Good morning. My name is Leann, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hilton Worldwide Holdings Q2, 2015 Earnings. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Christian Charnaux, you may begin.

Thank you, Leann. Welcome to the Hilton Worldwide second quarter 2015 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements; and forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion as some of the factors that could cause actual results to differ, please see the risk factors section of our most recently filed Form 10-K. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at www.hiltonworldwide.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of our second quarter results and will describe the current operating environment as well as the company's outlook for the remainder of 2015. Kevin Jacobs, our Executive Vice President and Chief Financial Officer, will then provide greater detail on our results and outlook. Following their remarks, we will be available to respond to your questions. With that, I am pleased to turn the call over to Chris.

Thanks, Christian. Good morning, everyone, and thanks for joining us today. We're pleased to report another strong quarter with adjusted EBITDA and earnings per share above the high end of our guidance. We continue to feel great about the fundamentals, which should continue to support strong performance going forward. As a result, we've raised our full year adjusted EBITDA and EPS guidance. Given our confidence in the outlook and the significant deleveraging we've achieved, we are also pleased to commence returning capital to shareholders with the declaration this morning of our first quarterly cash dividend. Kevin will cover this in more detail later in his remarks, but we intend to grow our dividend over time as earnings grow, and we believe we should be able to initiate these share buyback program next year. Turning to our performance in the quarter, system-wide comp RevPAR grew 5.2% on a currency-neutral basis. May was somewhat softer than expected largely due to weaker transient business caused by weather in the Southern and Central U.S. and demand declined across oil and gas markets, impacting quarterly RevPAR growth by approximately a 100 basis points. However, trading growth for the quarter was still relatively strong, up a little over 5% system-wide and strengthened significantly in June continuing into July. Group business was strong in the quarter as system-wide group revenue increased over 6% at our comp owned Americas owned and operated hotels largely during my company meetings that were up over 10% in the quarter, with particular strength in the Chicago, New Orleans and Hawaii markets. Favorable mix shifts also combined to support ancillary spend with F&B as owned and operating hotels growing 7% in the quarter. Group position continues to track up in the mid-single digits for both the balance of this year, and into 2016.…

Thanks Chris, good morning everyone. During the quarter our RevPAR growth of 5.2% was driven by a 3.4% increase in average rate and a 1.3 percentage point increase in occupancy. In actual dollar system line RevPAR per increased 2.9%. RevPAR growth was 5.8% for the first half of the year roughly two-thirds driven by rate. Diluted earnings per share adjusted for special items was $0.25 an increase of 19% versus the prior year period and above the high end of our guidance. Adjusted EBITDA was $777 million an increase of 15% year-over-year. Beating the high end of our guidance by approximately $17 million. SP growth significantly outperformed expectations and FX headwinds were lower than expected. We attribute $5 million to $10 million of the beat to timing items that should normalize during the back half of the year. For the quarter enterprise wide adjusted EBITDA margins were up 320 basis points year-over-year to 41.8%. Management franchise fees were $434 million in the quarter, up 17% over the second quarter of 2014 driven by strong franchise sales, new unit growth and accelerated timing of certain items including change of ownership and termination fees. We continue to grow fees by increasing effective franchise rates through the second quarter, we have approved the relicensing of over above 275 hotels this year, more than double the pace of last year. Resulting in a net increase of franchise rates from 4.6% to 5.5% in those hotels or an estimated fee increase of more than $10 million annually. For the fee business overall, we expect growth in the back half of the year, particularly the fourth quarter to de-accelerate relative to the first half. Again, this is mostly owing to accelerated timing of fees booked earlier in the year than we initially anticipated. Tougher comparisons to…

[Operator Instructions] Our first question comes from Harry Curtis from Nomura. Your line is open.

Good morning everyone.

Good morning.

Just wanted to ask you a bigger picture question. Investor’s single biggest concern is that the lodging demand and pricing are decelerating that the cycle is over. So I wonder if you could give maybe a bit more 'meat around the bone' that gives you confidence that Hilton can enjoy pricing power in the 5% to 7% range for an extended period that the cycle really has ample room to run? Harry, I'm happy to do it, I know that prime on everybody's mind particularly given what I've seen volatility in the markets and as others have reported. I think my philosophy on this is quite simple and frankly quite consistent, which is I think we're in a very, very nice part of the cycle. I don't feel any different in that regard than I felt over the last several quarters. I think that is supported not to over simplify it, but I think it is supported by the basic laws of economics, okay. And that is, as I look at the world or I look at the U.S. market which still represents in our large part of - nearly 80% of our EBITDA. We have an economy that is certainly not roaring, but is showing reasonably stable growth with the potential that have a slight uptick in growth. The demand for rooms - the hotel rooms follows very closely, it's on a very high correlation to that. We are seeing decent demand growth for rooms that is being matched by historically - continuing historically low supply level. So it was less than 1%. We're now clicking a little bit over 1% in 2015. It will go up a little bit from there. Recognizing the 30 year averages 2.5% and by the way in my history of many, many cycle,…

That takes care of it for me. Thanks.

