Q4 2024 Earnings Call Transcript

Good morning, and welcome to the Hilton Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. To ask a question, you may press star then one. Please note this event is being recorded. I would now like to turn the conference over to Jill Chapman, Senior Vice President, Head of Development, Operations, and Investor Relations. Please begin.

Thank you, Betsy. Welcome to Hilton Worldwide Holdings Inc.'s fourth quarter and full year 2024 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 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 of our most recently filed Form 10-Ks. 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 and the company's outlook. Kevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our fourth quarter and full year results and discuss our expectations for the year. Following their remarks, we'll be happy to take your questions.

And with that, I'm pleased to turn the call over to Chris.

Thank you, Jill. Good morning, everyone, and thanks for joining us today. We're happy to report a great end to another strong year, marked by record unit growth and several important milestones. We added new brands and strategic partnerships to meet guests' needs.

We opened more rooms than in any other year in our history, all of which further strengthened our network and positioned Hilton Worldwide Holdings Inc. for continued growth in 2025 and beyond. Thanks to our incredible team members and owners, we also welcomed more than 224 million guests to our properties, more than any year in our history. For the full year, system-wide RevPAR increased 2.7% compared to 2023, with growth across all segments and all major regions. Solid top-line performance coupled with strong net unit growth drove record adjusted EBITDA of more than $3.4 billion, up 11% year over year, demonstrating the strength of our fee-based business model and the power of our growth algorithm.

Significant free cash flow generation enabled us to return $3 billion to shareholders. Turning to results for the quarter, system-wide RevPAR increased 3.5% year over year, above the high end of our guidance range, driven by better-than-expected trends in leisure and continued growth in business transient and group. Leisure transient RevPAR increased 4%, driven by solid growth in both occupancy and rate, with particularly strong trends throughout December. In the quarter, leisure occupancy remained five points higher than pre-pandemic levels.

Business transient RevPAR increased more than 3%, led by continued recovery in large corporates, with big tech and big banks meaningfully outperforming. Group RevPAR rose 3% year over year as demand for company meetings and social events remained strong. Additionally, booking windows continued to lengthen, and strong demand in conventions and company meetings drove higher rates for future periods. As we look to the year ahead, we feel incrementally a bit better than we did a quarter ago and expect system-wide top-line growth of 2% to 3% for 2025. We expect relatively steady growth across the Americas, modest deceleration in EMEA due to tough comparisons following a robust year last year, and growth across Asia Pacific given improvements in China and continued strength throughout the rest of the region.

We also expect positive RevPAR growth across all major segments, with group outperforming driven by continued strength in company meetings and convention business. We assume very modest RevPAR growth in leisure transient, given forecasts for steady levels of consumer spending and challenging comparisons. We expect continued recovery in business transient driven by further momentum in large corporates, coupled with steady demand across small and medium-sized businesses. Turning to development, we opened 171 hotels in the fourth quarter, totaling nearly 23,000 rooms, as our strategic and diversified approach to development continued to expand into new markets around the world.

During the quarter, we opened our first Tapestry hotels in Paraguay, Bonaire, and Australia, helping the conversion-friendly lifestyle brand to surpass 150 hotels in 20 countries and territories worldwide. We also debuted our Curio brand in Romania and opened our first Hampton in Africa, Tru in Colombia, Hilton Garden Inn in Greece, and Spark in Austria. In Asia Pacific, we celebrated the opening of our thousandth hotel ahead of schedule, representing growth of more than 30% versus last year. For the full year, we added a record 973 hotels representing nearly 100,000 rooms and the single biggest increase in rooms in Hilton's more than 100-year history, driving net unit growth of 7.3%.

Conversions accounted for roughly 45%, driven by the addition of SLH properties and continued momentum from Spark, DoubleTree, and our conversion-friendly lifestyle brands. Overall, luxury lifestyle hotels accounted for roughly half of our system-wide openings in the year, bringing those portfolios to more than 900 hotels across the world. Additionally, our luxury and lifestyle pipeline mix is nearly two times our existing supply, supporting continued growth in these important segments. Even with record openings, our system-wide pipeline grew 8% year over year to total approximately 500,000 rooms at year-end.

We signed 154,000 rooms in the year, up 18% and representing our biggest year of signings to date. We also ended the year with several notable signings, including the Waldorf Astoria Bahrain, Waldorf Astoria Al Madinah in Saudi Arabia, Conrad in Los Cabos, and our first Motto in China, and agreements to debut LXR, Curio, and Hampton in Morocco. Construction starts for the year remained strong, the highest in our history, increasing 10% year over year across all regions. Excluding acquisitions and partnerships with meaningful growth, we finished the year with nearly a quarter million rooms under construction, which is more than any other hotel company.

This represents more than 20% of industry share of rooms under construction relative to our existing share of supply. With nearly half of our pipeline under construction and continued growth and conversion opportunities, we feel confident in our ability to deliver strong net unit growth of 6% to 7% in 2025, defined by our continued focus on geographic and chain scale diversity. We have exciting development opportunities ahead. LiveSmart Studios is slated to open its first locations this summer.

