The paragraph introduces the Hilton Third Quarter 2024 Earnings Conference Call. Jill Chapman, Senior Vice President, begins by noting that the call includes forward-looking statements and that actual results may vary. Chris Nassetta, President and CEO, and Kevin Jacobs, CFO, will provide insights into the company's current performance and future outlook. The call will also include discussions on both GAAP and non-GAAP financial measures, with reconciliations available online. Chris Nassetta begins his remarks by highlighting the strength of Hilton's business model and strong net unit growth contributing to robust financial performance in the third quarter.

In the third quarter, Hilton exceeded expectations for adjusted EBITDA and EPS despite underperforming RevPAR, which grew 1.4% year-over-year. The company opened a record number of hotel rooms, surpassed 8,000 hotels, and reached 200 million Hilton Honors members. Despite challenges such as weather impacts and labor disputes, business transient and group RevPAR both increased, with group bookings showing strong future trends. Leisure RevPAR slightly declined from post-pandemic peaks but benefited from strong performance in Continental Europe. For the fourth quarter, projected RevPAR growth is expected to align with the third quarter, supported by robust group bookings and business transient recovery, though affected by U.S. elections and labor issues. Weekday booking pace improved by over 300 basis points in October, indicating strong corporate meetings and convention business growth.

The paragraph highlights the company's strong performance and expansion efforts in the recent quarter. It reports a 2-2.5% expected RevPAR growth and a 10% adjusted EBITDA growth for the year, illustrating business resilience. The company opened a record 531 hotels, adding over 36,000 rooms and marking significant milestones such as reaching 8,000 hotels worldwide and substantial growth in regions like Asia-Pacific and EMEA. Home2 Suites, with its growing supply, opened its 700th hotel, and the lifestyle portfolio also expanded with new hotels under the Graduate brand. The introduction of several brands in new international markets showcases the strength of its brands. Additionally, an exclusive agreement with Small Luxury Hotels of the World added nearly 400 luxury properties, enhancing the company's luxury offerings. Conversions, primarily from SLH properties and the Spark brand, accounted for 60% of new openings, with over 6,000 Spark rooms added in a year.

The paragraph details Spark's rapid expansion in the hotel industry, highlighting new hotel openings in the US, UK, Canada, and upcoming ones in Germany and Austria. Spark's growth is evident from its large pipeline, which has increased by 8% year-over-year and includes 28,000 newly signed rooms. This expansion is supported by luxury deals in Greece, Japan, and the UAE, and numerous lifestyle properties, with conversions comprising over 30% of signings. Half of its pipeline is under construction, giving Spark a significant industry share. The company anticipates a net unit growth of 7% to 7.5% for the year and recognition for being a top workplace globally, also earning accolades like the People Magazine Companies That Care list and Time's Best Hotel Brand of 2024.

The paragraph highlights the company's strong quarterly performance, including a 1.4% increase in system-wide RevPAR and an 8% rise in adjusted EBITDA, which exceeded expectations. The growth was primarily driven by robust international performance and group recovery. Management franchise fees also grew by 8%. In the U.S., RevPAR increased by 1%, and by 4% in the broader Americas, mainly due to urban market success in Mexico. Europe saw a 7% rise, aided by major summer events, while the Middle East and Africa recorded a 3% increase led by gains in Qatar and Riyadh. The Asia-Pacific region experienced a 3% decline, particularly due to challenges in China, though India performed well.

The company ended the quarter with around 492,000 rooms in its pipeline, an 8% increase from the previous year, with 60% located outside the US and nearly half under construction. They anticipate net unit growth of 7% to 7.5% for the year. For the fourth quarter, they expect system-wide RevPAR to grow by 1% to 2% year-over-year, adjusted EBITDA between $804 million and $834 million, and diluted EPS adjusted for special items between $1.57 and $1.67. For 2024, they forecast RevPAR growth of 2% to 2.5%, adjusted EBITDA between $3.375 billion and $3.405 billion, and diluted EPS adjusted for special items between $6.93 and $7.03. These forecasts exclude future share repurchases. They paid a $0.15 dividend per share in Q3, totaling $37 million, and will do the same in Q4. So far, they have returned over $2.4 billion to shareholders and expect to reach $3 billion for the year. The paragraph ends with the company opening the floor for questions, the first being from Joe Greff of JPMorgan about a 2025 EBITDA target given at an Investor Day event.

In the paragraph, Christopher Nassetta discusses the economic outlook for 2025, noting that it's too early to provide specific guidance but expressing optimism about the year ahead. He highlights a strong consensus on the macroeconomic environment, particularly in the U.S., and describes the economy as resilient with positive growth expected. Nassetta believes the likelihood of a recession is low and shares a generally positive sentiment about achieving RevPAR growth targets, though broader economic conditions will play a crucial role.