Our next question comes from line of Joe Greff from JPMorgan. Your line is open.

Good morning everybody, and thank you...

Good morning, Joe.

...and thanks for the prospectus, Chris. Kevin when you're looking at the 3Q guidance, the 4.5% to 6.5% which I think is probably reassuring relative to what others have talked about to the 3Q. On a currency adjusted basis, how do you see that? And then what's the assumption for the U.S. properties in that one - 6.5...

The 4.5% to 6.5% I assume - mean that the 4.5% to 6.5% is FX neutral, so what it would be at actual rates. I think I would be a 0.2% to lower than that at actual rates. And then, the U.S. is consistent with that outlook.

Got it. And then which in the last couple of quarters we've seen relatively stronger growth?

And Joe that - and Joe we covered it sort of indirectly, that the reason is they have that pick down really as everything to do with sort of the holiday calendar in - in the third quarter. With just the effect of the calendar is shifting some business is just waiting fourth quarter, particularly on the group side more than the third quarter, the full second half of the year looks [indiscernible] bit more waiting in fourth quarter versus and third quarter, and so that half a point is the reflection of that.

So would you expect the second half U.S. to be consistent with the growth that you saw in the first half?

Generally, yes.

Great. That's it from me. Thanks very much guys.

Our next question comes from the line of Smedes Rose from Citigroup. Your line is open.

Hi thanks. I guess just along the same lines here, sort of - so in order to achieve the higher end of your RevPAR growth for the year, we're going to need to see RevPAR kind of pick up at a pretty healthy pace through the second half, and I know you have your range there. But if you had to kind of lean one way or the other, would you be kind of towards the higher or kind of mid part of that range?

Well, I'd say couple things. I think you're doing the math, right, so yes, it does imply a pickup and I do think that what you will see I think you will see sequentially the third quarter RevPAR numbers be higher than second quarter, and I think the fourth quarter at least as we look at our forecast, particularly, given that really stronger base will be higher than the third quarter. I would say for the full year [indiscernible] gave you a range, I'd probably direct it to the middleish of the range.

And then just, Kevin just to clarify in the management and fee income for the quarter, you said, there were $5 million to $10 million of sort of for lack of a better word, one-time items in there...

Yes.

...is that all in that line? Okay.

That's right.

Even if you adjust for those, it seems like growth in the second quarter was a little above the high-end of your range, and I am just wondering through the back half for the year, you just sort of being trying to be conservative there or is there something that would kind of slowdown that pace of growth?

No, I think there is couple of things have planned with me, one is the timing as you mentioned, I mean there is something that materialized, earlier in the year then we thought and then in the fourth quarter last year, we had some one-time items that created a little bit tougher comps on the growth rate basis.

Okay. Can you quantify what the amount loss in that fourth quarter last year, or?

No. We could take you through some of the modeling offline, but I wouldn't, I wouldn't one against to come out.

All right, thank you.

Your next question comes from the line of Felicia Hendrix from Barclay. Your line is open.

Hi, thank you. Just switching gears for a moment to your pipeline. Chris, just was your new unit openings and your development pipelines seems to be efficiently waited source of the U.S. now about 54% international versus [indiscernible] 60% when guys hedge IPO. I just am wondering what you think is causing the shift in international market. What do you think gets the new construction development reinvigorated?

You've got those numbers, exactly right. The IPO was 64 they announced, 54, 46. And I think, here's that I say, I mean, obviously the different parts of the world move in a different cadence, the U.S. development side particularly in a limited service base has been picking up steam, you can see it in our numbers and some others numbers. And other parts of the world including Europe slowed down now are picking up steam. Asia-Pac compared to where it was has slowed down somewhat. I'd say the Middle East is generally consistent. What I'd love is, and we did talk a lot about at the IPO is, at our scale and with the breadth of chain scale diversification we have, we have the ability to sort of ebb and flow with market conditions and went everywhere. So, the idea is, there are going to be times where, and we saw it for the five years leading up to maybe last year that China and Asia-Pacific are roaring, they're going to be times, and the U.S. and Europe were very slow. Now, Asia-Pacific is slowing somewhat modestly and Europe is finally stabilizing improving a bit. And the development side in the U.S. is starting to pick-up, pick up some steam. So that - this is one of the great things about diversification that, as that's going on, we are making sure that we're really thoughtful about our development strategies, making sure we have the right resources in the right place that we're layering our brands in the right way, that is satisfying both the consumer demand obviously. But also, where the capital is flowing in these various parts of the world. And the idea is that, if we're intelligent and strategic about how we do that, we're going to keep growing and we're going to grow in an accelerated pace, no matter what's going on in the world, because the world is a big place, and it's diversified world and we're going to be able to continue to gain momentum by being intelligent. So that what we've seen is just what I said, the U.S. and Europe now are picking up a little bit providing a little bit more of the growth up until in 2010 through 2013 when we went public. The U.S. had little or nothing going on, Europe was in stays and Asia Pacific was big part of the story. That's why I like horror story frankly relative to others is that we can do this. We've got 12 of the best brands with the highest market share and create development teams around the world and we push and pull and very strategic about what we're doing around the world to continue to grow our base of hotels to better serve customers where any need they have anywhere in the world they want to be.

