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Hilton Worldwide Holdings Inc  (NYSE:HLT)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. And welcome to the Hilton Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note, this event is being recorded.

At this time, I would like to turn the conference over to Jill Slattery, Vice President and Head of Investor Relations. Please go ahead, ma'am.

Jill Slattery -- Vice President and Head of Investor Relations

Thank you, Denise. Welcome to Hilton's third quarter 2018 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ, please see the Risk Factors section of our most recently filed Form 10-K.

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 Executive Vice President and Chief Financial Officer, will then review our third quarter results and provide an update on our expectations for the year. Following their remarks, we'll be happy to take your questions.

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

Christopher J. Nassetta -- President & Chief Executive Officer

Thank you, Jill. Good morning, everyone, and thanks for joining us today. We are pleased to report another strong quarter driven by our resilient business model. Adjusted EBITDA was at the high end of our guidance range and EPS exceeded expectations. We continue to increase our industry-leading market share premiums and to deliver strong net unit growth, all leading to increasing free cash flow. This setup, coupled with a disciplined capital allocation strategy, enables us to continue delivering long-term value for shareholders. Year-to-date, we have returned more than 8% of our market cap to shareholders or approximately $1.7 billion in the form of share buybacks and dividends.

Turning to third quarter results, systemwide RevPAR grew 2%, driven entirely by rate gains. Broader industry fundamentals remained favorable with solid corporate transient RevPAR up 3% and continued strength in group business. Leisure transient was softer than forecasted given weather-related disruptions and a meaningful impact from calendar shifts. Accounting for holidays and weather event impacts, we estimate second and third quarter RevPAR trends were essentially steady. For the fourth quarter, we expect fundamentals to remain favorable, but comparability issues due to weather impacts to continue to affect RevPAR results. Our updated full-year RevPAR guidance range is 3% to 3.5%.

Looking ahead to 2019, positive macro indicators suggest continued strength in lodging demand. This together with decelerating supply growth in the US should lead to fundamentals remaining positive with regional GDP growth forecast indicating continued strength in international markets. Additionally, areas of the business where we have better visibility further support healthy dynamics going forward. Group position for next year remains up in the mid to the high single-digits with nearly 70% of group business on the books. And early corporate negotiations show healthy year-over-year increases. As a result, we feel good about things heading into 2019 and expect RevPAR trends similar to this year with growth of 2% to 4%.

Our optimism also extends to our development outlook, where we continue to gain share of global activity. We ended the third quarter with more than 2,400 hotels totaling roughly 371,000 rooms in our pipeline, up 11% year-over-year, driven by increases across both our US and international pipelines. We remain on track to sign a record 110,000 rooms this year and deliver net unit growth of approximately 6.5% in 2018 and again in 2019.

Highlighting our commitment to disciplined capitalized expansion across segments and geographies, we announced several notable transactions in the quarter. We expect to nearly double our all-inclusive portfolio over the next several years through our strategic alliance with Playa Hotels & Resorts, including adding two additional all-inclusive resorts by year-end. We also announced the signing of the Waldorf Astoria Miami, which will feature private residences, retail and top restaurants. With Waldorf Astoria now having 30 properties globally with recently added hotels in Las Vegas and Bangkok, we continue to gain traction among guests and owners alike. Additionally, we converted three properties in Dubai to luxury and full service brands across our portfolio. This conversion significantly increases our presence in a unique and growing market, while further strengthening our partnership with the Al Habtoor Group.

We continuously look for opportunities to broaden our demographic appeal and increase stay occasion among existing guests. With that in mind, yesterday, we launched our newest brand, Motto by Hilton. Motto is an affordable brand that combines the best elements of micro hotels and urban lifestyle products. Properties will feature efficiently designed adaptable rooms, innovative guest solutions and unique F&B offerings, local to each hotel's respective neighborhood. Deals in various stages of development span prime global locations, including New York City, London, Washington DC, and Tokyo. At both scale, we estimate Motto could total several hundred hotels across all major geographies.

Our culture of innovation extends across brands and business areas, resulting in more loyalty members and growing market share premiums. In the third quarter, we added 3.7 million new Hilton Honors members, up more than 16% year-over-year. Our roughly 82 million Honors members now account for nearly 60% of systemwide occupancy. Systemwide RevPAR index premiums rose approximately a 100 basis points in the quarter, with all major regions and brand segments contributing to growth. Our web direct platforms remain our fastest growing booking channels, a trend we expect to further accelerate with the roll-out of 'Expect Better. Expect Hilton' our largest portfolio marketing campaign to-date launched at the end of the third quarter.

I'm very pleased, we continue to be recognized for our ongoing commitment to our guests, team members, owners, and communities. Most recently, Great Place to Work named Hilton number two on their list of the World's Best Workplaces. This is the third consecutive year we've been included on this prestigious list of global companies. Additionally, for the second year in a row, we were named to the Dow Jones Sustainability North American Index. We're thrilled to be recognized as an industry leader for our Travel with Purpose commitments.

Overall, the macro environment continues to drive favorable fundamentals, and as we look ahead into the balance of this year and into next year, we remain confident in our ability to continue to drive strong top line and bottom line growth and to expand our global presence. As a result, we expect to continue to generate significant free cash flow to drive shareholder returns.

Thank you. Now with that, I'll turn the call over to Kevin to give a bit more detail on our results and the outlook going forward.

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Thanks, Chris, and good morning, everyone. In the quarter, systemwide RevPAR grew 2% versus the prior year on a currency neutral basis. International RevPAR growth modestly exceeded expectations and continued to outpace US growth. As Chris mentioned, weather and greater than expected disruption from calendar shifts led to modestly lower top line growth than we anticipated. Adjusted EBITDA of $557 million was near the high end of our guidance range, increasing 9% year-over-year. Our performance was largely driven by better than expected license fees and greater cost discipline. In the quarter, management and franchise fees increased 10% to $544 million at the high end of our expected 8% to 10% range. Diluted earnings per share adjusted for special items was $0.77, exceeding the high end of our guidance.

Turning to our regional performance and outlook, third quarter comparable US RevPAR grew 1%. Corporate transient and group business remained solid. Performance was somewhat tempered by softer leisure transient occupancy given weather and calendar related disruption. For full-year 2018, we forecast US RevPAR growth of between 2% and 2.5% given good fundamentals, partially offset by continued difficult comps from the storms last year.

