Hilton Worldwide Holdings Inc. (HLT) Q3 2026 Earnings Report, Transcript and Summary

Good morning and welcome to the Hilton Q3 2026 Earnings Conference Call. All participants will be in a listen-only mode. Star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then 1, on your touch tone phone. And to withdraw your question, please press Star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruehr, Vice President Corporate Finance and investor Relations. You may begin.

Thank you, Chuck. Welcome to Hilton's third quarter 2026 earnings call. Before we begin, we would like to remind you that our discussion this morning will include forward-looking. 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 update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our most recently filed Form 10-K. In addition, we will refer to certain non GAAP financial measures on this call. You can find reconciliations of non 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, Christopher J. Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment and the company's outlook. Kevin J. Jacobs, our Executive Vice President and Chief Financial Officer will then review our third quarter results and discuss our expectations for the fourth quarter and full year. Following their remarks, we will be happy to take your questions. With that, I am pleased to turn the call over to Chris.

Thank you, Charlie, and good morning, everyone. We are pleased to report a strong third quarter. With top and bottom line results exceeding our expectations. Strength in travel demand supported by favorable macro trends is driving RevPAR outperformance, a trend we expect to continue into 2027 We continue to lead the industry with net unit growth at scale with the third quarter being our largest quarter of organic openings in our history with very strong momentum heading into the fourth quarter. Our award winning brands, strong commercial engines and powerful partnerships continue to further increase industry leading market share while our culture of innovation creates additional growth opportunities. Together, these drivers support meaningful free cash flow generation and shareholder returns, and we remain on track to return $3.5 billion to shareholders for the full year. For the third quarter, system wide RevPAR increased 5.8% year over year with rate and occupancy growth both ahead of expectations RevPAR outperformance reflected strength in business and group demand continued momentum following the World Cup and favorable calendar and holiday shifts. Globally, business transient RevPAR was up 83.3% driven by outperformance in The US, with continued strength in manufacturing, technology and workforce lodging, that all grew more than 10%. Leisure transient RevPAR was up 1.6% as demand normalized following a strong summer travel period. Group RevPAR was up 8.2% driven by sequentially stronger demand from the second quarter continued rate gains and favorable demand from social events and company meetings. For the full year, we now expect RevPAR growth of 4% to 4.5% as business transient momentum carries into the fourth quarter particularly in The U. S. Where supportive policy increased private sector investment, including AI, and ongoing public infrastructure spending are supporting demand The US, we are seeing middle class real wage growth despite higher inflation contributing to broad based strength we have described as a C shaped economy. We believe we are uniquely positioned to benefit from this demand given our exposure to business travel, especially small and medium sized companies. Looking beyond 2026, we remain optimistic about the strengthening demand backdrop particularly given the close correlation between hotel demand in our segments and non residential fixed investment or NRFI. NRFI growth for the past 6 and soon to be 7 quarters has been growing nearly 2x faster than the average rate over the prior 20 years, providing an unusually strong and durable macroeconomic for our business. We expect continued growth in GDP and NFI together with historically low industry supply growth to support strong RevPAR growth over the next several years. Turning to development, we had another robust quarter of openings adding more than 180 hotels and over 27 thousand rooms to our system, our largest quarter ever for rooms added on an organic basis. Our luxury and lifestyle portfolios continue to grow the most quickly across categories, with trailing 12-month net unit growth rates of 11%, 20%, respectively. Respectively. For the quarter, and lifestyle openings comprised approximately 30% of total openings, and included Conrad openings in Saudi Arabia and Japan. and the debut of Canopy in Thailand, marking our 50th Canopy globally. Our collection brands continue to drive growth with the opening of nearly 20 Tapestry and Curio hotels across nearly all regions, Additionally, we surpassed 3 thousand LXR rooms with a brand's debut in India, extending LXR's presence to this fast growing region. In the third quarter, we delivered conversion openings across 12 of our 28 brands, including the debut of DoubleTree in Singapore, the debut of Spark in Italy, and the conversion of 10 Spark by Hilton Yotel properties across 4 countries. Over the last 12 months, we have converted hotels from almost 60 different brands into our system. Because our brands drive RevPAR index premiums, we believe there is significant opportunity to continue growing through conversions, with Europe being a strong example of that opportunity. Independent non branded hotels account for approximately 60% of the region's current supply, while Hilton represents just 2% of the region's supply. Across the system, conversions represented 37% of our openings this quarter, a trend we expect to continue as we execute against this opportunity. In the quarter, we signed approximately 30 thousand rooms and are on pace to deliver mid single digit growth in signings for the full year driven by strong signings in EMEA only 9 months into the year. We increased our development pipeline to more than 543 thousand rooms, growing both year over year and sequentially versus the second quarter with expansion in strategic markets and across chain scales. The pipeline now includes approximately 250 unique brand country combinations. In the quarter, we announced the signings of debuts of Outset Collection in U.S. and Motto in Japan, We continue to expand Tempo's global footprint with new signings in Switzerland, Thailand, Saudi Arabia, and additional U. S. Markets. We also announced the signing of our first Signia Hilton on the Florida Gulf Coast increasing the brand's pipeline to over 4 thousand rooms and further accelerating its momentum. We are also expanding our presence in the Nordic where we recently announced the signing of a new Hilton in Copenhagen the first hotel under a multiyear development agreement with Scandic Hotels Group, the region's largest hotel operator. The agreement creates new opportunities to grow in Sweden, Norway, Denmark and Finland, high value markets that have historically been very difficult to enter while introducing more travelers to our brands and Hilton Honors. System wide new development construction starts continue to show incredible momentum up over 40% year over year in the quarter with all regions independently up more than 20%. Nearly half of our pipeline is under construction and we continue to have more rooms under construction than any other hotel company accounting for nearly 20% of industry share and 3.5x our share of existing supply. Our disciplined development strategy continues to strengthen Hilton's competitive positions as owners choose to join the system to benefit from the RevPAR premiums our brands deliver and the value of our commercial platform. We expect fourth quarter net unit additions to be above third quarter delivering around the midpoint of our 6% to 7% range for 2026 and continuing to grow 6% to 7% annually over the next several years. Globally, Hilton is still less than 6% of supply providing a long runway for continued growth. As technology continues to reshape every part of our lives, and business in unprecedented ways, we believe our ability to connect the physical and digital elements of hospitality will create meaningful opportunities to harness the power of our proprietary technology platform across our business. In the years to come, we believe technology will become an even greater strategic advantage for Hilton, empowering our team members strengthening performance for our owners and making it easier for guests to experience the very best of Hilton. As we continue to further differentiate Hilton's technology from the competition, we recently announced the appointment of Savneet Singh as Chief Technology Officer. He brings more than 2 decades of experience building and scaling consumer logistics and enterprise platforms for some of the world's most recognized brands. We are excited for Jeff to help harness our industry leading technology platform and to add to our existing talented leadership team. Keeping with this people led tech powered strategy last week, we announced that our listing exchange will move to NASDAQ providing a platform aligned with our innovation and growth ambitions and positioning Hilton alongside some of the world's most innovative companies. As we approach the end of 2020, we are pleased to report that we remain on track to deliver against the ranges we laid out for our key metrics at our 2020 Investor Day. Looking ahead, we are more confident than ever in our ability to drive algorithm growth over the next several years. This will be driven by continued net unit growth new brand growth, RevPAR index gains and incremental non RevPAR business opportunities. Making all of this possible is our family of Hilton team members who continue to spread the light and warmth of hospitality in remarkable ways. Their dedication continues to earn global recognition with Hilton named the number 1 best workplace by Great Place to Work in 21 countries this year more than ever before in addition to recognition as the number 1 best workplace in several regions, including Latin America, Asia and Europe. In fact, just this week, we were named #1 on Great Place to Work's inaugural list of Best Workplace in the Hotels and Resorts in the U.S. Another meaningful recognition of the culture our team members create every day across all of our hotels. We remain highly optimistic about our business and the opportunities ahead globally in the years to come. Our strong leadership team technology orientation and brand led network driven strategy gives us confidence in our ability to continue meeting the evolving needs of travelers and delivering strong returns to owners and shareholders. Now I will turn the call over to Kevin for a few more details on our results for the quarter. And our outlook going forward.