Thanks. And if I could just bring it back to the quarter results for a second, you gave us some very helpful color on the weaker [indiscernible] business in May. Can you just help us understand what percentage of your system wide room count ended up being affected by the weather and the weaker energy demand just to drive the 100 basis points decline in RevPAR?

Yeah, I wouldn't guess if you combine it, so I don't have the exact number so hopefully we'll get back to you, but not insignificant, I would say probably because it was a large swap of the limited service system and franchise system that was really impacted, I would guess 20%. But I'll ask Christian and Joe to take care of that, but we did do the math, I just don't have the number of hotels.

Okay. That's...

Not, not insignificant.

Okay. Great. Thank you.

Our next question comes from the line of Shaun Kelley from Bank of America. Your line is open.

Thanks and thanks for taking my question. So just to maybe switch gears and talk a little bit about strategic alternatives. Chris you eluded a little bit about this in your prepared remarks. So the first question I have is, last quarter the only thing we could talk about was M&A and this quarter made it five questions and without asking about it. So, you know how does M&A fit into the strategic alternatives, could you sort of alluded to real estate and timeshare, but didn't mentioned to that. So, how are you thinking about that today, and how that change it all?

I think, it is not changed. I think, we think about it very consistently with what I've articulated and Kevin and others have articulated before, and that is, we feel really good about the attributes of the company, as they stand, and our ability to expand those attributes organically meaning launching new brands, and as a result, be able to leave the industry in growth and doing in a very capital like way, which we think is going to drive the best returns on equity in the business. And so, I've been pretty clear in saying you'd never say never, I mean, we look at everything that's out there, generally, and you know if there is - we found anything that sort of went through our filter being highly strategic for us and economically compelling in terms of value enhancing to the company, it would be something that we have consider. I will say I don't really see anything that's out there right now that that gets through that filter, and that's because of a good problem we have, which is, getting back to what I started with. We have pretty much in our view what we need to be successful. That doesn't mean, [indiscernible] we're going to launch new brands, we talked about big scale, we just launched two new brands last year, Home2 not too long before that, but given the base size of the company, our scale, our geographic distribution, our existing chain scale distribution, importantly 10,000 owner groups that we have an amazing relationship with, we think that the, the higher return answer for investors - all investors including ourselves is to really focused on our organic growth. So in a simple way, I would say, we are not particularly acquisitive. But we are always trying to be intelligent and thoughtful.

That's very helpful. And then my follow-up would just be, when we think about the other two alternatives in terms of more organic things you can do. The real estate, the regroup which you know as better than anyone on - the evaluations that have come off fairly significantly in the last few weeks and the quality things are volatile. But the question is on does it change in or does the recent change in valuation have a material impact on where you guys are sort of viewing that longer term set of alternatives for the real estate side?

No, I don't think so. I mean we're really trying to look at this as I've described a couple of times do have very long-term lends, which is when you think about the company is its best - do we think we can create the most value for shareholders over the long-term in our current setup or another setup. And so, it is a very - it is very much a long-term view. We've done a considerable amount of work, and looking at all the options as you can imagine, it's quite complex structurally manageable, but [indiscernible] quite complex, and we want to be really thoughtful about the value levers, because we're not in the business of doing things for practice, we're in the business of doing things that we think are going to create long-term value. So, we have done a lot of work. We'll continue to do a lot of work in - as I said certainly before the end of the year, I think we can layout the rational for how we want to move forward. But these recent ups and downs, I think when we're looking to a longer term lends at least what I've seen so far, it doesn't really have any material impact on our thinking.

Thanks very much.

Our next question comes from the line of Jeff Donnelly from Wells Fargo. Your line is open.

Good morning, Chris. I guess maybe to put - maybe a finer point on it is, in products, how are you thinking then about your 2016 RevPAR growth either domestically or globally, just as compared to the pace in 2015. Do you think, it's going to hold or accelerate or even sorry [ph] ?

I'll go back to what I think I started saying at the IPO. IPO is really good and I said earlier today, Jeff, I think we will be in that 5% to 7% range. We have not started to begin on doing our - into our budgeting process that you actually start, we'll start to kick off in a couple of weeks. But we're in a regular dialogue around the company and with all of our regional heads about their view of this year and next and obviously looking at the pace of bookings, and I think, that the cycle is alive and well, I standby what I said, which is I think, we will be able to for the next couple of years at least deliver RevPAR growth in that time zone, and that - that's what we will be aiming towards.

And I apologize it. I got on a - a little like, can you talk about your perspective on trends and pricing in China in the next 12 months versus the past 12 months, just given some of the headlines we've been seeing in the - into the market falling and a low with consumption or what not?