In the Americas, outside of the US, third quarter RevPAR grew 5% versus the prior year given a mix of strong leisure and corporate transient trends across Canada and broader market strength across the Caribbean. For full-year 2018, we expect RevPAR in the region in the mid-single digit range.

RevPAR in Europe grew 6.9% in the quarter, roughly 250 basis points ahead of our expectations. Strength in Turkey coupled with increased demand in Russia related to the World Cup, largely drove our results. For the full year, we continue to expect RevPAR in Europe to grow in the mid single-digit range with strong trends across Continental Europe and an improved outlook for the UK and Ireland.

In the Middle East and Africa region, RevPAR grew 1.3% in the quarter led by increased group volume and strong ADR across resort properties in Egypt. Performance was modestly offset by softer leisure business in the UAE and Dubai given supply and demand imbalances. For full-year 2018, we expect RevPAR growth in the region to grow in the low single-digit range.

In the Asia-Pacific region, RevPAR increased 5% in the quarter as typhoons and weather conditions slowed leisure growth. Trends in China remained robust with RevPAR up 8% driven by strong industry dynamics and market share gains. For full-year 2018, we continue to expect RevPAR growth for the Asia-Pacific region in the high single-digit range with RevPAR growth in China of around 11%, which accounts for weather-related impacts.

Moving to guidance, for full-year 2018, we expect RevPAR growth of between 3% and 3.5%, and adjusted EBITDA of $2.075 billion to $2.095 billion, representing a year-over-year increase of 9% at the midpoint. Guidance is in line with prior expectations factoring for the third quarter beat with some offset primarily from FX. We forecast diluted EPS adjusted for special items of $2.67 to $2.72. For the fourth quarter, we expect systemwide RevPAR growth of between 2% and 3%. We expect adjusted EBITDA of $518 million to $538 million, and diluted EPS adjusted for special items of $0.66 to $0.71. Please note that our guidance ranges do not incorporate incremental share repurchases.

Moving on the capital return, we paid a cash dividend of $0.15 per share during the third quarter, bringing year-to-date dividends to $137 million. Our Board also authorized a quarterly cash dividend of $0.15 per share for the fourth quarter. For 2018, we expect to return between $1.8 billion and $1.9 billion to shareholders in the form of buybacks and dividends.

Further details on our third quarter results and our latest guidance ranges 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'd like to speak with all of you this morning, so we ask that you limit yourself to one question and one follow-up that is related to your original question. Denise, can we have our first question please?

Questions and Answers:

Operator

Absolutely, Mr. Jacobs. We will now begin the question-and-answer session. (Operator Instructions). The first question will be from Joe Greff of JPMorgan. Please go ahead.

Joseph R. Greff -- JPMorgan Securities LLC -- Analyst

Good morning, everybody.

Christopher J. Nassetta -- President & Chief Executive Officer

Good morning, Joe.

Joseph R. Greff -- JPMorgan Securities LLC -- Analyst

Not so surprisingly -- my first question, or my question relates to your 2019 RevPAR growth commentary. I know it's early, but can you talk about how much of that is incorporated from some of grounded up either property level or regional inputs? And this just broadly, can you talk about how you're seeing next year in terms of US, non-US and then between corporate transient group and leisure? And then I have a quick follow-up for Kevin after that question.

Christopher J. Nassetta -- President & Chief Executive Officer

Wow, this could take the rest of the call, and I'm happy to do that. So as you would imagine, this time of year every year, we go through a process of looking -- going top-down and bottom-up. I think we started our budget process by sort of having a view of what's going on around the world broadly from a macro trend point of view, but also very -- from a micro point of view in the various regions, we have lots of discussions with our teams in the regions and leadership and commercial teams, and then we go about a very granular bottoms-up budget process. While we are not complete with that process, I would say we are 90% complete with that process which does give us a very -- very much a hotel by hotel and region by region look at what we think we're going to produce next year. And so, what we would typically do is, aggregate that up and then give you, given that we're in October of 2018 and we are looking forward to '19, give a fairly broad range, that's the point up and point down around the midpoint in this case of 3%, just based on the fact that it's early as you pointed out. Important to note, so the range in outcome that we're giving focusing on the midpoint is very much the result of that process and very much the result of a buildup of a property-by-property and region-by-region analysis that takes a lot of time and effort by our teams.

I think when you think about it, it is informed from a macro point of view by a few things; one, the current expectations are both for the US and global GDP growth that they will be relatively consistent with this year. When you look at non-residential fixed investment numbers broadly, particularly in the US, they have been very strong this year and reasonably strong last year, expected forecast it to be strong again next year. That has the highest correlation to demand in hotel rooms historically. In the US, looking at supply numbers, we think the supply numbers are going to tick down against that backdrop next year. Obviously, in the same way that we are experiencing difficult comps in the second half of this year related to both holidays and weather impacts, those comps then for the second half of next year will become much easier, which will be helpful. And then getting to the segments, our view and I said it in my comments is that we are seeing very healthy growth across all the major segments. If you sort of neutralize for all the weather and holiday impacts and then what's happening right now, which we think best we can see is going to continue into next year. You saw post tax reform business transient pick up from anemic growth of like 0% to 1% to sort of in the 2% to 3% range. You've seen leisure transient remained relatively steady and strong, you know, sort of in the 3%, 3 plus percent range.

And then you've seen group ticking up into the 3% to 4% range, that's what you've been seeing this year. Our -- again, when we neutralize for all the things that are going on with weather and everything else, we don't think that that changed in the third quarter. We don't think that's changing in the fourth quarter. We think those trends are broadly going to remain consistent and I think are supported by, where we do have visibility and I talked about it a little bit, are supported by the fact that we have a very strong group position, pace has been great, position going into next year is frankly as strong as I've seen it and that supports it when we think about our special corporate negotiations and the dialog with our big corporate accounts around both volume and our ability to drive some incremental rate. Those conversations have been quite positive and stronger than where we were at this time last year. So when we put all of that together, again those macro conditions that I just walked through, and then we, -- then we look at it property by property and aggregate it up, this -- that's where we come out. And I said this I think a bunch of times on the last call and otherwise publicly, next year at the moment, I feel -- but to us a lot like this year feels, you know both from the standpoint of our NUG growth, but also our same-store growth. And I do realize there's a negative sentiment out there, I read the papers, I watch the news. And so I appreciate that. The reality is, when we look at the business and what it's producing today and we look at the forward trends that we have, it does not reflect. What it reflects is what we've suggested is that next year it looks like, all things being equal, we should be delivering results very similar to this year. And so, that's what we're trying to give you the best perspective we have in looking at the business in a scientific way as we can.