Following the recent opening of Spark's 100th hotel, the brand has several international market debuts, including India and the CALA region, scheduled for this year. We expect our newly announced strategic licensing agreement with Olive by Embassy to accelerate Spark's expansion in India, representing an exciting opportunity to tap into the country's growing middle class. We also expect continued momentum in luxury, including the iconic Waldorf Astoria in New York. Following an extensive and thoughtfully designed renovation, the 375-room hotel will usher in a new era of luxury for New York City.

This year, we will also welcome Waldorf Astoria properties in Costa Rica, Shanghai, Osaka, and Morocco, in addition to Conrad Hotels in Athens and Hamburg. Signia celebrated an important milestone just last week, with the opening of the brand's first hotel outside the US, located in Amman, Jordan. The property offers another sought-after location for business and leisure travelers. Demonstrating our continued commitment to meeting the evolving preferences of our guests, we recently announced several new wellness initiatives.

In January, we expanded our partnership with Peloton to provide guests with complimentary access to classes on our in-room TVs. We also recently partnered with Calm, a leading wellness company, to offer guests access to guided meditation, sleep stories, calming soundscapes, and mindfulness exercises directly from their in-room TVs. Thanks to our incredible team members around the world, we continue to be recognized for our culture. During the fourth quarter, we celebrated our eighth consecutive year as the top hospitality company on the World's Best Workplace list by Great Place to Work.

Our brands also continue to receive recognition, most recently by Entrepreneur Magazine's Franchise 500. For the sixteenth consecutive year, Hampton took the number one spot in the lodging category, thanks to its strong preference, global growth, and guest loyalty. In total, twelve of our brands received recognition, underscoring the value they drive for owners and guests and our leadership in franchising and innovation across the hospitality industry. We are proud of the record growth we delivered last year. Our powerful network of brands continues to be an engine of opportunity for all of our stakeholders.

Given our strong momentum, robust pipeline, and resilient fee-based business model, we're confident that we are well-positioned to continue driving strong performance in 2025 and beyond. Now I'll turn the call over to Kevin to give you a little bit more details on the quarter and our expectations for the year.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR grew 3.5% versus the prior year on a comparable and currency-neutral basis. Growth was largely driven by adjusted EBITDA, which was $858 million in the fourth quarter, up 7% year over year and exceeding the high end of our guidance range. Outperformance was largely driven by better-than-expected RevPAR growth.

Management franchise fees grew 5% year over year, ahead of our expectations despite an FX drag. For the quarter, diluted earnings per share adjusted for special items was $1.76. Turning to our regional performance, fourth quarter comparable U.S. RevPAR was up 2.9%, driven by strong leisure demand and continued improvement across business transient and group. For full year 2025, we expect U.S.

RevPAR growth at the low end of our wide range. In the Americas outside the U.S., fourth quarter RevPAR increased 8.1% year over year, driven by increased air capacity to the region and strong leisure trends during the holidays. For full year 2025, we expect RevPAR growth in the mid-single-digit range. In Europe, RevPAR grew 6.2% year over year in the fourth quarter.

For full year 2025, we expect low to mid-single-digit RevPAR growth following the region's strong performance in 2024. In the Middle East and Africa region, RevPAR increased 8.4% year over year, supported by key events, including COP29 in Baku and Formula One races in Qatar and Abu Dhabi. For full year 2025, we expect RevPAR growth in the mid-single-digit range. In the Asia Pacific region, fourth quarter RevPAR was up 1.7% year over year. RevPAR in APAC ex-China increased 8.8%, led by strong leisure performance in Southeast Asia during the holiday season.

China RevPAR declined 4% in the quarter as softer macro conditions and cloud travel continued to weigh on performance. However, trends improved sequentially versus the third quarter, driven by Golden Week and an uptick in demand following fiscal stimulus, with positive momentum carrying into the New Year. For full year 2025, we expect RevPAR growth in Asia Pacific to be in the low to mid-single-digit range, assuming low single-digit growth in China. Turning to development, as Chris mentioned, for the full year, we grew net units 7.3% and ended the year with over 498,000 rooms in our pipeline, which was up 8% year over year, with more than half located outside the U.S. and nearly half under construction.

Looking to the year ahead, we are excited about our strong development story and the robust demand for Hilton branded products in both the U.S. and international markets. Moving to guidance, for the first quarter, we expect system-wide RevPAR growth of 2.5% to 3.5% year over year. We expect adjusted EBITDA of between $770 million and $790 million and diluted EPS adjusted for special items to be between $1.57. For full year 2025, we expect RevPAR growth of 2% to 3%. We forecast adjusted EBITDA of between $3.7 billion and $3.74 billion and diluted EPS adjusted for special items of between $7.71 and $7.82. 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 fourth quarter for a total of $150 million in dividends for the year. For full year 2024, we returned $3 billion to shareholders in the form of buybacks and dividends. In the first quarter, our Board authorized a quarterly cash dividend of $0.15 per share. For the full year, we expect to return approximately $3.3 billion to shareholders in the form of buybacks and dividends.