China, obviously, the economic growth story there is one of a bit of deceleration. I think, they're going to great lengths to stabilize their markets to keep consumer confidence high, because in the end they're transitioning that economy to be a consumption-led economy, not unlike ours, and many of the other more mature economies, so I suspect, there'll be some bumps and bruises along the way as they're always are in these things, but that the underlying fundamentals of $1.3 billion people that are no question have ups and downs, but are gaining in wealth that is going to allow them over an extended period of time to accomplish their objective. I think they've been reasonably smart. I suspect they'll continue to be reasonably smart. We are seeing reasonably healthy results in the market. I think the hotel space there is in its nascent stages of development and growth. I mean there're certainly some markets, some of the core markets that maybe have had more development than others, but if you look at representation per room, yeah, thousands of people per room or rooms per thousand people rather in China, it is still much lower than any of the divesting or the developed western economy. So I think any stage you look at the next 10 years, 20 years, 30 years and China will have ups and downs but will be a rise up meaning you're going to continue to see a massive amount of development because you're going to have a massive amount of demand coming from their consumers and more people visiting China. When you look at the current trends, I gave you the number we had a great second quarter. We still think will be 6% to 8% for the full year. Some of that is we're…

Great. Thank you.

Our next question comes from the line of Thomas Allen from Morgan Stanley. Your line is open.

Hi. Good morning. So a bigger picture on the midscale brand launch you're going to do, I think you said in early 2016 or maybe later this year. If you look at supply growth in the U.S. the one chain scale that's actually seeing decline in supply growth in the U.S. is actually the midscale segment and most of the future construction is an upper mid to upscale. So what gives you guys the confidence that you can clearly developers are choosing to build these other slightly higher chain scale properties over mid-scale. So what gives you guys the confidence that you can kind of launch a brand and change that dynamic?

Everything, you just said gives us the confidence that we're going to do. I think what why you're seeing what you're seeing is there with all due respect those are the products that are out there. There is no good mid-scale product that's why we are doing it. We've had such amaze. If you think about the history of it and I've said this certainly in one-on-one meetings and I think maybe on one of these calls, I mean Hampton was initially targeted to be in that segment. It has just been so successful that it's grown up out of it so it's in upscale. It's not a technically, I think this year will be close a $115 average rates in the system, and as a result there is a huge swap 40% of the demand base in the U.S. markets and similar sort of stats as you go around the world that we find we're not serving as much as we want to because they can't afford our - basically our lowest chain scale product. So we think there is a big customer base out there that wanted but to your point the reason there has not been a lot of development. I don't think the products just by development the reason that we are taking along to get this right is we are not just going out and saying just do our hands and look alike, we're creating this segment and what we're doing - and when we're doing it in a way that there's going to be unlike anything anybody has done, it's going to be a - all new build against product that's out there that is almost no new build to your point. That's going to be very appealing to the customer and importantly that…

Thanks. And as my follow up, I think the first question you guys were asked about I think Harry highlighted that investors top concern is just around the cycle. I think investors second highest concern is just around the threat from the sharing economy, and I'm often and people were often accused of being two flipping around that threat. Can you kind of address that? Thanks.

Yeah. Arabian B or [indiscernible] or anything above I guess.

Exactly.

Yeah. We - you can imagine that we've said around this table that the management team as of - with our board of directors talking about it and really - and we've talked with the Arabian B folks I mean and lots of other things in the industry. In the end, I won't [indiscernible] I view it as a different sort of customer, looking for a different type of experience. I think it's a real business for sure, a growing business for sure that what it really is that its core is a leisure value adventure sort of need that it's fulfilling. That is not what we are. I mean we are at some leisure, yes, but we're not trying to be the cheapest. We're trying to be the highest quality product and service, so the people will pay a premium and we're not trying to provide an adventure in that sense, meaning we wanted to be very high quality product and service that you know exactly what you're getting. So, I think the proposition when customers - our customers are coming to us, what they're looking for is something different than what they're looking for when they go there. I'm not going to say there is zero overlap that none of our customers ever used them, but I think they use them for different needs, and I think largely as we look at it statistically, okay, in every market is a little different and we can talk about New York, whatever, but if you look at the broad business for those guys, I think it is growing the pie more than anything. I think it is stimulating more travel that wouldn't have occurred, and in the end I think that's a good thing. Getting people travelling more is fantastic. As we think once they're travelling and they get the bug, they're eventually going to come stay with us, because we're going to be able to satisfy a different kind of need that they're going to have, particularly as they sort of grow up and move up in their careers and family then all of those things, so what they're looking for may be a little bit different. So, I'm not saying, but I'm not trying to be [indiscernible] and say, we don't think about it, we don't care, we dismiss it, we think about it a lot. We talk about it a lot. But those anecdotally and with hard statistics, I think in the end they are not impacting. I do not think they have a material impact on us. I think they make our pie bigger and ultimately stimulating people to travel more and that I think a good thing.

Our next question comes from the line of Carlo Santarelli from Deutsche Bank. Your line is open.