In terms of -- I think the only question, Joe, I didn't get there was the US versus international. I think it's again common theme, I think next year is going to look a lot like this year. I believe the international will lead the US, it will be stronger than US. My guess is, particularly with the strong group base and that tick down in supply, the US will probably in our numbers in our roll-up will be be modestly better, not material -- modestly better. And the international'd be modestly lower. And it'll be modestly lower because hard to replicate the year we are having an APAC. And for that matter, in Europe. So our expectation is, while it will outpace US growth, it won't outpace it at quite the same rate. So a little bit more US, a little bit less international, but I would say, I think when the year is out next year, it looks a lot like this year and it's not going to be materially off of that. Did I miss any of your points?

Joseph R. Greff -- JPMorgan Securities LLC -- Analyst

No. You hit them all, Chris. Thank you.

And then Kevin, just quickly, you referenced FX as an offset or as a drag a couple of times in your prepared comments. What was the FX EBITDA impact in the 3Q and what's incorporated at the 4Q relative to a quarter ago?

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Yes. In the fourth quarter-- so in the third quarter, it was sort of mid -- mid single-digit millions; in the fourth quarter, it's about the same. So if you take, we'd be by 7, it's the majority of that 7 coming down -- bringing the full year down to the midpoint is FX.

Joseph R. Greff -- JPMorgan Securities LLC -- Analyst

Got it. Thank you so much.

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Sure.

Operator

The next question will be from Harry Curtis of Nomura Instinet. Please go ahead.

Harry C. Curtis -- Nomura Instinet -- Analyst

Hey, good morning.

Christopher J. Nassetta -- President & Chief Executive Officer

Good morning.

Harry C. Curtis -- Nomura Instinet -- Analyst

I just wanted to drill down a little bit more maybe into regional question, first of all. If we were to see any evidence of global economic slowing, probably be in Asia, what are you seeing there as far as pacing in price for the next -- for the next say, six months to 12 months?

Christopher J. Nassetta -- President & Chief Executive Officer

We haven't seen, Harry, a whole lot of difference. You can look at our third quarter numbers, then I think rightfully say, well, it looks like it's cooled off a little bit, but I think there, not to make excuses, I think scientifically they're just -- there were things going on in Asia that drove that. You had a bunch of typhoons that affect -- some effect in China, meaningful effect in Japan, other sort of one-time events that affected South East Asia. So those are the things when we look at what happened in the third quarter were driving it. The basic underlying trends like much of the world we think are relatively stable.

Having said that, it does appear that China's economy is slowing down, sort of, as I said, we read the papers, we -- I was just in China, we're around the world a lot. And so, when I said, our expectation is maybe a tick higher in the US, a bit lower driven by the Asia and Europe. Maybe not being able to keep up the -- quite the pace of growth. Some of it -- we have certainly built some of that into our thinking. In other words, we would expect China to finish this year sort of in the 11% range as an example. We are assuming something lower than that next year. Honestly, I think it's 8% or 9%, from a budgeting point of view just to put it in context to be reflective of the fact that even though we haven't seen any meaningful trend other than the sort of the impacts I told you in third quarter, we haven't seen that underlying weakness. The reality is that the economy is going to slow in China, there should be some knockout effect. So we've tried to reflect that in the numbers for Asia Pacific, largely driven by what I talked about in China, and same in Europe, Europe is having a really good year and the expectation is, it's just to a degree we're early, but it's -- we have a great position -- group position et cetera. But group is not nearly as much of the business over there. I think just to be a bit conservative, if you will, we've assumed that -- that we won't have quite the growth rate. So we tried -- we've tried to reflect that in -- but in terms of like have we seen real signs of like sort of global slowdown in the core parts of the business? We have not seen that. We are trying to be thoughtful and reasonably conservative about looking into next year to incorporate some of those views, but we have not real time seen them.

Harry C. Curtis -- Nomura Instinet -- Analyst

Very good. And let's come back to the US. My question is, as you've been having conversations with meeting planners and heads of corporate travel. What are they telling you about next year's demand needs and is there any evidence of push back? What I'm trying to get a sense of is, you've been dealing with them for a long time. How reliable -- how often that they're right, how -- is it a reliable forward in --

Christopher J. Nassetta -- President & Chief Executive Officer

I think that they are right until they're wrong. I know that's not the answer you want. I mean, here's the thing, when we're talking to our meeting planners and on the group side you heard, we have a lot of optimism, because the numbers suggest we should -- talked -- that I said on the corporate side, special corporates, by the way that's only 10% of the business. So keep it perspective. But it's a good sight line into the psychology of some of the biggest companies we deal with. All those are positive, I mean, not everybody is created equal, but broadly people say they're going to travel more for business and for meetings, and they know they're going to pay more, and they're willing to pay more. And they're willing to pay more at an increasing rate as compared to what they would have said a year ago. So again, I don't want be a Pollyanna, but I think all that's positive. And I think all of those judgments are based on the fact that people think that the global economy, the US economy in the case of US-centric companies are just going to hang in there and keep chugging along, which is obviously what is built into the assumptions of our guidance. But the conversations have been quite positive. I mean, not racing to the stars, but incrementally more positive than when I was sitting here a year ago. It would be hard to say it any other way.

Harry C. Curtis -- Nomura Instinet -- Analyst

Very good. Thanks, Chris.

Christopher J. Nassetta -- President & Chief Executive Officer

Yes.

Operator

The next question will be from Carlo Santarelli of Deutsche Bank. Please go ahead.

Carlo Santarelli -- Deutsche Bank Securities, Inc. -- Analyst

Hi, everyone. Good morning and thanks for taking the questions.

Christopher J. Nassetta -- President & Chief Executive Officer

Hi, Carlo.

Carlo Santarelli -- Deutsche Bank Securities, Inc. -- Analyst

You guys talked a little bit about what you're seeing in terms of the demand side in China et cetera. But on the pipeline side, has anything changed with respect to the cadence of your discussions and or the kind of ongoing development that would give you guys any pause?