Further details on our fourth quarter and full year 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

We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, The first question today comes from Shaun Kelley with Bank of America. Please go ahead.

Hi. Good morning, everyone. Chris, I wanted to build off a mention that you made in your prepared remarks, just a bit more of a macro one here to start. But we obviously just went through a major U.S. election cycle since you know, our last call and our last update.

You've undoubtedly spoke with a number of hotel and business leaders, and you said that, you know, you sounded a little bit more confident than where we were a quarter ago. So can you just expand on that comment a little bit? What are some of those conversations with business leaders looking like right now? And maybe what segments of the lodging business could we expect this some of the sentiment improvement to possibly impact?

Thank you.

Yeah. Yeah. Happy. I assume somebody would ask me that.

I'm glad we're getting to it early. And, obviously, these are just my opinions, but that's what you're asking for. And most of this I think, would not surprise you or anybody in the sense of sort of the general view on what's going on in the macro. I mean, if you go back a quarter ago, we hadn't gotten to an election.

There was a lot of noise around the election, and there was a lot of uncertainty around the outcome of the election at that time. And that uncertainty then translated into a whole bunch of uncertainty around things that people care about, you know, whether that's consumers from a leisure point of view and certainly business and group ends up being a lot, you know, very directly related to business with huge, massive uncertainty on regulatory spending, regulatory immigration, border, tax policy, and the practical reality is not just the uncertainty around the election, but the uncertainty around all of those outcomes means that people sort of husband their capital a little bit more.

They pull in their reins a little bit. They're a little bit more tepid, I think, broadly. In spending. So fast forward to today, we have an election.

That is complete. Whether you like it or not, it was pretty dispositive. It wasn't, like, close. It wasn't disputed.

You know, we knew in a day and or not even a day, and while there is certainly a lot of noise in a cycle of things that are going on by EO and every living in Washington. Trust me. I hear a lot of the noise, you know, if I live inside the Beltway. I mean, I think there is a broader belief, and I'll get to what I'm hearing from other leaders that will go nameless.

There is a broad belief, and I would say fairly consistent, you know, amongst the folks that I talk to across a broad range of industries. That people think that the opportunity for economic growth in the short to intermediate term will be better. That doesn't mean that people don't think that there's noise and some people appreciate it more than others, you know, in terms of the various things that are going on. But I think almost to a person that I'm talking to really, quietly.

I think people feel like you're gonna see there is an opportunity for a pickup more broadly in economic growth, and that there's an opportunity, you know, I think in our business as a result, you know, for a bit of an uptick, which is why I said I feel a bit better. Why? Because you have an election behind you. One, while there's a lot of noise, you're gonna be in a lighter regulatory environment across the board.

Financial services, you know, broad range of industries. Two, tax policy. I mean, unclear. It's gonna take time.

You know, we're all reading about the morning. You know, one reconciliation build, two, we're gonna be debating it and trust me. You know, we're talking to a lot of people about it. It's gonna be unclear when exactly how it happens.

But it sort of has to happen. And I think, you know, certainly, the business community is much more optimistic that, you know, that's gonna get done in a way that is favorable. And so, again, across the board, as I talk to folks. But by the way, talk to friends and, you know, think about, you know, as it affects leisure business.

But certainly talking to folks that are running businesses across a broad range of three I really can't think of one. That doesn't mean it didn't happen, but it's not in my memory set. Of somebody that thought that this is gonna be what's happening is negative for broader economic growth. So that's why I feel that you know, a bit more positive.

Now, there is a lot of noise, right, particularly in the beginning. So the reason that we're not, you know, in our guidance and all those things, not going crazy in terms of building big upside is because there's a lot happening and it's early. And I think we need to see how these sort of things play out. But I think the general sentiment, I've said it is underneath it all when you lift you know, I guess, say, above it all.

When you lift up above all the noise. Is that this is going to be good for the U.S. economy. And to a degree, that will have some knock-on impact in various economies, you know, around the world as a result.

Thank you very much.

The next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.

Hey, thank you. Despite that positive business demand outlook, coming out of ALICE, it seemed like there was a lot of skepticism around the development backdrop just given where returns are versus interest rates. Yet you sound pretty positive on the development pipeline. Clearly, your pipeline's been growing.

So I'm just would love to hear how you think about what has set Hilton apart from you know, that much more cautious kind of tone at the, at the industry conference.

Yeah. I was there, not for long, but I did the main panel. And so I, you know, we had a big owner reception. I think we have four hundred owners.

So I talked to a lot of people in a in the short time I was there. And so not to Steven I I appreciate the comment and you were probably there longer than I, but I would probably frame it a little bit differently and maybe what I, you know, I know, sort of like break it down into, like, you know, what how people felt about M&A activity, versus, you know, how they're sort of feeling about new development activity. And I I would say my read of it, again, not to take issue with it, was generally on on the first M&A much more positive I think people are very much of there's more capital available. Rates have moved up a bit, but I think there's a belief you know, that over the next twelve, twenty-four months, broadly, rates will come down.