Thanks, Chris, and good morning, everyone. During the quarter, system wide RevPAR increased 5.8% versus the prior year on a comparable and currency neutral basis. Growth was driven by rate and occupancy both being ahead of expectations. Strength in business and group demand, continued momentum following the World Cup and favorable calendar and holiday shifts. Adjusted EBITDA was $1.058 billion in the third quarter, up 8.4% year-over year and exceeding the high end of our guidance range. Growth was affected by significant renovations in the ownership portfolio, continued conflict in The Middle East, and performance of timeshare license fees and timing of other license fees. Management and franchise fees grew 9.5% year over year. For the fourth quarter, diluted earnings per share adjusted for special items was $2.45. Turning to our regional performance, third quarter comparable U. S. RevPAR increased 7% driven by a strong World Cup strong business and group demand that continued throughout the quarter. For full year 2026, we expect U. S. RevPAR growth to be in the mid single digits. In The Americas outside The U. S, third quarter RevPAR 6.3% year over year driven by strong group and business travel demand. Performance was led by Canada, Brazil and Argentina, all driven by rate strength. For full year 2026, we expect RevPAR growth to be in the mid single digits. In Europe, RevPAR grew 6.5% year over year led by Continental Europe with strong performance in the Business and Group segments. Turkey, Eastern Europe and Resort markets also delivered strong performance. For full year 2026, we expect RevPAR growth to be in the mid single digits. In the Middle East and Africa region, RevPAR declined 5.6% year-over-year as conflict related pressures in the region intensified during the quarter. We now expect full year RevPAR in the region to decline by a low double digit percentage as the conflict continues to affect the fourth quarter high season and we face challenging year over year comparisons. In the Asia Pacific region, third quarter RevPAR was up 7.3% in APAC ex China, led by Southeast Asia, Japan and Korea. Business and Group segments drove the strength in the region's performance. RevPAR in China declined 5.4% in the quarter driven by a decline across all segments as consumer sentiment weighed on leisure and government restraints on business travel spilled into group demand. For full year 2026, we expect RevPAR growth in Asia Pacific to be in the low single digits with RevPAR down low single digits in China. Turning to development. As Christian mentioned, for the quarter, we saw net unit growth of 6.0%. With the opening of 27 thousand rooms in the quarter, the highest quarter of organic openings in our history. Even in a record quarter of openings, our pipeline grew quarter over quarter and year over year, has now reached a record 543 thousand rooms. We continue to have more rooms under construction than any other hotel company. With approximately 1 in every 5 hotel rooms under construction globally, slated to join the Hilton portfolio. We expect fourth quarter net unit additions to be above the third quarter ending the year around the midpoint of our 6% to 7% range for 2026. We also expect to grow 6% to 7% annually over the next several years. Moving to guidance. For the fourth quarter, we expect system wide RevPAR growth to be 3% to 3.5%. We expect adjusted EBITDA to be between $1.05 million and 1 point sorry, dollars $1.047 billion and $1.067 billion and diluted EPS adjusted for special items to be between $2.32 and $2.38 both displaying strong growth despite the effects of ongoing conflict in The Middle East, significant renovations in the ownership portfolio and lower expectations for time share license fees. For the full year, we expect RevPAR growth between 4-4.5% driven by continued business strength, especially in The U. S. We expect adjusted EBITDA of between $4.06 billion and $4.08 billion and diluted EPS adjusted for special items of between $9.07 and $9.13 Please note that our guidance ranges do not incorporate future share repurchases. Moving on to capital return. We paid a cash dividend of $0.15 per share during the third quarter for a total of $34 million Our Board also authorized a quarterly dividend of $0.15 per share for the fourth quarter. For 2026, we expect to return approximately $3.5 billion to shareholders in the form of buybacks and dividends. Further details on our third quarter results can be found in the earnings release we issued earlier this morning. This completes our prepared remarks. We would now like to open the line for any questions you may have. We would like to speak with as many of you as possible, so we ask that you limit yourself to 1 question. Chuck, can we have our first question, please?

