Third Quarter 2026 Investor Conference Call - HILTON WORLDWIDE HOLDINGS INC

Good morning, and welcome to the Hilton 3rd Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. And to withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruhr, 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'd 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-thinking 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-GAP 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, system-wide REVPAR increased 5.8% year-over-year, with rate and occupancy growth both ahead of expectations. REVTAR 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 U.S., with continued strength in manufacturing, technology, and workforce lodging that all grew more than 10%. Leisure transient REvPAR 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 REVVPARS growth of 4% to 4.5%, as business transient momentum carries into the fourth quarter, particularly in the U.S., where supportive policy, increased private sector investment, including AI, and ongoing public infrastructure spending are supporting demand. In the U.S., 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 segment and non-residential fixed investment, or NRFI. NRFI 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 curia hotels across nearly all regions. Additionally, we surpassed 3,000 LXR rooms with the brand's debut in India, extending LXRS 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 Spark in Italy, and the conversion of 10 Select by Hilton Yotel properties across four 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 region's supply. Across the system, conversions represented 37% of our openings 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 and 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 U.S. 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. System-wide new development construction starts to 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 three-and-a-half times our share of existing supply. Our discipline development strategy continues to strengthen Hilton's competitive positions. As owners choose to join the system to benefit from the REBPAR 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 platforms 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, rev par index gains, and incremental non-rev par business opportunities. Making all of this possible is our family of Hilton team members who 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 1 best workplace in several regions, including Latin America, Asia, and Europe. In fact, just this week, we were named number 1 on Great Place to work's inaugural list of best workplaces in the hotel and resorts in the U.S., 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, system-wide 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 $1.5 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 comparably US RFR 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 U.S. RevPAR growth to be in the mid-single digits. In the Americas outside the U.s., 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 RevPars growth to in the middle-singles digits. In Europe, REVPAR grew 6.5% year-over-year, led by continental Europe, with strong performance in the business and group segments. Turquia, Eastern Europe, and resort markets also delivered strong performance. For full-year 2026, we expect REVTAR 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 REV PAR was up 7.3 percent in APAC-X China, led by Southeast Asia, Japan, and Korea. Business and group segments drove the strength in the regions' 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 RevPар 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 room. 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% or 7% annually over the next several years. Moving to guidance, for the fourth quarter, we expect system-wide RFPR 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 $2,038, 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 U.S. 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 cents 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? Yes, sir. Today's first question will come from Dan Pulitzer with J.P. Morgan. Please go ahead. Hey, good morning, everyone, and thanks for the question. So, Chris, I think that it would be ideal to check on just on kind of 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 kind of opine on how you think about 2027, the demand environment, and kind of walk through the different buckets as you see across your customer base. Thanks. 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 U.S., quite muted, which is delivering a great result. As we go into the fourth quarter, you know, the REBPAR 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. You know, as I sit 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, you now, the demand patterns we feel better about. You know, and I'd say, you know, really continuing to be driven by business transient, you know, where we're seeing really, really strong growth, both in large and 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, you know, there's been a lot of noise this year with World Cup and, you know, like year-over-year sort of comps. And so what I tried to do is sort of lift up and say, like if you cleanse it all, you know, what we're basically, you know, on a run rate basis seeing was in the second half of the year, we thought like two and a half, you know, two, two and a half. 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 U.S., I think the U。S. run rate is more like 4%, and the global run rate it's like 3.5%. So a lot, a lot bett er, you know, and I think it's as a result of all the things I talked about, you know, like basic macro setup is quite good. So the way, and that's the basis for our four to four and a half for this year. As I would think about next year, I mean, we're not, you know – we're in the early stages of budgets we've been talking. We obviously see the current trends. So, you Know, 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's about 3.5%, you have things, you know, that are going, you know, back and forth. The benefits, I think, are clearly we see the U.S. 