I think people feel like the bid and the ask is getting closer because you know, performance has, you know, has ticked up a bit. And so I sensed, and in fact, we were asked on the panel, and I think the answer for most of the folks on the panel with me was you know, a lot more optimism in M&A. In terms of the new development side of it, which is I think probably what you're referencing more, there's still, you know, a lot of friction for the reasons that you're describing. You know, during COVID, following COVID, it got very expensive to build.

Cost structures went up. And so it got hard and and and interest rates went up and capital availability went down and so that's a awfully difficult equation for for new construction. I sensed actually you know, some increasing optimism. And so the question is why?

Well, again, people broader view, I think, was you know, don't wanna get ahead of ourselves, but more optimistic about what's gonna go on broadly with the economy. So improving performance, stabilization of cost to build, stabilization on labor cost, there are other, you know, component cost insurance and others that are still going up, but some stabilization and frankly the largest parts of of the expense base. A, you know, I believe and I think people are figuring this out an opportunity for rates, as I said, over the next twelve to twenty-four months to come down and is moderating as we see that one of the largest components of inflation as measured by the the federal government is shelter.

Which is on a lag and is still showing up at, you know, above target levels when reality of shelter costs are going up, that closer to one percent. So as you start to see that dataset factored into, you know, the inflation numbers, you're gonna see a very large component of inflation come down. Obviously, the administration's super focused on energy and try trying bring energy costs down, which is another large contributor that has broad impact. So I do I believe and I think people people are starting to believe that there is an opportunity not for rapid deceleration, in in in interest rates.

There is over the next twelve to twenty-four months a likelihood that rates are gonna come down. And then last but not least, I do believe people are seeing more availability of capital. It's not a gusher. You know, but I think they're seeing more availability ability of capital.

And I think there is a belief, which is what was driving, I think, again, I wanna be careful. It wasn't raging optimism, but sort of a bit of a a shift, at least amongst our our owner community is that in a world where the regulatory environment's gonna get a lot easier on the on the financial system, which I think is pretty clearly happening. And a world where the broader economic growth is stable, but, you know, moving up a tick, you know, that there's gonna end up by definition, as there always is in that kind of cycle, being more capital available because the lending institutions of all sorts are gonna have to go further on the risk spectrum to get their yields.

And as a result, gonna be looking more and more to do build and and that kind of activity. And that that's a normal cyclical thing that happens but I think with the regulatory environment that that we're moving into, it it will accelerate that. So I I again, I'm not gonna I'm not gonna say I I'm not taking issue with what you were hearing. There's certainly a lot of friction, and we hear that.

But I would say, I started to sense a movement you know, to to a more positive place. Now the last part of it, sorry, and I'll stop, you know, why are we doing what why are we doing well? How are we defining you didn't it but I'll say it's sort of how are we defining gravity and what's been you know, a difficult environment you know, for new construction and development generally. And I think the answer is twofold.

One, we I mean, it's all related to our brands who are the best performing brands in the industry. So while there isn't as much money, I think there's more coming. We are getting a very disproportionate share. We're just more financeable with the money that's available for new construction.

And because our brands perform the best in the industry, we get a large disproportionate amount of conversion opportunities. I think over the last twelve months, we're not quite fifty percent of all conversion opportunities are moving in into our system. And so those two things you know, are uniquely helping have been uniquely helping us over the last couple of years, and I think we'll continue to help us, but I do believe the other things I said as well.

That's great. Thanks so much.

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

Hey, Chris, Kevin. Good morning. Good morning. Chris, I I you spoke a lot about development and and conversions and stuff. And I might have missed this. You might have said earlier. One of you may have said it, but conversions as a percentage of of your unit growth in twenty-four and then kinda how you see how you see that shaping up for twenty-five? Then I just had a quick follow-up.

Yeah. For for twenty-four, if you include everything, the acquisitions and partnerships, it was about forty-five percent. It was in my prepared comments, I think. It was.

And if you take those out, it was about a third plus or minus. I think this year, twenty-five will be about a third. You know? That mean meaning that we don't we don't have any big play I mean, there'll be some very modest incremental growth in our partnerships, but I would I would do that in at our scale sort of a rounding error.

And so, you know, we're we're gonna go back to, you know, sort of more normally where we'd be, which is elevated from the mid-twenties into the low to mid-thirties. But know, not not up where we were last year. And what was the last part?

No. The the second part, I just had a follow-up. The as as you look at your guidance, obviously, first quarter RevPAR guidance a little bit better than the full year. Adjusted EBITDA guidance obviously, you know, you're you're facing a challenging comparison.

Was there were there some I don't wanna say, abnormalities, but some one-offs that that were benefits in the one Q twenty-four that that you'll kinda have to lap just so at kinda the the midpoint of of your adjusted EBITDA growth over year is looking like four to five percent versus kind of eight and a half percent for the full year. So I just wanna get a little bit of color on on some of the moving parts for the first quarter.