Yes, sir. Today's first question will come from Daniel Politzer with JPMorgan. Please go ahead.

Hey, good morning, everyone. Thanks for the question. Chris, I think that it would be ideal to check on the demand environment and how you are thinking about updated thoughts on 2027 It feels like a lot has changed. From a lot of people on this call and their vantage point, but maybe you could opine on how you are thinking about 2027, the demand environment and walk through the different buckets as you see across your customer base? Thanks.

Yeah. Happy to do it. Obviously, 1 of the most important questions that we could answer. I would say if you lift up I mean you heard everything that Kevin and I said about the third quarter which was strong in terms of the fundamentals, demand growing at a great pace, and supply continuing to be, in our largest market in The U. S. Quite muted, is delivering a great result as we go into the fourth quarter, the RevPAR guidance is down, but that just is to do with elections and primarily to do with calendar shifts that benefit Q3 and hurt Q4. If you look at underneath all that are getting better. As I said in this very spot every Monday morning with my executive committee, everybody reporting from around the world, pretty much every week that we are talking, the demand patterns we feel better about. And I would say really continuing to be driven by business transient, where we are seeing really strong growth both in large and corporate and SMBs. Very good strength as you saw in the quarter in the group side and continued strength in leisure transient. And so on the last call, talked about, like, there is been a lot of noise this year with World Cup and year-over-year sort of comps. And so what I tried to do is sort of lift up and say, like, if you cleanse it all, you know, what we are basically on a run rate basis seeing was in the second half of the year, I thought like 2.5%, 2%, 2.5 That obviously. Well, maybe not obviously. We feel a lot better about it today. If you look at the run rate that we see in second half of the year now versus the quarter ago, just given basic strength in the business, particularly led by The US, I think the US run rate is more like 4% and the global run rate is like 3.5%. So a lot a lot better, you know, and I think it is. As a result of all the things I talked about, you know, like the basic macro setup is quite good. So the way and that is the basis for our 4% to 4.5 for this year. As I think about next year, I mean, we are in the early stages of budgets. We have been talking. We obviously see the current trends. So you know, I will give you a directional sense of it. I think the way to think about it is on a global basis, if the run rate is about 3.5%, you have things that are going back and forth The benefits I think are clearly we see The U. S. Continuing to pick up. I would hope and think that Mexico and The Middle East, which have been challenged this year, are going to normalize to a large degree with the case of Mexico, and I am hopeful to a large degree in The Middle East. We have seen stabilization in China, and I do think there is an opportunity to see some not huge improvements, but some basic improvement from where we are. So I think all of those things are sort of helping. And then you have the mathematical World Cup thing that you got to deal with just basically quarter over quarter. You know, and largely in the second quarter. But to a degree in the third quarter. When we do the math and we lift up and look at all of those things, the good things and then the headwinds on comparability I would say next year we feel pretty darn good that global RevPAR numbers are going to be in the 3% to 4% range. that is great.

