Good morning, and welcome to the Hilton First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s prepared remarks, there will a question-and-answer session. [Operator Instructions]. Please also note today’s event is being recorded. And at this time, I would like to turn the conference call over to Jill Slattery, Vice President Investor Relations. Ma'am, please go ahead.

Thank you, Jaime. Welcome to Hilton’s first quarter 2020 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements. And forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ, please see the Risk Factors section of our most recently filed Form 10-K supplemented by our Form 8-K filed on April 16, 2020. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today’s call, in our earnings press release and on our website at ir.hilton.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment; Kevin Jacobs, our Executive Vice President and Chief Financial Officer, will then review our first quarter results. Following their remarks, we’ll be happy to take your questions. With that, I’m pleased to turn the call over to Chris.

Thank you, Jill. Good morning, everyone, and thanks for joining us today. As I think we can all agree and certainly probably have all been saying a lot lately, these are truly unprecedented times. COVID-19 has created challenges that our industry has never encountered before. On behalf of Hilton's entire leadership team, I'd like to express our deepest sympathies to those who have lost loved ones during this devastating pandemic. I'd also like to extend our sincere gratitude to the millions of workers on the frontlines across many industries and in many roles, working selflessly to help keep us all safe. I also want to thank our team members around the world for their remarkable dedication, hard work and sacrifice. Many of our own team members have been personally impacted by this crisis and yet, through this adversity, they've continued to spread the light and warmth of hospitality. Across every region, we've adapted quickly to provide hospitality in new ways in our communities. In London, several of our properties are hosting the National Health Service and other key workers. The Hilton Orlando has been hosting the National Guard and working to distribute essential items to community residents in need and over 500 hotels around the world are being used for recovery efforts. Our properties have also donated thousands of pounds of food and supplies to local food banks. Through the Hilton Effect Foundation, we are providing disaster response grants for organizations and communities fighting the spread of COVID-19. As part of this effort, our Hilton Honors members have donated more than 6.5 million points to these causes. In partnership with American Express and our ownership community, we committed to donating up to 1 million room nights to frontline medical professionals in the United States to support those who are putting…

Thanks, Chris, and good morning, everyone. In the quarter system-wide RevPAR declined 23% versus the prior year on a comparable and currency neutral basis. RevPAR was down across all regions with the weakest results in Asia Pacific. Decreases were primarily driven by occupancy declines with rate pressure from the lower rated business further impacting results. Adjusted EBITDA was $363 million in the first quarter declining 27% year-over-year. Results reflect significant reductions in travel demand and the temporary suspension of operations in a number of hotels across the world. While the decline was somewhat mitigated by greater cost control, more significant measures were largely implemented after quarter end. Management and franchise fees decreased 18% to $422 million driven by RevPAR declines and roughly flat license fees. Given the extremely challenging operating environment, which included the suspension of operations at 35 of our leased hotels during the quarter, our ownership segment posted a loss due to higher levels of operating leverage and fixed rent structures at some of our leased properties. Diluted earnings per share adjusted for special items was $0.74. During the quarter, we opened nearly 9,000 rooms meaningfully lower than prior expectations due to postponed openings driven by COVID-19. Approvals and construction starts increased ahead of our expectations, largely due to the signing of our largest development deal to-date, and agreement with Resorts World for a 3500 room tri-branded hotel resort on the Las Vegas Strip. Much like the rest of our business, development activity for the balance of the year will depend on a number of factors. However, we do expect that our ultimate rate of net unit growth for the year will be significantly lower than our pre-crisis expectations, likely around half the rate or a bit better. Turning to liquidity, as Chris mentioned earlier, we've taken a number of actions to enhance our position and increase our financial flexibility, including executing on the bond transaction that Chris referenced earlier. We were very pleased with the outcome of that transaction through which we issued two $500 million tranches of senior notes at pricing that was very attractive relative to other transactions executed in the same timeframe. At the time, it also marked the first eight year high yield financing done since the crisis, which allowed us to continue to enhance our maturity schedule. We continue to have no debt maturities prior to 2024 and a well-staggered maturity ladder thereafter. Factoring for the senior note issuance as well as the $1 billion Hilton Honors points presale, we ended the quarter with cash and cash equivalents of $3.8 billion on a pro forma basis, which we think should provide us with ample liquidity to navigate the current environment and prepare for recovery. Further details on our first quarter 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. Jamie, can we have our first question please?