Yeah. You hit on it, Carlo. It is a tougher comp, and that was driven by a couple of one-time items. And then you've got some FX impact in the first quarter. If you adjust for all that, it's basically in line with the algorithm.

Great. Thank you, guys.

The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.

Hi there. Thanks for taking the question. Another Alice one, but seems like you're defying gravity a little bit on the cost side too with, you know, the great EBITDA guide yet at Alice last week, there was a lot of talk around cost pressures in the industry. Particularly on, you know, the insurance side, the wage side.

You maybe talk about just how you're thinking about that broadly and any initiatives you have to offset it?

Yeah, Lizzie. I think if you're talking about us in our, you know, in our cost structure, we we continue to be very disciplined. Our, you know, our GAAP G and A guide for the year, you probably noticed is even slightly lower than twenty nineteen after six years of of cost inflation. I, you know, I think on the on the operating side, as you say with owners, you know, yeah, there are some cost pressures and we have you know, we just have to keep we are and we'll continue to work for our owners to try to find as many operational efficiencies as we can so that so that they can grow their bottom lines as well and, you know, doing doing the best we can on on wages and benefits, doing the best we can on insurance, just helping them with operating efficiencies across the board.

So you're so I I've actually missed Dallas this year. So I but my guess is you were hearing a little bit from the ownership side on cost pressures. And then for us, we just continue to remain disciplined.

The next question comes from David Katz with Jefferies. Please go ahead. It does appear that you're making some good traction in the luxury side of things. I also observed that you know, some of the capital deployed, you know, is up a bit this year and obviously, what we're hearing in in, you know, around analysis that the checks people are writing for luxury hotels are going up.

Can you just give us a little more depth into sort of how you're thinking about that? Obviously, the strategy is getting some traction. But, you know, balancing that with you know, some of the capital required to play in that segment. Thanks.

Yeah. Sure. I mean, I think if you think about it, it's been on where you are in the world. We are getting a ton of traction in luxury.

And depending on where you are in the world, capital contributions from the operator can be can be higher or lower. In the Western world, they tend to be higher in that space. It's probably worth noting that a bunch of our traction in luxury, at least last year, came from the SLH partnership, which completely capitalized, right? Zero contribution on our part.

You are hearing about some deals up there. I'll there as you get into the higher end of the range. Particularly in luxury, there are more competitors. Right?

In in our bread and butter, in the mid-market, know, depending on where you are and the location, know, maybe the list of brands that you want to play with is, you know, two or three, and we we might be at the top of that list. When you get into the higher end of the range of luxury and the higher ends of full service, that that the number of brands know, in the aperture opens up pretty wide, and so the laws of supply and demand are alive and well. So it creates a lot of demand for key money. With all of that said, we still only contribute key money on ten percent or less of our deals.

We do play in some of those deals because they're important and they tend to be from time to time higher checks. But I think if you look at what we do versus our competitors, you know, I'll take our track record against anybody's any day. And then the last thing is you talked about a little bit of the trajectory. You know, last year was a little bit light.

I'd say there are a couple of deals out there where the timing has kind of pushed into twenty twenty-five. So you're seeing that a little bit in our guidance. And our guidance for this year is right in line with what we said at the Investor Day, two fifty to three hundred I think that's the right way to think about it on a run rate basis.

Okay. Thank you. And that's for all CapEx including KeyMite.

Yep. Thank you. Sure.

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

Great. Thank you. So, you know, obviously, great Q4 result, and and better twenty-five RevPAR guidance than a quarter ago. I did want to ask about you know, you often talk about the algorithm growth algorithm being RevPAR plus unit growth and getting to see growth and kind of moving higher as as you move down the P&L, and it seems like for twenty-five that the EBITDA growth rate is a little bit lower than the sort of midpoint of your RevPAR unit growth.

Just wondering what may be going on there and sort of wondering if it's tied to, you know, in Q4, it looked like based on other management fees were were down a bit. And so if if there's something there that is sort of continuing into twenty twenty-five that's not bringing the that top line growth kind of getting magnified as it moves down the P&L? Thanks.

Yeah, Robin. It's a good question. I'll take the second part first because it's a little bit more straightforward answer. If you adjust those base and other fees for some one-time items in FX, it actually would have been in the high single digits and that was all baked into our guidance for Q4 and the numbers we gave you and we beat that guidance.

So it actually came in a little bit better than we thought. So there's nothing going on there other than timing and some FX. And then for the full year twenty-four, yeah, our mid the midpoint of our guidance guidance is at eight and a half. Algorithm would suggest nine.

Again, the same it's actually the same answer as Carlos' question earlier in Q4. Where if you adjust for some of the one-time items last year, and you adjust for FX, we're above algorithm for this year at the midpoint.

Are there any one-time and importantly, if you go back and look at even with that, if you go back and look at investor day, sort of what we laid out, yep. Bottom line, EBITDA numbers are higher than what we would have laid out a year ago for twenty twenty-five even with the FX. Really is FX. If you take FX out, it's above the algorithm.

I mean, either one-time thing is going on, but it's really FX. But even still, even with the FX, bottom line EBITDA is higher than what we presented to everybody know, in our in our three-year plan. And that's because, again, we're super disciplined. Like, we were super disciplined on the top line.