Thanks so much.

The next question will come from Elizabeth Dove with Goldman Sachs. Please go ahead.

Hey, good morning. Thanks for taking the question. I just wanted to ask on, I guess, flow through and the algo, particularly as it looks to, I think you called out some IMS impacts in HGB. I am wondering if you could quantify that. And then I suppose as we look to next year, this year, I think you have had some headwinds, maybe on my math, million or so from Middle East, owned and leased renovations, HGV. And then as you look to next year, I think you could get, hopefully, as you said, a chunk of these back And so I am wondering how you think about that and whether that kind of sets up for more of an above algo year.

Yeah. I mean, you know, I made the comment in my prepared comments that we feel really good about delivering algo in the next few years. And I would not say that lightly. We generally deliver on what we are going to deliver on. I think you embedded in the question, I think you captured sort of what is going on sort of in the in the beat and the flow through to the raise, and it really is as simple as what we put in the press release and what Kevin said in his comments. You have the Middle East is a little more beaten up. than we thought, and license fees in the timeshare segment are not performing at the level that we had expected. And pretty much the difference If you look at the flow through, the 10 would have been 30. it is pretty equal split between those 2 things. I think if you lift up, which again, I like to do when you sort of talked about a $60 million number and the reason we feel confident in delivering algorithm is that it is actually at a minimum probably 60. This year, we have some unique not structural, just sort of onetime related events that are impeding algorithm growth. The. Those are The Middle East and Mexico, Those are ultimately ownership, which you talked about and HGV. If you add those 3 things together, and I will come back to each of those, sort of talked about it. it is probably $60 million to $70 million maybe even a little bit more. And so the way I think about it is obviously, those things are not producing this year. So I cannot add them back in. But in my own mind, they are unique things that are not, like, structural impediments to the business. they are just happening. We cannot control. Certain world events. And so I look at it as algorithms alive and well. And as you think about the 4 years, the reason we feel comfortable is the business is performing well, unit growth we feel really, really good about. The basic fundamentals on same-store growth, we feel really good about. And as I said, I am pretty confident Mexico is going to normalize. I think The Middle East will be a heck of a lot better next year than this year. I mean, that is my view. Ownership will take a couple of years, but the reality is ownership's probably in and of itself $20 million-plus drag this year. When you look forward a few years, these are really, really good decisions. We are going to more than double the EBITDA comp contribution from those same assets because we are completely repositioning them. And we feel really good about obviously in a constant dialogue with HGV. They have some you know, integration that they have been dealing with the 2 big acquisitions. And some comparability year over year issues. But we feel quite good about their ability to be sort of on algorithm growth. As we think about the world going forward. So again, these are that is why we feel good about next year. it is why I am giving you sort of a we are we are effectively giving you a range in same store and unit growth. And bottom line, you know, without being specific in the sense that we believe that we will be able to deliver algorithm growth. And some of it will be because the things are normalizing. The only 1 that I think takes a little bit more time. It will certainly be better year, but to get to the doubling of prior EBITDA will take 2 or 3 years on the ownership side. Thank you.

The next question will come from Shaun Kelley with Bank of America. Please go ahead.

Hi, good morning everyone and thanks for taking my question. Chris, maybe to switch gears, multiple comments in there. About the development environment and the NUG side and obviously the additions are a huge accomplishment in this environment. So can we just talk a little bit more about what is underlying the confidence there? And maybe just put on the hat from the developer perspective a little bit. We are in a world where I am starting to get that question again about higher interest rates potentially weighing on development, but the flip side is now we have got this really strong RevPAR environment, which should effectively attract, some new, encouragement in the space. So could you kind of put all that together for us, would appreciate your thoughts. Thanks.