Hey, guys. Thanks for taking my question. I was just wondering, I know within the context of your group pace for 2016. Kevin, I believe you said mid-single digits. Could you guys talk a little about that the tenure of maybe some of your group discussions over the several months and relative to - we have this conversation at the end of April. And, then maybe if could provide a little bit color on in-the-quarter, for-the-quarter trends?

See, I would say group tenure is the same. I mean, I don't think there is already material difference. I think we're looking at year, next year, that's going to be another very good year. We're looking at having a good position. So that means, we don't have as much capacity to available for people. So I think that - to kind of just to give us incrementally a bit, a bit more leverage. So I don't - I wouldn't say its moved a whole lot, either way. I mean, if anything, I think our leverage levels for a group of things have gotten little stronger, if I look at west, if I look at sort of the back that up even in the quarter, but certainly going forward, the majority of our group growth is coming through rates. So I think is, for us a good reflection if anything that we're - the leverage level we're getting is growing, not diminishing and it should be, the more we build out, the bigger we based, the more we selective, we can be and there is less sort of capacity for people to book. So we can drive higher rates. In the quarter, bookings were strong, I think they were Q2 forward looking up in the high single digits from our pace point of view. So quite good

Great. Thanks Chris.

Our next question comes from the line of David Loeb from Baird. Your line is open.

Good morning.

Good morning, David.

I want to come back to China for a minute. I wanted to ask about your agreement with Plateno, there have been some press accounts, it's just the Plateno and Jin Jiang are getting together, will that have any impact on your deal with them?

No. I mean we've been in a pretty constant dialogue with them as that has been evolving as you might imagine, and I think our view of a combination of Jin Jiang and Plateno is that together they are even stronger and an even better partner for us than what we're trying to do, and in discussions with them I don't think it changes their commitment to what we're trying to do at all.

Great. Thanks. You've covered all the other important stuff already, so. Thank you.

Okay. Thanks, David.

Our next question comes from the line of Wes Golladay from RBC Capital Markets. Your line is open.

Hey. Hey, good morning, everyone. Are you seeing any...

Good morning.

...headwinds on that - are you seeing any headwinds on the cost side with developers in the U.S. particularly in the select service?

Well, I mean the answer is yes, but not in a way that's slowing down our ability to get our - add to our pipeline. There is no question that there is more construction going on and not just in hotels incrementally, obviously, a bit more on hotels, but across the board more infrastructure spending going on. You're starting to see construction in the other areas of real estate, home building is picking up. So there is no question, cost of build are going up at higher than the sort of average inflationary increases, but given the strength of the business in terms of the growth in RevPARs, I think it has generally been keeping up enough that the deals that really make sense that are getting done. That is a reason, by the way and I have articulated this before that I have such confidence in the supply side of it, which is that not all deals make sense. There is a reason that there is basically two companies that make up half a more than half of what's getting built in U.S. and those are the two companies [indiscernible] included that have very, very high market share that allow the economics to work, the [indiscernible] while the other stuff is being getting done is because cost to build are - have been going up and they're high, and if you don't have the high market shares, the economics don't work. So it's sort of a good new story for us, because we've got that market share, we can continue to build our pipeline when others can't - and the cost increases that are going on in construction which are not insignificant are keeping a bit [indiscernible] on overall supply, and I think we'll continue to do so. I don't think the U.S. economy get sort of season this recovery a little bit more, I think that will continue to be problematic.

Okay. Now switching over to China, how are the developers funding the projects over there. And can you give us a brief overview profile of the developers?

Well, the profile is changing, I'd say in the big full service and luxury stuff that is still a component of what's in our pipeline and getting done, and we're still signing some of those deals new, that those are very large companies that that are in a lot of different businesses and in many cases partially government owned or is it local or nationally in national government, and that sort of been the pattern and there is a spattering of publically listed Hong Kong based real estate companies in there, but a lot of those deals have been done by very big Chinese conglomerates that own lots of different, I mean lots of different industry potential and have some government ownership. What's shifting in that is as we're going to a more of a limited service make up because that's where the demand is as I already described, and where the money is flowing, it's changing not unlike in the United States where you're getting smaller players, entrepreneurial players much lesser the big conglomerates and much more diversified smaller entrepreneurial individuals, small companies, families that are making those kinds of investment that I think is a really good thing that's a natural thing, that's exactly you look at the [indiscernible] system in the U.S. as an example of this massively diversified and largely our owners are small families and small businesses. I think that is increasingly what you're going to find happening in China as you shift the business to more of a limit sort of business for us that create, I think a great diversified base of owners that lowers risk and also provide more avenues of growth.

Okay. Thanks a lot for taking the question.

Yeah.

Our next question comes from Robin Farley from UBS. Your line is open.

Great. Thanks. I think most of my questions have been answered, maybe just a circle back to one topic for little more clarification, which is a potential for spinning out of REIT. I mean, I think just maintaining the RevPAR guidance is kind of a victory, given the lower RevPAR guidance from the number of other [indiscernible] . So, its sounds like you're saying that kind of lower valuations out there wouldn't deter you interest in a REIT spent, but maybe it's fair to say it would change the potential timing of it?