We're also disciplined on cost structure. And so if you think about this business versus nineteen, we finished last year well, EBITDA margins that are over one thousand basis points higher than the prior peak of twenty nineteen. So think that's a pretty good testament to the discipline that we have running this business.

Thank you. That's super, super helpful color. Just let anything you'd call out in terms of those one-time items, just so we can think about that when we're thinking about the quarterly cadence just sort of any of the big ones you'd call out.

No. It's just sort of the lumpy you know, there are all sorts of their term fees are all sorts of things that happen in a normal year and they sometimes get weighted in one quarter versus the other. And and and in this case, that some of them were weighted in the fourth quarter of twenty twenty-four or twenty-three and the first quarter of twenty twenty-four once you once you get through that those those go away. I mean, you still have FX.

Depending on where the dollar goes, that's that all washes away. And, obviously, for the full year, it washes away. Kevin? You saw our guidance for the full year.

Thank you. The next question comes from Brandt Montour with Barclays. Please go ahead.

Good morning. Thanks for taking my question. Maybe just following on that question, Kevin. If you could just maybe bridge the rest of the P&L.

When we look at EPS guide, versus, again, the Investor Day algo, it's it's you know, below that. Obviously, buybacks are not in the the full year guide, but it was in the the three-year algo. But, yeah, look, the the the bottom end of the EBITDA guide is right there in line. It makes sense with your RevPAR it looks like the EPS is still a little lower.

And if you could provide some extra color there, I'm sure it'd be helpful.

Yeah. Sure, Brandt. I mean, you look you mentioned that the big, you know, big driver is buybacks, but that that was all factored for, and I assume you're factored for. The other one is just leveraging, right?

We we we did two billion dollars of financing to relever the balance sheet to fund our to help fund our buyback program. This past year, we've got another about similar amount next year, and it's just a little bit higher rates than than we had been borrowing at before, and so you're just seeing that catch up flow through to EPS. And other other than that, if you adjusted for all that, we'd be in the mid-teens in terms of adjusted EPS growth. Yeah.

And while you're relevering.

It hasn't impact longer term, it doesn't have any impact meaning once you've stabilized that's a certain leverage level than year over year.

Excellent. Thanks, everybody.

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

Hi. Thank you. I just wanted to ask you just really thinking about maybe just the U.S. for a moment and your top about your RevPAR expectations. Across the system.

But when you think about kind of just the luxury or upscaled, you know, full-service properties versus select service, would you expect to continue to see more relative weakness on the select server side or any kind of commentary there of what you know, how you think the year could unfold and maybe what's what's weighing or supporting your expectations for that segment?

No. I think, Smedes, you might I'm it's I I think talking about Q4. Are you talking about Q4 relative to chain scale performance?

Well, and for the year as well. I mean, I most It's really just I'm sorry. I mean, you're.

It's really just year over year comps. Right? So I think we I wouldn't we wouldn't call out any any underperformance. We continue to be in line or better than chain scale performance for the full year twenty twenty-four. We're gaining share and we expect that to continue.

The next question comes from Patrick Scholes with Truist Securities. Please go ahead.

Thank you. Good morning, Chris and Kevin. Morning. Mark, good morning.

One thing I don't think I've heard you speak about is tariffs and specifically, you know, what potentially might be any impacts on your franchisees or potential developers and builders. You know, what what are you hearing from them? And the last time I blinked, I believe they would care of us at the moment. Could change in a moment is the ten percent from China.

But, you know, I'd like to hear your thoughts around that potential and.

Yeah. If any happy to talk about it. As you pointed out, embedded in your question is they're tariffs and then they're not. And it's it's sort of moving around a lot.

So far, obviously, you know, we've talked to a lot of people, not not any real impact to to speak of. It depends what happens. I do I do believe what's playing out is a series of trade negotiations, you know, that are that are delicate and I believe tariffs are part of that negotiation and part of the strategy to getting to the right kinds of deals in the end. So doesn't mean there won't be tariffs.

But my guess is that that we will end up in most cases in a place where we get some form of trade deal done that will not involve major tariffs. And so again, I sort of like that all of you that know me know, I like to lift up above all the noise. This whole steady hand on the wheel. Think when you lift above it all, you know, I still believe that with the opportunity is broadly even with all the noise of tariffs and I'll come back to supply chain.

In the second, we're going to that we have broader economic growth that's better than we thought it was going to be, not not worse even with the risk of various negotiations and short-term tariff imposed imposition of short-term tariffs. One of the things that we've done, so far no impact and frankly not to say it depends what happens that we we couldn't have impact, but we've diversified our supply chains in a very aggressive way. Over the last five years. I mean, think about what happened in COVID.

You know, like, couldn't get things. So, you know, part of it was driven by the necessity of diversification coming out of COVID. But then we continued on because we just think it's a really good idea to have various places in the world where we can get various products. So that's not, like, we're getting Terry from one place in the world for the whole system.