[Operator Instructions]. And our first question today comes from Joe Greff from JP Morgan. Please go ahead with your question.

I was hoping to get a better understanding of your operating sensitivities in this environment. And as we kind of look at these -- unbelievable to me to be talking about the magnitude of these RevPAR declines. But given these pretty steep RevPAR declines, how do you see the relationship to base and franchise fees? How do you see that relationship, which I can guess on the incentive management fee side? How are you thinking about your run rate G&A from here? And if you can give us some sort of -- some points on understanding the components of your monthly cash burn, I think that would be helpful to us?

Wow! That's about 20 questions in there, Joe. Good job.

Don't ask me to repeat it. I can't remember all of the questions.

I can't either. Yes. We can't, as we said, we're not giving guidance. So we'll answer what we can but happy to talk about the sensitivities at a high level. I would say, as we look at the, what I think would be helpful sort of RevPAR to EBITDA relationship, the way I would think about it in terms of sensitivities and there's thousands of assumptions as you would guess that go into this is, if you have RevPAR declines -- and we're not giving guidance, so we're not going to suggest what we think they are for the year and you guys have views, I would say the model is such that up to around 30% RevPAR declines, the whole company RevPAR to EBITDA is a bit better than 1-to-1 and when it goes over 30%, it's a bit worse than 1-to-1 but not materially so. The base fee business throughout that continuum is better than 1-to-1 and what obviously hurts as the higher you go is a certain level of negative operating leverage because no matter how much you cut corporate costs, which we've done a lot of, there's a limit to how far you can go and keep the system going. And then in real estate, the lower the RevPAR is given that these are leased assets with some degree of fixed rent structure, that creates a tailwind. But again, that's a very small part of the business overall and has been. So, it keeps us even -- I've seen the industry sort of numbers I've seen from a bunch of folks I think including you are sort of minus 50 for the year, sort of funny to hear myself say that. But if you're doing this for 35 plus years, that's what the industry thinks. I…

I think you covered most of it. I think overall embedded in that cash burn -- those cash burn guidance is obviously an assumption of pretty extensive mitigation on our gross controllable expenses outside of G&A. And I'd say on an overall basis, we think we can over the course of the year mitigate about 60% of the gross controllable expenses, but that's all embedded in the cash burn assumption. I think you actually said the third quarter was going to be the worst, but we think the second quarter ….

Second quarter. I did say that?

Yes, second quarter. I've already skipped the quarter. Yes, second quarter recovery to a degree. Yes.

Our next question comes from Carlo Santarelli from Deutsche Bank. Please go ahead with your question.

Kevin, acknowledging that, that you mentioned kind of NUG, half of the 6 to 7 you were prior -- you were previously looking for, for this year. How much of that call it 300 basis points to 350 basis points of NUG erosion for this year relates to just delays in the pipeline that we will see come through presumably next year. And how much of that is just stuff that that maybe was early and has a lower likelihood at this point of getting finished? So, more or less even if you want to take a bigger picture approach, when you think about the opportunities for conversions and whatnot, looking out to ‘21, ‘22, ‘23 etcetera, are you still reasonably comfortable in kind of a mid single-digit net unit growth baseline for those years?

Yes, so here's what I would say, Carlo, and obviously a good question. Virtually all of the decline in our outlook for NUG for this year is due to delays related to COVID-19. Meaning, we do have in our guidance is always an embedded assumption for conversions. And I'll come back to that, I know that's part of your question. But the decline is really entirely related to delays because going into the year, even for a limited service hotel, if something is expected to open this year, it's going to be under construction this year, right? So, as of -- about a third of the hotels that we had under construction that we expected to open this year, went into some form of suspension over the last month or so as part of the crisis. About half of those that went under suspension are already back under construction, but they're going to be somewhat delayed, right, obviously, because they suspended. And about half of them, the other half we think will resume construction, largely every project we think will resume construction over the balance of year. There certainly will be onesies, twosies of things where a deal might not make sense. But generally, once the hotel starts construction, it opens, right? And so, what that means is almost all of it will push into next year. So as a result, we think that whatever this year ends up being will be the bottom and that will climb back from there. And yes, on a run rate basis, once we get back to normal, we're more than comfortable with a mid single-digit NUG growth rate. And we think that conversions, there will be some period of time where, obviously at the moment -- although we are working on some conversions as we speak, we're working on a bunch of them actually, but at the moment transaction activity is relatively limited. But in general, we think the crisis will probably create more opportunities than it hurts. And so, hopefully that covers.