Christopher J. Nassetta -- President & Chief Executive Officer

Not really. I mean, I think, well, I talked about one of the supporting factors in the macro side on the fundamentals was supply is going down in the US. Okay. So it stands to reason that it's getting, if that's happening, it's getting harder for everybody to get deals done in the US. Thankfully, we fight it twice, we're 11 and change of the market in the US and we have 25% of the rooms under construction or something like that. So when we fight way of our way, but I would say, the trend line continues in the sense that it's getting -- we're getting more than our fair share, but it's getting harder to get deals done. So we will, even that we will hit a record in signings in the world this year, another one, of the record of last year, signings in the US will go down a little bit, starts will go down a little bit, and NUG will go down a little bit because it's getting harder to get deals done. So it's not getting, I mean, incrementally, it's not getting, since the last quarter, I don't think it's dramatically or materially different, but it's definitely harder, why? Inflation is picking up, cost of labor is going up, cost to build projects is going up. We think by the end of the year, it will be sort of a 10% increase in the cost to build, well, you're not seeing incredible turn of the wheel and tightening of credit. It's just a little bit tighter, a little bit harder to get things done. Interest rates are at little -- are moving a little bit in the wrong direction. So all of that adds up to, it makes it harder in the US, and that's why you see supply going down, and I think you'll keep seeing supply go down because it takes a long time for that cycle to reverse. I would be remiss in not making the following statements. The great news is, the reason we're signing record deals and we're going to have a record delivery of NUG this year, and it's going to go up again next year, it's because the world is a big place, and we've anticipated the ebbs and flows and allocated our resources appropriately around the world. And so while one market is slowing, in this case, the US, other markets are picking up. So Asia-Pacific keeps -- continues to pick up, all -- well, frankly all of our international markets continue to pick up. And we continue to get better and better at what we do, it's sort of building relationships and deploying our brands and intelligent ways to keep our growth going. So that's how we can add more net rooms next year and hit another record than we did this year, notwithstanding the fact that the US market is slowing, and I think we'll continue to be at slowing pattern until you have -- until the whole sort of system resets itself.

Carlo Santarelli -- Deutsche Bank Securities, Inc. -- Analyst

Great, thank you. And then, if I could -- Chris, you've always been kind of very firm in your views on M&A, and your ability to kind of develop and grow from within. In the current environment, has anything changed in your perception of where and when possible you would consider acquisitions?

Christopher J. Nassetta -- President & Chief Executive Officer

No, no, the short answer is, no. The filters have always been -- for the 11 years I've been here, the filters have literally remained the same, does something really work well strategically in terms of brands in our brand portfolio versus what we can do on our own. And does it, would it -- can we do it in a way that's really accretive to value. And as we filtered, and I'd say it all the time, we look at almost everything, everything to date that we have filtered through that -- those lenses really has not made sense versus what we are doing like launching Motto by Hilton just yesterday, where we think we can do it better than anything out there and we can do it exactly the way the customer wants it and create more organic growth without having to buy growth. So we keep making that decision, because I think it's been the right decision. I always, in this M&A discussion, would never say never. I'm not saying something wouldn't pass through that filtration system. It hasn't to date and our philosophy remains exactly what it has been.

Carlo Santarelli -- Deutsche Bank Securities, Inc. -- Analyst

Great, thank you, sir.

Operator

The next question will be from Stephen Grambling of Goldman Sachs. Please go ahead.

Stephen Grambling -- Goldman Sachs & Co. LLC -- Analyst

Thanks. Just I guess a couple of quick follow-ups to Carlo's questions. I guess, first, are you seeing any changes in the competitive dynamic as it relates to getting deals done whether that's terms and or the need for key money to incite deals and would you anticipate that to change if the environment remains tight? And then second, given the current weakness in the stock and market more broadly, I guess how is your approach to capital allocation evolving? And can you just remind us of your leverage thresholds? Thanks.

Christopher J. Nassetta -- President & Chief Executive Officer

I'll take the first and give Kevin the second. The competitive environment, I would -- I'd say, it did not change in any material way. I mean in the US, when there is less getting done, deals get a little bit harder to do, reality is, as I said, we fight way our way, because we have the highest market share brands and the highest average market share. That doesn't mean we don't compete, on occasion -- sometimes we don't, but on occasion we do. So I would say in a minor way, I'd say the deal terms in the US have gotten incrementally tougher, but not in any -- not in any material way. Around the rest of the world, really no change, things sort of click along as usual. So I'd say, not much to talk about there. Kevin on capital allocation --

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Yes, Stephen, on capital allocation, nothing's really changed, our stated leverage range is 3 to 3.5, you saw it get kind of the top-ish, maybe a little bit higher on a trailing basis to that range when we did the HNA transaction earlier this year. So we're still thinking about the same things, the same way, we will continue to distribute the lion share of our free cash flow. You noticed from our prepared remarks that we're keeping the dividend the same which means that as the EBITDA of the company grows, the amount available for share buybacks will increase accordingly, but nothing's really changed yet strategically.

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, we like the stock at 88. Obviously, we like it even better at this price.

Stephen Grambling -- Goldman Sachs & Co. LLC -- Analyst

Great, thanks. I'll jump back in the queue.

Operator

The next question will be from Shaun Kelley of Bank of America Merrill Lynch. Please go ahead.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Hi, good morning, guys. On -- just wanted to ask, I think in the press release this morning guys, actually put in a comment on the unit growth side around conversion activity and how important that is or maybe becoming? So could you just give us a little bit more color there, and so first half, is conversion activity accelerating at this point in the cycle? And then what are you seeing or hearing from your developments organization on that front? And how much of that is sort of factored into your net unit growth outlook for 2019?

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, I think, a good question. I expect that conversion activity will accelerate more. I would say, what we've seen technically so far is a minor acceleration, not much of a uptick. I think, when we finish the year, we'll probably do in 18% about 20% of our NUG will be conversions. I think ultimately depending on what goes on, this is sort of counter cyclical, the tougher when things get tough, conversion activity picks up. We've seen a little bit of an uptick this year, we're not expecting, given our outlook for next year, to see a whole heck of a lot of uptick as we think next year is going to be another pretty good year. Eventually, when a business cycle turns, I think you would see those numbers go up, but what's built into our expectations for our 6% to 7% is a comparable percentage of conversions, which is about 20%. We have almost never delivered less than that, and we have more tools and more weapons in the arsenal in the sense that, in the old days, we had really one conversion brand in DoubleTree, now we have Tapestry, Curio a soon soft luxury brand that is coming in addition to DoubleTree and other brands. But those would be the brands where you find a bulk of it. So what's built -- we will eventually see the numbers tick up. I don't think real soon built into next year as a comparable level to this year. So a lot of next year, when you boil it down, with that gap having to obviously be filled, a lot of next year is in the bank in the sense that 80% of it is under construction. I mean we -- we did may move a month or two here or there, but it's -- it's in process.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Can you just give us a sense, Chris, so that we get a high level where that number was or the conversion activity was kind of two to three years ago, just as a guidepost for would be on the 20 -- that 20% number, it was at lower two or three years ago, kind of and directional (Multiple Speakers).