You know, because that would create risk that if you, you know, had a problem with tariffs in that particular location, it could cause a ripple effect. So I would say, again, never you know, I can't say it would have no impact, but we we have done our HSM team has a terrific job of diversifying our supply chain. And so we feel pretty good feel pretty good that Lulu's what's going on so far and that and and the areas that are in question that we have ways to pivot you know, given our supply chain relationships in other other parts of the world.

Thank you. Well said and explained.

The next question comes from Michael Bellisario with Baird. Please go ahead.

Thanks. Good morning, everyone. Good morning, Michael. Just wondering if there's any commentary you can give on deletions and also what might be falling out of the pipeline. Any color on how those might be trending and and what the read-throughs would be there? Thanks.

It's a good question. We, you know, we we generally remove a point to a point in a quarter of the system every year. I mean, it's sort of same answer we've talked about before, Michael. Most of those are our choice.

We did do a little bit more last year for twenty twenty-four than than typical than that run rate, but but everything that's baked into our expectation for twenty-five is consistent with long-term averages.

The next question comes from Chad Beynon with Macquarie. Please go ahead.

Hi, good morning. Thanks for taking my question. Just wanted to ask about your comment on large corporations traveling more. Kind of that impact on on BT and group.

Wondering when you started to see that acceleration and now that we have more certainty and and some more certainty around policy inside the Beltway. If that could be a a a big positive swing factor, you know, sequentially as we kinda work through the next couple months, for the go forward. Thank you.

It certainly could be. We are not we we have not, you know, given you guidance or forecasted that. I would say we saw throughout the fourth quarter, you know, an uptick and then particularly election. You know, demonstrated by midweek strength.

Now, you know, I think that was based on all the things that I described earlier. People belief on, you know, more certainty on tax, regulatory environment, it's just more more comfort, you know, spending more. I think you know, part of it was that the way the holidays fell, it compressed the fourth quarter in terms of travel days. And that, you know, that gave us a benefit in the fourth quarter.

But net net, as I said, every every CEO I'm talking to, we've met I met with our head of sales, you know, across all our special corporate account. I mean, uniformly, I think people whether it hadn't in part because the election, which I think it probably did, but it was happening anyway, just in in a, you know, sort of normal cycle of people getting back to office and getting more serious about running their businesses and sort of back to a little bit of business as usual. You know, if you talk to all accounts, if you talk to large, medium, small. Almost, you know, without exception, people are broadly saying that they're gonna travel more.

Okay? And they broadly understand that they're gonna pay more for their travel because they then that the environment they're living in. And so I do think that you know, that bodes well for business transient recovery to continue to, you know, sort of beat our way back to prior. Obviously, rate structures are higher.

We're still not back to prior levels demand, but I think by the end of the year, there's certainly a pretty good shot of being able to do that. Same same with group and leisure as I commented on my introductory comments. Leisure's already way over. So I, you know, I think you'll see some substitution effect.

As between the segments, which which will be good. You know? What you should wanna see, and I certainly is you know, as business transient demand levels you know, sort of recover. And then I think we'll ultimately go beyond prior peaks in in core demand you'll be trying to, you know, sort of manage your inventory in a way where you're taking out lower price segments that would be, you know, sort of lower rated leisure.

We wanna keep the high rated leisure, but some of the lower rated leisure. Which we're super we're super focused on as a type. So it's a long long winded way of saying it was happening in the fourth quarter. It accelerated in you know, in a post-election world.

The trend so far are are sort of indicative of the same thing, although it's early in the year, you know. You're not you're not you had the holidays falling away, where January wasn't, you know, a a barn burner. I mean, we it was fine and in line with our expectations, but people just aren't full you know, they're just fully getting back out on the road, but I I suspect we will see you know, a a bit of a a small step change in in midweek route.

Thanks, Chris. Appreciate it.

The next question comes from Richard Clarke with Bernstein. Please go ahead.

Hi, good morning. Thanks for taking my question. Just want to ask about the dawn of the AgenTek AI AI. Obviously, the the first partners into those AI agents have been the online travel agencies booking TripAdvisor, etcetera.

Are you talking to those agents? Would you be happy for an OTA to handle your distribution through those agents? And then maybe overall, do you see that development as as good or bad news for Hilton?

Yeah. I mean, we we obviously wanna, you know, deal with our customers as directly as we can. I mean, we do have a percentage of our business that comes through the OTAs. It's a relatively small percentage of the business.

We have good relationships there. You know, the better they can serve that customer that we access, through them, the better for for everybody, the better experience is always what what what we want. And so you know, we think that's great. But the very large majority of our system is is is driven through our direct relationships.

We want, obviously, for that to continue, we have done a huge amount of work in how we think about, you know, every element of the relation dream about a trip, to exploration of you know, how they where they wanna go to the booking if experience, to putting their package together, to pre-arrival, on stay, post-arrival, every element of it, and we're, you know, without getting into a great detail because it would take a whole day to do it. You know, we are super engaged in how we use tools and technology, including AI in every step of that journey, to make it a more pleasant and friction-free experience for our customers and so no, we don't plan to outsource that is the short answer.