Yeah. I mean, I. there is a lot of swirl out there, obviously, Shaun, on the development side and competitors. Have said different things. All I can tell you is what we are seeing. And what we are seeing is real. And we gave you a few of the data points, strong growth. Our brands on the conversion side continue to perform really, really well. We are taking a disproportionate share within the industry of opportunities there. It will represent circa 40% of the growth this year. We feel like we have a lot of momentum going into next year. And new construction starts, gave you some of the quarterly data. But for the full year, we think new construction starts will be up well over 20% in The U. S. And well over in the sort of mid to high teens globally. Yes, interest rates are high. Actually, the last week, interest rates have come down a little bit, but interest rates are higher. My own bet would be a year from now that the tenure will be lower. I said that a few weeks ago, I think, on stage with you, and so far, it is moving a little bit the right direction. But in any event, what is I think underpinning it is implied in the question you asked, which is the performance is getting so much better. I mean, you are talking about a year, think about like last year in The U. S. Like system in The U. S. Was like down 1.5% or 2% you know, this year, you are gonna have a, you know, 600- or 700-basis point flip around, margins are growing, and yeah, interest rates are higher, cost to build, is higher, but it has not, you know, that has not been going up at a crazy rate. People are still able to get things financed, probably not as much as they would like, but they are obviously getting financed if our starts are up. And, you know, this is self serving, but true, we are more financeable. So in a world where not much is getting done, we just continue to take, I think, more and more share of lesser amount that is getting done. And so it is not easy. My development team, everybody listens to these calls, they are probably saying why does he make our job seem so easy. Not. They are out, you know, in the trenches fighting and clawing and doing the great work that our development teams do. But we feel good about our where we are going to end up this year. We feel good about our to 7 for the next few years. I mean, you know, like I mean, you know, 1 stat, which you know, which I love is that. And when we talked about it, it is like, we are 5.6% of the industry in the world. We are 20% of the rooms under construction. Like to have 6% or 7% growth over the next 15 or 20 years you really only need to get like up high single-digit, 10% when you do it mathematically of what is of what is available. it is not it is not like it is crazy. You know, like, I know, you know, like, 6 to 7, how can you keep doing it? it is not. it is a big world. We have got 28 brands. On average, we have 4 brands in all our major markets out of our 28. And we are and in most markets, we are a very, very low, much lower than the 5.6 in a lot of the major markets around the world. So Honestly, I have never been more excited about our growth opportunities than I am today. I think we have the right brands. We are doing a few more things and we are deploying those in the right markets. We continue to build extraordinary relationships with owners around the world, including importantly our owner community here in The US. And it is our job, and we are going to do it. Thank you.

The next question will come from Brandt Montour with Barclays. Please go ahead.

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

Listen, I am very excited by what I see vis a vis these new and nascent, and a whole bunch of other activities we are in the middle of. I think it is really, I have said. I will say this probably for a long time. I think we are in the very early days of this opportunity with AI, particularly in the distribution space. And I love what I see. You should assume we are working with each and every 1 of them. You can find our products you know, pretty much everywhere. Even in the newer, plays where we are deep in the middle of that night. And I think in the end, what is really important to us is that we can continue to build great and direct relationships with our customers And I think all of these tools, while it is early and it is insignificant, to be honest, right now in the industry in terms of what you see in terms of flow of traffic and dollars of bookings and all that. This is the future. Just like the Internet was the future. I mean, when you know, humans like things to be done fast and easy, particularly when they are done well. And all of these products, while they are early and they are developing, I suspect there are going to be many more of them. They are going to be fast. They are going to be easy. They are going to be very effective, and humans like that, and they are going to trend to that. What I like about our setup is we have a really big platform. We believe we have the best products in the industry. We drive the highest market share, which I think is pretty good evidence that customers really like what we do. And we are a very large. You know, we use The US as a surrogate. Like, we are we think we are about 25% of the quality inventory in The United States Of America, which we think gives us an extraordinary seat at the table as all of the ones that you are talking about and I am talking about and probably 20 others come into the market. And so we are there early with everybody working with them to make sure that we are present. We are. We have extraordinary teams that are working on content strategies And last but not least, I do believe our tech stack is a huge competitive advantage. We have modernized our tech stack ahead of most, if not all, And I consistently hear from many of our counterparties that it is a lot easier for us to create direct connectivity. that is why we are able to do it and do it faster. So I think in the end, this will be we will continue to have a big relationship with our OTA partners for a certain segment of our business. I do not think that is going away anytime soon. But I do think these tools are ultimately going to lead to a path of our being able to drive much more direct business at lower cost structures. Which benefit us but benefit our owner community, which is the most important element of it. Perfect. Thanks, Chris.

Your next question will come from Steven Pizzella with Deutsche Bank. Please go ahead.

Hey, good morning and thank you for taking our question. Chris, recognizing it is only 1 week of data but we saw select service RevPAR outperform luxury last week. Are you seeing any early signs that the C-shaped recovery is beginning to broaden? And can you remind us of Hilton's exposure and potential benefit from a recovery in select service?