The paragraph discusses the anticipated macroeconomic influences on business performance leading up to 2025, predicting that next year's same-store growth will resemble this year's. Regionally, the US is expected to maintain similar growth levels as this year, Asia-Pacific is anticipated to perform better due to easier comparisons and economic stimulus in China, and EMEA might experience slightly less growth though still strong, potentially leading in RevPAR growth among major regions. Overall, the blend of regional performances is expected to result in a similar growth outlook compared to the current year.

The paragraph discusses anticipated trends in different business segments for the upcoming year. The group segment is expected to show strong growth in both demand and pricing, driven by insufficient supply relative to demand. The business transient segment is projected to surpass 2019 demand levels, with sustained pricing power supported by feedback from key accounts. In the leisure segment, demand is expected to normalize, potentially being flat or slightly down, but solid pricing power will persist despite ongoing inflation. Overall, the company anticipates a balanced blend of demand and pricing dynamics, similar to the current year, as concluded in their quarterly business review.

The paragraph features a conversation between Shaun Kelley from Bank of America Merrill Lynch and Christopher Nassetta, focusing on development and growth expectations. Nassetta expresses optimism about unit growth and RevPAR, despite a desire for higher RevPAR growth. He mentions feeling confident about the company's growth algorithm, which combines same-store and unit growth to achieve targets. Shaun Kelley asks about the assumptions behind the 6% to 7% growth expectation for next year and what factors could influence better or worse outcomes in the development environment. Nassetta responds positively, emphasizing their confidence in the 6% to 7% growth range and noting they have more visibility into that compared to the broader macroeconomic environment.

The paragraph discusses the company's strong performance and strategy regarding growth, emphasizing their clear visibility into ongoing projects and the momentum in their conversion efforts. They anticipate organic growth of 6% to 7%, but this year's numbers are higher due to partnerships, reaching 7% to 7.5%. Conversions account for about a third of this growth, potentially reaching 50% when including partnerships. They stress that future projects must already be underway or planned imminently to contribute to next year's figures. The company boasts a robust track record with conversions, indicating an increasing share from historical levels, largely due to the strong performance of their brands and their significant share in conversion opportunities globally.

The paragraph discusses the potential impact of conversion projects on achieving a projected outcome, emphasizing that while a few projects might advance by year's end, they are unlikely to significantly affect the overall result. The speaker expresses confidence in reaching a target range due to ongoing development efforts. Stephen Grambling from Morgan Stanley asks about the construction pipeline and its fee-per-room mix compared to the existing base, and whether development trends have changed as lending conditions improve. Kevin Jacobs responds that while interest rates have not significantly dropped, they have lowered enough to improve the development environment slightly, offering a more optimistic future in capital availability.

The paragraph discusses trends in the hospitality industry, focusing on changes in ownership and transaction activity. It highlights an increase in conversations about ownership changes, which aligns with a trend of conversions driven by a narrowing bid-ask spread in transactions. This has resulted in more applications for ownership changes recently. In terms of fees per room, there's been no significant change, as the overall construction and delivery mix remains consistent. RevPAR is growing, and the company is adjusting contract fees slightly upward. The company continues to develop in high-fee areas, which should lead to growth in fees per room over time. Additionally, a question from Carlo Santarelli of Deutsche Bank addresses RevPAR as a key factor in the outlook for 2025 and 2026, inquiring about the future of leisure and business travel based on current group booking trends.

In the paragraph, Christopher Nassetta discusses expected growth rates in different segments of the hospitality industry. He anticipates the highest growth in the group segment, projecting mid-single-digit growth driven by a balance of price and occupancy. Business transient growth is expected to be in the low single digits, similar to the current year, while leisure demand is expected to remain over historical levels but essentially flat. Despite this, pricing power and inflationary pressures may allow for slight rate increases. Overall, he predicts modestly positive growth for leisure and a general outlook for the industry that aligns closely with the current year's results.

In the paragraph, Christopher Nassetta explains the company's success in securing conversions by emphasizing the importance of hard work and building strong relationships. He attributes their achievements to a "scrappy" and "gritty" approach, where the team actively hustles and doesn't take opportunities for granted. While acknowledging that some success is due to bringing new partners into their system, much of it results from established relationships and a focus on performance. Nassetta highlights that signing these deals often involves long-term commitments, sometimes exceeding 20 years, which require delivering on what partners are seeking.

The paragraph discusses a company's strong performance and high market share, noting that although they don't win every deal, capturing half of the business is impressive given their global market share. The focus is on their ability to drive returns for investors by delivering performance over time. The operator then invites questions from Robin Farley of UBS, who asks about the company's visibility on business and leisure travel compared to 2019, and a question for Kevin about better-than-expected EBITDA results. Christopher Nassetta responds by indicating they don't have much additional visibility.