We're we're doing we're we're all over it. And I think, honestly, the work we're doing across the board, but particularly with the stay experience. Terms of being able to use AI from a data and analytics point of view to understand in great granular detail what individual customers want and then two. Mass customize the experience both ahead of the stay but particularly on stay.

We have some really really interesting things going on in game change changing things there. And so we are fully committed to to pursuing continuing our pursuit of direct relationships with our customers.

Thanks Chris. Maybe just to to also follow-up on that. Could I conclude, therefore, that you would not allow you know, an OpenAI agent or a, you know, a Gemini agent to navigate to Hilton and make a booking on behalf of a customer. You're saying they would have to come direct to do that, not through a agent's AI.

That that I I just said we may work directly with a number of those players. We would we will work directly with them. But what we're saying is we're we don't wanna work indirectly with some of those players.

Gotcha. Understood. Thank you.

The next question comes from Dan Politzer with Wells Fargo. Please go ahead.

Hey, good morning, everyone. Thanks for taking my question. I just want to circle back on leisure a bit. Guys called out the strong occupancy trends particularly in December.

Was that mostly in U.S.? Was it international? And then also, you know, can you maybe touch on if the it sounded like that was a bit lower lower rated than higher rated given the occupancy. And then know, just one one clarification for the first quarter.

Anything to call out in terms of calendar, spring break, Easter, anything we should be aware of. Thanks.

Yeah. I think in the fourth quarter, it was pretty much everywhere headed on leisure and had you know, a lot to do with how the holidays fell. Now that impacts some regions more than others, but the holidays fell in a way that stimulated a lot of travel. By the way, it was across the board.

It wasn't just low rated. It it you know, it volume wise would have been more low rate, but it stimulated all all all rate structures. Of leisure. And then it was the second part of the question.

Holiday. Oh, holiday in the first quarter, you have Easter. The biggest impact is Easter.

Got it. Thanks so much.

Otherwise, I mean, obviously, there's a lot of noise with what fires and storms and snow and all that, best we can tell you know, sadly, there's a lot of things that go on every year. There was enough of that going on in the first quarter of last year that it doesn't strike us yet that there's any real net impact. But Easter moving is is a net positive for Q1 and will be a net negative, obviously. For Q2. That's the primary driver of of guidance being a half a point ahead in Q1.

Got it. Makes sense. Thanks.

The next question comes from Conor Cunningham with Nellis Research. Please go ahead.

Hi, everyone. Thank you. So some positive comments on China today. So I'm just curious if you could kind of unpack that a little bit.

I would imagine that within that low single-digit number that you talked about for twenty-five, the differences in first half or second half are pretty stark. So if you could just bridge that a little bit and then maybe touch a bit on on just development and signings and what's going on in the region in general. Thank you. Yeah.

Yeah. Sure. For China, it was pretty consistent last year over the course of the year. It ended up sort of down five-ish for the year.

I think it was down four in the fourth quarter is what I had in my prepared remarks. For this year, I don't have the quarterly spread exactly in front of me, but I think it's pretty consistent across the board. Low low single digits. And then development, we're doing great.

In the in twenty twenty-four, our approvals were up our approvals in starts are both up ten percent, and our openings in China were up nearly thirty percent. And we continue to really well sort of across the board in in in chain scales in terms of demand for the product. So the slowdown you're seeing overall in real estate isn't affecting lodging as much. And in fact, lodging is, you know, our developers are a bit of a beneficiary from you know, hotels, particularly mid-market hotels, both in Hilton Garden Inn and our and and our master limited partnerships, being a good a good adaptive reuse for some of the Shell residential buildings and Shell office buildings that got developed and now need to find a different use in China.

So low single-digit RevPAR that is, of course, on easier comps and we really know what GDP growth is gonna be in China this year? No. But we feel pretty good about you know, doing better on the fundamental side, and then we're doing great on the development side.

The only other thing I'd add at China is Chinese are traveling like crazy. So there's the there's a whole outbound story, which is China has opened up visa-free zones into Asia. Visa-free zones. And so while we still expect China know, the sort of be tepid positive growth, but tepid as as Kevin just suggested.

When you aggregate all the demand for travel coming out of China, it's super beneficial to our broader APAC business. So like Japan, Southeast Asia, they are huge. You know, Australasia to a degree, they're huge beneficiaries of a lot of outbound travel outside of China. That obviously has the the effect of of diminishing what's going on within China.

But, you know, the good news about a big global diversified company like ours is we get to pick it up on the other side too.

Appreciate it. Thank you very much.

Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the call back over to Chris Nassetta for any additional or closing remarks.

Thanks again everybody for joining us. We always appreciate the time, great questions. Hopefully, we gave you a little bit of context in addition to our prepared commentary. It's an interesting world, but we're as you heard, I'm super optimistic about obviously, very happy with how we finished out twenty-four and twenty-four overall.

And optimistic as we go into twenty twenty-five. So we'll look forward to catching up with you after we finish the first quarter. Thanks again. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.