Yes. That did, Kevin, thank you very much. And then if I could just one quick follow up. When you guys think about the financial crisis and the resumption, obviously it was different circumstances and whatnot, but speaking specifically to the Group elements of the business, when you think about the recovery in that era, on the Group side relative to now, and based on obviously the positive traction you guys have had with re-bookings and some sales progress on future periods, et cetera, what are you hearing or what do you view as being kind of the key differentiators between that Group recovery and getting kind of adequate pricing back on the books, et cetera in this period relative to that period?

Well, there are going to be a lot of similarities, Carlo, and then some differences as you might guess. I mean, I think that the economic fallout we'll see -- I mean, I think the economic fallout here is likely to be greater. And then you put on top of that a mobility issue and a health and hygiene issue, which is people not wanting to for a period of time until maybe there's a vaccine or therapeutics or we get past this, not wanting to congregate in large groups. So, I think being pragmatic about it, and just straight forward about it, I think Group always is the last to recover. In the 30 whatever years I've been doing this and going through these ups and downs, Group is the last recovers for no other reason that it's longer lead business, right? So, it's sort of logical. I think here it will be a little longer than normal because of those factors. I think the economic impact is going to be greater than most of what we've seen in my time, and we have to get -- people are going to have to sort of not only just come out of their foxholes, but ultimately get comfortable congregating again. All of that I think will happen. By the way, I think the business, when you get two or three years out, will look a lot more like it did 90 days ago than it looks right now. I think it will look very, very similar to it. But I think, it's going to take time and progression. It's going to depend on what happens with reopening. It's going to depend on what happens with how we fight COVID-19. It's going to depend on things that are unknowns today, which…

And our next question comes from Harry Curtis from Instinet. Please go ahead with your question.

Hi, Chris. Given your vast experience through prior recessions, let's go back to 2008 and ‘09 where there was a significant amount of handwringing about the impact of video conferencing on corporate travel. And it didn't really pan out. Do you think it pans out in the recovery and I know it's anybody's guess, but is it different this time do you think?

I mean, it's anybody's guess. I mean, certainly I've done more WebEx meetings and Zoom than I ever want to do in my life. I don't know about all of you. Maybe it's [indiscernible] -- I'm tired of it. The last thing I'm going to want to do when I get done with this is do another video conference and I'm by the way hearing that from a lot of people. So, the honest answer is, I don't know. I would say, on the margin, yes, there's going to be certain trip occasions where maybe because people have become more accustomed to this out of necessity to sort of be able to function that they'll think, well, I can do that. I don't have to do a trip. But I think much like the debates that I've been part of for the last 20 or 30 years is has evolved, I think it is an unstoppable force that people want to travel and see each other and meet to, to build relationships, whether that is personal or related to business. I don't think that will change. I don't think globalization is going to stop. I don't think the need for people to travel the world is going to stop. And I am highly confident we can all wake up in two or three years -- and you can tell me I was right or wrong, but I am highly confident and as I said, when you wake up at two or three years, the world's going to -- it's hard to see it now, the world is going to look awful a lot like it did 90 days ago in terms of customer behavior and demand patterns, and alike. There will be some differences. As I said, maybe on the…

And as a quick follow up, what are your peers in the airline industry telling you about the pace of their restart?