Christopher J. Nassetta -- President & Chief Executive Officer

It's been running like 19% to 25%. I mean we've got in the -- at the coming out of the great recession on a much smaller base and the great recession obviously was a very big counter cyclical opportunity, where there was a lot of fear in the market. I mean we maxed out in the high 30s. I think, I wouldn't expect that we would get to that level again. But we've been sort of running around this level. So, I don't feel like this is a certainly -- it doesn't feel like it's a big pull to us -- my development team of course as they got to do a lot of work. So I don't want -- if they're listening, I don't want them to think otherwise. But I think, this is something we've typically been able to deliver with a fair amount of ease.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Very helpful. Thank you very much.

Christopher J. Nassetta -- President & Chief Executive Officer

Yeah.

Operator

The next question will be from Bill Crow of Raymond James. Please go ahead.

Bill Crow -- Raymond James -- Analyst

Good morning, Chris. I wanted to do honestly, if you could put a little finer point on corporate rate negotiations. I know it's only 10% of the business, but the owners are saying it's critical for ADR growth for next year. At one point, you said you're seeing healthy rate increases. But then you kind of broke it down and you said -- some -- on occupancy and our demand, the demand side. And then you said you hope to see some incremental rate increases. So I'm just curious, are we looking at kind of zero to 1 on the rates, are we looking at 2 to 3. What do you --

Christopher J. Nassetta -- President & Chief Executive Officer

I think we're looking at -- last year, we were looking at like 1-ish, you could argue 1 to 2, but I think it really ended up in the low 1s. We thought 1 to 2, it ended up closer to 1 than 2. Right now, it looks like 2 to 3. I mean I talked to the teams yesterday, to get the latest and greatest update. It feels to them like 2 to 3.

Bill Crow -- Raymond James -- Analyst

(Multiple speakers)

Christopher J. Nassetta -- President & Chief Executive Officer

-- 10% of the business. So but obviously a good indicator.

Bill Crow -- Raymond James -- Analyst

Okay and then maybe for Kevin, on the -- this the capital return, obviously you have the opportunity this year to buyback maybe more than you would have. But given Chris, your commentary on the sameness of next year versus this year in different metrics, should we assume $1.5 billion to $2 billion of capital return?

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Yes, I think, Bill, the way to think about it is -- next, we did bring forward some leverage into this year around the HNA opportunity. So the trade -- the trade-off obviously is free cash flow, we got to be careful, we're not giving bottom line guidance. But free cash flow, if you just take what we are saying about RevPAR and net unit growth ought to be a little bit higher next year than this year. And then you will have the opportunity as EBITDA grows to releverage a little bit. But we brought leverage forward this year around the HNA deal. So if we were to hit the midpoint of our leverage guidance for next year, it's logical to assume that the amount would be somewhat lower next year than it was this year.

Bill Crow -- Raymond James -- Analyst

Okay, that's it from me. Thanks.

Operator

The next question will be from Anthony Powell of Barclays. Please go ahead.

Anthony Powell -- Barclays -- Analyst

Hi, good morning. Could you provide some more detail on group position being up mid-by-single digits, what markets are driving that, is it of more in volume or rates?

Christopher J. Nassetta -- President & Chief Executive Officer

So it's broad based. It's not like one industry group driving it or frankly one region although the bulk of our group business ultimately is in the US, it's -- it is broad based. Its up, I would say in the close to 8% range. Now we being perfectly objective and as scientific as we can be, we believe some of that has to do with commission policies that we do believe that as we look into next year. Now the business is going to show up, so it's going to be good for the business. What we do believe -- there as a result of the -- of the change in the commission policies that we advanced some amount of bookings and we think that probably means that the real position -- the real position is 8 to 9. We think when you sort of back out the commission effect, it's still very easily 5% to 6% up, which we feel good about. And it's basically split pretty evenly between, just looking at this yesterday growth, it's basically split pretty equally between volume and rate.

Anthony Powell -- Barclays -- Analyst

Got it, thanks. And on the other end of the scale, something when your service brands underperformed at the quarter-end this year, is that just due to higher supply growth or is that bit of a demand component that is impacting relative RevPAR growth?

Christopher J. Nassetta -- President & Chief Executive Officer

I think that's what you're seeing kind of broadly across the industry and I think it's -- it's a combination of things. Yes, more of the supply growth -- even the supply growth is low and it's getting and it's going down, you certainly have seen more of the supply growth in those segments, which I think is probably the largest contributor. We have some other specific things going on. If you look at it, but I mean in terms of renovation work going on, like in the Hampton brand, I think 25% of the brand is under renovation at the moment. That has some impact, but even with that, the Hampton brand has grown market share. So it is still outperforming. It's still outperforming the market. And I think broadly in terms of what -- why is that segment in the market is underperforming is to do with the incremental supply in that area which will be diminishing.

Anthony Powell -- Barclays -- Analyst

Great, thank you.

Operator

The next question will be from Robin Farley of UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Great, thanks. One shorter term question and one longer term question. You were talking about some of the factors that led Q3 to come in a little bit lower in the US than you had thought. When we look at just the weekly data so far, first half of October is also not off to a great start. So just wondering if you see sort of a clear -- what you see in your sort of next 30 days in the US looking different maybe then kind of it looks like some of the same trends have continued in early October. So, I hate to be so short-term about it, but I know that there is concern out there about kind of what happened in the short-term versus previous guidance and all of that. And then my other question is on group. I think you said 3% to 4%, is what the increase was in 2018. I don't know if you put numbers around, I know you said 70% of next year's group is on the books. But where you're -- where you're seeing rate and volume for group business for 2019 so far? Thanks.