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'm hopeful to a larger degree in the Middle least. We have seen stabilization in China. And I do think there's, you know, an opportunity to see some not, you Know, huge improvements, but some basic improvement from where we are. So I think all of those things are sort of helping. And then you have the mathematical World Cup, you know, thing that you got to deal with just basically quarter over quarter, you you know, 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 red part numbers are going to be in the 3% to 4% range. That's great. Thanks so much. The next question will come from Lizzie Dove with Goldman Sachs. Please go ahead. 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 here, I think you called out some IMF 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 we've had some headwinds, maybe on my math, 60 million or so from Middle East, owned and leased renovations, HGv. And 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 yeah i made the comment my prepared comments that we feel really good about delivering algo in the next few years i wouldn't say that lightly we generally um deliver on what what we say we're going to deliver on um i think you embedded in the question i thinkyou captured sort of what you know what's going on sort of in the 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 you know what Kevin said in his comments you have you know the Middle East is a little more beaten up then we then we thought and license fees in the timeshare segment are not performing at the level that we had expected and 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 sort of 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. This year, we have some unique, not structural, just sort of 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 HTV. 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 to 70 million, maybe even a little bit more. And so, you know, 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 forward years, the reason we feel comfortable is the business is performing well. Unit growth, you know, we feel really, really good about. The basic fundamentals on same-store growth we feel real 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, 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, you know, obviously in a constant dialogue with HEV, They have some, you know, integration that they've been dealing with the two big acquisitions, you know, and some comparability year-over-year issues. But we feel quite good about their ability to be, you know, sort of on algorithm growth as we think about the world going forward. So, again, you know, these are, you know, this is why we feel good about next year. It's why, you know, I'm giving you sort of a, we're effectively giving you a range in same store and unit growth and bottom line you know without being specific in the sense that we believe we believe that we will be able to deliver rhythm growth and some of it will because be because these things are normalizing the only one you know that I think takes a little bit more time it'll certainly be better next year but to get to the doubling of you know a prior EBITDA will take two or three years on the ownership side. Thank you. The next question will come from Sean Kelly with Bank of America. Please go ahead. Hi, good morning, everyone, and thanks for taking my question. Chris, maybe to switch gears, you know, multiple comments in there about the development environment and, you know, the NUG side and obviously the organic additions are a huge accomplishment in this environment. So, can we just talk a little bit more about, you know, 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 encouragement in the space. So, if you could kind of put all that together for us, we would appreciate your thoughts. Thanks. Yeah, I mean, there's a lot of swirl out there, obviously, Sean, on the development side, and competitors have said different things. All I can tell you is what we're seeing, and what 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'll 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 start will be up well over 20 in the U.S. and, you know, well in the sort of mid-to-high teens globally. Yes, interest rates are higher. Actually, in the last week interest rates have come down a little bit, but interest rates are higher, you now. my own bet would be a year from now the the 10-year will be lower said that a few weeks ago I think on stage with you and so far it's moving a little bit the right direction but but in any event what 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 know you're talking about a year they can think about like Like last year in the, you know, like system in the U.S. was like down one and a half or two. You know, this year you're going to have a, you Know, six or seven hundred basis point flip around. Margins are growing. And, yeah, interest rates are higher. Cost to build is higher. But it hasn't, you Now, that 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, you know, 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, you know more and more share of the lesser amount that is getting done. And so it's not easy. My development team, everybody listens to these calls. They're probably saying, why does he make our job seem so easy? It's not. They're out, you know, in the trenches fighting and clawing and doing the great work that our development teams do. But, you Know, we feel good about where we're going to end up this year. We feel good About our six to seven for the next few 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. where 20% of the room is 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, you know, like I know, like 6% to 7%, how can you keep doing it? It's a big world. We've got 28 brands. On average, we have four brands in all our major markets out of our 28, and in most markets we're very, very low, much lower than the 5.6 in a lot of the major markets around the world. So, 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 own community here in the U.S. And it's our job, and we're going to do it. Thank you. The next question will come from Brant Montour with Barclays. Please go ahead. 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 MUSE 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 kind of put us in the position of the consumer? Or do you think that from what you can see so far, these agents are set up to perhaps shift some share from OTAs to yourselves? Listen, I am very excited by what I see vis-a-vis Muse, Instinct, 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 our products, you know, pretty much everywhere, even in the newer plays where we're deep in the middle of that. And, you know, 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 there are going to be many more of them. They're going tobe fast. They're gong to be easy. They're gonna be very effective, and humans like that, and they are going 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, you know, we use the U.S. 