I would say I have been talking to a lot of my peers, but looking at the data, to be honest, I thought at least in the last couple weeks, and in these days it's like every week makes a difference. But based on the conversations I have had over the last couple -- over the last month or two and then just looking at the data, I think while we're not in some -- let's be clear we're not showing robust recovery trends right now, I said we are like teeny type in China we are, but the rest of the world, it's like teeny tiny step forward. I think the airlines are way behind. And if you just look at the passenger mile data, how many enplanements, they're just way behind and here's the thing. That's because people are real -- those that are willing to travel are only willing to go so far from home. So, as I think about our team, you didn't ask, but I'll answer because we're spending an immense amount of time on recovery. I spent -- I had all 500 of our commercial leaders around the world on a Zoom call yesterday and talking about how we're retooling our approach to go to market over the next 6, 12, whatever it takes, 18 months, and that is going to be really much more about local business and a lot more in the beginning about drive to business, right? So, if you if you think about it, I mean, sort of the natural human reaction is like I'm going -- I want to move, I want to get out, I'm starting to feel safe, I'm going to get out of my house, I'm going to go to my neighborhood, maybe I'll sort of…

Our next question comes from Shaun Kelley from Bank of America. Please go ahead with your question.

So, Chris, I wanted to switch the subject a little bit to kind of the franchisee side of the world here. I was just wondering if you'd give us a little bit more color on how some of those conversations are going with your franchise partners. If it's possible, and I appreciate it's both early stage and it may be hard to give these numbers, but any sort of sense of magnitude of either asks of how many of your franchisees are looking for any form of fee relief or what that dialogue is kind of looking like right now?

Sure. So this is something I commented on for a good reason in my prepared comments as we're spending as you would guess a huge amount of time with our franchise and broader ownership community because they are the engine of our growth and they are our most important partners in business. And times are difficult for everybody, but times are more difficult for them given the situation, which is no -- essentially no demand or very little demand yet, even with furloughs and all those things, they still have to pay debt service. They still have to pay for insurance and real estate taxes and utilities and all that kind of stuff. So, we've had a multi-tiered approach. I'd say, first and foremost, and I talked about it a little bit, a very little bit. We and I have been deeply involved in what's been going on with the Federal Government, both with the administration and on the hill to try and get liquidity relief for the industry, which is our ownership community, and frankly trying to get relief for our frontline team members that have been furloughed and not in any way relief for Hilton. We don't need it. We have not asked for it in any way, shape or form. But we have been pushing really hard with the administration, treasury. I've had lots of conversations with all the right people, including the President, Secretary Mnuchin throughout the PPP. Reality is, I could go on a long time, you don't want me to. PPP is a really good program and Congress and the administration should be given a lot of credit for moving that fast and getting that much money into the system that will help owners and small business folks. And ultimately employees keep -- stay…

And then maybe a little bit more of a specific one for Kevin, I guess. Kevin could you outline for us a little bit more on maybe just this kind of point in time working capital drag that we could potentially see as it relates to mismatching on reimbursed costs. Primarily I think it's the system fund but anything else that maybe investors should be aware of just given the situation we're in when the music stops and drops as much as it is, kind of where cash could be trapped for a period of time and then how you expect to recover that down the road?

Yes, sure. Obviously, it's a question that's on a lot of people's minds. So, it's a good one. I think to take a step back if you think about, there's really three buckets of receivables that we have, right? In hotels that we manage which is a minority of the system, right, roughly 70% of the system is franchised. But in hotels that we manage, the owners are responsible for the working capital and all the obligations and some of those ultimately are paid by us and then reimbursed by owners. So there's an opportunity there. Then you have license fees and then system charges as Chris mentioned in his buildup. So those are the three primary buckets. What I would say in terms of sizing it, first of all, it's really early, right? So if you think about the crisis really starting in March, you don't even build these things until the following month and then you give people 30 days to pay. And so, we're sort of just getting into it. So anything we would say there would be speculative. But that said, embedded -- I think it's probably obvious, but we're saying embedded in the discussion that we've given you both publicly and in some of Chris' commentary earlier is, a working capital of drag, whereas we've said if things stay the way they are, meaning circa 90% down in revenue and in this environment, we have at least 24 months of liquidity and you've got our cash balance. And so, you can sort of just do the math and realize that if things stay the way they are, there is an embedded cash drag in there that could be in the hundreds of millions of dollars ultimately. And so -- but of course, it depends on duration of the cycle, how it plays out? And ultimately, we believe as Chris just got done explaining that, the business is healthy. It's going to come back and when it comes back, we think we're going to get paid.