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, Robin, I think for the last few weeks, you're still seeing kind of residual or that you are seeing continuation of the tougher comps from last year, where the storms and the other weather-related events, particularly in the United States, just generated a lot of business last year that we're still comping over. So our outlook for the year incorporates a little bit better fourth quarter than third quarter. So I think you're still seeing some of that show up in the weeklies. And then on the group side, I think it's about the same. The picture is about the same, it's about half and half between -- split pretty evenly between volume and rate in that 3% to 4%.

Robin Farley -- UBS -- Analyst

If it a -- I was then asking about your 2019 group, what you have on the books rate and volume. What levels increases or not increases for 2019 versus what you saw a year ago for '18?

Christopher J. Nassetta -- President & Chief Executive Officer

It's about the same. Yes, it's about the same.

Robin Farley -- UBS -- Analyst

So in other words, were this 3% to 4% where group is ending up for 2018, is exactly what you thought it would be a year ago?

Christopher J. Nassetta -- President & Chief Executive Officer

(Multiple Speakers). Yes. That's a pretty comparable. I think about a year ago, we were saying -- we were saying mid-single digits and it's coming in sort of 3% to 4% (Multiple Speakers) pretty -- pretty close as we expected. Yes, sorry, I didn't understand the question, Robin.

Robin Farley -- UBS -- Analyst

Right. In other words just thinking about where group came in versus your expectations for '18 and then how that means for '19 (Multiple Speakers)

Christopher J. Nassetta -- President & Chief Executive Officer

It came in consistent with our expectation.

Robin Farley -- UBS -- Analyst

Okay, great. Thank you.

Operator

The next question will be from Patrick Scholes of SunTrust. Please go ahead.

Patrick Scholes -- SunTrust -- Analyst

Great. Good morning. Thank you. My first question relates to your management business. What are you seeing or forecasting for labor costs growing at next year?

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Yes, I think next year, Patrick, probably about the same as this year on the labor side, probably 3% to 4% all in wages and benefits. which is of I think about the same as this year.

Patrick Scholes -- SunTrust -- Analyst

Okay. Thank you. And secondly, on the group numbers that you gave for 8% to 9% next year and correct me if I'm wrong, that's not a same-store number. Do you have a same-store number that you can give?

Christopher J. Nassetta -- President & Chief Executive Officer

Now, that is a systemwide same store, what I was trying to do is make sure that we're being honest about trying to filter out the impact of anything we thought that was a result of bookings being advanced because of our change in commission policy. Now, admittedly that, Pat, that's -- I mean, we're trying to apply science to it -- it isn't going to be perfect science. We look at what we're doing through intermediaries versus what we're doing in direct bookings to sort of arrive at an equation that tell us where we think we'd be. Mid-single digits, 5% or 6% is where we feel confident without any changes in commission policy, we would have been, which is not too terrible as Kevin pointed out, not too terribly different than where we were at this time last year. That's why we think delivering 3% to 4% next year, and when we finish the year in group growth is reasonable.

Patrick Scholes -- SunTrust -- Analyst

Okay. I think it makes sense. Thank you. That's it.

Operator

The next question will be from Rich Hightower of Evercore ISI. Please go ahead.

Rich Hightower -- Evercore ISI -- Analyst

Hi, good morning, everybody.

Christopher J. Nassetta -- President & Chief Executive Officer

Good morning.

Rich Hightower -- Evercore ISI -- Analyst

To quickly follow up on Pat's question there, just in the context of ongoing union negotiations around the country, I think it's been a little more impactful recently to Marriott than you guys, but within that 3% to 4% labor cost assumption for next year, how much variability would you say is included within that range, just again given the ongoing nature of those sorts of discussions?

Christopher J. Nassetta -- President & Chief Executive Officer

I don't think a lot of variability obviously If I can comment on negotiations going on with the unions, which are ongoing. We have a good relationship with the unions that have been sorting through market by market deals. I think that we will end up in those ranges regardless of where those deals turn out. Remember also that in our case, it's a little less than a third of our workforce is in organized format, so two-thirds of it is outside of that, when you blend it together, we -- in Kevin's number, he's in that range -- it's all system and he is factoring for that.

Rich Hightower -- Evercore ISI -- Analyst

Okay, that's helpful. And then another quick follow-up to the capital return forecast whether speaking of this year or next year. Just in general, how much -- how quickly can you pivot if need be given a short-term dislocation in stock prices as we may or may not be seeing kind of in the current environment against those longer-term capital return forecasts and also the leverage limits that you guided --

Christopher J. Nassetta -- President & Chief Executive Officer

I mean, I think if we want to, we have a significant amount of flexibility and we can pivot quite quickly.

Rich Hightower -- Evercore ISI -- Analyst

Okay. Any more specifics around that or just as a general comment?

Christopher J. Nassetta -- President & Chief Executive Officer

No.

Rich Hightower -- Evercore ISI -- Analyst

Okay. That's all from me. Thanks.

Christopher J. Nassetta -- President & Chief Executive Officer

All right, thanks.

Operator

The next question will be from Smedes Rose of Citi Research. Please go ahead.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Hi, thanks. I wanted to ask you about this new brand roll-out, Motto. When you did Tru (Multiple Speakers) --

Christopher J. Nassetta -- President & Chief Executive Officer

Motto, come on Smedes, get it right.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Motto, Motto, sorry.

Christopher J. Nassetta -- President & Chief Executive Officer

You have a Motto, it's not moto, photo.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

When you did Tru, Chris, I think that it was initially offered to owners at Hampton Inns. And then obviously went onto a very successful roll-out. I'm wondering, is there anything that you're doing to kind of jump-start this brand with your current owners, maybe sort of any feedback on initial sign-ups that you're receiving from developers?