Yeah. I mean, I have talked about it a lot publicly. and for a long time. I think I was talking about it during the summer of 2020, to be honest. Not that it was happening, but that it was going to happen simply because, again, I like to lift up. If you lift up and you looked at what was coming from a macro point of view, limited supply additions and huge growth rates in NFI as a result of the massive investment cycle of AI, AI infrastructure, core infrastructure, all these things. It seemed undeniable to me just rationally that would not happen. And so okay, it is happening. And so we have been seeing, you know, the lower and the mid, the mid section of the industry continue to pick up. Luxury has done well too. Slightly less well on a growth rate as it had been, but still quite strong. And so thus, the C. it is the mid the mid and the bottom particularly the mid continues to come up really driven by business transient, which has just been on a tear. I mean, interestingly, business transient when you really dig deep into the segmentation is approaching pre COVID levels, which I know a lot of people said, oh, it never will. People are not going to travel for business. Well, we said they would and they are and it is not quite there, but I my guess is in the next couple of quarters you are going to see it you are going to see it back to you are going to see segmentation generally back. So I think you will continue to see this, but because like the whole thing on NRFI is and why it is been such a high correlation is when people are investing, people have to run around the country and do it. And that is generally the middle class of our country that is making all of that half. They are building the data centers, the energy complex, the bridges, the highways, you know, they are they are the ones that are making all this happen. And so as long as you are seeing NFI at these elevated levels, which I think my own view is pretty unstoppable in the next at least, couple of years. You are going to see this C-shaped thing to keep going. I mean, I think it is not, you know, because of politics at the moment being toxic with a midterm next Tuesday, that is why I put the comment. I mean, we are actually I it would be much higher if you did not have the energy price increases related to the War In The Middle East. But even with it, you have real wage growth in the middle class right now. Imagine what it would be if we if The Middle East sort of gets resolved at some level. But with or without that, you have enough investment, enough activity by the trillions in the. In this country that I think you are going to continue to see an acceleration in those trends. Thank you.

The next will come from Stephen Grambling with Morgan Stanley. Please go ahead.

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

Yeah. I would say broadly, and I have talked about this on a number of prior calls, it is been a rough extended period of time for owners. I mean there is just no 2 ways to. Other way to say it. You had pretty anemic growth and reasonably high expense growth pre COVID. COVID you know, was obviously terrible for everybody, but particularly the owners given the operating costs that they bear. You came out of COVID. You had the sugar high where it is like, you know, the government pushed out trillions of dollars, and everybody. nobody had to go to work. So it felt pretty good. And then inflation spikes demand you know, is sort of, you know, tepid and you know, you had a couple. 2 or 3 years where you were basically going backwards. Off of you know, COVID, the back of pre COVID that was not, you know, particularly you know, rosy. And so it is been a. You know, listen. No. I would say there is no other way of saying it. it is been a it is been a tough run. Having said that, my conversations with our franchise community, and we had our big owners conference this summer in Vegas. So we had thousands of them, and I am talking to owners all the time. They are quite constructive and generally I think they appreciate everything that we are doing. I mean, 1, you have a backdrop, which is getting a lot better. Right? I get. we are pretty good index for the country. So when we are starting to produce these kinds of numbers and you are seeing really reasonable margin growth, I think the owner community, like anybody, when things go. Are going better, you know, I think people are happy. I think the things that we did with what we call rise in the reduction in system fees that we launched in June 2025. We started working on that in 2024. I think it is been really well received. We reduced loyalty costs for everybody by 30 bps We gave 50 bps to those that got through customer satisfaction quality gate. About half the system is getting through it. And honestly, I have heard nothing but really, really good feedback. I have not heard you know. Yeah. I mean, by the way, people that are not getting it want it, but that is the behavior set we want. Every hotel I walk into, if they are not in it, they are telling me what they are going to do to get it. So it is it is creating the right sort of outcomes, I think, for everybody. We are not done there. We have what we have, you know, we have told our owners we are working on RISE 2.0. I am not going to get. get into it in detail, but probably in the first quarter of next year, we will be looking again at the system side loyalty to figure out alright, where can we buy use. Utilization of tech, AI, process change, the benefits of leveraging our scale, where do we think there are some ways that we can be even more efficient that can translate in a positive way to our owners. So I would expect that we will be out in the first quarter with that. And we will never stop, meaning our job, like our of course, the customers that sleep in the hotels are critically important, but our owners are equally critically important. We. There is no Hilton without our owners. And there is no growth, and there is no nug unless they are doing well, feeling good, and making the kind of profits that they. That are commensurate with what they need to continue to invest in the hotel and to continue to invest potentially new hotels and grow their business. So I think the summary of that is in my conversations, with our broad owner community, they are quite constructive. And people are starting to feel a lot better as you would think and, you know, hope they would as a result of sort of the macro conditions. that we see as a backdrop. Great color. Thank you.