Not necessarily, again, I think the lens, we're going to look at which is what I would have, all shareholders would want us to look there is, how do we create the best long-term value for everybody, and so, I think when you're doing that you'll be very careful in my mind to look at any sort of snapshot in time of what it was three months ago or yesterday what it might be a month from now. I think it is sort of, when you look at the different pieces of our businesses, it's a bunch of different filters that you're looking at its relative valuations, its tax efficiencies, its opportunities to activate in different ways various businesses, all against incremental cost of what might be more G&A that more than one enterprise as compared to what we are today, and I think all of those things are factors, not they're complicating too much and not to put tangle [indiscernible] . Those are the sort of factors that we are filtering through as we go through it, and obviously we're kind of seeing what's going on in the market, but we're trying to take a long view on where relative valuations, we think relative evaluations have been and will be.

Great. Thank you.

Our next question comes from the line of Steven Kent from Goldman Sachs. Your line is open.

Hi, good morning.

Good morning.

Two questions. First, just a better sense for cash used, you generally have been paying down around $200 million in debt every quarter, now you'll be paying around $70 million with the dividend. What will happen to the rest of the $130 million or so, if that kind of go towards debt, you mentioned buybacks, but is there some kind of pacing that you are thinking about or how do you think about that? And then separately that with the other adjustment line item and the adjusted EBITDA bridge, and I just wanted to understand what that is, and how we should be thinking about that other adjustment line over the next couple of quarters?

Sure, Steve, its Kevin. I think on dividend versus use of cash, I think our other uses of cash are going to stay very similar, we're not going to change our overall outlook on our capital allocation, and we do still, as I said in my prepared remarks want to achieve investment grade. And I think as we've said to you all along that we thought that target range for our balance sheet was between three times or four times leverage. I think we'll find that a little bit as we've gotten into it where we're targeting a range of 3 times to 3.5 times. And so, we think we're going to finish the year at 3.4 times with the dividend. So that gives us a little bit of room to go towards getting into sort of the middle of that range. So you would see the other use would be continued debt pay down in the back half of the year. And then on the other line item, it's pretty straightforward that the line share of that is severance related to the Waldorf story of transaction, which was effectively a transaction cost as part of the overall transaction where we're picking up 80% of the severance deal, and that's all baked into that line [indiscernible] .

That as a line, will go back to our figure on $20 million or so per quarter?

Yes. Yes.

Okay. Thank you.

Our next question comes from the line of Bill Crow from Raymond James. Your line is open.

Hey, good morning.

Good morning, Bill.

Just to clarify, Kevin you had earlier suggested $800 million debt reduction for the year, you're now increasing that, I'm just trying to build that same bridge between the $1.1 billion, $1.3 billion of capital available to reduce debt and return to shareholders against $800 million debt reduction and $130 million, $140 million dividends?

Yeah. I think the difference Bill is the Sydney paydowns worth $800 million or so, $800 million or so I think was a prior number, I'm not [indiscernible] I'm not sure exactly what the number you're referring to, but I think it was our prior guidance number and then that moved up to $1.1 billion to $1.3 billion when we sold Sidney and have the Sidney paydown in there, and so now all you would do is take the dividend amount and that would be part of the $1.1 billion to $1.3 billion. Does that answer the question?

Yeah. I guess so, I though your actual debt retirement paydown number was $800 million for this year, which was actually hit already, but you're increasing that number [indiscernible] , correct? Well, we increased it last quarter to our guidance went up to $1.1 billion to $1.3 billion last quarter when we reached agreement on Sidney.

Okay. Of debt reduction, okay. Very good, Chris, couple of quick topics. Myriad signed a marketing and distribution agreement with TripAdvisor, I wanted to get your thoughts on that, any, you'll go reducing commissions paid out. And then the other topic, Chris is, as you think about this potential to divide up the company and knowing that you're kind of allergic to G&A would it not make sense to look for an existing REIT platform that already has the G&A commitment that might make the economics work better?

Okay. Happy to [indiscernible] on Trip, obviously I'm not going to get into where we might be with any particular party. We've had some discussion with them, those discussions are ongoing, unclear where they will end up. But we made you something with - that's the reason we would see because the terms of what we get term with them are consistent with basically three pillars that we have in dealing with any of our distribution partners, and that is 1) we want complete control of our inventory 2) we want to have the ability to price differentially to our most loyal customers or otherwise known as our honest members, and 3) we want to have very efficient margin structures or commission structures with them. And I'd say not a pillar, but sort of the overarching philosophy is always going to be that we want to have the most direct relationship we can have with our customer. So, everything we are doing that we talked about in the prepared comments about our HHonors app and straight-to-room, and all of what we are doing with CRMs is all around trying to shift as many people into our direct channels, because number one, we want to have that direct relationship, and two, it's the most cost efficient way for us to be able to distribute our product. It will always - obviously be - we will have distribution partners. I don't see a world where we're going to get everybody to come direct to our channels, the more the better, and when we're going to have distribution channel partners like potentially three or four or others that we are all aware. We are very, very focused on making sure it sort of meets the standards of our three pillars. Then what we do with trip, I don't know, if we can reach the standards of our three pillars, we may do something with them. On the spends, I don't want to - yes, there is theoretically a rational for - if you decide at some point, you wanted to separate the real state and yes, I do not like incremental GNA, that there would be ways to do it that would be more efficient to doing it ourselves, that when I say we will look at all options, we will look at that option as well.