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, you know, 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 staff 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, 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. Great. Thanks, everyone. Which benefit us, but benefit our owner community, which is the most important element of it. Perfect. Thanks. The next question will come from Steve Pizzella with Deutsche Bank. Please go ahead. hey good morning and thank you for taking our question chris recognizing it's only one week of data but we saw select service rev par outperform luxury last week are you seeing any early signs that the c-shaped recovery is beginning to broaden and can you remind us of health and exposure and potential benefit from a recovery and 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 and NRFI 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, you know, the lower and the mid, you know, mid-section of the industry continue to pick up. Luxury has done well, too. Slightly less, you know, well on a growth rate as it had been, but still quite strong. And And so thus, you know, the C, you know, it's, you know, the mid and the bottom, particularly the mid, continues to come up, really driven, you know, 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 quarters, you're going to see it back. You're going to segmentation generally back. So I think you'll continue to see this because the whole thing on NRFI 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 that hat they're building the data centers the energy complex the bridges the highways you know they're they're the ones that are making all this happen and so as long as you're seeing an nrfi at these elevated levels which i think my own view is pretty unstoppable in the next at least couple of years you're gonna see this c-shaped thing keep going I mean I think it's not you know because politics at the moment being toxic with a midterm next Tuesday you know 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 issue energy price increases related to the war in the Middle East but even with it you have real wage growth in the middle class right now. Imagine what it would be, you know, if we, 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. Thank you. The next question will come from Stephen Gramlin with Morgan Stanley. Please go ahead. Hey, thank you. I wanted to touch on franchisee relationships, just giving some noise around franchisee-franchisor 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 per key are now, perhaps, versus history across the platform. Thank you. Yeah, I would say broadly, and I've talked about this on a number of prior calls, it's been a rough, you know extended period of time for owners i mean there's just no two ways to to other way to say it um you had you know pretty anemic growth and reasonably high expense growth you know pre covid um covid you know was obviously terrible for everybody but particularly the owners given the operating costs that that they bear you came out of covid you had the sugar high where it's like you know the government pushed out trillions of dollars so everybody nobody had to go to work so it felt pretty good and then inflation spikes demand you know was sort of you know uh tepid and you know you you had a couple two or three years where you were basically going backwards off of uh you know covet off the back of pre-covered that wasn't you know particularly rosy. And so it's been a, you know, 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 a 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? I get, you You know, like all this, you know, we're a pretty good index for the country. So when we're starting to produce these kinds of numbers and you're seeing, you know, really reasonable margin growth, I think, you know, the owner community, like anybody, when things are going better, you know, I thing 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, you know, by 30 bps, we gave 50 bps 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, really good feedback. I haven't heard, you know, 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, you now, 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 tech, 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, you know, 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. 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's no NUG unless they are doing well, feeling good, and making the kind of profits that are commensurate with what they need to continue to invest in the hotel and to continueto invest potentially in 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, you know, hope they would as a result of sort of the macro conditions that we see as a backdrop. Great, Colin. Thank you. The next question will come from Smeeds Rose with Citi. Please go ahead. Hi. Thank You. I appreciate your commentary around how 2027 could shape up from a rev part perspective. And I was wondering maybe if you could talk specifically about what you're seeing kind of in the u.s on the group side either with sort of larger corporate bookings or um some of this you know the strength in the smaller enterprises that you've talked about yeah it continues to be quite strong if you look at the you know big group you know managed hotels at this point we're up in the mid single digits going going into next year something something like that so strong again if you were to i did somebody asked i didn't really do this but you You know, if you were to rank, you know, performance by segment to get to that three to four next year, I think it would be business transient, 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 to supply. Generally, you know, lots 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 sort of getting – the real growth there has been kind of a half-a-year phenomenon. Great. Thank you. I appreciate that. the next question will come from david katz with jeffries please go ahead uh hi good morning thanks for taking my question um you know from your public side advertising and you know reading through you know the release and obviously our conversations there seems to be some building momentum around luxury all right and you know 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. Thanks. Yeah. I