The next question will come from Smedes Rose with Citi. Please go ahead.

I appreciate your commentary around how 2027 could shape up from a RevPAR perspective. I was wondering maybe if you could talk specifically about what you are seeing in the U.S. On the group side, either with larger corporate bookings or some of the strength in smaller enterprises that you talked about before? It continues to be quite strong.

If you look at the big group made its total sales At this point, we are up in the mid single digits going into next year or something. Something like that. So strong. Again, if you were to. I did. Somebody asked. I did not really do this but, you know, if you were to rank you know, performance by segment to get to that 3% to 4% next year. I think it would be business transient group and leisure, all of which we believe will be positive, but in that order. And we think we have got quite a good backdrop on the group side. I mean, demand has generally been very good. And if you think about it, with supply having been really low for a long time, there is just not a lot of group hotels that have been built in The United States Of America. And that is the that is the practical truth. High demand, not a lot of supply, generally, lots of economics are alive and well. And so we feel quite good about it. But I do think business transient will lead the way again just because you start you are seeing a real surge there, and you are going to get the benefit, we think, for a full year next year where, you know, this year, you are really sort of getting the real growth there has been kind of a half a year phenomenon. Great. Thank you. Appreciate that.

The next question will come from David Katz with Jefferies. Please go ahead.

Hi, good morning. Thanks for taking my question. From your public side advertising and reading through the release and obviously our conversations, there seems to be some building momentum around luxury. And I wanted, 1, for you to just talk about that strategy a little bit, and 2, conventional thinking is that sometimes requires increased investment. And just some color to that side of it also. And it is a topic I have been asking about for a long time and, you know, needed for, you know, completing Hilton's portfolio, etcetera. Thanks.

Yeah. I mean, it is a risk of filibuster because it could take a while. I will try to be succinct. Yeah. Luxury and lifestyle, we have been talking about for lots of years. You are right, David, you and others have asked about it. And we have continued to invest and spend a lot of energy on it. For all the right reasons. We think it does help create a halo effect for Honors generally. And we feel like we have made really. You heard some of the data on sort of recent performance. We think we have made really good performance. I mean, Waldorf is flying and doing extraordinarily well. We are gonna open 5 or 6 of the best hotels in the world in the next 12, you know, 15 months within Waldorf, but Conrad equally, LXR picking up a lot of men and then all our lifestyle brands with more to come. I mean, we have another which I have mentioned publicly, in the works right now that I would hope we would get out probably early next year. You know, in the lifestyle space. So that, you know, that has been it is not a new focus. it is been a continued focus. I think we are just you know, picking up momentum. I mean, 1 of the, you know, interesting data points is this year, between upper upscale and above, 45% of our deliveries this year will be represented in those in those categories. So it, you know, it is it is working, and we are. You know, we could certainly this year and I think generally are have tilted that way. In terms of, like, the cost and key money, we did you know, incrementally move our key money up. Just to be clear on that. I do not think, you know, I think key money has obviously always been more oriented to the high end stuff, and key money generally has gone up a smidgen. I mean, if I look at it, like, over the last 5 or 6 years, the percentage where we have any key money in our rooms under construction has moved 100 or 200 basis points, still unbelievably low. it is gone from 9-10 to 11 But the bigger deals are with. So it is very low. The bigger deals are where it gets spent. This year, with CapEx, we have a bunch of things going on. We have the ownership stuff, which we have talked about, which is going to pay, we think, huge dividends, and there is a little bit more waiting We just are finishing as we sit here, a reboot of our world headquarters And so there is a little bit you know, more spending that goes on there. And a bit and a bit of a key money, and if you read the recent press releases, you can see oriented towards a couple of specific deals. If I look at where I think we will end up relative to you know, the averages, I do not think it will be a whole lot different than what we have spent over the last 5 or 10 years. I mean, there will be years where we spend more, where we have big unique opportunities like we have had and described many times before. There will be years when it is lower where we do not have to have those opportunities. But I do not think it I do not think it requires. In order for us to continue to push the envelope on luxury and lifestyle, I do not I do not think it requires a step change relative to historical norms. Thank you.

The next question will come from Robin Farley with UBS. Please go ahead.

Great. Just going back to the unit growth question, you answered part of it already, which is that your use of key money has not really changed. Just wanted to ask about unit growth given most other C-corps have lower unit growth guide. Either last quarter or this quarter. And just thinking about your confidence with that 6% to 7% for next year, can you give us a sense of how much of that already on the books in terms of it is under construction and so almost perfect visibility versus what percent or conversions that you are relying on? Like, will it accelerate or decelerate from this year's conversions?