And our next question comes from Anthony Powell from Barclays. Please go ahead with your question.

So, longer term, how do you think this event changes the financing market for new hotel construction? Do you think lenders may require higher equity contributions or higher cash reserves? And could it be a headwind for construction and your net unit growth over the medium to longer term?

Yes. That's a good question, Anthony. And the reality is, we don't really know. But what I think is that, generally when you come out of these crises, lenders get appropriately more cautious. Although I would say that, even pre-COVID, we were pretty deep into an economic cycle. And so, you were starting to see caution. That said, over the long-term, I would say, for construction, most of the hotels that get built in our system are not actually even financed aggressively. When you're talking about like big full service hotels and luxury hotels, sometimes they use more leverage, but the lion's share of the hotels that get built in our system are not actually financed all that aggressively. You're talking about like 50% loan to cost. And I would say, personally I think that when the business recovers, the lending community will be there and as long as hotels are productive and profitable investments that they'll be able to be financed. And then I think the last thing I'd add is, you have to remember the amount of liquidity that is in the system. Pre-COVID you're talking about like tripling plus of the money supply from quantitative easing and then even more capital being injected into systems globally. There's going to be plenty of capital looking for productive yields. And I would say, for some period of time it will be a distressed environment and then as it always does, it will recover back to normal.

Got it. And then just one more. You mentioned that you’ve relaxed brand standards across the board which helped owners. How do you manage that with customer expectations as you start to see recovery? Hilton Honors has been known for a very consistent experience across the board, customers are going to be returning to see no breakfast buffets or whatnot. How do you manage that going forward?

It's a really good question. I think in the short-term, as we've been talking to customers and serving customers, everybody gets what's going on in the world. So, they're incredibly lenient. And so, we have not serving sadly, that many customers but those that we are -- who are mostly on the frontlines of recovery efforts have been fine with all of the standard changes in suspension of certain elements of the service. The work that I described that we're doing is sort of in the intermediate and long-term in making sure that we; one, create the most efficient operating model; and two, obviously, continue as implied to your question to drive premium market share. I mean, we're not -- we continue to have the premium market share in the industry, we have no plans to give that up. The trick is, as we transition from the intermediate to the longer term, what are the things that you basically put back into the standards and what do you take -- what do you leave out and/or change. And that's sort of I can't give you the answer and not because I don't want to, I don't have it yet. I mean, that's the work that we are doing right now. I suspect that what we will do is test a whole bunch of different things. I know we will, as well others during the intermediate timeframe when customers are very forgiving, and what we're going to do is iterate, with the objective of making sure that we are delivering premium product and service always to get our market share premium, but we want to drive efficiency. So, short-term is easy, intermediate term, I think will be a significant opportunity for testing when you're still in a relatively low demand environment where customers are still quite sort of accepting of things that are different. And then I think what we learn in that intermediate timeframe, we will sort of institute as our longer range standards and we're working through all of that. I think there'll be a whole bunch of things that we'll do that'll be more efficient long-term, and they're going to be some that we're going to have some standards that we are going to -- that our customers are going to want in a more normalized environment and we're going to reinstitute.

Our next question comes from Stephen Grambling from Goldman Sachs. Please go ahead with your question?

Two related follow ups. First, on the working capital drag you cited in the hundreds of millions of dollars potentially. You mentioned, it depends on how long this will last. So, on the cash burn and monthly liquidity you provided in the debt deal, I think you were assuming that this is -- or maybe you can elaborate on whether you're assuming this is a consistent drag each quarter or if that would potentially moderate even if things remain weak? And then second, can you talk a little bit more about what you're seeing from consumers as it relates to the loyalty program. You have some of the partnerships you have and how that may impact the model both during this period and then also how you ensure customer engagement to position yourself to use this asset and take share in eventual recovery?