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, I'm happy. And thank you for the question. I'm glad we got a question on our new brand, it seems like people ask about our new brands every call and then we launched one and nobody wants to talk about it, but happy to talk about it. We're very excited about Motto by Hilton and we are of course, as we would do with all our brands and you're right to point out that we went to our most important Hampton owners and largely and gave them the opportunity on Tru. Doing a very similar, we have a very similar approach with Motto always because our existing owner base has been very loyal to us and we want to be loyal to them. So not only we are going to them as the first shot out of the blocks to say, hey, do you want to work with us, but there has been a cadre of them that have been very involved in the development of the brands. So we're not always, but we're always, we put in the pie, we're always talking to customers and doing focus groups as we design these brands and figure out how to make them tick the right way, so that they'll appeal to customers, but we're also working very closely with owners to make sure that we are engineering the cost to build and the cost to operate in a way that they will deliver returns that work for owners, otherwise, we'll have the great thing for our customer, but will have no hotels for the customer to stay in. So it's very much sort of a dual process and so we brought a great cadre of owners that we've worked with around the world and to be part of that process, and they are very excited about it. And so not surprisingly, the first deals, many of the first deals we are doing are with existing owners, not all, but many of those deals are. We have essentially, I think we have six deals. I mean these are more complicated than Tru's given that they are urban and by the very nature of what it is, it's a bit longer gestation period and higher degree of complexity. We have about a half a dozen deals done. I would say, based just on the conversations I've been having including yesterday we had a huge group of owners in for the launch here at our innovation gallery we probably have another 20 deals sort of cooking and ultimately, Tru will be thousands of hotels. Okay. And the Tru will be the biggest brand we have just because of the price point it's at. Motto will be very big, but as I said in my prepared comments, it's hundreds of hotels. So I think we're off to a great start. It's a wonderful way for us to better serve our existing customer base. Even more importantly, it's a great customer acquisition toward a great product that we can attract customers that have heretofore not been able to stay with us that want to be in an urban environment and adventurous, and they need a product at a price point they can afford, whether they're young and middle age or old, this is where they want to be, and this is a product now that we're putting out there that we think will make it much more affordable for them to stay with us and when they stay with us, we have a pretty good track record of getting them to try other things with us. So we're very excited about it. Again and all these are more complicated urban deals they take on, really sort of pull together, but I think you'll see, that will very quickly get a pipeline into the dozens of hotels, then I think we'll start bringing it to life, in reality, hopefully next year, we will be able to take you on a tour of the first Motto.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Great. And then I just wanted to ask you, you mentioned, you guys hit about 80 million Honors members at this point. Can you -- have you seen any change in the percent of bookings going to direct versus OTAs or is that ratio still pretty constant?

Christopher J. Nassetta -- President & Chief Executive Officer

No, the ratio is good. We -- what we -- what we saw in the third quarter, which generally tracks year-to-date, the third quarter number is, we were growing our direct channel share and the OTAs were flat. So that's, and that's before we essentially started the latest big push on our campaign of direct book that started rolling out at the end of the quarter. So the trends are what -- what we want to see, which again is not that we're not going to or don't want to work with the OTAs. We do, we just want to work with them in the right times, in the right ways, at the right price, and we want more and more to have a direct relationship as much as we can, and that's what we're seeing happen in our channel mix, more growth in direct -- our direct channels, particularly our web direct channels and third quarter flat on OTAs.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Thank you.

Operator

The next question will be from Chad Beynon of Macquarie. Please go ahead.

Chad Beynon -- Macquarie Group Limited -- Analyst

Hi, good morning. Thanks for taking my question. Just one for me, just on the ownership assets, they've performed pretty well in the third quarter from a RevPAR standpoint and year-to-date, I believe most of these are flagship Hiltons in Europe. Is this strong performance really just kind of a product of, Chris, what you were talking about a strong group traveler in Europe or is there anything else? And as your outlook, as you mentioned, for Europe is positive in 4Q, and going forward, is there any reason why these assets should kind of come down below the M&F RevPAR? Thanks.

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, Chad, I'll take this one. I mean, it's interesting that there are a bunch of flagship Hiltons in Europe that are part of that portfolio. There also are a bunch of hotels in Asia that are part of that portfolio. And even though Japan had a little bit disruption from a typhoon, the RevPAR growth was still quite strong in Japan and a couple of other places in Asia. So you're seeing some of that sort of filter through that portfolio, but Central Europe of course was quite strong in the quarter, which helped in that -- and the trends ought to be really consistent in the fourth quarter. It's a very similar outlook.

Chad Beynon -- Macquarie Group Limited -- Analyst

Okay, thanks. That's all from me.

Christopher J. Nassetta -- President & Chief Executive Officer

Sure.

Operator

The next question will be from David Beckel of Bernstein Research. Please go ahead.

David Beckel -- Bernstein Research -- Analyst

Hi, thanks for the question. I think it's been a little bit of time since you've updated us on the Hampton Inn roll-out in China. Can you just give us an update on signings and openings for the year?

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, it's -- our Plateno deal is going really, really well. I think at this point, Jill and Kevin can fact check me. I think we've done 250 deals. Yes, I think we have opened 50, I think we expect to open like 20 more by the end of the year. I think we're hoping that we have about 70 opened. And I think we expect to open 100 next year. So it's moving at a great pace, it's having the impact that we want, which is building our network effect in China in secondary and tertiary cities with what is a great product with a great partner. Importantly, because if we don't deliver results now people, as I say, would stop building us hotels. The performance of the hotels is really, really strong in terms of the returns that our partners are getting on these deals. So we feel very good about it and think it's going to keep -- keep cranking. If you think about what's going on in China, I've said this many times, not dissimilar from other parts of world. The mid-market is where you're going to see the bulk of the growth just because the phenomenon because middle class grows at a very high rate -- middle class can afford mid-market type brands and that's why we were so interested to get in with Hampton with a partner to try and build that network as fast as we could and it's working.

David Beckel -- Bernstein Research -- Analyst

And just a quick follow-up, given some of the M&A that Jinjiang has been involved with. Has that affected your relationship with them or the development agreement in anyway?

Christopher J. Nassetta -- President & Chief Executive Officer

No, it hasn't. We maintain a great relationship. We are in constant dialog with them about a whole bunch of different things, including the Hampton relationship. I think it's one that they are very positive about and if anything interested in speeding it up as are we. Not in anyway changing or either slowing it down.

David Beckel -- Bernstein Research -- Analyst

Thank you so much.

Operator

The next question will be from David Katz of Jefferies. Please go ahead.

David Katz -- Jefferies -- Analyst

Hi, good morning all.

Christopher J. Nassetta -- President & Chief Executive Officer

Good morning.