I think that number is like, what is on the books is a little over 80%. So we would need to do a similar amount, maybe not quite as much on conversions given what is on the books because over last year, and this year, you have started to see new construction, new development construction start go up. As that happens, I do not think we will have less success in conversions, but the mathematics will change as you have more new development. You will see that ratio come down. I mean, it is very high. Historically, it is been around 30%. If you look at long term averages, my guess is given we have a lot, we are better at it, and we have a lot more brands we can do conversions with. that will be. End up probably in the mid in the mid thirties. But 80% plus we think, is on the books and we are quite. It does not mean we are always right. We have a lot of work to do to get it done, but we are extraordinarily granular in our analysis of unit growth. We do not, you know, every single hotel is identified Every region has very specific goals. You know, on, you know, by brand. And so we feel we feel good about it. So just mathematically, if conversions are sort of the part where you have a little less visibility than new construction, you actually have it sounds like higher conviction in your 2027 growth rate than you did going into 2026 even, just based on what about the same. Well, I more conviction in terms of what we are carrying over it is it is actually I will I will fact check myself. I am looking at these guys. it is easier than this year because we have more new construction deliveries this year because of the ramp over the last couple of years. So yeah. By definition, I feel better about it because we have fewer that we have to fill in. Yeah. Great. Thank you.

The next question will come from Meredith Jensen with HSBC. Please go ahead.

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

Yep. That. that is great. Well, Savneet just got here Monday. So I am gonna give him a few more days to get it together. But we are really excited about his joining. 1 important note, and I said it in my prepared comments, is Michael Langer, who is been our CIO, and his team have done an incredible job to put us in this position. And they are not going anywhere, by the way. Michael's here. he is remaining CIO. All we are doing is you know, I am doing is giving tech more oxygen by bringing somebody more senior at a EC executive committee level and reporting directly to me. Just to supplement the great work that is already going on. And I think we could talk for hours and I will not because we are gonna run out of time. But I think, you know, there are really 3 buckets which I have talked about. Quite a lot that we are really focused on is, 1, efficiencies in the system corporately, but also for the system we manage on behalf of owners. We are crazy not to. That can translate to benefits to shareholders, but it most importantly could translate as the bulk of the cost structure for us is managing the system. It can translate in meaningful benefits to owners. And so we are spending a huge amount of time on that. Some of it is AI, some of it is tech, some of it is process. Change, but it is all interconnected, and technology is a core enabler of all of that. We talked about it earlier on the call, the distribution side of the business. We are super focused there. We are super excited about the advent of all of these new ways agents are going to make our lives easier and how we are gonna connect with them with the goal, again, to be driving better customer experiences, more direct experience, at a lower cost that will translate into more profitability for owners, the more profitable owners are, obviously, the happy they are, but the more likely they are to build more hotels. Which becomes a virtuous cycle. And then to your question, I think on a customer experience side, there are some extraordinary things we are already doing and testing in how we are connecting our whole tech and connecting the physical and the digital that I think will afford us the opportunity when you wake up in the next 2, 3, 4, 5 years to revolutionize the way we go to market, to revolutionize the way we customize at mass scale, both how we sell, what we sell, the experience on property, and problem resolution. Not gonna get into a lot of specifics for lots of important competitive but we are very excited and hopefully, you are a customer, you can see some of it already. I view that as a small down payment on what is to come. that is super helpful. Thank you.

The next question will come from Mike Bellisario with Baird. Please go ahead.

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

Yeah. I mean, obviously, Europe on the new development front, has continued to be more difficult simply because economics are harder, the financing markets are not as robust. But we continue to have good success largely in the focus. in the limited service space because that is what makes economic sense. But as I said in my prepared comments, I mean, if you think about Europe, 60% of the hotels over the pond of the inventory is basically independent hotels, and we are at a fly spec in terms of our overall market share. And so it will not be all conversions, but I think if there will be a heavy component of conversions, you know, in that environment, to soft brands, hard brands, sort of, you know, things across the spectrum. I would say you know, owner sentiment is quite good. Throughout. I mean, every. You know, Europe's a big place. So if. I hate to generalize, but I would say quite good and not surprisingly driven by performance. Performance in Europe, many of the European economies have not been extraordinarily robust and are not maybe experiencing quite the surge that we are now starting to see in The U. S. From a travel point and tourism point of view, they have been really strong for an extended period of time, and they and they continue to maintain that strength. Obviously, with things going on in Eastern Europe and now The Middle East, which they are a lot closer to, you know, people are people are rattled a bit, but from a development point of view, from a same store point of view, we are going to have a terrific year in Europe. And from a development point of view, we are gonna have 1 of our best years So you know, I would say sentiment is generally broadly good.

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

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

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