The paragraph discusses visibility and predictability in different business segments, specifically group, leisure, and transient bookings. The group segment is highlighted as having the most visibility and is considered "sticky," meaning it's more stable over time. In contrast, leisure and business transient segments offer limited visibility, usually only 60 to 90 days ahead. Despite this, ongoing communications with customers and data collection provide some insight into future trends. The outlook for these segments largely depends on economic conditions. The group business, while not immune, is less affected by short-term economic fluctuations compared to other segments. Improved customer insights have been gained over the years, but the overall ability to predict bookings hasn't changed much. Additionally, Kevin Jacobs mentions satisfaction with the performance of non-RevPAR German fees.

The paragraph discusses the positive outlook for group bookings in the hospitality sector, particularly for 2025 in the U.S. Christopher Nassetta notes that both large citywide conventions and smaller social groups are contributing to this strength. The return of big conventions is highlighted, as these events take years to plan and were disrupted by the pandemic. Additionally, there is significant demand for social gatherings and corporate meetings, which are also boosting group business.

The workplace is not returning to its pre-pandemic state, as people have adapted to new ways of working, often requiring less office space due to increased mobility. This has led to a broad-based shift, affecting various aspects like meetings for innovation and culture-building. The conversation then shifts to Lizzie Dove from Goldman Sachs, who asks about strong unit growth and international expansion, including in China. Kevin Jacobs responds that while brands must be adapted for different markets globally, their core essence remains unchanged. He notes that around 55% of the growth pipeline is outside the US, indicating significant international opportunities.

The paragraph discusses the global construction and delivery plans for a business, highlighting that about 80% of its construction is outside the U.S. and predicting delivery allocations of mid-40% in the U.S. and 55% internationally. It emphasizes strong business performance in China despite macroeconomic challenges, attributing success to adaptive reuse of real estate, particularly in the limited service sector. It also forecasts regional growth potential, focusing on expansion opportunities in the Americas, EMEA, and APAC regions, alongside growth prospects in India and the Middle East.

The paragraph discusses the early traction of SLH, a new addition to a portfolio of luxury hotels where people can earn and redeem points. Although it's early days, with SLH joined around the middle to end of the summer, the initial data indicates positive engagement from customers. These luxury properties are in unique locations and were often fully booked by the time they were incorporated into the system, limiting early data. However, redemption activity is promising, aligning with expectations. The speaker expresses optimism about the partnership's future success and anticipates increased engagement in upcoming seasons.

In the paragraph, Christopher Nassetta discusses the current state of the RevPAR index and its implications for their business. Despite preferring higher RevPAR, he acknowledges benefits in slower environments, drawing parallels to 2018 and 2019. In such conditions, their company often gains better performance share on existing assets and attracts more conversions and new constructions due to the strength and financeability of their brands. This trend has been observed historically and continues to benefit them in less favorable financial environments.

The paragraph discusses the company's consistent growth in market share and the resilience of its business model, even in challenging economic conditions. Despite operating in a less-than-ideal market environment with modest same-store growth, the company expects to achieve significant growth in EBITDA, EPS, and free cash flow. The speaker emphasizes that while they cannot control macroeconomic factors, they are focused on outperforming the competition and are optimistic about their ability to deliver strong performance. The operator then announces the next question from Meredith Jensen, who asks about occupancy and rate dynamics.

In the paragraph, Christopher Nassetta discusses how conversations with franchisees and hotels regarding pricing have remained consistent despite fluctuations in inflation. While inflation has decreased in the U.S., it's still above target levels, which, alongside significant public sector spending, supports economic growth and demand for Hilton's services. This creates continued pricing pressure, which Hilton's advanced revenue management systems account for, maintaining rate integrity. Though leisure demand might decline as it normalizes, especially on weekends, Nassetta expects leisure rates to increase by the end of this year and next.

The discussion involves questions about the projected costs related to key money or contract acquisition expenses for a company. Despite a reduction in these costs for the current quarter, Kevin Jacobs indicated that the strategy surrounding key money hasn't changed; it's still used in less than 10% of deals, particularly in competitive situations. The decrease in key money expenses is attributed to project timing, with some projects expected to occur next year instead. Comparatively, last year's expenses were higher due to strategic projects, and next year is anticipated to be in between last year's and this year's expense levels. Overall, there's no significant change in the company's strategy regarding key money.

In the paragraph, Patrick Scholes asks Kevin Jacobs about the ROI targets for developing brands internally versus acquiring them, and whether recent brand acquisitions are immediately accretive to earnings. Kevin Jacobs responds by explaining that the ROI is typically higher when building brands internally due to their potential to grow into large businesses organically. He mentions that recent acquisitions have been accretive right away, aided by strategic timing during a distressed market environment. The session concludes with Chris Nassetta expressing satisfaction with the third-quarter results, optimism for the fourth quarter and full year, and a positive outlook for 2025.

The speaker expresses anticipation about reconnecting in 2025 and wishes everyone a pleasant end of the year and holiday season. They conclude by thanking attendees for their time and indicate that the conference has ended.

This summary was generated with AI and may contain some inaccuracies.