Yes, so on the working capital, Stephen, I would say, look the assumptions that we gave publicly which again just to make sure everything -- everyone's clear as part of the bond deal, we said 18 to 24 months, that was pre-money for the bond deal and we ended up upsizing that deal. So, that's sort of how you get to the longer end of that range. I would say that. Again when the crisis is new, things are a little sharper. So, I would -- the way I'd characterize it is, the first month, second quarter of this year probably would be the worst on that front and then it would moderate from there. But again, the assumption....

The assumption to get to the 24 months -- or at least 24 months are basically you have little or no ….

Yes, you stay that way.

And from that perspective, again, I said it would be a little bit harsher at the beginning and then it would be relatively flat again in that under those assumptions, with any kind of recovery curve, it gets better from there.

And then on the loyalty program side just any color you can provide on that?

Yes. We have done a bunch of things if you look at it I'd say. First of all, not that we have a lot of business, but our Honors occupancy with the modest business we have has skyrocketed. So, it was already very high and now it's a lot higher because seemingly they are more willing to travel than I guess non-Honors members. But, what we've been focused on during this timeframe and you can see it in a lot of the things I talked about and that you would see publicly is, people aren't traveling that much. So, what can we do to build loyalty? We can give them flexibility, so we -- in the industry, we were the first ones, I believe. Certainly we were very early to come out and give very significant cancellation flexibility. We were definitely the first to come out and give status, allow people to remain -- keep their status. We were definitely the first to come out and say, we weren't going to -- we are not going to have points expire. We did a bunch of things to say to our Honors members, no fault of your own, you can't travel and we're not going to hold that against you. We've been communicating with them regularly. And so far, I'd say that's going well. The work that we're doing in the community, we're doing that because we want to be part of the solution, not part of the problem. So, our 1 million room nights with AMEX to first responders for free, our World Central Kitchen work, all of the other work that we're doing is about sort of continuing to build our brand, the Honors brand with consumers who are sitting around and can't move but are watching a lot…

Our next question comes from Bill Crow from Raymond James. Please go ahead with your question.

Based on your discussion, I think it was with Harry earlier. It sounds like your view is that the primary gating factor for travel is not the hotel, it’s the airplane -- airline. And if that's the case, is it fair to suggest that no matter how much they discount fares, it's probably not going to be as stimulative as it would have been in prior downturns. And then the second part of that is, does that also mean that the larger coastal gateway and markets come back far later than the rest of the country?

Well, to a degree yes, but let me let me reframe it a little bit. What I was saying which is right. To get back to full recovery, I think the airlines are a gating issue. People have to be comfortable to get on planes, planes have to be flying, there's a bunch of the business particularly in the big -- in the major markets that are -- that is flied to. And so to get to full recovery you have to have that. I absolutely believe you can get a significant amount of recovery before you get there. I think, Bill I wish I had all the answers. I think it's wrapped up in a whole bunch of different things that relate to what's going on with vaccines, therapeutics, human nature and just the comfort factor. My own belief is as you continue to get more testing, which is what I've been reinforcing with the White House and everybody that will listen and including antibody testing, that you are going to understand that because the data is pretty clear that while this is a terrible virus and it's affecting people's lives and it's killing people, which is horrific and every life is important, when you get down to it, it has infected a lot more people that we know and the mortality rate is much, much lower than people have thought and the real data suggests there's a very small part of the population that is really at risk. I think the more of the testing data that comes out even without a vaccine or a therapeutic, the more people are going -- particularly those that are not at risk, the more comfort that they are going to have. With a vaccine and/or therapeutics, I think it's game changing.…

I hope you're right. Chris, if I can just follow up with one other question that I'm not sure you can answer. But as you look out, you talked about two, three, four years out using this period for innovation and whatnot. Do you think the operating cost or cost per occupied room will be lower or higher as we start to stabilize this industry?

Lower, for sure. Lower. I mean just because all the things that we're working on, I can't tell you how much lower, because I don't have the answer yet. But clearly, I mean, there are a few things Bill as you might guess that, that are going to cost a little bit more like our CleanStay standard working with Lysol and Mayo. Yes, Lysol products may be a little more expensive than some of the products, that's relatively insignificant. Other things that we're thinking about in terms of garnering efficiencies vastly outweigh that. So I think when we wake up on a stabilized basis, operating costs are going to go down.