Thank you.

Our next question comes from the line Vince Ciepiel from Cleveland Research. Your line is open.

Hi. Thanks for taking my question. I have question on margins, they have been impressive in the quarter and year-to-date, when you look at RevPAR growth of your business it's equally been driven by occupancy and rate, so is there anything going on with costs there, and how should we think about margins progressing into the second half?

Yeah. Vince this is Kevin. We certainly had something's go our way in terms of cost in the quarter. Energy being predominant costs that's been down due to what's going on in the oil markets, and we continue to work our labor management systems to run the properties as efficiently as we can, and so if we achieve RevPAR growth that is in excess of inflation, particularly as you point out of it, it comes more from rate than occupancy, we should be able to continue to drive margin growth.

Great. Thanks. And then, different topic, the last couple - actually last couple of years, Hampton, Doubletree and Garden Inn have led you guidance as RevPAR growth. I noticed they are more in line with the system average this quarter. So I guess first, how much of that's related to kind of the weather taxes impact you alluded to? And then second, you guys provided kind of a positive longer term outlook, just part of that those brands leading system [indiscernible] RevPAR growth going forward?

Yeah, I think, I think it is partially a result of those brands being more impacted by the things that impact the Q2 for sure. But as we've said in couple of calls ago, we do believe that RevPAR growth levels are going converge as between the lower segments and the upper segments, and I think, when we look at the balance of the year, and we look in the next year and frankly the year-to-date even sort of extracting out the weather impact, we believe that's happening. The upper end of the business is definitely catching up, which is I think a good thing. International thing is as the group base continues to build because the upper end is more driven by that Group base.

Our next question comes from the line of Joel Simkins from Credit Suisse. Your line is open.

Yeah, good morning guys. I can't believe we've made it 67 minutes on the timeshare. But timeshare obviously has continued momentum for you can you just give us a little bit color on what you're seeing out there in this business, whether it relates to tour flow, package size, well I miss to use financing and then you are seeing some additional opportunities with this to continue to feed them own to retail inventory or something that tend one assets to this business?

We're - the timeshare but we didn't spend in time on time it's doing incredibly well they look at it again others that are reporting, I mean our tour flow numbers are way up in the quarter up 9%, VPG is up 7.5%. We expect those kinds of numbers plus or minus for the full year. So our timeshare business is hitting and also and there is and it's doing honestly in a very different way as we've talked about then all of our competitors in the sense that we've got the vast majority now over 80% of our inventory that is what we're doing that a very capitalized way, I think 60% roughly of our sales in the quarter were in the capitalized segment. So we have really, I think - I know I have really transformed this business over the last three or four years and we continue to build momentum, I know there's always a question like was it sustainable and can you keep building the inventory and I think we have proven our inventory numbers have been moving up even as the economy hits stronger, people thought well there won't be broken deals and we've proven just because of the returns we can deliver that we're able to find more and more counterparties that want to do this with us. So, we announced - I think Kevin comment a couple of deals, we did it quickly and gently. But we just did another in the quarter, another couple of capital light deal. So, Kevin may want to add to it. I think this business is cranking and sitting on all cylinders. Our team is doing an amazingly good job.

Yeah. I think as it relates to the consumer Joe, I mean the consumer confidence is up, right. And so, the time shares, it is at the end of the day, consumer products driven by how the consumer feels about their own outlook and their own balance sheet. And so, you are seeing [indiscernible] see high levels of sales growth, more people willing to go on tours. On the margin, we haven't really changed the financing profile of the business that much. But on the margin that consumer willing to borrow a little bit more to stretch with that project - product, because they feel good about their own balance sheet. And then the last thing, Joe, I didn't quite follow the question as it related back to the 1031, were you are asking if there are time share opportunities specifically at those assets?

Yeah. Those assets are - how you continue to think about parsing out a couple for [indiscernible] your own hotels to these types of projects particularly urban locations?

Yeah. I think we continue to think about those kinds of things that the 1031, there is - the urban hotel in San Francisco, who knows. But I think as Chris mentioned, we are - we're finding really good capital light deals to do. So, we look at those first, and then we always continue to look at opportunities for value enhancement in our properties including at the 1031. I'm not sure that there will be any major projects there, but we are certainly finding good ROI projects to do in that portfolio whether or not there will be in the time share state, I'm not sure. But we will create value in those...

