80%-plus we think is on the books. And we're quite -- that doesn't mean we're always right, we have a lot of work to do to get it done, but we're extraordinarily granular in our analysis of unit growth. We don't -- every single hotel is identified, every region has very specific goals on -- by brand, and so we feel good about it.

So just mathematically, if conversions are sort of the part where you have a little less visibility than new construction, you actually have, it sounds like, higher conviction in your '27 growth rate than you did going into '26 even, just based on what?

About the same. Well, I have more conviction in terms of what we're carrying over. It's actually -- I'll fact check myself. I'm looking at these guys. It's easier than this year because we have more new construction deliveries this year because of the ramp over the last couple of years. So by definition, I feel better about it because we have fewer that we have to fill in.

Yeah. Great. Thank you.

Meredith Jensen, HSBC.

Good morning. I was hoping you might speak a little bit more about the technology side and prioritization of innovation with the appointment of the new CTO. And combined with, I think, some changes in the marketing leadership, how many might see the opportunities evolve there, how the approach towards. Guest experience operations and things like that might evolve.

Yeah, that's great. Well, Jeff just got here Monday, so I'm going to give him a few more days to like, get it together. But we're really excited about his joining. One important note, and I said it in my prepared comments is, Michael Leidinger who has been our CIO and his team have done an incredible job to put us in this position, and they're not going anywhere, by the way, Michael is here, he's remaining CIO.

All we're doing is, I'm doing is giving tech more oxygen by bringing somebody more senior at an EC executive committee level and reporting directly to me just to supplement the great work that is already going on.

And I think, listen, we could talk for hours, and I won't because we're going to run out of time, but I think there are really three buckets, which I've talked about quite a lot that we're really focused on is, one efficiencies in the system corporately, but also for the system we manage on behalf of owners, we're crazy not to, that can translate to benefits to shareholders, but it most importantly could translate because the bulk of the cost structure for us is managing the system.

It can translate into meaningful benefits to owners, and so we're spending a huge amount of time on that. Some of it's AI, some of it's tech, some of it's process change, but it's all interconnected and technology is a core enabler of all of that. We talked about it earlier on the call, the distribution side of the business, we're super focused there.

We're super excited about the advent of all of these new ways agents are going to make our lives easier and how we're going to connect with them with the goal again to be driving better customer experiences, more direct experiences at a lower cost that will translate into more profitability for owners. The more profitable owners are, obviously the happy they are, but the more likely they are to build more hotels, which becomes a virtuous cycle.

And then to your question, I think on the customer experience side, there are some extraordinary things we're already doing and testing in how we're connecting our whole tech ecosystem and connecting the physical and the digital that I think will afford us the opportunity when you wake up in the next two, three, four, five years to revolutionize the way we go to market, to revolutionize the way we customize at mass scale, both how we sell, what we sell, the experience on property and problem resolution.

I'm not going to get into a lot of specifics for lots of important competitive reasons, but we're very excited and hopefully you're a customer, you can see some of it already, view that as a small down payment on what's to come.

Mike Bellisario, Baird.

Good morning, everyone. Chris, on Europe, you noted a huge white space there for you, just a couple of parts here. What is owner sentiment like across the pond? And then what's the development dynamics there just given some of the macro headwinds that are occurring and then also the indirect impacts from the Middle East just on both conversions and the new development front?

I mean, obviously, Europe on the new development front has continues to be more difficult. Simply because economics are harder, the financing markets aren't as robust. But we continue to have good success largely in the focus in the limited-service space because that's what makes economic sense.

But as I said in my prepared comments, I mean, if you think about Europe, 60% over the pond of the inventory is basically independent hotels and we're a. In terms of our overall market share and so it won't be all conversions, but I think there will be a heavy component of conversions in that environment to soft brands, hard brands, sort of things across the spectrum.

I would say, owner sentiment is quite good throughout. I mean, Europe is a big place, so I mean, I hate to generalize, but I'd say quite good and not surprisingly driven by performance. Performance in Europe, while many of the European economies have not been extraordinarily robust and are not maybe experiencing quite the surge that we are now starting to see in the US.

From a travel point and tourism point of view, they've been really strong for an extended period of time, and they continue to maintain that strength. Obviously, with things going on in Eastern Europe and now the Middle East, which they're a lot closer to, people are rattled a bit.

But from a development point of view, from a same-store point of view, we're going to have a terrific year in Europe and from a development point of view, we're going to have one of our best years ever. So I'd say.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Chris Nassetta for any additional or closing remarks. Please go ahead.

Thank you, Chuck, and thank you as always for taking an hour out of your life. And listening to where we our results, but more importantly, where we think the world is going. As I said, we feel really good about what we've been able to deliver, even better about what's to come and we'll look forward to updating you after we close out the year. Take care and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.