Our next question comes from Robin Farley from UBS. Please go ahead with your question.

Great. Thank you. Most of my questions have been asked, but I did want to follow up on the unit growth question and I appreciate how difficult it is to have visibility on this. You were talking about financing that there will be capital available. But I guess just thinking about from a perspective of owner appetite and when you look at historic downturns, anything under construction as you pointed out would open and the decline or like a slower rate of growth typically in supplies would usually come a year or two later because of those new projects. So, I wonder if you could talk about kind of owner appetite. It seems like given even what you're saying about how it could take a couple of years to get back to 2019 levels, that may be an owner or developer that hasn't put a shovel in the ground yet, would be rethinking anything that's not under construction. And then, we would see something much lower than mid single-digit growth in terms of pipeline kind of a year or so out from now?

Yes. I think, listen, it's a good point Robin. And certainly that is generally how it worked last time, although not really. I mean, I think the first year after the great financial crisis was the low point and then it sort of started building from there. There was another year in 2012 where we were sort of stayed low/went down a touch because of what you're describing. The difference this time is, it's delayed, right? I mean it's a different crisis and you've just got construction that's being suspended. Things are going to take longer and it's going to push. And then the other thing is you've had -- this is coming at the end of the cycle. So, you just had -- you've had a bunch of deliveries and their existing hotels and there's going to be a little bit less demand for a while and we think more demand for our engine. So, we do think we'll drive a higher level of conversions going forward. And thus, we think a growing trajectory from here. We'll see what happens, but that's what we think.

Okay. Great. That's helpful. And then one other sort of point on the same topic is, we've looked at all the data historically for hotel removals, right, hotels that closed and never reopened in previous downturns. And interestingly, that doesn't go up a lot, even in '09 that wasn't really that much above average. I would assume that you don't expect removals to be at a higher rate this year is with this issue as well or I mean, but tell me if that's not?

No, that's accurate. That's accurate. We think removals will be very normal.

And our next question comes from Thomas Allen from Morgan Stanley. Please go ahead with your question.

Just in terms of buybacks, just wanted to -- so, in the prepared remarks in the press release that said, Hilton formally suspend your buyback program, the program remains authorized and you may resume share purchases in the future at any time. How do you think about the buyback program, how do you think about the right leverage levels, any thought there would be helpful? Thank you.

Yes, a really good question. And I'd say a little bit early given where we are to have sort of be dispositive about it. But I don't think long-term we have a -- in the short-term we're not going to be doing dividends and buybacks. We've made that pretty clear. As we get back to recovery and more normalized environment, I don't think our capital allocation strategy has really changed. One might argue even though I think from a liquidity point of view, we find ourselves in a really good position and we did the right things not just post-crisis, but pre-crisis in terms of having credit available, maturity schedule that was very attractive, those weren't lucky. I mean we knew we were at the end of a business cycle, and those are things that we planned out to make sure that we had all the financial flexibility we would need now we know we would have COVID-19, of course not. But we knew we're at the end of the business cycle, and we wanted to have being really set up well for it, and so we are. And so I'd say the this should hopefully be the greatest test of all time for a balance sheet. It's hard to believe another one can be worse given what's happened and I think we feel like we're in a really good position to sort of pass that test and have the liquidity and the credit profile to get through it. So, I don't think when we get back to a normalized environment, we have a too much of a different view. What I can say is you could argue about would you be a little bit lower leverage than you might have been? I'm sure we will debate that and this isn't the time to conclude that. But more broadly, we will definitely resume at some point when we get to a normalized environment. I believe our intention would be to resume sort of where we left off in terms of our capital allocation strategy.

Okay. I think that's it. Well, it's an interesting call and interesting times. We appreciate everybody's time. I know, we've been talking with lots of people sort of as this has been going on obviously, happy to continue doing that as we work our way through this. As we sad in our comments second quarter will not be pretty, but hopefully third quarter and fourth will be back on the road to recovery. So, everybody stay safe, stay well and we're going to keep working awfully hard to do the right things here and we'll look forward to catching up with you and updating you on where we are after the second quarter.

Ladies and gentlemen, with that, we will conclude today's conference. We do thank you for joining. You may now disconnect your lines.