In the owned segment including properties that we have owned for a period of time, there are two or three incremental opportunities over time to take pieces of existing hotels, something that we will more potentially at the New York Hilton and so, and we've talked a little bit about Hawaii in Waikoloa [ph] and there are one or two other urban markets where I think there is some opportunities that were moving down the path on and at the appropriate time we'll make sure we let you guys know about them.

That's very helpful. One quick follow-up if I may here. Chris, you call out some very interesting mobile, check-ins [indiscernible] , and I certainly recognize this isn't all about cost savings, but it sounds like you've had some pretty high adoption rates, clearly the consumer wants to control their experience, so in terms of that small base of the hotels you're deployed at currently, do you - are you seeing any real meaningful kind of front of the house, back of the house, how is efficiency opportunities?

Not yet, because it's too early in the process. I mean right now, we're not trying to drive cost and as you pointed out, eventually, I think it is there opportunities to drive costs down and/or repurpose people, but at the moment we're using - we're doing - we're using those people to sort of help retrain our customers. So not unlike, I feel like how the airlines did this and they went to online check in and kiosk [indiscernible] . In the beginning, there is a lot of work in training and human resource effort to get people to adopt, understand and make sure work. So, we're in that stage, but the adoption rates are huge, by the way I didn't noted, but the satisfaction rates are off the chart. Think about it, it's a real simple philosophy. You guys, everybody wants, what you want and I want. They want choice and control in the palm of their hand and they want to interact with us just like they're interacting with so many other businesses in every - their everyday life, and so, the hotel business honestly over time probably hasn't kept up with that. We're trying to not only keep up with it, but get ahead of it. I do think ultimately it's going to build increased loyalty and market share. It's going to create cross-sell opportunities and up-sell opportunities that I think are going to be meaningful and it's going to create cost efficiencies, okay. It's not incremental extra cost now I'd say sort of neutral but ultimately there will be cost efficiencies as we get broad adoption.

Thank you.

Our next question comes from the line of Chris Agnew from MKM Partners. Your line is open.

Thanks very much. Good morning.

Good morning.

Agree with your sentiments air BMB, but just wanted to follow up with the question. A) is the risk that the rapid growth of alternative accommodation is holding back pricing power, or even has the potential to hold back pricing power for the industry given that these types of accommodation can come into their own when there is compression. So how do you think about the risks that pricing power is maybe weaker than in previous cycles, or what it should be given favorable supply demand conditions in the industry? Thanks.

Yeah, not to be a poly I mean obviously any type of supply could have the effect of taking away our pricing power and there may be markets where there is some impact there. It's not an impact as we look at it enough that we can measure, and as I said, I think it's just a different kind of customer. So the largest part of our base of customers is really a business customer for a business purpose. And I know they're trying to get in that business and good luck and then and I'm sure they'll love the business, but I just don't think in terms of the core customer that we're serving and what that core customer is telling us that they want from us that they're enough similarities where they overlap is creating a really credible alternative that's effecting pricing power in a meaningful way as we study. Again, you can probably pick micro-markets and there'd be exceptions to but broadly we are not seeing. I don't expect to see it.

Thank you.

Our next question comes from the line of Chad Beynon from Macquarie. Your line is open.

Great. Thank you very much. With respect to corporate negotiated rate budgeting and the timing of these conversations with your partners in the next couple of months, acknowledging that the majority of the leverage is in your favor as you spoken about how important is the timing of these conversations against a potential fed rate increase and how important is the size of that increase in these negotiations maybe some anecdotes over the past couple of cycles what you've seen during other periods when rates were increasing? Thanks.

Yeah, it's a good question, I'm going to ask to admit I haven't actually scientifically done the correlation that increases while we're in negotiations on corporate rate. So I can't give you an exact answer. Here is what I'd say that anecdotally, I do think we have more pricing power, so if we were in the sort of low to mid-single digits I would - this year, I would expect we'd be in the mid to higher single digits, just because we do have incrementally more pricing power while increasing rates could have an impact. The net results of increasing - the reason rates would be going up to begin whether the economy is stronger. If they're going up faster than people expect it just means ultimately the economy is stronger than everybody expects. The economy being stronger is advantageous to us meaning kind of we being stronger is creating more demand for room nights there is the same amount of capacity essentially because there is very limited new set capacity coming on. It should incrementally give us more pricing power. So not that I want to rates to go up fast, don't get me wrong, but if rates started to go a lot better faster clip, I think it’s reflective of our business [indiscernible] ultimately we are, we re-price every day and ultimately reflective of our business being very, very strong, and I think gives us more leverage in the negotiation.

Okay. Thanks. And can you provide us with the percentage of your managed properties that paid IMS during the quarter versus last year?

Yeah. I think it was in the low 50s versus - that - it was in the low 60s this year versus low 50s last year.

Okay. Thank you very much.

You bet.

Okay. Is that - I guess we're done by questions. So thanks everybody for joining the call, we'll, I don't know where our operator is, maybe she disappeared, but we appreciate this time today, obviously pleased with the quarter, very excited about the way we think the second half of the year is going play out. Looking forward to getting back with you after our third quarter end. Take care. Have a great day.

That concludes today's conference.