mean, at the risk of a filibuster, because it could take a while, I'll try to be think 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 we think it does help create a halo effect for honors you know generally and we feel like we have We've made, really, you heard some of the data on sort of recent performance. We think we've made really good performance. I mean, Waldorf is flying and doing, you know, extraordinarily well. We're going to open five or six of the best hotels in the world in the next, well, you know, 15 months within Waldorf, but Conrad equally, LXR picking up a lot of momentum, and then all our lifestyle brands with more to come. I mean, we have another, which I've mentioned publicly, you know, in the Skunk Works right now that I would hope we would get out probably early next year, you know, in the lifestyle space. So that, you know, that has been not a new focus. It's been, you know, a continued focus. I think we're just, you know, picking up momentum. I mean one of the, you know, interesting data points is this year, you know between upper upscale and above, 45% of our deliveries this year will be represented in those in those categories so um it you know it is it is working and we are you know we certainly this year and i think generally are tilted that way in terms of like the cost and key money we we did you know incrementally move our key money up just just to be clear on that i don't think you know 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 rooms under construction has has moved one or two hundred basis points still unbelievably low it's gone from you know nine or ten to 11 but the bigger deals are with so it's very low the bigger deal or work gets spent this year you know 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 you know a reboot of our world headquarters and so there's little bit you know more spending that goes on there and a bit at a bit of a key money and you if you read the recent press releases you can see oriented towards a couple of specific deals if I look at where I think we'll end up relative to you know the averages I don't think it would be a whole lot different than what we've spent over the last five or ten 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'll years when it's lower 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 on luxury and lifestyle, I don' t think it requires a step change relative to historical norms. Thank you. The next question will come from Robin Farley with UBS. Please go ahead. great thank you um 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 um just wanted to ask about unit growth given you know most other c corps have lower unit growth guys either last quarter or this quarter and just thinking about your confidence with that six to seven percent for next year can you give us a sense of how much of that is already on the books in terms of you know it's under construction and so, you know, 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 the 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 book because over last year and this year, you've started to see new construction, new development construction starts 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, you know, 80% plus we think is on the books. And we're quite – that doesn't mean we're always right. We have a whole lot of work to do to get it done, but we're extraordinarily granular in our analysis of unit growth. We don't – you know. Every single hotel is identified. Every region has very specific goals on, you know, 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 you— It's 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 fewer that we have to fill in. Yeah, great. Thank you. The next question will come from Meredith Jensen with HSBC. Please go ahead. 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 we might see the opportunities evolve there, how the approach towards guest experience operations and things like that might evolve. Thanks. 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 Langer, who's 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's here. He's remaining CAO. All we're doing is, you know, 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, you know, there are really three buckets, which I've talked about quite a lot, you know, that we're really focused on is, one, efficiencies in the system corporately, but also for the system we manage on behalf of owners. You know, we're crazy not to. You know 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 tech, some 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 happier 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, It's revolutionized 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 in it. Hopefully you're a customer. You can see some of it already. I view that as a small down payment on what's to come. That's super helpful. Thank you. The next question will come from Mike Bellisario with Beard. Please go ahead. Thanks. Good morning, everyone. Chris, on Europe, you noted a huge white space there for you, just a couple 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? Thanks. Yeah, I mean, obviously Europe on the new development front has, you know, continues to be more difficult simply because the economics are harder, the financing markets aren't, you know, as robust. But we continue to have good success largely in, you know, 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, you know, independent hotels, and we're a fly speck 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, you know, in that environment to soft brands, hard brands, sort of, you know, things across the spectrum. I would say, you knows, owner sentiment is quite good throughout. I mean, every, you now, Europe's a big place. So, I mean, I hate to generalize, but I'd say quite good and not, you know, not surprisingly driven by performance. You know, 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 U.S., 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, you know, people are rattled a bit. But from a development point of view, from a same-store point of vue, we're going to have a terrific year in Europe. And from a developmental point of vu, we'll have one of our best years ever. So, you now, I'd say sentiment is generally broadly good. and this will conclude our question and answer session i would like to turn the conference back over to mr chris nesetta 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 uh 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.