David Katz -- Jefferies -- Analyst

Congrats -- it all seems quite clear. That we're two minutes away from the hour. But I wanted to just touch on one topic which is your high-end strategy. The portfolio of brands is obviously very complete. We are nearly complete from top to bottom. How are you thinking about the highest end? I know you're adding Waldorfs and Conrads et cetera in different places. But just go back to the make or buy discussion as it relates to that end of the business and the degree to which you can bolster through soft branding, let's say, but I'd love a little color just about that's particularly --

Christopher J. Nassetta -- President & Chief Executive Officer

Yes, it's a good and important question, in the sense that, we give you, if I think about how I allocate my time relative to the size -- the business, I allocate disproportionate amount of time to luxury for a couple of reasons, one, it's hard, the deals are complicated and difficult, not many of them get done around the world. And it's important -- it's important because even though in the end I don't think luxury is going to be a whopping component of our bottom line, EBITDA, and free cash flow, it's important as a halo effect for our loyalty system and for our most loyal customers who want to be able to travel the road and be the road warrior and ultimately aspire to hit the Conrad in the Maldives or the Waldorf in the Maldives or Waldorf in Bangkok, resorts and luxury hotels. Whether they use it or not, they want to dream about using it and so become -- it is important and we spend a lot of time on it. We started standing still 11 years ago, we pretty much had nothing really going on in luxury, a handful of assets you would call luxury. I think we have -- if you fast forward to today, we've worked very diligently with great discipline over time grinding it out organically, and today, with Conrad and Waldorf alone, and I'll talk about other things we're going to do, we have over a 100 hotels open or in the pipeline. And that's with having taken some properties out that really don't fit the bill. There's probably a few more of those, that over time have to happen, but the net of that will be more adding then, the net unit growth in luxury will be positive because we have so many good things going on. And if you think about where we've been adding in Beverly Hills, and Shanghai and Beijing and Amsterdam, our deal in London, just announced deal in Miami, another important one coming in the United States and I could go on and on, I think we're making a tremendous amount of progress, we've got 64 open, we've got 38 in the pipeline for both brands and these are really world-class luxury assets that are resonating unbelievably well with our customers. That's why we're having such great growth -- part of the reason we're having great growth in Honors, more Honors occupancy, all of this is connected together. We have a couple other pistons that will start firing in -- one soon the other probably in the next year or two. The one soon is soft luxury, again it's not going to be hundreds of hotels, I guess it could be over time, but it will certainly add to the -- to the luxury side of the business. And then we will eventually do luxury lifestyle. We have chosen not to do it because of other opportunities and we can only do so much at one time, but ultimately, we will have a luxury lifestyle brand as well. And those two incremental brands, I think will take what is already a very good story with Waldorf and Conrad and growth and quality of the properties and size of the system and add to it.

If you could in a per -- if you said to me like in a perfect world, you could just go out tomorrow and fix it. If I could have done that 11 years ago, it would have been a lot easier. But it's not -- the practical reality is, it's not really possible. Because back to my comments on M&A, the things that you could make available don't really funnel through our filtration system. They either have their own problems as a brand or the economics of it would be such that you would destroy a lot of value and so while we've looked at lots of things, honestly, none of them have made sense and we are quite confident, I underline confident, particularly today after 11 years of hard work that we have really good trajectory on luxury that we're going to a good place that we have enough scale and presence that it is not only not holding us back, but look at the overall network effect we've created. We've got the highest average market share across all of our brands of anybody in the industry. So, here's the thing, it's working. We got to keep it working, which is what we get paid to do and we will, but it's working and so we will keep grinding it out and then five and 10 not even over the next three or four years, you'll continue to see some really important hotels and advances in the upper end of the business for us.

David Katz -- Jefferies -- Analyst

Thank you. And if I can just follow-up on one other segment. Obviously, you think it's important enough to look at the all-inclusive segment, as it is today based on what you've done. But is that a segment that you could envision broadening across different price levels over time, how big an opportunity do you think that particular segment is or is this just a good to have because it was available to you?

Christopher J. Nassetta -- President & Chief Executive Officer

I think it's a pretty important segment. I think it's big, but it's not gargantuan, in the sense that it's only really applicable at the moment in certain micro markets around the world. And so I think it's important when we talk to our -- a reason we did the deal with Playa is because they're very good at it. And we've had a long relationship there, and I have had a long relationship with Bruce. We did a lot of work with our customer base and they said this is something that we want. Again, it wasn't overwhelming like every cus(ph), but there was enough of our customer base that said they wanted it. And you can do it in enough places at -- with high-quality product that we thought it was important to do. Whether you do it across a bunch of different price points, I think that's unclear, I mean, I think it is all resorts and sort of in the upper upscale, could you go upscale? Possibly at the moment, we're really focused more in the upper upscale, we do think there are bunch of other markets that we're not in that we could do it. And I do think it's a decent size opportunity, but not as I said not a gargantuan opportunity. And we will look, currently, we're doing it with sort of as an extension of our core brand at the moment Hilton. We will look at whether if as we get into it, if we think there is enough opportunity to sort of create us effectively its own presence, create a independent or an extension of the Hilton with a real brand name to it as opposed to just being part of the Hilton system. But it's pre -- yes, it's premature for us to judge that. We're very pleased with where we are, we think it makes -- it adds to our growth, adds to our profitability and it's one more weapon in our arsenal to please a certain segment of our customers who want to stay there and earn points and importantly they want to redeem at certain types of resorts and the all-inclusive environment is an environment that enough of our customer base says they want that we thought it was important that we were present.

Operator

And ladies and gentlemen, this will conclude our question-and-answer session.

I would like to hand the conference back over to Chris Nassetta for his closing comments.

Christopher J. Nassetta -- President & Chief Executive Officer

Thank you everybody. We went a little over time. Appreciate everybody's sticking with us. We'll look forward to catching up with you to discuss the end of the year and give a little bit more detail on what we think is going to happen next year on the bottom line on our next call. Hope everybody has a great day. Thanks.

Operator

Thank you, sir. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Duration: 63 minutes

Call participants:

Jill Slattery -- Vice President and Head of Investor Relations

Christopher J. Nassetta -- President & Chief Executive Officer

Kevin Jacobs -- Executive Vice President and Chief Financial Officer

Joseph R. Greff -- JPMorgan Securities LLC -- Analyst

Harry C. Curtis -- Nomura Instinet -- Analyst

Carlo Santarelli -- Deutsche Bank Securities, Inc. -- Analyst

Stephen Grambling -- Goldman Sachs & Co. LLC -- Analyst

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Bill Crow -- Raymond James -- Analyst

Anthony Powell -- Barclays -- Analyst

Robin Farley -- UBS -- Analyst

Patrick Scholes -- SunTrust -- Analyst

Rich Hightower -- Evercore ISI -- Analyst

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Chad Beynon -- Macquarie Group Limited -- Analyst

David Beckel -- Bernstein Research -- Analyst

David Katz -- Jefferies -- Analyst

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